Lapin v Abigail [1930] HCA 6

Solicitors for the appellant, Minter, Simpson & Co. Solicitor for the respondent, W. H. Sharwood, Commonwealth Crown Solicitor. %

ON APPEAL FROM THE SUPREME COURT OF NEW SOUTH WALES.

as security only - Registration - No caveat lodged by transferor - Subsequer unregistered mortgage from registered proprietor of land to third party - evidence as to search by third party for caveats - Priority of equities - Neglig

• Estoppel - Notice - Onus of proof - Real Property Act 1900 (N.S.W.) 25 of 1900), sec. 43.*

Money-lender - Solicitor - Loan transactions - Nature of transactions and ing cireumstances - Question of fact as to whether " money-lender ™- proof - Money-lenders and Infants Loans Act 1905 (N.S.W.) (No. 24 of 19 sec. 8.*

The registered proprietors of land under the Real Property Act 1900 (N.S. by transfers absolute in form and expressed to be made in consideration 0 money payment, transferred the land to the nominee of a creditor as s@

*The Real Property Act 1900 (N.S.W.) provides, by sec. 43, as follows: "Except in the case of fraud no person contracting or dealing with or taking or proposing to take a transfer from the

registered proprietor of any estate or interest shall be required o in any manner concemed to inquil ascertain the circumstances in or consideration for which such

for the debt. 'The transferee was registered as proprietor in pursuance of the transfer. The creditor without the knowledge or consent of the transferors, who had lodged no caveat, raised a loan for himself upon the security of the land and caused his nominee as the registered proprietor to execute a regis- trable mortgage over the land in favour of the lender. The lender did not register his mortgage and he did not, before taking it, search the register, ascertain that the title was free of caveats, or see the contents of the transfers,

Held, by Knox C.3., Isaacs and Dixon JJ. (Gavan Duffy and Starke JJ. dissenting), that the unregistered security of the lender did not take priority of the transferors' equitable right to redeem, inasmuch as -

(1) Both were equitable rights or interests and the earlier of them in time prevailed unless its priority was lost ;

(2) Its priority was not impaired by the transferors parting with the legal estate and causing the party who gave the unregistered mortgage to be regis- tered as proprietor of the land, because possession of the legal estate can be no ground for assuming that the legal estate is not subject to equitable rights in others ;

(3) Its priority was not lost by the transferors' failure to caveat or by the statement of the consideration in the transfers, because the lender did not act upon the faith of the title being free of caveats or of the contents of the transfers ;

(4) Sec. 43 of the Real Property Act 1900 protects registered dealings only.

The lender, a solicitor, obtained a finding in the Courts below that he took bona fide and without notice of the outstanding equities, although he did not call as a witness his clerk who conducted the business.

Held, by Knox C.J. and Dixon J., that although the evidence was unsatis- factory it was unnecessary to decide whether he had discharged the burden of proof upon this issue, because, even so, he failed to show that his unregistered mortgage gained priority, and, further, by Isaacs J., that the finding could

Before the lender took his unregistered mortgage, a loan had been raised from a bank without the consent of the transferors, but this loan was secured by a

owner or any previous registered owner ing, or who advertises or announces

or was registered, or to see to the application of the purchase-money or any part thereof, or shall be affected by notice direct or constructive of any trust or unregistered interest, any rule of law or equity to the contrary not- withstanding ; and the knowledge that any such trust or unregistered interest. is 'in existence shall not of itself be imputed as fraud."

The Money-lenders and Infants Loans Act 1905 (N.S.W.) provides, by sec. 8, as follows: "The expression 'money-lender' in this Act shall include every person or company

himself or holds himself out in any way as carrying on that business, but shall not include - (a) any pawn- broker . or (b) any registered society . or (c) any body cor- porate, incorporated or empowered by a special Act of Parliament, to lend money in accordance with such special Act; or (d) any person or company

bona fide carrying on any business not having for its primary object the lending of money, in the course of which and for the purpose whereof money is lent."

registered mortgage. The mortgage to the bank was paid off when the ad was made by the lender and was discharged. It appeared probable that it so paid off out of the moneys so advanced, but certain evidence had b rejected and it did not appear whether the lender had made his advance upo the faith of obtaining a first mortgage and whether his money had accordingly been applied in discharge of the bank's mortgage.

Held, by Knox ©.5. and Dizon J., that an inquiry should be ordered at risk of the lender to ascertain whether he was entitled to a change in resp of moneys so applied ranking in priority to the transferors' equitable rig to redeem.

A solicitor repeatedly lent large sums of money at interest in the course: his business, but the Courts below held that in all the circumstances it was established that he carried on the business of a money-lender within the meaning of the Money-lenders and Infants Loans Act 1905 (N.S.W.).

Held, by Knox C.J., Gavan Duffy, Starke and Dizon JJ. (Isaacs J. doubting), that the finding should not be disturbed,

Decision of the Supreme Court of New South Wales (Full Court): Lapin y, Heavener, (1929) $.R. (N.S.W.) 514, reversed, except on the last point.

A suit was brought in the Supreme Court in its equitable j diction by Mark Lapin and Pearl Lapin, his wife, against Olivi Sophia Heavener, Bertram Theodore Heavener, Ernest Robert Abigail, Alexander McKeachie, Lazarus Harris and the trar General.

On and before 5th December 1923 Mark Lapin and Pearl Lapin

land comprised in certificates of title reg. vol. 2450 fol. 52 and certificate of title reg. vol. 3337 fol. 97, under the Real Property Ad

was at that time indebted to Bertram Theodore Heavener, a solici in a considerable sum in respect of costs. On 5th December Ii the Lapins, by transfers in the form prescribed by the Act, transfen the said lands to Olivia Sophia Heavener, the wife of the abov named Bertram Theodore Heavener. These transfers, thou absolute in form, were found by the trial Judge to have been giv as security only for payment of the above-mentioned costs and t amount owing to the Union Bank. The mortgage to the Bank 1 paid off and the transfers to Mrs. Heavener were registered on 18th

December 1923. By memoranda of mortgage dated 14th March 1. ©. oF A.

1924 Mrs. Heavener mortgaged the land to the English, Scottish and Australian Bank. These memoranda of mortgage were registered on 14th August 1925, and on 2nd September 1925 they were discharged; and on the same day Mrs. Heavener executed in favour of Abigail a memorandum of mortgage over the said lands to secure repayment of £5,500. This memorandum of mortgage was never registered. It did not appear how or out of whose money _ the English, Scottish and Australian Bank was paid off, but the sum of £3,500 was paid by Abigail into Heavener's bank account on 2nd September and the balance of £2,000 on 7th September 1925. On 4th September 1925 Abigail's clerk, on behalf of Abigail, lodged a caveat against dealing with the said lands. On 16th October 1925 Lapin commenced proceedings in equity against Heavener for an injunction. Abigail was Heavener's solicitor in those proceedings. On 30th November 1925 Abigail advanced to Heavener a further sum of £1,000, and memoranda of mortgage over the above-mentioned lands were on that day executed by Mrs. Heavener in Abigail's favour to secure the repayment of £6,600. These memoranda were never registered. On 1st December 1925 Abigail caused a caveat to be lodged claiming an interest under such memoranda. In 1927 the Lapins instituted a suit in equity against Heavener and his wife, Abigail and others, the plaintifis claiming a declaration that the memoranda of transfer from them to Mrs. Heavener were void and that the plaintiffs were respectively entitled to be registered as proprietors in fee simple of the lands in question freed from the mortgage to Abigail. The plaintifis alleged that the transfers to Mrs. Heavener were obtained by means of representations by Heavener that they were memoranda of mortgage, and that the plaintiffs did not knowingly sign transfers of the lands in question, that Abigail took with notice of the facts alleged ; and further that Abigail, when he obtained his securities, was carrying on the business of a money-lender within the meaning of the Money-lenders and Infants Loans Act 1905 (N.S.W.) and was not registered. The appellants had not lodged a caveat with respect to the lands in question, and Abigail before advancing the money to the Heaveners had not searched for one.

The suit was heard by Long Innes J., who made.a decree declarin, in effect that Mrs. Heavener held the respective parcels of land i question in trust for the respective plaintiffs subject, so far as i relevant to this appeal, to the mortgage given by Mrs. Heaven to the defendant Abigail dated 2nd September 1925. 3

From this decree the plaintiffs appealed to the Full Court of th Supreme Court, which dismissed the appeal: Lapin v. Heavener (1).

The appellants, Lapin and his wife, now appealed to the H Court from the decision of the Full Court.

Other material facts are stated in the judgments hereunder.

Evatt K.C. and Miller, for the appellants. This is a matter whidl involves two competing equities, that of the appellants' being prior in time. Although had the respondent searched the register h would not have found any caveats registered against the subjec lands, the fact remains that he did not search ; therefore he took the risk of whatever equitable interests might be outstanding (National Bank of Australasia Ltd. v. Joseph (2)). The evide

of at least one of the subject properties; which is an additio reason why the respondent's equity should not be given priori (National Bank of Australasia v. Joseph (3) ). There is no evide that the respondent saw the transfer in respect of that property That is a vital difference between the facts in this case and those in _ Barry v. Heider (4) and Great West Permanent Loan Co. v. Fi (5). A prudent lender should search up to the moment of lendi for notification of bankruptcies and caveats. The main princi is stated by Lord Cairns L.C. in Shropshire Union Railways a d Canal Co. v. The Queen (6). As the respondent omitted to search the register, the maxim Qui prior est tempore potior est jure applies. A person claiming priority for an equity later in time must show

act or default on the part of the holder of the equity earlier in ti by which he was induced to act to his detriment. Not having availed himself of the precautions allowed to him by law in order to

(1) (1929) 29 S.R. (N.S.W.) 514, (3) (1922) S.A.L.R. 578. (2) (1918) SALR. 72; (1919) (4) (1914) 19 CLR, 197, SA.L.R. 309; (1922) S.A.LR. 578. (5) (1925) A.C. 208.

protect himself from all risk, the respondent is estopped from setting up misconduct or negligence on the part of the appellants (Burgis vy. Constantine (1) ). There is no evidence that any representations were made by the appellants to the respondent or that the latter lent the money to Heavener on the faith of the documents ; which constitutes a further distinction between this case and Barry v. Heider (2) and Great West Permanent Loan Co. v. Friesen (3). The trial Judge found as a fact that the original agreement between the appellants and Heavener did not contemplate the registration of the transfers. The respondent acted upon representations made to him by Heavener unknown to and unauthorized by the appellants. [Isaacs J. referred to Commonwealth Trust Lid. v. Akotey (4).]

