Fink v Robertson [1907] HCA 7

Fink v Robertson [1907] HCA 7 - HCA 1890 case summary — Zoe

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section must be interpreted to mean what they say. No machinery is provided by the Act for re-opening a foreclosure. Under the Real Property Acts of New South Wales it has been held that there is no power to re-open a foreclosure : Campbell v. Bank of New South Wales (1); Matton v. Lipscomb (2). The words of sec. 114 of the Real Property Act 1863 of New South Wales are not so strong as those of sec. 130 of the Transfer of Land Act 1890. A foreclosure order under sec. 130 operates as a vesting order which vests in the mortgagee the land of the mortgagor as if it had been transferred by the mortgagor to the mortgagee, and it vests the land as it existed at the date of the mortgage. Thus, in the case of a second mortgage, on a fore- closure order, the second mortgagee would be registered as having the estate of the mortgagor as at the time the second mortgage was granted, and the second mortgagee would therefore have to indemnify the mortgagor against the first mortgage debt. Similar words to the words "shall be deemed a transferee " in sec. 130, are used in other sections with a similar object: See sees. 118 and 188. If the view is taken that a mortgagee who forecloses takes the land with the burdens which existed at the time of the registration of the mortgage, the Act works out scientifically. Sec. 124 also bears out this view. The first part of it provides for the somewhat anomalous position into which mortgagor and mortgagee have been put by the Act, giving certain rights and remedies to the mortgagee, and then the second part is a proviso that, when after foreclosure the mortgagee has become proprietor of the land, none of his rights or liabilities incident to his new ownership are to be affected by the previous part of the section. [Counsel also referred to Bridgman v. Daw (3); Adair v. Carden (4); Ashburner on Mortgages, p. 374; Ex parte National Trustees, Executors and Agency Co. of Australia Ltd. (5); Registrar of Titles v. Paterson (6); Trust and Agency Co. v. Markwell (7); Greig v. Watson (8); Canaway's Real Property Act, p. 99; In re Premier Permanent Building, Land and

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Sec. 124 confers on the mortgagee, in addition to all other rights and powers, all the rights and remedies to which he would have been entitled if he were the owner of the legal estate, but imposes no liabilities. Secs. 125 and 126 provide for the case of certain actions brought by a mortgagee under this power. Sees. 129 and 130 deal with the right now particularly in question. A special procedure is prescribed which must be followed. After default in payment has continued for six months the mortgagee may make a written application to the Commissioner for fore- closure, but before doing so the land must have been offered for sale by public auction by a licensed auctioneer after a prescribed notice to the mortgagor. The application to the Commissioner iust state this fact, and the further fact that the amount of the highest bidding was not sufficient to satisfy the mortgage debt, and that notice of the application has been given to all persons interested in the land subsequent to the mortgage, and these statements are required to be verified by statutory declaration. The Commissioner is thereupon to offer the land by advertise- ment for private sale, and after the expiration of a month he may issue to the applicant, i.e. the mortgagee, "an order for foreclosure," unless in the interval a sufficient sum has been realized by sale of the land to satisfy the principal, interest, and expenses. Sec. 130 then proceeds : - * Every such order for fore- closure under the hand of the Registrar when entered in the register book shall-have the effect of vesting in the mortgagee or his transferree the land mentioned in such order, free from all right and equity of redemption on the part of the mortgagor or of any person claiming through or under him subsequently to the mortgage : and such mortgagee or his transferree shall upon such entry being made be deemed a transferree of the mortgaged land, and become the proprietor thereof, and be entitled to receive a certificate of title to the same."

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two answers seem to be possible - either the price at which the property was offered to others, i.¢., the mortgage debt, or the then value of the land. The latter answer is not supported by anything in the Act itself, and would give rise to possible, and indeed probable, injustice. Suppose, for a moment, that an action on the express or implied covenants in the mortgage is not taken away, and that the Court if such an action is brought can impose terms on the mortgagee plaintitt, In such an event what terms would do justice as between the parties? The Court could, no doubt, order the plaintiff to transfer the land to the defendant on payment of the mortgage debt and interest. But the de- fendant may be unwilling to take it or to pay the necessary amount. He has by the mortgagee's election been deprived of the land and of all right to obtain it, and it would be impossible to put him in the same position as if the mortgagee had elected to take advantage of some other provision of the Act in his favour. It is a general rule that when a party is entitled to elect between two inconsistent rights against another, and has done so, he cannot afterwards alter his election without the con- sent of the other party: Clough v. London and North Western Railway Co. (1). In the case supposed the mortgagor has, perhaps for some years, been in the position of having no right cognizable in a Court of Justice in respect of the land, but accord- ing to the argument he has, all that time, been a debtor for the full amount of the debt. But he was a debtor who would acquire no rights to the land by payment of the debt. The mortgagee was under no obligation to receive it. If the mortgagor tendered the money he would be in no better position, for he could not afterwards plead the tender unless he was still ready to pay the money tendered. Ordinarily rights and obligations are mutual. In the case supposed the rights are entirely on one side - the mortgagee is entitled to keep the land, and is also entitled, at his option, until the Statute of Limitations has run, to the whole of the debt with accruing interest. The mortgagor, on the other hand, owes the money and has no right capable of enforcement. His only escape from the difficulty would be by taking advantage of the insolvency laws. (1) L.R., 7 Ex., 26.

