Nabeth Taleb v National Australia Bank Ltd

National Australia Bank Ltd (First Defendant) Vashiliki Tsemetzis (Second Defendant) Representation: Mr M Evans (Plaintiff) Mr J Hynes (First Defendant) Mr Z Mandoh (Second Defendant) Sommerville & Co (Plaintiff) TurksLegal (First Defendant) Mandoh & Associates (Second Defendant) File Number(s): 2011/00239432

Judgment 1The parties to this litigation have all been cheated by Mr Peter Kay in lending money to Hock A Car Investments Pty Ltd or taking security over the company's land at Tempe on the basis that they would receive a mortgage or other security or would have a charge over that property. Mr Peter Kay did not tell any of the people he was dealing with that he had made or was going to make similar arrangements with someone else. He acted in fraud throughout. Mr Kay died on 3 March 2011 in strange circumstances, it may be by suicide or it may be at the hands of somebody else. His estate is not a party to this litigation. 2At the times significant for this litigation the registered proprietor of the land was Hock A Car Investments Pty Ltd. Hock A Car Pty Ltd operated a licensed pawnbroking business in business premises on the land. Both companies were controlled by Mr Peter Kay. The pawns were mainly motor cars, so a large storage area was needed. Motor cars were pawned (or as in the company's name hocked) at large interest rates for relatively small periods. 3The relevant events opened at 8 July 2008 when Westpac Banking Corporation held a registered mortgage over the property to secure advances which Hock A Car Investments had borrowed or had given security for. 4Mr Taleb is an electrician and conducts business in which he provides skilled services in property maintenance for strata title buildings. The money advanced was mostly his own, but included moneys given to him to invest by relatives. He had no involvement in business related to Mr Kay until 2008. However he had met Mr Kay several years earlier and knew that he was in business pawning motor cars and other property. He came into contact with Mr Kay through Ms Kalledis who worked in the business. He had known her for some years, perhaps from about 2002, when she was a tenant of a property where Mr Taleb did maintenance work. They became friends, and they still are. It was through this connection that he came to know Mr Kay and to lend money to the Hock A Car business. When he first invested money some arrangement was made to the effect that he could or might enter into a franchise of the Hock A Car business. He was given no more than an option or opportunity to do this and he gave no commitment. 5After Mr Taleb had been making loans for about two years Mr Kay and Mr Taleb entered into the Deed of Acknowledgement out of which this litigation arises. Mr Kay executed the document on behalf of Hock A Car Investments Pty Ltd as both director and secretary. The Deed of Acknowledgement is dated 28 January 2010 although it refers to a series of loans which began with a loan of $50,000 on 1 January 2008. The Deed contains a schedule setting out a calculation of interest and the balance of account for each month from 1 January 2008. In this schedule interest was charged with monthly rests at the rate of 120% per annum; that is, it was compounded monthly. The calculation produced a debt at 1 February 2010 of $544,270.00, and it was further acknowledged that Mr Taleb agreed to advance a further $155,709.93 for three months; and the parties agreed that the amount of the debt was $700,000. Then the Deed contains operative provisions. Clause 1 was entitled Terms and included provisions for interest at 24% per annum, to be paid three months in advance, the first payment of $42,000 at the date of the deed, and further instalments at $42,000 per quarter. Interest was to be adjusted on a pro rata basis with any reduction of the debt. There were provisions about a franchise agreement: 1.5 The debtor agrees to assign rights to the creditor to use the business name Hock A Car at a value of $100,000 per site under a franchise agreement in reduction of the debt. 1.7. The debtor will not charge the creditor franchise fee until the debt is discharged. No actual arrangements were ever made about franchising the business name; Mr Taleb did not take this up. 6The most important provision for the purpose of this litigation is clause 1.3: "1.3 the Debtor will grant to the Creditor the right to register a Caveat over the Debtor's interest in property located at [address] ("the secured property")". 7Other provisions include clause 2 which deals with interpretation, clause 3 which establishes that the law of New South Wales is the governing law, and clause 4 which rebuts unrecorded representations and warranties. Clause 4 includes: "Each party warrants that they have obtained independent legal advice". Clause 5 deals with costs of the deed "The parties agree respectively to bear their own legal and other costs and expenses in relation to the preparation of, execution and completion of this deed." Clause 6 rebuts merger and clause 7 rebuts waiver. 