The application in that case of the doctrine laid down in Lickbarrow vy. Mason (5) was dealt with by Lord Sumner in R. E. Jones Ltd. v. Waring & Gillow Lid. (6). Even if the appellants were negligent, the negligence of the respondent in not searching brings the case within Clarke v. Palmer (7). The respondent was not influenced either in his belief or his conduct by any representations which the appellants may have made, and therefore they are not responsible for anything done by the respondent to his prejudice or detriment (Spencer Bower on Estoppel by Representation, p. 120, par. 137). The four suggested principles relied upon by the respondent, namely, (1) that the statutory provision in sec. 43 of the Real Property Act 1900 protects him ; (2) that the appellants are estopped by their conduct (Barry v. Heider (8) ) ; (3) that the appellants were guilty of negli- gence in not filing a caveat to protect their equitable interests in the Jand, and (4) that on a comparison of the merits of the parties the respondent should be preferred, do not afford any ground for departing from the rule Qui prior est tempore potior est jure (Gibbs v. Messer (9) ; Waimiha Sawmilling Co. v. Waione Timber Co. (10); Commissioner of Stamp Duties (N.S.W.) v. Thomson (11); Toohey v. Gunther (12) ).

(1) (1908) 2 K.B, 484, per Farwell (6) (1926) A.C. 670, at pp. 692-693. L.J. at p. 501. (7) (1882) 21 Ch, D. 124.

(2) (1914) 19 C.L.R., at pp. 201-202, (8) (1914) 19 C.L.R. 197.

(4) (1926) A.C. 72. (10) (1926) A.C. 101, at p. 106.

(5) (1787) 2 T.R. 63; 100 E.R. 35. (11) (1927) 40 C.L.R. 394.

Secs. 41 and 43 of the Real Property Act 1900 must be read toget The appellants owed no duty to the respondent. The mere that the appellants could have had protection by lodging a ca does not indicate negligence on their part in omitting to do so v. Brassware Ltd. (1)). As to the practice of searching, g Beckenham and Harris on The Real Property Act (N.S.W.), pp. 117, 253, 254. It does not necessarily follow that because a p holds the indicia of title (i.e., legal title) to property that he is th beneficial owner thereof (Burgis v. Constantine (2)). As the appel lants were in possession of part of the subject property at the rele times, the respondent's title to that part, at least, must be subject to whatever right the appellants had therein (National Bank of Australasia Ltd. v. Joseph (3) ). It is very apparent that the doer ment set up by the respondent as his security has on a number: occasions been altered in material particulars, and it would that such alterations were effected subsequent to execution.

The onus is on the respondent to show that he is not a " mone lender " within the meaning of the Money-lenders and Infants Loa

and continuity ; and there is no evidence to show that such loan were made for the purposes of the respondent's business as a solicit The test to be applied is: is it necessary for a solicitor to lend m in order to carry on the business of a solicitor? The fact that some loans were made to hotelkeepers who were clients of the res does not determine the question. Nor is the fact that the respondent is a solicitor conclusive evidence that he is not also a money-lendet within the meaning of the Act (Newton v. Pyke (5); Edgelow vy. MacElwee (6)). The evidence shows that the respondent wa carrying on two businesses, that of a solicitor and that of a mo lender. [Drxon J. referred to Bonnard v. Dott (7).]

That case was considered in Kerr v. Louisson (8), where, on facts similar to the facts in this case, it was held that the defend

(1) (1926) 26 S.R. (N.S.W.) 449, at p. (4) (1911) 105 L.-T. 583. 452. (5) (1908) 25 TLR. 127. (2) (1908) 2 K.B., at p. 501. (6) (1918) 1 K.B, 205.

(3) (1922) S.A.LLR., at p. 583. (7) (1906) 1 Ch, 740,

a solicitor, was also a money-lender. The fact that people went to H. ©. or A.

the respondent for a particular kind of loan must be taken as evidence that he held himself out as being willing to lend money (Bonnard v. Dott (1) ).

[Dixon J. referred to Bonnard v. Dott as reported in the Times Law Reports (2).} It is a fair inference from the nature and form of the securities taken by the respondent that the loans were not "occasional" loans. The case of Lodge v. National Union Investment Co. (3) is not applicable to this case.

Teece K.C. (with him Mason), for the respondent. When dealing with competing equities the principle to be considered is: was the holder of the prior equity guilty of improper conduct by which the holder of the later equity was induced to act to his prejudice? (See Rice y. Rice (4).) Here the appellants are responsible for the position in which the respondent finds himself, either by their own conduct or the representations made by Heavener (Hunter, Curling and Darnell v. Walters (5); Capell v. Winter (6).) The fact that the appellants executed transfers in absolute form in favour of Heavener is, in the circumstances, sufficient to take the matter out of the operation of the rule Qui prior est tempore potior est jure (Halsbury's Laws of England, vol. xut., p. 77). Burgis v. Constantine (7) was a case in which the registered owner of the property was an express trustee, and the observations of Farwell L.J. (8) do not apply to a case in which the beneficial owner vests the real estate in a person who is not his express trustee. Heavener was not an express trustee but a mortgagee.

Apart from what the respondent did or did not know, the acts and omissions of the appellants enabled Heavener to obtain the money from the respondent. If a caveat had been lodged by the appellants, Heavener could not have acted as he did. Prima facie a person

(1) (1906) 1 Ch. 740. (5) (1871) 7 Ch. App. 75, at p. 85. (2) (1905) 21 T.L.R. 491. (6) (1907) 2 Ch, 376.

(4) (1853) 2 Drew. 73; 61 E.R. 646. (8) (1908) 2 K.B., at p. 501.

shown as being the registered proprietor of land under the R Property Act 1900 is the legal and equitable owner of such land therefore, anyone dealing with him is entitled to assume, witho more appearing, that he is such legal and equitable owner. as the respondent was concerned Heavener was in that p As the object of a caveat is to give notice of other interests a pe is not prejudiced by not having searched when the position is f] had a search been made, nothing would have been found (Com ancing Act 1919 (N.S.W.), sec. 164). Sec. 43 of the Real Pro Act 1900 should be read literally, and, if so read, a caveat may b ignored. The protection afforded by that section should apply before registration, and not after registration only as expressed Knox C.J. in Templeton v. Leviathan Pty. Ltd. (1). Such ani pretation is not a correct interpretation of the words " contracti or dealing with or proposing to take a transfer " as appearing in th section. All the sections in the Real Property Act 1900 dealing caveats are exceptions to sec. 43 of the Act. A caveat makes result voidable whether before or after registration. The obje the Act was to force people to protect their unregistered inter by caveat (Oertel v. Hordern (2); Cooke v. Union Bank (3)). regards priority of equities, the respondent intended to keep Bank's mortgage alive for his own benefit and only parted with his money on the understanding that he was to have a legal mort; over the property (Whiteley v. Delaney (4)). As between # appellants and the Bank there was a good mortgage. The case show that where an existing charge is paid off by a third person and that charge could by appropriate conveyance be kept alive for the benefit of that third person, the law will assume it was intende to keep the benefit of such charge alive for such third person (B v. Rice (5); Halsbury's Laws of England, vol. xxt., p. 180). [Knox C.J. referred to Real Property Act 1900, sec. 65 (2).] Even if the respondent is not entitled to the benefit of the char the doctrine that equitable relief will be given only to those wh do equity will apply ; that is to say, relief will be granted only on wal!) (1921) 30 C.L.R. 34, at pp. 54- (3) (1893) 14 N.S.W.LR. (Eq.) 28 (4) (1914) A.C. 132, at pp. 139,

Ma) (102) 28.8, (S.W.) (Ba) 9% sh 148 (5) (1910) 2 Ch, 277.

condition that the appellants pay to the respondent the amount of H: ©. or A.

money the latter advanced against the property of the former. There is no satisfactory evidence before the Court that the appellants, or either of them, were in possession of any of the subject properties at material times as alleged. This point - that the appellants were not in possession when the respondent took his security - was not raised in the Court below, and therefore should not be considered by this Court (North Staffordshire Railway Co. v. Edge (1)). Tf this Court is of the opinion that there is prima facie evidence of possession by one or both of the appellants, then the matter should be sent back to the primary Judge to be reheard on this point. Long Innes J. ordered accounts against Heavener as a mortgagee in possession ; he therefore must have found as a fact that Heavener was in posses- sion during the currency of the mortgage.

As to whether the respondent was affected with notice, see Great West Permanent Loan Co. v. Friesen (3). The proper inference the Court will draw from the facts in evidence is that the respondent did not have notice of any interest claimed by the appellants (Wilkes v. Spooner (4) ).

The question as to what constitutes a '" money-lender" has not been dealt with by an appellate Court. The test of system, repetition and continuity is not sufficient. In addition to the lending of money, there must be other indicia of the business of money-lending ; e.g., that the lender has an office for that purpose, that he advertises as such. The investment of money by a wealthy person does not constitute him a "' money-lender " (Bull v. Simpson (5); Rabone v. Deane (6)). The respondent has no separate office for the purpose of lending money, his money was lent to his clients, to some he did not charge interest. This is a case of a professional man investing the emoluments derived from his pro- fession ; but, even if it is deemed that he was carrying on the business of lending money, he comes within the exemptions provided by the Act, because such money was lent in the course and for the purpose of his business as a solicitor, to retain clients and attract new clients.

(1) (1920) A.C. 254. (4) (1911) 2 K.B, 473, at p. 484, (2) (1886) 32 Ch. D. 53. (5) (1915) 15 S.R. (N.S.W.) 365, at (3) (1925) A.C., at p. 224. p. 371.

H.C. or A. The lending of money is a recognized feature of the business 1920-1980. solicitor (Furber v. Fieldings Ltd. (1) ).

ea Evatt K.C., in reply. The respondent has not discharged the onu

See ror showing that when he executed the documents on 2nd Septembe 1925 he had no notice of anything which would affect his ri, an owner. Although the respondent's managing clerk, was said to have had complete charge of the matter, it is that he was not called on behalf of the respondent to give e The documents have been altered; this casts a doubt on authenticity. As to the effect of the altering of documents, Beal's Cardinal Rules of Legal Interpretation, 3rd ed., p. 94. documents are not evidence against the appellants of any fe stated therein. The Court should not interpret sec. 43 of the Property Act 1900 as having a meaning different from that whi has been accepted in New South Wales for very many years; es} as the Act has been dealt with by the Legislature during that tim and not altered in this respect (Beal's Cardinal Rules of Legal Inter- pretation, 3rd ed., pp. 415-420). The view taken in Templeton Leviathan Pty. Ltd. (2) should not be disturbed by this Cow the matter should be left to the Legislature (Waimiha Sawm Co. v. Waione Timber Co. (3) ).

Any person relying upon sec. 43 must show that he ascertained state of the register at the relevant time.

