Garnock & (3) Ors v Black &

Blackwood v London Chartered Bank of Australia (1874) LR 5 PC 92 CASES CITED : Breskvar v Wall (1971) 126 CLR 376 IAC (Finance) Pty Limited v Courtenay (1963) 110 CLR 550

Bruce Lachlan Garnock - First Plaintiff Sarah Jane Garnock - Second Plaintiff Robert Leonard Luff - Third Plaintiff Lynette Anne Luff - Fourth Plaintiff Stuart Alexander Black - First Defendant PARTIES : Vaughan Lee Chapman - Second Defendant Andrew Phillip Carter - Third Defendant The Sheriff of New South Wales - Fourth Defendant Marilyn Claire Smith - Fifth Defendant

A J Grant - Plaintiffs J Stoljar and K Dawson - First, Second and Third Defendants COUNSEL : N/A - Fourth and Fifth Defendants

JMA Legal - Plaintiffs SOLICITORS : Stephen Blanks & Associates - First, Second and Third Defendants N/A - Fourth and Fifth Defendants

• 3 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

5164/05 BRYCE LACHLAN GARNOCK & (3) ORS) v STUART ALEXANDER BLACK & (4) ORS

EX TEMPORE JUDGMENT 1 HIS HONOUR: Pursuant to r 28.2 of the Uniform Civil Procedure Rules 2005 (NSW) I ordered that the following question be determined separately and before further trial in these proceedings: have the plaintiffs acquired title to the land as defined in paragraph 1 of the amended summons within the meaning of s 112(2) of the Civil Procedure Act 2005 (NSW)? 2 For the purpose of determining the preliminary question it is necessary to describe some basic facts. Those relevant facts are best understood by reference to the following chronology of events:

17 September 2004: The first, second and third defendants Messrs Black, Chapman and Carter, trading as Chapman & Eastway, obtained in the District Court of New South Wales judgment in the sum of $228,519.68 against the fifth defendant, Mrs M C Smith and her husband, P Smith. Mrs Smith was and is at the present time the registered proprietor of rural land known as "Wanaka" being lots 2, 109 and 110 at South Bukalong in New South Wales, being the land comprised in folio identifiers 2/594272, 109/658087 and 110/658088.

15 July 2005: The plaintiffs as purchasers exchanged a contract for the sale of land known as "Wanaka" to them for the sum of $1 million and paid a ten per cent deposit of $100,000. The date for completion of the contract was the 42nd day after 15 July 2005 being 26th August 2005, but the date for settlement was subsequently brought forward to 24 August 2005.

23 August 2005: At the request of the solicitors for Messrs Black, Chapman and Carter the District Court issued on that day a writ for the levy of property on Mrs Smith.

24 August 2005: Between 8:53 and 8:55 am the solicitor for the plaintiffs obtained final searches of "Wanaka" which disclosed nothing materially adverse. At 9:21 am Mr S J Blanks, the solicitor for Messrs Black, Chapman and Carter, had a telephone conversation with Ms M J Gill, solicitor for the plaintiffs, in which he told Ms Gill that his clients were judgment creditors of the vendor, Mrs Smith; his clients had served a bankruptcy notice against Mrs Smith; the judgment was for about $228,000 in September 2004; unless satisfactory arrangements were made, Mrs Smith would be declared bankrupt and the sale of "Wanaka" was liable to be set aside; and the District Court had made a charging order on that day over the deposit held by the agent. No mention was made of the writ or of the intention to register it with the Registrar General under s 105 of the Real Property Act 1900 (NSW). At about 9:30 am Mr S A Black, the first defendant, had a telephone conversation with Mr G J Main, solicitor for the plaintiff, in which he repeated much of the previous conversation between Mr Blanks and Ms Gill and indicated that he was putting Mr Main on notice that they intend to stop the sale. At about 10:40 am during a further telephone conversation Ms Gill asked Mr Blanks to fax a copy of the charging order, which was then sent at about 10:59 am. At about 11:53 am, unbeknown to the plaintiffs or their solicitors, the writ was registered in the Register maintained by the Registrar-General and allocated registration number AB18530P. At about 2:00 pm the plaintiffs completed the purchase of the land from Mrs Smith and the balance of the purchase price was paid. 26 August 2005: Having received the certificates of title, transfers and other documents, Ms Gill forwarded them to her Sydney registration agents, Lawpoint Galloways, for registration. On the same day the writ was delivered to the Sheriff.