8Mr Taleb did not arrange for preparation of this deed. He left that to Mr Kay and Ms Kalledis, and the Deed was actually prepared by A Luong & Associates, solicitors who before then and later acted for Mr Kay's interests in other legal business. Notwithstanding what clause 4 says, Mr Taleb did not actually obtain legal advice either from those solicitors or from any other source before he entered into the Deed. Notwithstanding clause 5 he did not incur any legal or other costs and expenses in relation to preparation, execution and completion of the deed; until much later in 2010 when he lodged a caveat on 26 November 2010 and paid stamp duty on the Deed of Acknowledgment on 17 June 2011. 9Arrangements were made about the time that the deed of acknowledgement was signed for a caveat to be prepared. Mr Taleb signed the document and Miss Kalledis returned it to Mr Peter Kay; I accept her evidence that Mr Kay signed the caveat: the signature of the registered proprietor is provided for on printed forms, although it is not essential. Ms Kalledis believed there was an arrangement to give it to Nancy of A Luong and Associates on the following Saturday. Those arrangements were not carried out. (It was her evidence that Mr Taleb did sign the caveat; he does not know whether he did). 10As 2010 passed Mr Taleb was given payments of interest which he found satisfactory. Mr Taleb was of the belief that the solicitors who prepared the Deed would carry through the project of lodging a caveat, and he expected them to carry out the right conferred on him by the deed. However they did not do so. The solicitors deny that they ever acted for Mr Taleb and according to them they were not acting in his interest when they prepared the deed and they had no instructions from him to lodge a caveat. The solicitors are not parties to this litigation, and I have not been asked to decide that they had a duty to Mr Taleb to lodge a caveat for him. I make no conclusion on that subject. 11Mr Taleb and Miss Kalledis are both witnesses in whose evidence I have confidence. Counsel for NAB cross-examined Mr Taleb with the object of showing that in fact Mr Taleb did not actually lend any money as the terms of agreement show, and made submissions to the same effect. I am quite satisfied that Mr Taleb actually did lend money, both his own and that of friends and relatives, to enterprises connected with Mr Kay, and that the rights of both sides are genuinely recorded in the deed of acknowledgement. There is no sham or pretence about it. Mr Taleb made what would, in a well organised business, have been an inadequate performance when required to produce documents relating to these transactions, but this did not cause me to doubt his evidence. Mr Taleb is not sophisticated in the investment business. He is an artisan, an emergency call electrician, and works as a locksmith and plumber as well as an electrician. Nothing in the evidence indicated to me that he was not a sincere and reliable witness, although there were some things he did not fully understand. 12Ms Emelie Kalledis worked in the Hock A Car business from about 2004. She became a director of Hock A Car Pty Ltd, but was not ever a director of Hock A Car Investments Pty Ltd. She ran the day to day dealings of the pawnbroking business, arranging to make loans and accept vehicles as pledges, and did everything under instructions of Mr Kay. She said in evidence: "I didn't do the finances. I did the pawning." (transcript 44, line 48 - 49) She had significant responsibilities which included signing agreements and dealing with banks, but always under Mr Kay's instructions. She had some part in passing information from Mr Kay to a mortgage broker named Mr Ditsis who arranged finance with NAB. Among other things, she saw Mr Crakanthorp of NAB at some time in September 2010 when arrangements were made to take banking business from ANZ to NAB and some documents related to new bank accounts were signed. She did not recall whether the discussions related to banking business moving from Westpac to NAB. 13Then late in September 2010 Mr Kay asked Ms Kalledis to sign a document which was to be a Fixed and Floating Charge by Hock A Car Investments Pty Ltd with a guarantee by Hock A Car Pty Ltd, of which she was a director. She refused to sign the document. She received messages including an SMS of 28 September recorded on her mobile phone (which she read out in evidence), from a paralegal at Andrew Luong's firm named Nancy, passing on Mr Kay's request to sign the document. She refused. Somebody wrote her name in block letters at the place indicated for her signature; it