[Drxon J. referred to Ross v. Victorian Permanent Property Invest- ment and Building Society (5).] Sec. 43 has no application to a competition between two equities The respondent has no interest in the land inasmuch as his instru ments of mortgage have not been registered (Taylor v. London ant County Banking Co. (6)). The notice of alienation as required bi

of the land from the appellants to Heavener, was not given 16th November 1925, being some time after the date of the mor gages given by Heavener to the respondent.

(1) (1907) 23 T.L.R. 362. (4) (1926) V.L.R. 509; 48 ALT. 79, (2) (1921) 30 CLR. 3 (5) (1882) 8 V.LLR. (Eq.) 2545 (3) (1926) A.C., at p. ALT. 17.

[Srarke J. referred to In ve Morgan ; Pillgrem v. Pillgrem (1).] It is not sufficient to rely upon the mere fact of registration: it must be shown that such registration was relied upon at the relevant time (M'Iver v. Humble (2)). The view expressed in Honeybone v. National Bank of New Zealand (3) is no longer the law, nor pos- sible. The whole of the evidence is consistent with Heavener having used the money obtained from the respondent for his own purposes. There is no evidence that the money was applied to the paying off of the Bank's mortgage. The word " business " is defined in Frost v. Caslon and Wilkins (4).

As to the respondent being a money-lender the question is: was he sufficiently occupied during the relevant period in lending money, for whatever motives he desired to lend money? What those motives were is immaterial. By constant and numerous dealings he held himself out to members of a selected section of the community as being a person ready to Jend money to them on terms; this is an ordinary form of advertisement.

Knox ©.J. On and before 5th December 1923 the appellants were respectively registered proprietors of certain lands at Dee Why and Paddington respectively under the provisions of the Real Property Act, each parcel being subject to a duly registered mortgage in favour of the Union Bank of Australia to secure payment of £1,300 or thereabout. The appellant Mark Lapin was at that time indebted to the defendant Bertram Theodore Heavener, a solicitor, in a considerable sum in respect of costs. On 5th December 1923 the appellants, by transfers in the form prescribed by the Act, transferred the said parcels of land to the defendant Olivia Sophia Heavener, the wife of the defendant Bertram Theodore Heavener. These transfers were absolute in form and entitled the said Olivia Sophia Heavener by registration thereof to become registered proprietor of the said parcels of land subject only to the mortgage of

(1) (1881) 18 Ch. D. 93. (3) (1890) 9 N.7.L.R. 102. (2) (1812) 16 East 170, at p. 174; (4) (1929) 2 K.B, 138, at pp. 149, 152. 104 E.R. 1053, at p. 1055.

the Union Bank. The learned trial Judge found, and it is not disputed, that these transfers, though absolute in form, were gi as security only for payment of the costs owing to the defends Bertram Theodore Heavener and the amount owing to the Unio Bank. The mortgage to the Union Bank was paid off, and th transfers were registered on 18th December 1923, and thereupo Mrs. Heavener became the registered proprietor of the lands.

By memoranda of mortgage dated 14th March 1924 Mrs. Heavy ei mortgaged the said parcels of land to the English, Scottish Australian Bank. On 14th August 1925 these memoranda of mortgage were registered, and on 2nd September 1925 they wer discharged, and on the same day Mrs. Heavener executed in favour of the respondent Abigail a memorandum of mortgage over respective parcels of land to secure the repayment of £5,500. memorandum of mortgage has not been registered. It does appear how or out of whose money the English, Scottish and tralian Bank was paid off, but the sum of £3,500 was paid Abigail into Heavener's bank account on 2nd September and balance of £2,000 on 7th September 1925. On 4th September Ii one Harris - respondent Abigail's managing clerk - with the autho and on behalf of his principal lodged a caveat against registrat of any instrument affecting these parcels of land in the form scribed by the Sixteenth Schedule to the Real Property Act 1900. 16th October 1925 the appellant Mark Lapin commenced proc ings in equity against Heavener, in which an affidavit of that ap, was filed on 20th October in support of a motion for injun The respondent Abigail was solicitor on the record for Heavene in these proceedings, and his managing clerk Harris had the condu of the case on his behalf. On 30th November 1925 Abigail ad to Heavener a further sum of £1,000, and memoranda of mo:

by Mrs. Heavener in his favour to secure the repayment of £6, These memoranda of mortgage have never been registered. lst December 1925 the respondent Abigail caused a caveat to be lodged, claiming interest under the said memoranda of mo In the year 1927 the appellants filed a statement of claim in e against Heavener and his wife, the respondent Abigail and

persons not parties to this appeal, claiming a declaration that the H. ©. oF A.

memoranda of transfer from the appellants to Mrs. Heavener were void, a declaration that the respective appellants were respectively entitled to be registered as proprietors in fee simple of the lands contained in the said respective memoranda of transfer freed from the memoranda of mortgage to the respondent Abigail, and conse- quential and other relief not now material. The appellants alleged that the transfers to Mrs. Heavener were obtained by means of representations by Heavener that they were memoranda of mort- gage to secure certain advances and that they did not knowingly sign transfers of the lands in question, that respondent Abigail took with notice of the facts alleged by them, and that the respondent Abigail was, when he obtained his securities, carrying on the business of a money-lender within the meaning of the Money-lenders and Infants Loans Act 1905 and was not registered under that Act. By his statement of defence the respondent Abigail set up that at the time he made the advances to Heavener he had no notice, express or implied, of any claim of the appellants, and that he acted bona fide and dealt with the registered proprietor of the said lands, and further that at the time of such dealing the only incumbrance noted on the certificate of title of the said lands was a mortgage to the English, Scottish and Australian Bank Ltd., and that immediately on obtaining the said securities he lodged caveats against dealings with the said lands. He set up further that the mortgage to the English, Scottish and Australian Bank was a valid mortgage and. that he advanced the necessary moneys to discharge the same and that, in any event to the extent to which the moneys advanced by him were used to discharge the first mortgage and any other incum- brances over the said lands, he was entitled to security over the said lands. He denied that he at any time carried on the business of a money-lender within the meaning of the Act. He set up, further, that the appellants had been guilty of negligence in (among other things) not lodging caveats against dealings with the said lands and in allowing Mrs. Heavener to become and remain the registered proprietor thereof. The learned trial Judge held (1) that the trans- fers to Mrs. Heavener were given not as absolute transfers but as security for payment of Heavener's costs and for the repayment

of the amount owing to the Union Bank ; (2) that he was not fied that the respondent Abigail was at the material dates carrying on business as a money-lender, though he was not satisfied that h was not doing so ; (3) that the respondent Abigail had establish defence that with respect to the mortgage of 2nd September he was a bona fide purchaser for value without notice ; (4) that y respect to the mortgage of 30th November 1925 he had failed establish that defence ; (5) that the respondent Abigail had establi: to his satisfaction that the advances of £5,500 and £1,000 made on the faith of the memoranda of transfer executed by t appellants in favour of Mrs. Heavener and of the certificates title standing in her name and of the execution by her of the relative memoranda of mortgage ; (6) that with respect to the mortgage 2nd September 1925 the decision in Barry v. Heider (1) applied and that the appellants were estopped by their representations from asserting against respondent Abigail that their equity was prior ir point of time to his. Incidentally the learned Judge held Harris was the person who acted for respondent Abigail in connecti with the conveyancing part of the loan transactions of 2nd Septembe 1925 and was his agent in that respect. With respect to the defences of purchaser for value without notice, his Honor said (2) : - " The onus of establishing that he was a bona fide purchaser for value without notice rests on the defendant (Wilkes v. Spooner (3) ; see also Pil v. Rawlins (4)). In my view the defendant Abigail has by own evidence discharged this onus so far as regards the mortge of the 2nd September 1925 to secure the repayment of the loan £5,500, which was advanced Ly his two cheques for £3,500 and £2,000 respectively on the 2nd and 7th September ; and I so hold, notw standing that his clerk Harris, who attended to the conveyancing part of the matter, was not called to prove that he also had no notice at that time of the plaintiffs' equity. There was not, in my view, any evidence to suggest that at that date Harris had such notice, or knowledge of any facts which might rouse his suspici or put him on inquiry, and it was not, therefore, in my opinion, incumbent on the defendant Abigail to call him, as he had himself gone

(3) (1911) 2 K.B., at p. 486, ( 2) (1929) 29 S.R. (N.

into the box and made what was at least a prima facie case in support H- ©. oF A-

of his defence. When he had done that I think it was for the plaintiffs to demolish that prima facie case, and that it was not necessary for him to tender in support of that case every person, whether few or many, who might possibly have had notice which might be On these findings the learned Judge made a

imputed to him." decree declaring in effect that Mrs. Heavener held the respective parcels of land in question in trust for the respective appellants subject, so far as is relevant to this appeal, to the mortgage given by Mrs. Heavener to respondent Abigail dated 2nd September 1925. An appeal by the present appellants to the Full Court of the Supreme Court from this decree was dismissed, subject to a variation of the decree in respect of costs which is not now material; and the appellants now appeal to this Court.

The questions raised in the course of the argument on this appeal may be stated as follows : - (1) Were the securities given to the respondent Abigail on 2nd September 1925 void under the Money- lenders and Infants Loans Act 1905? (2) Has the respondent Abigail established that he took the securities in question without notice of the appellants' equity? (3) On the facts proved ought the equitable interest of the appellants to be postponed to that of the respondent Abigail? (4) If the respondent Abigail is not entitled to priority over the appellants, is he entitled to any, and if so what, relief in respect of the payment off of the mortgage to the English, Scottish and Australian Bank ¢

The appellants do not dispute their liability in respect of the amount owing to Heavener for costs or the amount paid to the Union Bank in discharge of its mortgage.

As to the first question, I think the learned Judges in the Supreme Court were right in holding that on the evidence it was not affirm- atively established that the respondent Abigail was a money-lender within the meaning of the Act 1905 No. 24; and I have nothing to add to the reasons given by Harvey C.J. in Eq. in support of that conclusion.

As to the second question, it is clear that the onus of establishing that he was a bona fide purchaser for value without notice was on the respondent Abigail. If it were necessary to decide this question

H.C. or A. [ should feel considerable difficulty in holding that the res peceor: Abigail had discharged the onus of proof which lay on him.

Lares in the view which I take of the case a decision on this ques v

Apica, not necessary. The claim of the respondent Abigail to priority

the provisions of sec. 43 of the Real Property Act 1900 and, atively, (2) that there had been some act or omission on the the appellants such as to cause their equitable title which was p in point of time to be postponed to his subsequent equitable title (Laylor v. London and County Banking Co. (1)). In cases fall within the scope of sec. 43 of the Real Property Act notice of a p equitable interest is immaterial unless the conduct of the claiming the protection of the section amounts to fraud. Apart from that section the fact that the holder of an equitable interest acquired it without notice of an equity prior in point of time affo of itself no ground for postponing the prior equity (see Phillips Phillips (2)). If the holder of the subsequent equity acquired it with notice of the prior equity, his claim for priority necessarily fa but the fact that he took without notice or that it is not proved that he had notice of the prior equity amounts to no more than a to be considered in connection with the other circumstances on' question whether the conduct of the holder of the prior equity is such as to entitle the holder of the subsequent equity to priority over him.

