I can find nothing in the Real Property Act 1900 which is inconsistent with an unregistered second mortgagee being able to make application for an order for sale under section 103. Thus, section 6(1) does not provide a reason for section 103 not being available in the present case.
73 Part 7 Division 1 of the Conveyancing Act 1919 stretches from section 90 to section 104 inclusive. Section 90 says:
"The provisions of this Division apply to and in respect of mortgages of and charges on land under the Real Property Act 1900 only to the extent specified in those provisions."
74 The only statement in section 103 about its application to Real Property Act 1900 land is that contained in section 103(7):
"(7) Except as provided by section 101, this section applies only to charges imposed under section 88F on land which is not under the provisions of the Real Property Act 1900 ."
75 There is some difficulty in construing section 103(7): Aitken, "Mortgagor's Rights" (2000) 74 ALJ 226 at 227. However, one thing which is clear about it is that it does not specify that section 103 applies to unregistered mortgages (or indeed any mortgages) under the Real Property Act 1900. And section 90 requires there to be a positive specification in section 103 that it applies to Real Property Act 1900 land, before it applies. If follows, in my view, that section 103 does not, in its terms, apply to such unregistered mortgages.
76 This conclusion is the same as the conclusion reached, for a different reason, by Young J in Yarrangah Pty Ltd v National Australia Bank Ltd (1999) 9 BPR 17,061; [1999] NSWSC 97 at [22].
77 It also accords with the view expressed by Steytler J in Sandgate Corporation Pty Ltd (in liq) and Others v Ionnou Nominees Pty Ltd and Others (2000) 22 WAR 172 at 187-189. Though Steytler J held that the Western Australian equivalent of section 103 applied to Torrens Title land, he distinguished the context in which that section appears in the West Australian statute from the context in which section 103 appears in the New South Wales statute, and because of those differences found that the view expressed by Young J. in Yarrangabah did not apply to the Western Australian legislation.
General Law Jurisdiction to Order Sale?
78 In Yarrangah Pty Ltd v National Australia Bank Ltd (1999) 9 BPR 17,061; [1999] NSWSC 97 Young J considered a mortgagor's application to restrain a mortgagee from exercising, out of court, a power of sale of the mortgaged property. Though his Honour concluded that there was no basis for restraining the mortgagee from exercising the power, he gave consideration to whether there would be jurisdiction for the court itself to order a judicial sale of the property at the suit of the mortgagor, and held that there probably was jurisdiction to order judicial sale. From the context, it is clear that his Honour regarded this jurisdiction as being part of the jurisdiction of the Court to apply the principles of the law of equity. His Honour also held, however, that the circumstances of the case before him did not justify the making of such an order. It was these remarks which were followed by Wood CJ at CL in Guardian Mortgages v Miller, as mentioned at para [38] above.
79 No party argued that Part 30 of the Supreme Court Rules 1970 provided a jurisdictional basis for the order. That Part, which is reproduced in substance in Part 27 UCP Rules, allows the court to make orders for the disposal of land in certain circumstances. It is derived from section 55 of the Chancery Procedure Act 1852 (Imp). It does not seem to provide a promising candidate for a basis for the jurisdiction in the present case: notes to section 14 Equity Act 1901 in Parker's Practice in Equity (NSW) 2nd edition 1949 page 21-22.
80 In the present case, the mortgage of the second mortgagee contains a contractual power of sale. In itself, that provides a basis for the Court to have jurisdiction to make an order for sale of the mortgaged property, by way of an action for specific performance.
81 Another route leads to this same conclusion. The interest of a mortgagee of Torrens title land is only ever, even when the mortgage is registered, in the nature of a statutory charge, together with some of the attributes of an old system mortgage that are not inconsistent with the Torrens system and such equitable rights as arise from the contract between the mortgagor and mortgagee. An unregistered mortgage will likewise be regarded by equity as conferring an equitable charge together with some of the attributes of an old system mortgage that are not inconsistent with the Torrens system and such equitable rights as arise from the contract between the mortgagor and mortgagee. As seen earlier (para [53] above), an order for judicial sale is the standard way of enforcing an equitable charge. Indeed, the Court can order sale even where there is a charge or lien which expressly excludes the right to a legal mortgage: Tenant v Trenchard (1869) LR 4 Ch App 537.
82 I conclude that the Court has jurisdiction to order a sale at the suit of an unregistered mortgagee of Real Property Act 1900 land. However, further consideration will need to be given to the circumstances in which, and terms on which, it is proper to make such an order. In particular, consideration will need to be given to the precise interest in the land over which the unregistered mortgage has been granted that can be ordered to be sold.
Service of Notice Under Section 57(2)(b) or 111(2)(b)?
83 One ground upon which the mortgagors attack the order made below is that no proper notice under either section 57(2)(b) Real Property Act 1900, or under section 111(2)(b) Conveyancing Act 1919, was served on them.
84 The notices required by those sections are statutory preconditions for the exercise of the power of sale conferred by, respectively, section 58 Real Property Act 1900, and section 109 Conveyancing Act 1919. Each of those sections are ones which confer on a mortgagee power to sell the mortgaged property out of court. The exercise of the Court's equitable jurisdiction to order a sale of mortgaged property does not depend upon the service of notices under those statutory provisions. I respectfully agree with Guardian Mortgages v Miller [2004] NSWSC 1236 at [86] in this respect.
85 In fact, at the time of service of the Statement of Claim initiating these proceedings, the second mortgagee served on the mortgagors a document which purported to be a notice pursuant to both section 57(2)(b) Real Property Act 1900 and section 112(2)(b) Conveyancing Act 1919. Though criticisms were made by Mr Knaggs of the validity of this notice, it is not necessary to deal with those criticisms, as the second mortgagee does not seek to support the decision below on the basis that a valid statutory notice was served.