was not Ms Kalledis who wrote this and it does not look like a person's signature. Later this was scored through and initialled by Mr Kay. Ms Kalledis said: "... And I refused to sign this document because I had full knowledge of the loan between Mr Taleb and I was not going to sign it and I told Nancy to that effect in the mobile conversation." (transcript 47 line 50, 48 line 2). This was around 28 September. She was sufficiently concerned to see Mr Jordan, another solicitor who acted for the companies and get his advice, which was against signing it. 14Mr Kay gave her further documents to sign which she refused. Nancy the paralegal from A Luong & Associates' office arranged to come in on a Saturday for her to sign them and she refused. She explained that concern: "Because I had brought it up with Nancy that Mr Taleb had a loan and a caveat that have been in place prior to this loan agreement and she said it would be fine and I refused to sign it." (transcript 49 line 22) Miss Kalledis was sufficiently concerned to leave her job and resign from her position as director on 6 October. She made some efforts to get the loan repaid, and also to get the caveat organised. She said: "I was not hassling them, I was requesting it as per the original loan agreement." (transcript 50 line 10) She resigned on 6 October: "I told him that I am no longer working there and I found out that the caveat was not registered and that [Mr Kay] was proceeding with the refinance... [with the NAB]". (transcript 51 line 21) 15Some days later, after 6 October, 2010, she told Mr Taleb about these documents, which must have indicated to Mr Taleb that Mr Kay was proceeding to get secured bank finance over all the assets of Hock A Car Investments. In October 2010 Mr Taleb spoke to Nancy the paralegal at A Luong and Associates, to arrange for payment of his interest. At about this time he found that the caveat was not registered. Until then he put his trust in the people he was dealing with. The state of his mind was: "I always thought the caveat was registered or supposed to be registered in January or February of that year, 2010" (transcript 38 line 42) "The agreement was that I assumed they would stick to their word and get it registered as the deed says, the agreement". (transcript 34 line 49) He began to push for it to be registered; he asked Mr Kay to have it registered. He also asked the firm A Luong & Associates to lodge a caveat (transcript 37). Later in October he engaged a solicitor named Marcel whom Miss Kalledis organised for him to see; his lawyer communicated with A Luong & Associates and other lawyers about getting the caveat registered. 16After more delay, eventually a caveat by Mr Taleb was lodged on 26 November 2010. The estate or interest claimed was "Equitable Interest" which was said to arise by virtue of the deed of acknowledgement. From then on it was known to anyone who searched the register that Mr Taleb claimed an equitable interest. Anyone who would have searched the register and found the caveat if he had been acting reasonably in his own interest had constructive notice of the claim made in the caveat. 17The circumstances in which NAB claims the equitable interest which competes with the interest claimed by Mr Taleb are these. Mr Crakanthorp an officer of the bank worked in a position designated as Partner at the City South Business Banking Centre and was responsible for day-to-day management of the banking facility provided to Hock A Car Investments Pty Ltd and Hock A Car Pty Ltd as business customers. These dealings opened about July 2010 when Mr Ditsis, whose business was known as First European Mortgages and Business Advisors, brought a proposition to Mr Crakanthorp in which Mr Kay owned 25% of the property at Princes Highway Tempe and wanted to buy the other share from business partners. This led to interviews and investigations, which included ASIC company searches for both companies and a course of interviews and discussions extending to September. The proposed business became a loan to Hock A Car Pty Ltd and not to Mr Kay, and the purpose of the loan came to be simply to refinance the existing finance which Hock A Car Pty Ltd had from Westpac on mortgage. Mr Crakanthorp collected much detail and many documents relating to Mr Kay and Hock A Car Pty Ltd and related companies and their affairs, and prepared submissions which led to approval of the business by NAB's Credit Department about 23 September, 2010. In all his extensive enquiries Mr Crakanthorp was not told and saw no document which should have told him that the companies involved owed any money to Mr Taleb or had made any security arrangements with Mr Taleb. NAB was simply not told by Mr Kay or his mortgage broker about the deed of acknowledgement or about Mr Taleb's debt. The fact that the bank was dealing with a borrower who could direct the Certificate of Title from Westpac to NAB's hands confirmed the apparent strength of the view that NAB was dealing with someone who really could confer a registered first mortgage on it with priority over any other claims. 