On the third question, so far as the claim of the respondent Ab to priority rests on the provisions of sec. 43 of the Real Property I see no reason to modify the opinion expressed by me in Temy v. Leviathan Pty. Ltd. (3) that the immunity conferred on the chaser under this section extends to him only when he becomes registered and not before; and it follows that as the memoranda mortgage given to the respondent Abigail have never been re: he can claim no priority by virtue of the provisions of the secti Y Nor do I think that the evidence discloses any act or omission on the part of the appellants such as to cause their equitable title which

(1) (1901) 2 Ch., at p. 260. Lord Westbury L.C, at p. 215: 45 (2) (1861) 4 DeG. F. & J. 208, per '1164, at p. 1166. (3) (1921) 30 G.L.R. 34.

was prior in point of time to be postponed to the equitable title of H- ©. or A.

the respondent. Prima facie the equitable title of the appellants, being prior in point of time, takes priority of the equitable title of the respondent Abigail, and it is for him to show facts which render it inequitable for the appellants to insist as against him on that priority. The facts relied on by the respondent Abigail as entitling him to priority are (1) that the appellants executed in favour of Mrs. Heavener transfers absolute in form purporting to be transfers on sale for valuable consideration ; (2) that the appellants by such transfers enabled Mrs. Heavener to become registered as proprietor infee simple and to obtain certificates of title; (3) that the appellants omitted to lodge caveats to protect their equitable interests. In the circumstances of this case these facts appear to me insufficient to justify the postponement of the appellants' equities to the equity of the respondent Abigail. Heavener was the appellants' solicitor, and it does not appear that they had any reason to assume that he was a rogue or that he would make a dishonest use of the certificates of title (Union Bank of London v. Kent (1)). There is no evidence that Abigail ever saw the transfers or that before the money was advanced any search was made to ascertain if a caveat had been lodged against dealings with the land. The registration of Mrs. Heavener as proprietor in fee simple was consistent with the existence of an equitable interest outstanding in some other person, and not inconsistent with the whole beneficial title to the lands being in the appellants. Mrs. Heavener was in a fiduciary relation to the appel- lants, and was entitled under the arrangement between them and Heavener to become registered as proprietor and to hold the docu- ments of title until the debt intended to be secured was paid off. The decisions in Shropshire Union Railways and Canal Co. v. The Queen (2), Carritt v. Real and Personal Advance Co. (3) and Taylor v. London and County Banking Co. (4), and the observations of Farwell J. in Rimmer vy. Webster (5) and Burgis v. Constantine (6), seem to me to indicate that the possessor of the prior equity is not to be postponed to the possessor of a subsequent equity unless the act

(1) (1888) 39 Ch. D. 238 (C.A.). (4) (1901) 2 (2) (1875) L.R. 7 HLL. 496. (5) (1902) 2 (3) (1889) 42 Ch. D. 263. (6) (1908) 2

belief on the part of the holder of the subsequent equity, at the ti when he acquired it, that the prior equity was not in existence. the evidence as it stands no such act or omission on the part of appellants has, in my opinion, been proved. The transfers did n amount to such an act, for there is no evidence that Abigail ey saw them. The certificates of title showing Mrs. Heavener registered proprietor were consistent with the beneficial ownershiy of the lands being in the appellants or any other persons, and did not indicate that she held the beneficial as well as the legal inter est, The omission to lodge a caveat can have had no effect in inducing Abigail to advance the money, for it is not proved that any seare was made before the money was advanced. For these reasons am of opinion that respondent Abigail has failed to establish that his equitable interest in the lands is entitled to priority over that of the appellants, and that on this question the judgment of Long Innes J. and of the Supreme Court should be reversed.

The question remains whether the respondent Abigail is entitled t relief in respect of the discharge of the English, Scottish Australian Bank's mortgage, which, having been registered, con stituted a valid incumbrance on the lands as against the appellants. On this question I agree with my brother Dizon in thinking th at the evidence is not sufficient to enable this Court finally to dete mine the matter and that the respondent Abigail should be allowed to have an inquiry upon this subject in the Supreme Court on terms suggested.

I concur in the terms of the order which is about to be made.

Isaacs J. Lapin and Abigail are opposing equitable claimants, each deriving an equity from Heavener. J refer to Lapin as includ ing Mrs. Lapin, and to Heavener as including Mrs. Heavenet Lapin's is the earlier, dating from 1923; Abigail's arising in 1925. Lapin's equity is therefore superior (Phillips v. Phillips (1) ; Oma y Cave (2) and In ve Morgan ; Pillgrem v. Pillgrem (3) ), unless A establishes that his is the better equity. If he succeeds in doing this

(1) (1861) 4 DeG. F & J, at p. 215; (2) (1880) 15 Ch, D. 639, at pp. 646, 45 E.R., at p. 1166, 647. (3) (1881) 18 Ch. D., at p. 103.

then, as Lord Cairns L.C. said in Pease v. Jackson (1), "the rule. . . which gives the preference to the first in time as between two equal equities, could not apply, the equities not being equal."

Lapin's equity, according to the facts as found by Long Innes J. -

*and the finding is not challenged - is that subject only to redemption by payment of Heavener's costs as Lapin's solicitor, and of what- ever amount Heavener paid in discharge of the Union Bank of Australia mortgage, Heavener held the land in trust for Lapin (see Carritt v. Real and Personal Advance Co. (2), and In re Richards ; Humber v. Richards (3) ). A strong case is therefore needed to displace Lapin's equity (per Turner L.J. in Cory v. Hyre (4) ). Abigail's alleged equity is that in September 1925, relying on Heavener being the registered proprietor - which was due to Lapin's act in giving an absolute transfer unaccompanied by any caveat lodged - he, without notice of Lapin's prior interest, advanced money to Heavener to pay off a registered mortgage on the land to the English, Scottish and Australian Bank, the money being applied to that purpose. He also claims that in view of sec. 43 of the Real Property Act he is protected, even if he had notice. Now, there is no doubt that if Abigail can establish that his is the better equity, he succeeds. What is a better equity ?

There are two cases which deal with equality of equities in this connection. In Bailey v. Burnes (5) Lindley L.J. for the Court said: '" Equality, here, does not mean or refer to priority in point of time, as is shown by the cases on tacking. Equality means the non-existence of any circumstance which affects the conduct of one of the rival claimants, and makes it less meritorious than that of the other." In Taylor v. London and County Banking Co. (6) Stirling L.J., with the approval of the other members of the Court, said that priority in point of time would govern as between purely equitable titles, "unless there has been some act or omission on the part of the owner of an equitable title prior in point of time, such as to cause that title to be postponed to a subsequent equitable interest." In my opinion those enunciations are not exhaustive: they state

(1) (1868) 3 Ch. App. 576, at p. 582. (4) (1863) 1 DeG. J. & S. 149; 46

(3) (1890) 45 Ch. D. 589, at 594. (6) (1894) 1 Ch, 25, at p. 36. (6) (1901) 2 Ch., at p. 260.

rather a working rule, which applies in the great majority of ins but do not state the principle. The principle is that the Court not for the worst, but for the best equity. And the best equi for there may be several claimants - is that which on the whole i the most meritorious, it may be because the others are, by of circumstances indicated in the passages quoted, lessened in rela merit, or because one is, by reason of some additional circum not attributable to any act or omission of the others, rendered in the eye of equity more meritorious than the rest. That, I think, is the view taken by Parker J. in Crosbie-Hill v. Sayer (1), where he says: "The mortgages to the plaintiffs, and the mortgage to the first tw« defendants, are thus all of them equitable mortgages only, and the question I have to decide is whether the plaintiffs or these two defendants have the better equity." Then he says: "In m opinion the plaintiffs have the better equity"; the reason being: the plaintiffs had in the circumstances a better right to call for th legal estate than the first two defendants. That was quite inde pendent of any act or omission on the part of the defendants, whiel so to speak, created a special relation on their part towards thé plaintifis. To this I shall return in proper sequence. For present I advert to the point because, though in the majority of cases the result would be the same, yet in some instances, of which this is one, attention to principle tends to clarify the matter. In proceeding to determine whether Abigail's equity is bette it is convenient to test it first by the working rule indicated Bailey's Case (2) and Taylor's Case (3). What conduct, either by way of act or omission, is imputable to Lapin on which Abigail found a claim to subordinate the earlier equity to his own? So f as concerns the mere registration of Heavener as proprietor, contention fails. In Bradley v. Riches (4) Fry J. states both pr ciple and authorities, and acts on them, antagonistically to Al position here. So also Burgis v. Constantine (5). With to the absence of a caveat, the omission is not shown to have in any way influenced Abigail's action in advancing the money. If he, b himself or his agent Harris, had searched the register and found

(1) (1908) 1 Ch, 866, at p. 875. (4) (1878) 9 Ch. D, 189, at pp. 19 (2) (1894) 1 Ch., at p. 36. 193. (3) (1901) 2 Ch. 231. (5) (1908) 2 K.B, 484,

caveat, he could fairly, in the absence of proof of actual notice, have said to Lapin: "I have been induced to act to my prejudice by your or your solicitor's omission to take a step so ordinarily taken. by anyone haying an interest to protect, that its omission may be anticipated as likely to mislead.'" (See Balkis Consolidated Co. v. Tomkinson (1) and R. E. Jones Ltd. v. Waring and Gillow Ltd. (2) and Butler v. Fairclough (3).) But the person relying on the omission must show that his conduct has been in fact affected by it. Lord Herschell in London Joint Stock Bank v. Simmons (4), states the principle. And unless the fact relied on was known to the person relying on it, he cannot say his conduct was affected by it, whatever might be the onus of proof, if once such knowledge was established. (See Miles v. McIlwraith (5).)