8 September 2005: Ms Gill received a letter from Lawpoint Galloways stating that because of the registration of the writ, the plaintiffs' transfers and other documents lodged could not be registered. 3 The effect of the forwarding of the writ under s 105 of the Real Property Act is that, although the writ does not create any interest in the land, it enables the Sheriff to sell the land and the person purchasing at such a sale takes the estate or interest then appearing upon the Register. Section 105A(2) relevantly states: Where a writ is recorded under s 105 (in a dealing to which by the operation of subsection (1) this subsection does not apply) that affects the land to which the recording relates is lodged for registration within the protected period the Registrar-General shall not, during the protected period, register the dealing unless the writ is referred to in the dealing as if it were a prior encumbrance. 4 The protected period is the period of six months after the writ is recorded in the Register or on the expiration of the writ, whichever occurs first: s 105A(9). 5 The question for determination raises for consideration s 112(2) of the Civil Procedure Act which relevantly states: Despite subsection (1), a writ of execution does not affect the title to land acquired by a person in good faith and for valuable consideration unless, when the person acquires title, he or she has notice that such a writ has been delivered to the Sheriff and remains unexecuted. 6 The question is, therefore: have the plaintiffs acquired title to the land within the meaning of s 112(2) of the Civil Procedure Act before registration of the writ? The parties have made some helpful and complete submissions on the question and it is appropriate that I decide the question now since this will have some influence on the further conduct of the case. 7 For the purpose of determining the preliminary question I am prepared to assume that the plaintiffs are purchasers in good faith and for valuable consideration. I am aware that there is an issue between the parties as to whether this is so, but it is not necessary for me to resolve that issue for the purpose of determining the question now before me. 8 It is submitted on behalf of the plaintiffs that on its true construction, "title" in s 112(2) of the Civil Procedure Act includes but it is not limited to the title obtained upon registration under the Real Property Act. This is said to be especially so as s 112 mirrors s 109(2) of the Act and those provisions concerning the effect of a writ against goods. It is to be noted that title to goods passes, usually, by transfer or delivery. There is of course, as pointed out by Mr A J Grant, counsel for the plaintiffs, no registration requirement for the acquisition of title to goods. 9 The plaintiffs then rely upon s 43A of the Real Property Act and say that this operates to give the plaintiffs the legal estate or title to the land which they were then entitled to perfect by registration. It is said that although not perfected, legal title had substantially be obtained. Reference is made to the well known case of IAC (Finance) Pty Limited v Courtenay (1963) 110 CLR 550, especially at 584 per Taylor J. 10 It is also said on behalf of the plaintiffs that in any event, on 24 August 2005 upon payment of the balance of the purchase price the plaintiffs became the full beneficial owners of "Wanaka" and acquired an equitable title and that s 112 of the Civil Procedure Act does not explicitly refer only to legal as distinct from equitable title. 11 Finally, it is submitted that the construction contended for is consistent with the rule at the relevant time for notice under s 112(2) is the time of the payment of money. Reliance is placed upon Blackwood v London Chartered Bank of Australia (1874) LR 5 PC 92 at 111. I note, however, in that case that the Privy Council was dealing with old system land. 12 In my view the question is resolved by the use of the word "title" in s 112(2) of the Civil Procedure Act; that is: "despite subsection (1) a writ of execution does not affect the title to land acquired by a person in good faith and for valuable consideration…" 13 As Mr J Stoljar, appearing with Ms K Dawson for the Messrs Black, Chapman and Carter, has pointed out, since Breskvar v Wall (1971) 126 CLR 376 it has been the position that the Torrens system of which the Real Property Act is a form is not a system of registration of title but a system of title by registration. I refer, in particular, to the judgment of Barwick CJ (at 385 and 386): The Torrens system of registration title to which the Act is a form is not a system of registration of title but a system of title by registration. That which the certificate of title describes is not the title which the registered proprietor formerly had, or which but for registration would have had. The title it certifies is not historical or derivative. It is the title which registration itself has vested in the proprietor. 14 The comparison with the effect of a writ against goods is valid. As noted above, it is usual that title to goods passes upon transfer or delivery. In the case of property under the Torrens system, however, title to property passes upon registration. This is to be contrasted with land which is under the old system, when title passes upon the payment of the purchase price and delivery of the deed of conveyance. 15 It is noted that whilst the plaintiffs may have acquired either an equitable interest or a "legal estate" (to use the words of s 43A of the Real Property Act), that does not equate to "title". It is the choice of the word "title" in s 112(2) of the Civil Procedure Act which I think is conclusive. The legislature could have chosen different language when drafting s 112 (such as "legal estate") but it did not. "Title" is only acquired upon registration. 16 Moreover, s 43A operates to confer a legal estate upon the taking by a person "under a dealing registrable". When the plaintiffs took the transfer it was not a "dealing registrable", since the writ had been registered, the existence of which prevented the transfer from being registrable. 17 That means that the preliminary question must be answered in the negative. That is, the plaintiffs have not acquired title to the land within the meaning of s 112(2) of the Civil Procedure Act.

I hereby certify that the preceding 17 paragraphs are a true copy of the reasons for judgment herein of the Honourable Mr Justice D H Lloyd.

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