18Mr Crakanthorp went overseas on leave from 24 September to 18 October 2010. When he returned bank records showed that the business had been carried through and the advance was made by other bank staff on 15 October, 2010. The accommodation was referred to as a Bill Facility and was secured by a first mortgage to NAB which was intended to be registered, and in a number of other ways including a Fixed and Floating Charge by Hock A Car Investments Pty Ltd, a Guarantee and Indemnity given by Mr Kay and Hock A Car Pty Ltd supported by a Fixed and Floating Charge by Hock A Car Pty Ltd, a registered mortgage over a home unit and the mortgage which was intended to be registered over the property at Princes Highway Tempe. Most of the documents were prepared earlier and completed on settlement, and on that day a bank officer received a discharge of the Westpac mortgage and the Certificate of Title. On 15 October a Bank Cheque in favour of Westpac for $1,341,534.85 was delivered to Westpac. The date shown on the mortgage is 18 October. Mr Crakanthorp straight away sent the documents on to NAB's Stamping and Registration Team. 19In the course of dealings up to settlement NAB searched the title of the land three times, on 27 July 2010, on 30 September 2010 and again at 8:57am on 15 October, 2010 the date of settlement. Of course these searches showed that the title was encumbered by the Westpac mortgage, but did not show any caveat by Mr Taleb or any other indication of his interest or loan. If Mr Crakanthorp had had information then that the loan would not have taken place, or would have been on quite different terms. 20Mr Crakanthorp gave an account (affidavit 37) of the Bank's usual practices for registering documents. Action taken by bank officers is recorded electronically in a record called the Siebel System. Bank officers called the Stamping and Registration Team attend to registration. They establish whether stamp duty is payable and whether all the documents required have been received and are in order. They then send the security documents to bank officers called the City Settlement Team who have the mortgage document appropriately stamped; in this case the mortgage required to be stamped. The City Settlement Team attend to bulk lodgment of mortgages at the Torrens Registry, and when that is completed they return the documents including the mortgage to the Stamping and Registration Team. 21This process usually takes up to 2 weeks but in the present case it took far longer. In this case there were difficulties, including difficulties relating to refund of stamp duty on the Westpac mortgage for which a certified copy of the loan agreement with Westpac was required. Mr Crakanthorp was unable to obtain the documents required until late in November, but he was not concerned because he thought the bank's position was sufficiently protected, especially by possession of the Certificate of Title and the executed mortgage in registrable form. He sent all the documents required to the Stamping and Registration Team about 30 November. Stamp duty was assessed on 30 November and the mortgage was probably stamped on that day or between that day and 7 December. The mortgage, the Westpac discharge and the Certificate of Title were lodged for registration, it would seem on 7 December 2010. As was appropriate, the Registrar General immediately raised a requisition requiring removal of the caveat before registration. 22In this way the existence of Mr Taleb's caveat, and (it must be said) the existence of Mr Taleb first became known to NAB; a record that the Stamping and Registration Team knew of this caveat appears in the Siebel System about 9 December. The requisition was the first information which actually came to NAB or any of its officers that the caveat existed, and a title search obtained soon afterwards was the first information that came to NAB indicating the terms of the caveat. In this way a competition of equitable interests emerged between Mr Taleb and NAB. In saying this I assume that the deed of acknowledgement confers an equitable interest in the land on Mr Taleb. I do not assume this for all purposes and I will return to the subject. 23Mr Crakanthorp contacted Mr Kay on 9 December as soon as he received notification and told him that the caveat had been found and needed to be removed. Mr Kay said that he would ring a solicitor Patrick Maloney and that it would be taken off. Mr Crakanthorp shortly afterwards telephoned Mr Maloney and also received assurance from him, but this was not followed through. After some further delay Mr Crakanthorp caused NAB to lodge a caveat notifying its interest on 12 January 2011. 