At this point Abigail fails. He did not personally act in the transaction, except as to what may be called formal externals, such as signing completed documents and cheques. He employed and relied on Harris to conduct all the investigations as to title. He said in his evidence : - "I have not done any conveyancing myself for twenty-five years. I have to depend on them " - that is, his clerks - " and I append my signature when a trusted man puts a document before me, or whom I believe when he says everything is in order. Then I sign it." Q.: "So I may take it you left the whole business to Harris?" A.: "Yes." In Vane v. Vane (6) James LJ. said: '' The agent in the matter, and in the course of the transaction acting within the limits of his agency, is the alter ego of the principal." Since, so far as " notice " is material, the burden of disproving it in the circumstances rests on Abigail he has failed todo so. He did not call Harris, though pressed to do so, and gave no explanation for his failure. The circumstances, taking into account the appearance of the documents, the mode of making the advances, the method of paying off the Bank mortgage, the caveat, and the non-registration of Abigail's memorandum of mortgage, while not sufficient affirmatively to establish notice to him or Harris of Lapin's prior equity, are no safe ground, in the absence of Harris,

(1) (1893) A.C. 396, at p. 410. (4) (1892) A.C, 201, at p. 215. (2) (1926) A.C. 670. (5) (1883) 8 App. Cas, 120, at pp. (8) (1917) 23 G.LR. 78. 133, 134,

notice and no reason forinquiry. It is true that Long Innes J. came to the conclusion on this point in Abigail's favour. But th learned Judge in doing so said: " There was not, in my view, a evidence to suggest that at that date " - the relevant date - *H had such notice, or knowledge of any facts which might rouse hi suspicions or put him on inquiry, and it was not, therefore, in my

case in support of his defence." That conclusion, with deep r is arrived at by placing the burden on the wrong shoulders in ¢

therefore be taken as a pure finding of fact (see per Viscount Du in Robins v. National Trust Co. (2)). The Full Court's coneu on that point is open, as I think, to the observation that too great significance is attached to the single fact of Heavener's registrati

being in part influenced by the absence of a caveat, and to the silence of Harris.

At that point it becomes material to consider whether, as arg on behalf of Abigail, sec. 43 of the Real Property Act gives

with Heavener as registered proprietor. If I thought, suppo it were res integra, that sec. 43 ought to be so read, I should s in view of the decisions cited in Templeton's Case (3) and the of legislation, feel bound to adhere to the view taken in the las mentioned case. But I would add that I agree with that view. M opinion was to some extent indicated, though not expressed, im Butler v. Fairclough (4). Consequently, sec. 43 has no application to this case. Up to that point Abigail fails entirely to show that his later equity is the better equity. But the further circumstanct have yet to be considered.

(1) (1929) S.R. (N.S.W.), at p. 525. (3) (1921) 30 C.L.R. 34. (2) (1927) A.C. 515, at p. 518. (4) (1917) 23 G.L.R., at p. 100,

The mere fact that the registered proprietor has executed the H. ©. or A.

statutory memorandum of mortgage to him does not confer any superiority in equity. This is very distinctly shown by the Earl of Selbornein Société Générale de Paris v. Walker (1). He there points out that the delivery of the completed transfer of the shares by the registered owner, and its lodgment in the company's office, did not create a better equity than that of the competing claimant. The learned Lord, however, added that if all necessary conditions had been fulfilled which would have given the transfer as between himself and the company a present absolute unconditional right to regis- tration before the company was informed of a better title, the case might be different. (See also Moore v. North-Western Bank (2).) So it is plain that something more is needed than the mere execution of the mortgage memorandum in this case by Heavener. Abigail is not in a position to say he has, subject to mere formal ministerial function, a present absolute and unconditional right to be placed on the register. But another principle of equity comes into play if the facts allow of it. It was, however, held by Parker J. in Crosbie- Hill v. Sayer (3) that "where a third party at the request of a mortgagor pays off a first mortgage with a view to becoming him- self a first mortgagee of the property, he becomes, in default of evidence of intention to the contrary, entitled in equity to stand, as against the property, in the shoes of the first mortgagee."

If Abigail can sustain the allegations of par. 18 of his defence, he comes within the ruling of Parker J. That ruling rests on the plainest principles of justice. The mortgage to the English, Scottish and Australian Bank was given, it is true, on 14th March 1924, but it was registered on 14th August 1925, prior to Abigail's first advance. Consequently, whatever the impropriety might have been on the part of Heavener in creating it - as to which I say nothing - it is clear it was as between Lapin and the Bank an unimpeachable security over the land. It was Heavener who was personally liable, and it was at Heavener's request that Abigail lent the money; but all the same, if Abigail's money was advanced and applied for the purpose of releasing Lapin's land from the statutory claims of the

(1) (1885) 11 App. Cas. 20, at pp. (2) (1891) 2 Ch. 599. Saeneee: tty ae (3) (1908) 1 Ch., at p. 877.

Bank, and if, as appears, Abigail intended to obtain a statutor mortgage over the land for himself, it appears to me that equit will sustain Abigail's claim to the extent that his money was s applied. In Butler v. Rice (1) Warrington J. refers to " the we known equitable doctrine that if a stranger pays off a mortgage on an estate he presumably does not intend to discharge that mo gage, but to keep it alive for his own benefit." In Phorne v. Can (2) Lord Macnaghten quotes James L.J. in saying: " It is not fo

benefit at the expense of another man who was under no liabii whatever to pay him." (See also per Lord Herschell L.C. and Macnaghten in Brocklesby v. Temperance Building Society (3), and the various cases cited by Parker J. in his judgment in Crosbie-Hill y. Sayer (4).) The difficulty, however, in Abigail's way in this caseis in finding the necessary facts to which the doctrine may be applied. It is by no means clear that a single penny of Abigail's money y to discharge the mortgage of the Bank. It is possible, but bey that it remains in conjecture. Abigail gave Heavener a cheque for £3,500 on 2nd September 1925, and saw him, he says, go to a ban the exact locality of which does not accurately describe that of th Bank in question. What happened to the cheque does not appeal except that it was credited to Heavener's account, and was paid by Abigail's bank on 4th September. But the mortgage was dis- charged on 2nd September 1925, though the discharge was not registered until 15th October. It would be unsafe to hold on tl evidence that par. 18 of the defence, which was distinetly put issue, has been proved. Strictly speaking, Dr. Evatt was right when he said that the issue as to this had been distinctly raised and th Abigail had failed. Nevertheless, on the whole, I think justice is better served if that be viewed as a matter of costs only, by req Abigail to pay the costs up to the present, and affording him a opportunity to apply to the Supreme Court as he may be adviset for leave to prove what may be required to enable him to stand any extent in the shoes of the English, Scottish and Australian Bank and in such terms as that Court, if it thinks fit to grant leave,

(1) (1910) 2 Ch., at p. 282. (3) (1895) A.C. 173, at pp. 183, (2) (1895) A.C. 11, at p. 18. (4) (1908) 1 Ch., at p. 875.

choose to require. That Court is in a much better position than 4. ©. oF A.

this Court to determine whether justice is more likely to be aided or defeated by granting such an application. Subject to that, the appeal should be allowed.

As to the Union Bank of Australia's mortgage, that did not exist when Abigail lent his money ; so that, as to anything beyond the English, Scottish and Australian Bank mortgage, Abigail is thrown entirely on Heavener's position. With regard to that, if Heavener paid the earlier mortgage out of the English, Scottish and Australian. Bank money, Abigail is already covered by the latter mortgage, if entitled at all. If Heavener paid it out of other moneys, his claim against Lapin stands in precisely the same position as his claim for costs. Then, as to Heavener's costs, and even assuming that these together with the Union Bank of Australia mortgage exceeded the amount of the English, Scottish and Australian Bank mortgage, Abigail stands thus : - Unless Abigail's money can be shown to have been applied so as to pay off Heavener, and thereby discharge Heavener's claims for that. excess as against Lapin, Abigail as to them does not bring himself within the doctrine of Crosbie-Hill v. Sayer (1) and other cases above cited, and therefore has no superior equity as against Lapin. Lapin in that case would still be Heavener's debtor. No pretence was made of any such arrangements. It is utterly inconsistent with the basis on which the defence was con- ducted. In order to establish it Abigail would have to assert that he regarded Heavener, not as absolute owner, but as an incum- brancer for his costs, and took over debt and incumbrance. I think the ends of justice preclude any permission to Abigail and Heavener to suggest such an arrangement now.

On the question of money-lending, I shall say only a few words. The view taken as to this by the majority of the Court makes it unnecessary, and in fact useless, for me to express my decided opinion on this point. I am not personally sorry, so far as this case is con- cerned, that my learned brothers have seen their way to arrive at the conclusion that Abigail is not "a person . . . whose business is that of money-lending " (sec. 8 of the Act No. 24 of 1905), because there is no exorbitancy proved and a very large sum is

involved in his money-lending transactions. For myself, howey to prevent future misapprehension, I ought to say I should haye serious difficulty in coming judicially to the same conelusi As an illustration of how closely a man may approach the s of a money-lender under the Act without actually reaching i 7 facts are interesting. The money (£3,500) was lent to Heavener 2nd September 1925, and the question therefore is: Was Al i at that time a person whose business was that of money-lendi It appears that in the period beginning 16th February 1923 ay ending 25th November 1925 he had eighty-one money- transactions, fairly evenly distributed over the period. times he had mortgages and sometimes bills of sale as security, one a deposit of jewellery, and always a promissory note. Some fc or five loans were to personal friends. The total amount of n Jent was over £89,000, of which about £39,000 was advan hotel-keepers who employed Abigail as solicitor; but the ady

except that it included varying sums large and small, as £22, 8 £38, £50, £75, £88, £150, £200, £250, £340, £445, £500, and up 1 £1,000, £1,441 15s., £1,500, £1,525, £2,000, £2,200, £2,600, £3,000 £3,225, £5,000 and £5,700. He charged interest at from 5 per n to 10 per cent. He did not publicly advertise having any except his solicitor's office, which apparently was sufficient for transactions referred to. I need hardly say the rate of interes does not determine the matter. This is shown by the e exception in sec. 8, par. (d), of persons and companies ca the business of banking and insurance from the term y lender," for in those cases Abigail's highest rate is certainly 1

exceeded. And Lord Loreburn's statement in Kirkwood vy. Gad (1) that carrying on business "imports a series or repetition o acts" is apparently satisfied in this case. Further, when I the judgment of Walton J. in Newton v. Pyke (2), and especially tl indicia there stated, I have grave doubts as to the grounds on ¥ hil I could hold that Abigail does not fall within the statute. If Walt J. had difficulty in absolving the lender in the case before hi

(1) (1910) A.C. 422, at p, 423, (2) (1908) 25 TLR. 12%.

cannot help thinking that, in such circumstances as we have here, H- ©. oF A.

he would have been tempted to abandon the effort. Philanthropy may be safely put aside. For income tax purposes, there is little doubt losses would be set against gains. Investment, having regard to the range of amounts and the absence of any evidence as to long terms, is hardly a legitimate conclusion. What, then, is the proper category ? The only method of escape that occurs to me is simply to style Abigail a " financier," and under that colourless but euphemistic and dignified appellation leave him to lend money systematically at interest and on security very much as a money-lender does, but with susceptibilities saved and immunity preserved.