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not repaid by a certain date. As soon as that day passed without payment, the Courts of Common Law treated the land as having passed absolutely to the mortgagee; and yet the mortgagor remained liable on his covenants to pay. The mortgagee could retain the land absolutely ; and yet might recover his full debt by action. But the Court of Chancery compelled the mortgagee to reconvey, if at any time the mortgagor could find the money to pay principal, interest and costs. Then it was felt that some time limit should be imposed on the mortgagor, in order that the mortgagee might not be left indefinitely in a position of un- certainty as to his rights with regard to the land; and therefore the Court of Chancery allowed the mortgagee to bring a suit to "foreclose" the right of the mortgagor to redeem. By the decree in such a suit the mortgagor was given some time - say

six months - to pay up; and if he failed to do so, an order abso- lute was made for foreclosure. The usual form of the order absolute was as follows: - " This Court doth order that the said defendant do from henceforth stand absolutely debarred and foreclosed of and from all right, title, interest and equity of redemption of in and to the said mortgaged hereditaments" (Seton on Decrees, 3rd ed., p. 1393). These words are adopted in see. 130. There it is said that the order for foreclosure "shall have the effect of vesting in the mortgagee . . . the land mentioned in such order, free from all right and equity of redemption on the part of the mortgagor." It is true that under the Act there are also the words as to vesting the land in the mortgagee ; but such words are necessary, because the Act pro- vides that a mortgage shall not operate as a transfer of the land, but only as a security (sec. 114). Similar provision had to be made in a foreclosure order under the ordinary law when an equit- able mortgage was the subject of the foreclosure. The equitable mortgagee had not the legal estate in the land, and so the Court used to insert a direction that the mortgagor execute a convey- ance of the land. The proceedings for a foreclosure by order of the Registrar under the Transfer of Land Act resemble the proceedings for a foreclosure by order of the Court; but greater indulgence is shown to the mortgagor, for the order for fore- closure cannot be obtained until the land has been offered first

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But the indulgence of Chancery followed the mortgagor even after foreclosure of his right to redeem the land. The foreclosure order, as we have seen, operated only on the land. It did not affect, or purport to affect, the debt. It said in effect, "we are not going to help you further to get the land back, whether you pay the debt or not." The debt remained. The mortgagee could sue, and often did sue, on the covenants for payment - especially when he found the land unequal in value to the debt, and found the mortgagor able to pay the debt or part of it. In such a case, _ Chancery would " open the foreclosure " - if the mortgagor asked for it. It would, if the mortgagor asked for it, compel the mort- gagee, suing on the covenants, to reconvey the land to the mort- gagor, if and when the mortgagee had been paid all that was due to him; and if the mortgagee could not reconvey the land - if he had sold it after foreclosure - the Court would even restrain him by injunction from proceeding with his action on the covenants. It is because of this practice of the Court that conveyancers have been in the habit of recommending their mortgagee clients to bring their action on the covenants first, and to bring the suit for foreclosure afterwards for any deficiency. In some cases, how- ever, mortgagees have gone for foreclosure first, sometimes from motives of mercy to the mortgagors, sometimes from motives of business expediency. In the present case, the mortgagor has not made any claim to have the foreclosure opened, or to get back the land on full payment; but the mortgagee's counsel have intimated that their clients will retransfer on payment of the debt, and will eredit the mortgagor with all sums received or that might have been received for rent or otherwise. I can see nothing in the Act which would prevent the Court from following the old practice, from ordering the mortgagee to re-transfer the land to the mort- gagor after foreclosure, on being repaid his principal, interest and costs; and I can see nothing in the Act to prevent the Court from refusing to the mortgagee a judgment on the covenants for