24Default under the Bill Facility occurred on 20 December 2010. The debt to NAB mounted and by 31 August 2010 was $1,617,629.38. NAB sought possession by giving notice purportedly under section 57(2) of the Real Property Act on 18 May 2011, to no effect because the bank was not a registered mortgagee. On 9 June, 2011 NAB delivered a lapsing notice and Mr Taleb responded inappropriately by lodging a further caveat on 16 July 2011. NAB served a further lapsing notice on 18 July 2011. On 25 July Mr Taleb filed the summons commencing these proceedings, which was amended on 28 July to add Vashiliki Tsemetzis as the second defendant. The claims are first a declaration establishing that the acknowledgement of 28 January 2010 creates an equitable charge, secondly a declaration that that charge prevails over any interest of NAB and thirdly a declaration that it prevails over any interest of the second defendant. There is practically no information about the second defendant in the evidence, but unless Mr Taleb is entitled to an equitable charge he cannot obtain that declaration against the second defendant. 25There were no pleadings in the litigation. I find this very surprising in view of the complexity of competitions of equitable priorities and of other issues. 26At an early stage there were interlocutory proceedings about caveats, and these led to interlocutory arrangements under which the bank's mortgage became registered with a view to exercise of the power of sale to produce funds to be disposed of according to the Court's decision on entitlement. It was only under these arrangements that Mr Taleb's caveat was withdrawn, the Westpac discharge and the bank's mortgage were registered and the bank was in a position to sell. These arrangements do not alter the competing priorities which I am to decide. 27Mr Taleb is, I am satisfied on the evidence, an honest person; he is not sophisticated in the kind of business in which he was engaged, and he has been grossly deceived. Mr Kay, and also the terms of the deed of acknowledgement, gave him assurance that he would be protected by caveat. In my finding however he did not act prudently in his own interests when he gained the contractual right to lodge a caveat. He relied on Mr Kay and on solicitors who were acting in the interests of Mr Kay to see that his caveat was actually lodged. His evidence does not clearly show why he acted on the basis that the solicitors were acting in his interest as well as in those of Mr Kay. There are hints even in the terms of the deed of acknowledgement that they were not; these are the warranty about obtaining independent legal advice, and the undertaking to pay his own legal expenses. He put his trust in people whose interests were directly and obviously adverse to his own interests, and this was naive and imprudent. 28I am satisfied that some document which if lodged would have been a caveat existed in late January 2010, and was put before Mr Kay and signed; but whatever happened next, the project was not taken to the stage where it was lodged. If Mr Taleb acted prudently he would not have left registration and lodgment of his caveat in the hands of anyone associated with Mr Kay, whose interests were plainly contrary to those of Taleb. He gives no evidence of having followed up with enquiries to find out whether a caveat had been lodged in the months after January 2010. The next he knew of the matter was that about 6 October Ms Kalledis told him to the effect that arrangements were being made that would compete with his interests. Even then he did not respond as a more sophisticated person would, or as a prudent person would. It took him some time to see a solicitor of his own, and some further time to lodge a caveat. In all more than seven weeks passed between receiving Ms Kalledis' warning and lodgment of his caveat. This delay was not prudent in his own interest. If he had got his caveat lodged by 14 October the conflict would not exist. He had over eight months to do that, and a week after Ms Kalledis raised the alarm. 29An important fact was that Mr Taleb did not control possession of the Certificate of Title. This increased the need for Mr Taleb to get whatever protection he could, and to minimise the risk that someone else might pay for the title in ignorance of his interest. His conduct overall since 28 January 2010 left it open to Hock A Car Investments Pty Ltd and Mr Kay to deal with title to the land in ways inconsistent with Mr Taleb's interests. It also meant that other people who were interested in dealing with Hock A Car Investments and searched the register would not find out from search that Mr Taleb claimed any interest, but would be left to assume that any information they had that there was not such an interest was correct. 