Gavan Durry AND Starke JJ. In 1923 Mark Lapin was regis- tered as the proprietor of certain lands under the Real Property Act 1900 of New South Wales, and his wife, Pearl Lapin, was also regis- tered as the proprietor of certain other lands under the Act. In the same year, they transferred these lands to Olivia Sophia Heavener, who became registered as the proprietor thereof. Olivia Sophia Heavener was the wife of Bertram Theodore Heavener, who at all material times was Lapin's solicitor. The transfer was absolute in form, but was, as has been found as a fact, given as a security only, for the payment of certain costs due to Bertram Theodore Heavener. The legal estate in the lands was, therefore, in Olivia Sophia Heavener, but the Lapins were entitled to redeem the lands upon payment of the moneys due to Bertram Theodore Heavener for costs. The Lapins might, of course, have executed a memorandum of mort- gage, instead of absolute transfers; in which case the mortgage would have had effect as a security but would not have operated as a transfer of the land charged. Or the interests of the Lapins in the lands might have been protected by caveats (see Real Property Act 1900 of New South Wales, sec. 72); but, doubtless owing to their own neglect or the neglect or misconduct of Heavener, their solicitor, their interests were not so protected. Equitable claims and interests in land, however, are not destroyed by the Real Property Act, and consequently the Lapins must be considered as the owners of an equitable estate or interest in the lands transferred

to Olivia Sophia Heavener (cf. Great West Permanent Loan Co, Friesen (1) ).

In March 1924 Olivia Sophia Heavener executed a mo the lands to the English, Scottish and Australian Bank Ltd., and: mortgage was registered in 1925. It was discharged on September 1925, and the discharge registered on 15th October 192 About 2nd September 1925 Olivia Sophia Heavener execu' memorandum of mortgage of the lands to Ernest Robert Abigail to secure the sum of £5,500, and on 30th November 1925 a furthe memorandum of mortgage to Abigail, to secure the same sum £5,500 and also a further sum of £1,100, but as to this last sm Abigail has been postponed to the Lapins, and he has not challengey the decision so postponing him. Abigail obtained possession the certificates of title to the lands, but never registered the insti ments of mortgage given to him; and, as these instruments until registered, ineffective to render the lands liable as security the payment of money (see Real Property Act 1900 (N.S.W.), sec. 4l) Abigail has no legal estate or interest in the lands. Indeed, at instrument of mortgage, even when registered, does not operate a a transfer of land, but only as a security (Real Property Act 1900, sec. 57); but, as claims or interests in land which are not registere are, under the Real Property Act, still recognized by the law, w may say that an equitable estate or interest in, or security over, # lands has been created in favour of Abigail.

The question is which title to the lands takes priority, that of the Lapins or that of Abigail? The interest of the Lapins is firs in point of time, and is therefore, prima facie, entitled to priori Moreover, it was said that it was Abigail's duty to investigate th title, and that as he and those acting for him made no inquiry ; all, in fact shut their eyes, the Court ought not to say that he too without notice (In re Morgan; Pillgrem v. Pillgrem (2) ). 1m 4g Bank Ltd. v. Barry (3) Lord Selborne thus dealt with a simi contention : - " It has been said in argument that investigation | of title and inquiry after deeds is ' the duty ' of a purchaser or a mor gagee; and, no doubt, there are authorities (not involving 4

(1) (1925) A.C., at p. 223, (2) (1881) 18 Ch. D., at p. 102. (3) (1874) LR, 7 HLL, 135, at p. 157.

question of registry) which do use that language. But this, if it can properly be called a duty, is not a duty owing to the possible holder of a latent title or security. It is merely the course which a man dealing bona fide in the proper and usual manner for his own interest, ought, by himself or his solicitor, to follow, with a view to his own title and his own security. . . . It may be evidence, if it is not explained, of a design inconsistent with bona fide dealing, to avoid knowledge of the true state of the title. What is a sufficient explanation, must always be a question to be decided with reference to the nature and circumstances of each particular case ; and among these the existence of a public registry . . . must necessarily be very material. It would . . . be quite inconsistent with the policy of the Register Act, which tells a purchaser or mortgagee that a prior unregistered deed is fraudulent and void as against a later registered deed - I say it would be altogether inconsistent with that policy to hold that a purchaser or mortgagee is under an obligation to make any inquiries with a view to the discovery of unregistered interests. But it is quite consistent with that, that if he or his agent actually knows of the existence of such unregistered instruments when he takes his own deed, he may be estopped in equity from saying that, as to him, they are fraudulent." Analogous reasoning is applicable to cases within the provisions of the Real Property Act 1900. Abigail advanced his money on the faith of the certificates of titles to the lands, which certified that Olivia Sophia Heavener was the registered proprietor of the lands, and, though he made no search of the Register of Titles, such a search would in fact have disclosed nothing.

In these circumstances, Long Innes J. and the Full Court both found, as a matter of fact, that Abigail acquired his title without notice of the prior title of the Lapins, and, in our opinion, this Court ought not to disturb that finding.

Abigail's contention is that the Lapins have been guilty of negli- gence such as to postpone their estate or interest in the lands to his. It is too late in the day to challenge the position that the Lapins were entitled to transfer their lands absolutely to Olivia Sophia Heavener by way of security. This form of security, opposed though it may seem to the provisions of sec. 56 of the Real Property

someone else (Shropshire Union Railways and Canal Co. y. Th Queen (2)). We accept also as settled law - though without much enthusiasm - the proposition that the protection given by sec. 43 of the Real Property Act 1900 to persons dealing with or taking or proposing to take a transfer from the registered proprietor is only effective when such persons become registered, and not before Templeton v. Leviathan Pty. Ltd. (3) and the cases there collected). also accept the proposition of Lord Cairns L.C. in Shropshire Uni Railways and Canal Co. v. The Queen (4) " that, in order to take away any pre-existing admitted equitable title, that which is relie upon for such a purpose must be shown and proved by those upo whom the burden to show and prove it lies, and that it must amount to something tangible and distinct, something which can have grave and strong effect to accomplish the purpose for which it 5 said to have been produced." In the cases, inquiries are made a to the better equity, as to the better right to the legal estate, as to which party was the more vigilant or careful, and whether the conduct of a party estops him from the assertion of a prior title, and so on. But, however the matter is approached, the questio n must ultimately come down to a consideration of the words or actions of the person having the prior equitable title, and whether thos words and actions have caused another to alter his position. " other words," as Lord Selborne L.C. said in Dizon v. Muckleston (5), "the man who has conducted himself in such a manner is not entitled to deny the truth of his own representations, if it be a case of exp representation - he is not entitled to deny being bound by the natural consequences of his own acts, if it be a case of posit acts - he is not entitled to refuse to abide by the consequences of his own wilful and unjustifiable neglect, if that is the nature of case. By one or other of those means he may have armed anoth

(3) (1921) 30 G.LR., at pp. 54.55. sp?) 18) LRT HLL, at pp. 505:

(4) (1875) LR. 7 HL, at p. 507, (5) (1872) 8 Ch. App. 155, at p. 160

person with the power of going into the world under false colours ; and if it be really and truly the case that by his act, or his improper omissions, such an apparent authority and power has been vested in that other person, he is bound upon equitable principles by the use made of that apparent authority and power."

Now, it must be observed that Olivia Sophia Heavener was in no sense a trustee for the Lapins. The lands were transferred to her absolutely - to be held, true, as security only, but that fact does not appear upon the register and rests entirely upon the agreement of the parties. This form of security was clearly adopted so that Olivia Sophia Heavener might deal with the lands as if they were her own, and without the restrictions created by an instrument of mortgage under the Real Property Act 1900. Thus, we apprehend, she might have raised the costs due to her husband by selling or mortgaging the lands: so far as the evidence goes, there was no restriction upon her, and she was necessarily trusted by the Lapins as to the time and method of realization and not to exceed the limit of her security. Again, the Lapins necessarily placed the indicia of title - the certificates of titlek - in her hands, so that she could readily exercise her rights, and appear as the absolute owner of the lands. Further, whether owing to their own neglect or owing to the neglect or misconduct of their solicitor, Heavener, they reinforced the apparent absolute ownership of Olivia Sophia Heavener by neglecting the well-known method of protecting their rights and interests by means of a caveat pursuant to the provisions of the Real Property Act 1900. In fact, they "armed" Olivia Sophia

"Heavener "with the power of going into the world under false colours." The case is more analagous, in our opinion, to such cases -as Brocklesby v. Temperance Building Society (1) than to other cases in the books, such as Shropshire Union Railways and Canal Co. v. The Queen (2) and In re Richards ; Humber v. Richards (3). Olivia Sophia Heavener, or her husband, goes to Abigail with all the indicia of absolute ownership given to her by the Lapins, and induces him to advance moneys on the strength of that title, and she - or cher husband - delivers to him the certificates of title which certify

(1) (1895) A.C, 173, (2) (1875) L.R. 7 HL, 496. (3) (1890) 45 Ch, 589,

H.C. or A. her to be the absolute owner. True, he does not search the eee 30. 'but, if he had searched, there was nothing to be found there

Larry ing any other interest. He certainly took the risk of caveats Apican, tecting the interests of the Lapins; otherwise the fact that he not search has no material bearing on the case.

There are cases in the books which assert that where two equi are equal, possession of the title deeds gives priority. (See Layar v. Maud (1); Hunter and Curling v. Walters; Darnell v. Hunter Lloyd's Banking Co. v. Jones (3): and, to the contrary, Thorp Holdsworth (4).) The proposition that possession of the title di gives priority goes too far, and, as Mr. John S. Ewart remarks ina article in the Law Quarterly Review, vol. xut., p. 46, at p. 153, " the locality of the deeds, but the conduct of the parties with refer ence to them, is the important point." The point to be inves

is " whether the conduct of" the person having the first equits

interest "is responsible for the success of the fraud" of the person "holding himself out as the unincumbered owner of the proper

In our opinion, the Lapins are bound by the natural consequence of their acts in arming Olivia Sophia Heavener with the power to go into the world as the absolute owner of the lands and thus exe¢ transfers or mortgages of the lands to other persons, and they o to be postponed to the equitable rights of Abigail to the ex allowed by the Supreme Court.

Lastly, it was argued that the mortgage transaction bet Olivia Sophia Heavener and Abigail was unlawful by reason of Money-lenders and Infants Loan Act 1905 (N.S.W.) (No. 24 of 1 Abigail it was contended, carried on the business of a money-lender as defined by that Act, and was unregistered. He certainly was registered as a money-lender. But Abigail was a solicitor, | t

of hotels, and good-naturedly advanced, in a rather casual no small amount of money to his friends, pecunious and impecun both the primary Judge and the Full Court nevertheless found 1 he was not a money-lender within the meaning of the Act, and we:

(1) (1867) LR. 4 Eq. 397. (3) (1885) 29 Ch, D. 221, at p.! (2) (1870) LR. 11 Eq. 292, at p. 316. (4) (1868) LR. 7 Eq. 139

no reason to disturb that finding. His transactions, though large in H- ©. oF A. the aggregate amount, were scattered over a considerable period, Tose eeo

and were not of the nature usually associated with a money-lender's Larry v

business. Apicam. In our opinion, the judgment below was right, and ought to be gayan putty J. aa Starke J.