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payment if, by reason of a sale effected after the foreclosure, he can no longer retransfer the land on full payment. In the present case, it is not pretended that the mortgagee can- not retransfer the land. The executors of the mortgagee are the registered proprietors. A retransfer of the land to the mortgagor would not involve a re-opening or disturbance of the register. All the registered transactions up to date would remain, There would be merely a registration of certain new instruments executed under the order of the Court. But even if it should be thought that the mortgagor can no longer demand an opening of the foreclosure, it by no means follows necessarily that the covenants have been released. I have asked counsel for the mortgagor to point out, if they could, any single point in which the machinery of the Transfer of Land Act clashes, ov is inconsistent with the right of the mortgagee to sue on his covenants after foreclosure; and they have been unable to indicate any such point. They merely rely on certain phrases, and inferences from phrases. By sec. 3: - " All laws Statutes Acts and rules whatsoever, so far as inconsistent with this Act, shall not apply . . . . to land under the operation of this Act." But the inconsistency must be demonstrated. Primd facie, when technical words are used in an Act, they are to be given their technical meaning, and to be treated as involving the usual consequences ; and the general policy of the law is not to be treated as altered unless you cannot give sense to the words of the Act otherwise (per Jessel M.R., Laird v. Briggs (1); Minet vy. Leman (2); Jay v. Johnstone (3) ). But it is not necessary to go even so far as this principle. It is sufficient to say that the mortgagee holds an unsatisfied covenant for payment, and there is nothing to be found in the Zransfer of Land Act enacting that the covenant is to be deemed satisfied. This is an action of debt on covenant. The usual pleas used to be payment (there has been no payment), release (there has been no release), accord and satisfaction (there has been some land acquired by the mortgagee, but there has been no accord, no agreement that the Jand shall be taken in satisfaction of the debt). I know of no

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would compel a mortgagee who has lent £1,000, and holds as security land worth £10, to take the land as a satisfaction of the debt, or else abstain from foreclosure. Why should foreclosure under the Act be treated as involving a release of the mortgage debt, when it does not involve it under the ordinary law? It is said that under this Act, as soon as a foreclosure order is made, the mortgage is treated as cancelled, is even marked " cancelled," and ceases to exist for all purposes. There is no authority given by the Act for any such marking or treatment. On the contrary, the Registrar has to keep the mortgage bound up in the register book (see. 55); and he has to make such notes in the book and on the instruments as will allow the title to be traced downwards from or upwards to the original grant (secs. 50, 78). Contrast secs. 93, 206, cases where cancellation of a instrument or a certificate is allowable, and see. 106 where provision is made for endorsing the word "surrendered." But it is said also that, under sec. 130, the mortgagee shall upon entry of the order for foreclosure "be deemed a transferree of the mortgaged land," and become the proprietor, and receive a certificate of title ; that under certain other sections a transferree of land takes on him all the burdens of his transferror as to the land, and that there- fore the mortgagee takes on himself the burden of his own debt, and the debt is merged. On this narrow plank of reasoning rests the whole of the doctrine that foreclosure operates as a release. If the Act did not say that on foreclosure the mortgagee is to be deemed a transferree of the land, the case for the defendant would not be arguable. If the defendant's argument is sound, it is extraordinary that no one ever discovered such a result in the foreclosure of land under the ordinary law. Under the ordinary law foreclosure operated as a transfer of all the interest of the mortgagor to the mortgagee: Heath v. Pugh (1); and under the ordinary law the purchaser of an equity of redemption, unless there be an express agreement to the contrary, becomes liable to indemnify the mortgagor against the mortgage debt: Waring v. Ward (2); Bridgman v. Daw (3). Ergo, according to the

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defendant's argument, under the ordinary law the mortgage debt was released. Yet under the ordinary law the mortgagee has always been able to recover on the covenants after foreclosure. It is obvious, to my mind, that no such implication of a promise to indemnify can be deduced from an order of the Court which merely gives effect to the rights of the parties, as from a transfer inter partes which rests on agreement. The mortgagor does not, on foreclosure, transfer the land to the mortgagee. It is the registration order which transfers it. It is at this point that I find what seems to me to be the fundamental fallacy of the defendant's contention. In other words, the presumption as to the intention of parties which arises in the case of documents made between the parties, documents which may be moulded by the parties so as to negative the presumption, cannot be applied to orders made by the Court, or by the Registrar of Titles as substituted for the Court. Moreover, it is to be noticed that according to see. 130 the mortgagee, on foreclosure, is to be deemed a transferree of the mortgaged land - not a transferree of "the estate and interest" of the mortgagor (as in sec. 89), or of the land "subject to the mortgage" (as in sec. 95). The distinetion between "land" and estates and interests in land is clearly marked throughout the Act (see, for instance, sec. 4 "land"; sees. 63,69, 73, 74). In ordinary transfers - instruments of transfer - the land is expressed to be transferred "subject to the encumbrances notified hereunder." The encumbrances are notified on the face of the instrument (sec. 89 and 6th Schedule) ; the certificate of title issued to the transferree shows the encum- brances on its face; and the transferree knows what incum- brances he has to meet. But the order for foreclosure issued by the Registrar to the mortgagee does not show the mortgage as an encumbrance. It is a clean, absolute, unimpeachable title ; and if the mortgagee after foreclosure sell the land, the purchaser from him does not by becoming registered come under any obligation to pay the mortgage debt. Sec. 89 relates merely to written instruments called "transfers" prescribing that the "estate and interest of the proprietor as set forth in such instrument" shall pass, &c.; and the instrument would set forth any existing