Significance of First Mortgagee Not Being a Party
86 Calvert, A Treatise upon the Law respecting Parties to Suits in Equity (2nd ed, London, 1847) at p 15 -16 states the principle by reference to which one decides what parties need to be joined in an action by the holder of a second or subsequent security to enforce his interest:
"… an incumbrancer, who merely desires to establish his charge, need not make a prior incumbrancer a party. Although he pray for satisfaction of his charge, the presence of the prior incumbrancer will not be required. The same rule is applicable, if he prays that, for the purpose of raising the amount claimed by him, a portion of the estate be sold subject to prior incumbrances. But if in the course of the suit he intends to apply for a receiver of the general proceeds of the estate, he proposes in that step to interfere with the interests of prior incumbrancers, and must for that purpose make them parties to the record: Gibbon v Strathmore , VC England 23 April 1841."
87 This is an application of a fundamental requirement for the exercise of a court's powers that a person whose rights will be affected by an order sought in proceedings should be a party to those proceedings.
88 Thus, in a suit for foreclosure, all persons interested in the equity of redemption, including the mortgagor, must be before the Court: Farmer v Curtis (1829) 2 Sim 466; 57 ER 862; Cropper v Mellersh (1855) LJ Ch 430; Moore v Morton [1886] WN 196; Setons Judgments and Orders 7th ed 1912 p 1858. That is because they are all people who are interested in the taking of the account, and also because they are the people whose rights in the property will cease if the foreclosure order is made.
89 Under the general law, a second or later encumbrancer may foreclose the mortgagor and those subsequent, without joining any encumbrancers prior to themselves: F&L [22.6]; Rose v Page (1829) 2 Sim 471; 57 ER 864; Slade v Rigg (1843) 3 Hare 35 at 38; 67 ER 286 at 287. However, that is so because a prior encumbrancer can suffer no detriment to his legal rights if an order for foreclosure of interests below him is made. The first mortgagee still has the legal estate, to secure the debt that is owed to him. Even if a third mortgagee forecloses a fourth mortgagee and the mortgagor, that does not affect the second mortgagee, because the second mortgagee still has the right to redeem the first mortgagee, and foreclose the third mortgage.
90 Sometimes, rules of court make exceptions to this requirement for all persons interested in the relief claimed in the suit to be parties. Thus, there is sufficient representation of parties if the beneficiaries of an interest in the land which is held on trust are represented by the trustee, in accordance with a rule of Court: Wilkins v Reeves (1855) 3 WR 305. In an Irish case, it was held that it was possible for a first mortgagee to be bound by an order for sale of the mortgaged property obtained by a subsequent mortgagee, in proceedings to which the first mortgagee was not a party, if a particular form of notice was given to the first mortgagee - however that was only because of a specific provision of the rules relating to the administration of equity in Ireland, and the giving of informal notice of the order for sale to the first mortgagee did not suffice: Duff v Devlin [1924] IR 56. However, there is no such rule of court which applies here.
91 In the present case, the first mortgagee is a necessary party to an action seeking an order for sale of the entire interest in the property. The orders which were made in the present case are ones which could result in the interest of the first mortgagee in the land being terminated, as a consequence of a transfer to a purchaser, which was authorised by the orders, becoming registered. That result could arise even if the sale proceeds were insufficient to pay out the interest of the first mortgagee. Particularly is that so when the orders empowered the second mortgagee to sell the land "either by public auction or by private contract on such terms as the Plaintiff may think fit". That termination of the interest of the first mortgagee could follow from the orders even if the first mortgage had a high interest rate or some other feature which was attractive to the first mortgagee, and the first mortgage did not want the mortgage to be paid out on any basis other than those contractually agreed between the mortgagor and the first mortgagee, or available to the mortgagor as a matter of law, eg under section 93 Conveyancing Act 1919.
92 The court does not take away property rights of a person, without specific statutory authority, in proceedings to which that person is not a party. The absence of the first mortgagee from the proceedings is a fundamental flaw to the order for sale which was made in the present case. It is not cured by having given informal notice of the Notice of Motion to the first mortgagee.
93 Even if the first mortgagee were a party, it does not follow that an order for sale of the entirety of interests in the mortgaged land would be made at the suit of the unregistered second mortgagee. Langton v Langton (1855) 3 WR 222; 3 Equity Reports 394 held that when proceedings were brought for the administration of a deceased estate, to which an equitable first mortgagee of an interest in an asset of the estate was party, the court should not order a sale of the mortgaged property in such a form as to oblige the mortgagee to concur in the sale - it should be either a sale subject to the mortgage, or, with the consent of the mortgagee, free from the mortgage.
94 To similar effect is Wickenden v Rayson (1855) 6 De G M & G 210; 43 ER 1212. That case was a suit for the administration of real estate subject to various securities. Lord Cranworth LC at 213 of De G M & G; 1214 of ER referred to
"… the clear rule of the Court, that a sale cannot be directed against a mortgagee without his consent. The only difference in practice in cases of this kind was, that where the mortgagee was a party to the suit, the Court would not make the order in the usual alternative form, but would put it at once to the mortgagee whether he would consent to a sale or not."
95 The "usual alternative form" which Lord Cranworth LC referred to was a form of order whereby:
"… the estate is ordered to be sold free from the incumbrances, if any, of such of the incumbrancers as shall consent to the sale, and subject to the incumbrances of such of them as shall not consent, leaving the incumbrancers to consent at Chambers to the sale, if they think fit." ( Seton's Judgments and Orders , 7th ed 1912 p.332).