Dixon J. The appellants are entitled to equities of redemption in two pieces of land. Their mortgagee, the wife of a solicitor named Heavener, took absolute transfers from them and is regis- tered proprietor of estates in fee simple in the land. Notwith- standing the appellants' equities, she gave to the respondent Abigail, who too is a solicitor, a mortgage of this and other land as security for advances made to her husband. Abigail did not register the mortgage, and the question for decision upon this appeal is whether the appellants are to be postponed to him.

At the trial and upon appeal before the Full Court of the Supreme Court of New South Wales the respondent Abigail succeeded upon the ground that he had dealt with the registered owner of the legal estate bona fide and for value, and had obtained an equity superior to that of the appellants. Before this Court as well as before the Supreme Court the appellants raised a question which precedes that of priorities. They contend that Abigail had no legal or equitable tight whatever because he was an unregistered money-lender and took the security in the course of that business. In neither Court below, however, did they obtain a finding that Abigail did in fact carry on the business of a money-lender. The evidence was to the effect that during the years 1923 and 1924 he had lent large sums of money, and by many transactions. But in the year 1925, in September of which his transaction with Heavener took place, Abigail did much less lending. In January 1925 he lent three sums amounting to £2,020, in February two sums amounting to £1,638 and in July one sum of £550, and, after his transaction with Heavener, he lent in November two sums amounting to £493. In his cross- examination Abigail said, in effect, that some of the loans were made to relieve the necessities of friends, others to help deserving cases, and many of them were made in connection with the sale and transfer

H.C. or A. of hotels when he acted as solicitor. No evidence was given tha

he held himself out as a money-lender, and none that he purs any system or plan in laying out and getting in his money. resources were not investigated, and no attempt was made to ascer tain from his books how losses were dealt with. In the result, the conclusion that he carried on the business of a money-lender must be drawn, if at all, simply from the number and magnitude of his advances. Having regard to this fact, and to the nature of his practice as a solicitor, and to the comparatively small number of transactions during the material part of 1925, the evidence does no require the conclusion that, at the relevant time, Abigail was "a person whose business was that of money-lending" within the meaning of that expression in sec. 8 of the Money-lenders and Infants Loans Act 1905 (N.8.W.).

It therefore becomes necessary to consider the question of priorities. The decision of this question is embarrassed by the lack of proof of the circumstances preceding and attending the trans- action between Abigail and Heavener. For this reason it w be convenient to state the more material facts which do appear. According to the finding of Long Innes J., which is not disputed upon this appeal, the appellants Mark Lapin and his wife, be registered proprietors of parcels of land situate in Paddington and Dee Why respectively, transferred the land to Mrs. Heavener as security for their indebtedness to her husband, and for moneys to be applied by him in discharge of an existing mortgage thereon. The transfers were expressed to be in consideration of money pay- ments. With a discharge of the existing mortgage, they were registered on 18th December 1923. On 14th March 1924 Mrs. Heavener gave a mortgage to a bank, which it registered on 1th August 1925. On or before 2nd September 1925 Heavener arranged - with the respondent Abigail for a loan upon the security of the appellants' two parcels and of some other land. The Bank executed a discharge of its mortgage which bore the date 2nd September 1925. The amount secured by the mortgage was not proved in evidence. On 3rd September 1925 Abigail's cheque for £3,500 in favour of Heavener was paid into Heavener's current account at another bank. The cheque was cleared on 4th September 192!

and on that date the sum of £2,570 19s. 6d. was placed to the debit H- ©. oF A.

of Heavener's account as a withdrawal. A registrable mortgage bearing date 2nd September 1925 was executed by Mrs. Heavener in favour of Abigail, expressed to secure the sum of £5,500 over the two parcels of land together with other land. On 4th September 1925 a caveat on behalf of Abigail was lodged in the Registrar- General's office forbidding registration of any dealings affecting the two parcels of land and another piece of land. Abigail's mort- gage was not, however, lodged for registration, and until 15th October 1925 the discharge of the Bank's mortgage was also with- held from registration. On 7th September 1925 Abigail made a further payment of £2,000 to Heavener.

It is clear that at some time Abigail obtained possession of the certificates of title, but when does not appear from the evidence, unless the time may be conjectured from the fact that in the fold of the mortgage given by Mrs. Heavener to Abigail there is a note in the handwriting of one of Heavener's clerks, " Herewith Titles"

• specifying the volume and folio ; and from the further fact that the caveat lodged on Abigail's behalf showed upon its face that the person who drew it must have seen either the certificates of title or some search notes. Heavener and Abigail were called as witnesses, but the conversations in which the transaction between them was arranged were objected to and rejected. Moreover, Abigail was unable to give any detailed account of the manner in which the transaction was carried out. After stating that he gave cheques on 2nd September for £3,500 and on 7th September for £2,000 to Heavener, he said that he had " almost a clear recollection of going down with Mr. Heavener to the bank at the corner of King and George Streets; I am sure I went there and picked up documents, I am certain of that. That bank used to be the A. J. S. and is on the south-west corner of King Street." There is reason to doubt the identity of this institution with the mortgagee Bank. However this may be, Abigail was not prepared to say whether the certificates of title produced in Court were the documents which he picked up at the Bank, saying he could not carry his memory back so far. In cross-examination he said that he had a recollection that when Heavener asked for the loan he gave him a

HIGH COURT [1929-1939 document setting out what he wanted and what his assets 'a and that he (Abigail) then told his clerk, whose name was Harri to make a search, and, if it was " right," to make the document te cover the amount, and that he relied upon what Heavener told him and his clerk Harris, when he signed the document, and did handle the matter personally. Harris was not, however, call as a witness, and there is no evidence whether he did or did search the register. On 30th November 1925 Abigail adva a further £1,000 and a new security for the whole of the advane was drawn up, executed, but not registered. Heavener's cas which was not accepted by the trial Judge, Long Innes J., was the transfers by the appellants to his wife were not by way of secur but were absolute, and given in satisfaction of the appella indebtedness to him. There seems no reason to doubt that Heavener had adopted this view of the transaction at an early date. Upon these facts the question is whether Abigail's rights

held that Abigail took the unregistered mortgage bona fide and far value in respect of the advance of £5,500, but he considered th he had constructive or imputed notice of the rights of the appella before he made the further advance of £1,000. Upon appeal, # Full Court of New South Wales, consisting of Harvey ©.J. in Eq,, Stephen J. and Hammond A.J., expressed the opinion that the decision of Long Innes J. was undoubtedly right that Abigail was a purchaser for value without notice of the plaintiffs' equity.

While the evidence supports a finding that Abigail did not him: have notice, an affirmative finding that Harris, acting within course of his authority, had no notice actual or constructive is mort doubtful. The failure to call Harris as a witness is remarkable and invites suspicion. It must not be forgotten, however, that a search at the Registrar-General's office would have disclosed no interest in the appellants inasmuch as they had not lodged a cave: and that Heavener himself would be unlikely to disclose to Harm any fact suggesting that the appellants had an interest in the It is more probable that he would tell the story which he maintain at the trial. Having regard to the unlikelihood of any avenue 0 information being available to Harris, an affirmative inference that

he had no notice may perhaps be open. It is true that Long Innes H- 0. oF A.

J. seems to have considered that when absence of notice in Abigail personally was proved, the burden of showing notice in Harris fell upon the plaintiffs. It may be, however, that this merely repre- sents his view of the presumptions of fact which arose from the circumstances in evidence, and does not involve any alteration of the legal onus. Unsatisfactory as the evidence is to establish an affirmative plea of purchaser for value without notice, it does not appear to leave entirely without support the conclusions arrived at by the two Courts below.

It does not follow, however, that Abigail is entitled to succeed simply because he obtained a registrable mortgage for an advance bona fide made without notice. Until registration of his security Abigail had no more than an equitable interest. Prima facie his equitable interest is to be postponed to the prior equitable interest of the appellants. Indeed, although it is often convenient to deal separ- ately with the question whether an equitable interest was taken bona fide for value without notice of a prior equitable interest, in strictness it forms only part of the issue whether the prior equity should lose its priority because the owner of the later equity was misled into its acquisition.

By a line of cases it is settled that sec. 43 of the Real Property Act 1900 does not give protection to a person who deals with a registered proprietor unless and until his dealing is registered (see Cowell v. Stacey (1); Bakers Creek Consolidated Gold Mining Co. v. Hack (2); Templeton v. Leviathan Pty. Ltd. (3)). Indeed, sec. 43 is expressed in terms which appear appropriate only to the protection of a legal estate or interest, and no legal estate or interest passes until registration. '' Grantees and incum- brancers claiming in equity take and are ranked according to the dates of their securities, and the maxim applies, Qui prior est tempore potior est jure. The first grantee is potior - that is, potentior. He has a better and superior - because a prior - equity. The first grantee has a right to be paid first, and it is quite immaterial whether

(1) (1887) 13 V.L.R. 80. (2) (1894) 15 N.S.W.L.R. (Eq.) 207, (3) (1921) 30 C.L.R. 34, and par- at p. 222, ticularly at p. 54, per Knox C.J.

the subsequent incumbrancers at the time when they took tj securities and paid their money had notice of the first incumbra or not" (per Lord Westbury L.C., Phillips v. Phillips (1) ).

As the priority of an earlier equitable interest depends upon ti the form and language of sec. 43 would be strangely misconcei if it was intended to protect against that priority one who obtain no legal estate or interest but a mere equitable right.

The question, therefore, is whether, for any reason appe: evidence, the appellants lost their priority. In general an e equity is not to be postponed to a later one unless because of s act or neglect of the prior equitable owner. "In order to t away any pre-existing admitted equitable title, that which is re upon for such a purpose must be shown and proved by those y whom the burden to show and prove it lies, and . . . itm amount to something tangible and distinct, something which « have the grave and strong effect to accomplish the purpose for whi it is said to have been produced " (per Lord Cairns L.C., Shropshi Union Railways and Canal Co. v. The Queen (2)). The act default of the prior equitable owner must be such as to make i inequitable as between him and the subsequent equitable owner tha he should retain his initial priority. This, in effect, generally meam that his act or default must in some way have contributed to : assumption upon which the subsequent legal owner acted acquiring his equity. i

No doubt, when the appellants executed transfers which expres the consideration as the receipt of a money payment, they d something which might well have operated to lead a person wl dealt with the transferee on the faith of the transfers and e d the statement of the consideration, to suppose that she had bought the land and paid the purchase-money, and thus becot beneficial owner. But once the transfers were registered and Mh Heavener's certificates of title were issued, it became unlikely that any person would deal with Mrs. Heavener upon the faith 0 the transfers themselves, and in this case it is not shown 0 suggested that either Abigail or Harris did in fact see them.