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instruments called "transfers," in cases where they are " subject to a mortgage." In such cases there is implied a covenant with the transferror to indemnify him ; and this implied covenant may be negatived - it is a matter for agreement between the parties (sec. 137). Sec. 118 relates to a sale under a power in a mortgage. The purchaser takes the "estate and interest of the mortgagor," and when registered is to be "deemed a transferree," but the section is express to the effect that he is freed from all liability on account of the mortgage. See. 188 merely provides for the registration of vesting orders. If, for instance, a trustee is out of the jurisdiction, or cannot be found, the Court or Commis- sioner can make an order vesting the "land, estate or interest " of the absent trustee in the new trustee; and the new trustee is to get just what the old trustee held, and no more. If in the name of the old trustee the land was stated to be subject to an encumbrance, the certificate of title issued to the new trustee would show that encumbrance. Sees. 225 and 226 provide machinery whereby a devisee of lands, under a will made before 1873, can become registered as proprietor, become the transferree of such land or estate. Here again the new certificate of title would show any encumbrance which the old certificate showed. Sees. 228 and 229 are to the same effect in the analogous cases. See. 230 is a drag-net section, obviously intended to provide that whatever burden the land was subject to in the hands of a trans- ferror it shall be subject to in the hands of the transferree. The words used are vague and wide, and it may not be easy to estimate their precise effect; but it is clear they refer to cases where' the encumbrance appears on the title, not to cases where, as under an order for foreclosure, the encumbrance no longer exists, and no longer appears on the face of the title. Under see. 74 the mortgagee having become the proprietor is to hold the Jand under such encumbrances as may be notified on the certifi- cate of title "but absolutely free from all other encumbrances whatsoever." The land is no longer under any liability to the mortgage debt; and there is no liability to indemnify against a debt which is not an encumbrance against the land. There is no need to imply an indemnity to the mortgagor; for if the mort- gagee do not sue, the mortgagor is not hurt; and if he do sue, the

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Court will treat the case as if there had been no foreclosure, as if the mortgagee were not freed from the mortgagor's right to redeem. If it was the intention of the legislature to create by the Transfer of Land Act an absolutely new and complete code of Jaw with regard to land under its provisions, or, as to land fore- closed, to prevent the mortgagee from suing on the covenants after foreclosure, it is hardly likely that it would have trusted to infer- ence from the meaning of the phrases which are relied on by the appellant. It is to be presumed rather that the legislature knew of the rule established by the long course of practice in England and Victoria, and did not intend to disturb it: Rolfe v. Flower (1). 'This view is confirmed by the expression used in sec. 124 saving the rights and liabilities of mortgagees after entry on the register of an order for foreclosure. But I do not wish to base my judg- ment on this clause, as possibly it is susceptible of a narrower meaning. It is, moreover, clear that this Act was not intended to be a complete self-sufficing code of law for land under its operation. The old law as to land and as to contracts was to remain except so far as inconsistent with this Act (sec. 3). The words of the Act assume that the law as to a husband's rights in his wife's land would remain, and merely regulate procedure for registration (sees. 228 and 229). They assume that the Statute of Uses would apply, and therefore negative it (sec. 91). They assume that the law as to conveyances by married women would apply, and regulate it (sec. 92). They assume, without saying it, that the Courts will enforce equitable mortgages by deposit: London Chartered Bank of Australia v. Hayes (2). They assume that equity will interfere with registered proprietors by enforcing . a trust or a contract, or by rectifying the consequences of fraud or mistake. There is no enactment that a mortgagee in posses- sion shall be liable for wilful default; for it is assumed that the ordinary equitable vale will apply. The purpose of the Act is well expressed in the preamble: - *" Whereas it is expedient to give certainty to the title to estates in land and to facilitate the proof thereof and also to render dealings with land more simple and less expensive." There is no indication of any intention to alter the obligation of contract.

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Court

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Judgment (111 paragraphs)

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