(1) (1861) 4 DeG. F. & J.,at p.215; 45 E.R., at p. 1166, 4 (2) (1875) LR. 7 HLL, at p. 507.

constituting Mrs. Heavener legal owner the appellants did nothing which would warrant an assumption that she held free from all equities. The very nature of an equitable right requires that the legal ownership shall be elsewhere, and to constitute a person legal owner does not per se imply any representation, or warrant any supposition, that his legal title is not subject to equities.

Under the Torrens' system it is registration of a dealing which operates to extinguish inconsistent equitable titles. The system pro- vides the machinery of caveats in order to enable the owner of an equitable interest to forbid registration and thus preserve his equity. This step the appellants did not take. The view has sometimes been expressed that failure on the part of a prior equitable owner to lodge a caveat is a default sufficient to postpone his interest to a subsequent equity acquired by one who has searched the register for caveats and, having found none, has thereupon acquired his interest (see Butler v. Fairclough (1)). It may be remarked that, if this view be correct, a curious consequence has arisen from the legislative attempt to provide a means of securing prior equitable rights from extinguishment by the registration of inconsistent dealings. Although it is registration which extinguishes the equity, and a caveat is therefore provided as a means of preventing registration, nevertheless, upon this view, failure to use that means affords a reason for defeating the equity or postponing it to the very interest, although unregistered, which, upon the terms of the statute, requires registration in order to prevail. No doubt, if it were the settled practice for all owners of equitable interests to lodge caveats, a failure to conform to the practice would naturally lead those who searched to believe that there was no outstanding equity. It may well be doubted, how- ever, whether such a regular practice has actually been established. But in this case the question need not be pursued because, although the appellants did not caveat, it does not appear that any search for caveats was made on Abigail's behalf or that he acted in the belief that there was no caveat. The default of the appellants - if default it be - therefore did not contribute directly to any assump- tion upon which Abigail may have dealt with the Heaveners.

(1) (1917) 23 G.L.R., at pp. 91-92, per Griffith C.J.

It was suggested that, by constituting Mrs. Heavener the legal o and by permitting the consideration to be stated in the transf as a money payment and by failing to caveat, the appellants h put the Heaveners in a position in which they, or one of them might be emboldened to attempt to deal with third parties, inasmuch as there would be little or no fear of a third party detecting the fraud or receiving notice of any outstanding interest. In this way P it was suggested, the supposed default of the appellants did indirecth contribute to the deception practised upon Abigail. But even if some circumstances such a process of causation might suffice postpone a prior equity, there is in this case a failure to establish the - requisite facts. All the circumstances which in truth operated to induce Heavener to commit the fraud, and the factors which k Abigail to trust him, would need investigation and proof. In poi of fact the case suggested does not appear to have been explicitly made at the trial, and neither cross-examination nor findings of fact appear to have been directed to it. Heavener had dealt it the land on other occasions, and in the transaction with Abi he was not attempting to defraud the appellants alone. In the: circumstances it is impossible now to reach an affirmative conclusion that the failure to caveat led to the dealing by Abigail. There is therefore, so far, nothing to postpone the appellants' prior equity to his.

It may, however, be suggested that, if Abigail obtained a regis- trable instrument together with the certificates of title, his equi is to be preferred upon the ground that he had an immediat and a better right to call for the legal estate. In the first plaet it is not proved satisfactorily, or perhaps at all, that Abigail obtain the certificates of title at the time of his advance or at an time before he got notice of the appellants' rights. But in amy case the equitable doctrine by which he who has a better right to legal estate obtains priority is not applicable in a registration

the supposed better right to the legal estate consists simply in the ability of the party claiming it to secure priority for a statuto security, if he chose to do so, by registration.

The circumstances, however, suggest that Abigail bargained H. C. or A.

with Heavener for a first mortgage as security for the loan he made, and that his money was accordingly applied by Heavener to pay off the existing mortgage held by the Bank in order that Abigail's mortgage should have priority. As the Bank's mortgage was registered there can be no doubt that it prevailed over the appellants' equity. It follows that before Abigail's loan was made to Heavener the appellants' equity was subject to the Bank's legal mortgage. The question, therefore, arises whether the discharge of that mortgage should put the appellants in a better position, as it would do if their equity were given complete priority to that of Abigail. "I think that, where a third party at the request of a mortgagor pays off a first mortgage with a view to becoming himself a first mortgagee of the property, he becomes, in default of evidence of intention to the contrary, entitled in equity to stand, as against the property, in the shoes of the first mortgagee " (per Parker J. in Crosbie-Hill v. Sayer (1) ).

There can in this case be no subrogation in the strict sense, because, after the registration of the discharge on 15th October 1925, the Bank's mortgage ceased to be a security and the land was wholly discharged from the debt. The question is, however, whether the security given to Abigail should not pro tanto prevail over the prior equity, which, otherwise, would obtain an advantage as a result of the transaction from which the later equity arose, and of the equitable remedies obtained in order to preserve the prior equity from the destruction which would follow if the later transaction were completed by registration.

The facts upon which this question turns can only be ascertained by conjecture. Neither the Bank's mortgage nor the discharge was put in evidence. The date of the discharge, 2nd September 1925, but no more, does appear from the entry of its registration. Who paid the Bank off does not appear, but it is clear that Abigail did not directly do so. There is no evidence that Abigail in fact bargained for a first mortgage of the land in question, but unfortunately the conversations which may have included such a bargain were rejected. The grounds upon which they were tendered

• the certificates of title in order to hand them to Abigail or his cle

are by no means clear, but they do not seem to have includ reason that they were relevant to this issue, although it was raised by a paragraph of Abigail's defence. The amount of the mortgage is not shown, nor are its terms. From the fact tl large a sum as £2,570 19s. 6d. was debited to Heavener's bs account upon the day upon which Abigail's cheque of £3,500 y credited, and upon which the caveat was lodged, it may be « jectured that the money received by Heavener from Abigail applied by him in discharging the Bank's mortgage, and obtain

who thereupon lodged the caveat. But this is mere guess- and could form no foundation for any judicial conclusion. 1 facts which it would be necessary for Abigail to prove in order establish priority in respect of such an amount as corres with the sum secured by the Bank's mortgage appear to be wholl lacking. In view, however, of the rejection of the evidence, an the manner in which the trial was conducted, it is perhaps just t concede to the respondent Abigail the right to an inquiry upon thi subject, but such a concession could only be made upon the term that he bore the whole costs of the inquiry and subsequent pr ceedings rendered necessary by his failure to tender evidence upo1 the proper ground and adduce sufficient evidence of the other fa necessary to establish his title.

It may be suggested that, because the land was transferred to Mrs. Heavener to secure the plaintiffs' indebtedness to her husband, the Heaveners had a beneficial interest in the land upon which the mortgage given to Abigail might operate. It must be rememb however, that the Heaveners did not intend to transfer to Abigail an such interest in the land, and there is nothing in the instrument ol mortgage which could operate as an assignment to Abigail of Lapin debt to Heavener. The observations of Sir William Grant in Jo vy. Gibbons (1) to the effect that by the assignment of the securit

intention to deal with the security at all as such and the

itself is outstanding and recoverable by a third person. this case Mrs. Heavener's husband is the creditor. He is

(1) (1804) 9 Ves. 407, at p. 410; 32 ER. 659, at pp. 660, 661.

entitled to recover and retain the debt which is not in any way assigned. Her right to retain the land until her husband is paid is not a proprietary interest which her mortgage could impart to Abigail. Indeed, the point is really governed by a further observa- tion of Sir William Grant (1): " But it is difficult to say, the mortgage passes, and is well assigned to one person, and yet the debt remains in another." It is impossible that it can be so divided. Mrs. Heavener held the land as nominee, and to this extent as the fiduciary, of the creditor to be secured, her husband. There is nothing to pass her interest in debt or security.

The decree appealed from contains directions for the purpose of ascertaining the amount, if any, remaining payable by the plaintiffs to the defendant Bertram Theodore Heavener. This amount would be reduced or extinguished if it were found that the defendant Abigail was in effect remitted to the position of the Bank whose mortgage or charge was created by the wrongful act of Heavener ; because the amount with which the land was thus burdened would no doubt be chargeable against Heavener in the account between him and the plaintiffs. The decree should therefore be discharged, except in so far as it deals with certain questions of costs, so that upon further consideration the rights of the parties can be finally dealt with consistently with the order made upon this appeal.

Appeal allowed. Order of Full Court discharged. Respon- dent Abigail to pay the costs of the appeal to the Full Court and of this appeal. Discharge the decree of Long Innes J. save in so far as it orders taxation and payment

of the costs of the plaintiffs of the suit and of certain other costs. Declare that the defendant Olivia Sophia Heavener holds the property comprised in certificate of title reg. vol. 2450 fol. 52 in trust for the plaintiff Mark Lapin, and the property comprised in certificate of title reg. vol. 3337 fol. 97 in trust for the plaintiff Pearl Lapin subject to the equitable charge in favour of the defendant Abigail which is referred to in the declaration hereinafter contained and after

Declare that the defendant Abigail is entitled to an e

Order that the suit be remitted to the Supreme Court (a) for tl

Solicitor for the appellants, Abram Landa. Solicitor for the respondent, W. Parker.

such lands have answered any moneys secured thei which may on further consideration be found to payable to the defendant Bertram Theodore Heave by the plaintiffs or either of them. Declare that mortgage or mortgages given by the defendant Olivi Sophia Heavener to the defendant Ernest Robert Abi by memoranda of mortgage dated 2nd September and 30th November 1925 ought not to be registered.

charge over the said lands to secure the advances mad by him to Olivia Sophia Heavener and/or mn Theodore Heavener up to but not beyond the sum, if

in respect of which the defendant Abigail may be found to have priority as the result of the determination of matters raised by par. 18 of his defence pursuant to ti order hereinafter contained.

purpose of enabling the said Court on the application of the defendant Abigail and at his cost to determine th matter raised by par. 18 of the defendant Ab defence whether upon the evidence already adduced upon further evidence or by an inquiry before th Master as to that Court shall seem just, and ) fo the purpose of making a decree on further co ation in this suit dealing with all matters (i questions of costs) not finally disposed of by this orde or by so much of the decree of Long Innes J. as is nd hereby discharged.