30My finding is that if Mr Taleb had acted prudently in his own interests and lodged a caveat soon after 28 January 2010, NAB would have found out about the caveat, and would have included enquiries about what Mr Taleb was claiming in the wide ranging enquiries which preceded its loan advance. NAB would have found about this in July, and certainly would have found about it from the search conducted at 8:57 AM on 15 October, 2010, and would have protected itself in some way, fairly certainly by not making the advance until it had established what interest Mr Taleb claimed. 31NAB also did not act prudently in its own interests after it made its advance on 15 or 18 October, and had in its hands documents which if handled properly would have given it a registered mortgage; the Westpac discharge, the Certificate of Title and the executed mortgage. NAB had other securities and they may give it some protection; I do not know. I am concerned only with competing equitable interests in the property. If NAB had acted prudently in its own interests it would not have allowed time to pass from 18 October to 7 December, 2010 before the mortgage was stamped and lodged for registration: over seven weeks. Registering a mortgage to secure $1,500,000 should be an urgent project for any lender. The only real difficulty was to get stamp duty paid on the right basis; otherwise lodging documents in the Torrens Registry is routine business, which if attended to prudently would take 2 or 3 days at the most. These delays would have done NAB no harm if it had completed this process and lodged documents by 25 November; that is within 38 days and before Mr Taleb's caveat was lodged. Overall, NAB did not act prudently in its own interests. 32In a competition of priorities between equitable interests, the enquiry is to establish which is the better equity, and this is established by reference to all relevant circumstances, and priority in time is usually by far the most important circumstance and governs the question unless displaced. 33I stated my views on the categorisation of equities and on priorities in Cranston v CBFC Ltd (Supreme Court of New South Wales, 11 June 1993, unreported) where I referred to Brooking J's restatement of the effect of the authorities in Cash Resources Aust Pty Ltd v BT Securities Ltd [1990] VR 576 at 586. The principal authority remains Heid v Reliance Finance Corporation (1983) 154 CLR 326 at 341 (Mason and Deane JJ). This decision was followed in Person To Person Financial Services v Sharari [1984] 1 NSWLR 745 at 747-748 (McLelland J). McLelland J's summary and restatement are important sources of understanding: As between two equitable interests in property, the earlier in time is entitled to priority unless the circumstances are such as to make it inequitable as between the holders thereof that the earlier should have such priority. Such circumstances may be found where some act or omission by the holder of the earlier interest has led the other to acquire his interest on the supposition that the earlier did not exist: see eg J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546 at 554, 555 and Heid v Reliance Finance Corporation (1983) 57 ALJR 683 at 684, 685, and 687; 49 ALR 229 at 232, 233 and 237. The omission relied on by the plaintiff in the present case is the failure of the defendant either to register his mortgage or lodge a caveat in respect of his interest as mortgagee. It is quite clear, as was held in J & H Just (Holdings) Pty Ltd v Bank of New South Wales , that failure by the holder of an equitable interest to lodge a caveat in respect of that interest where a caveat might have alerted the acquirer of a subsequent equitable interest to the existence of the earlier interest of which he was unaware, does not necessarily result in the postponement of the earlier to the subsequent interest, but that case does not provide authority for the proposition that failure to lodge a caveat can never bring about the postponement of an earlier to a subsequent interest. Such a proposition would be inconsistent with the decision of the High Court in Butler v Fairclough (1917) 23 CLR 78 which was not over-ruled by, and in my view stands comfortably with, the decision in J & H Just (Holdings) Pty Ltd v Bank of New South Wales . It is to be noted that in the latter case Barwick CJ (with whom McTiernan and Owen JJ agreed) and Menzies and Windeyer JJ all expressed agreement with the conclusion and reasons of Jacobs JA in the Court of Appeal ((1970) 72 SR (NSW) 499; 92 WN 803) on this aspect of the case. In dealing with Butler v Fairclough , Jacobs JA said (at 504; 806): "The real question of this aspect of the present case is whether the principle enunciated by Griffith, C.J. in Butler v. Fairclough ((1917) 23 CLR at pp 91, 92), is an absolute principle that a failure to give notice by lodging a caveat should be regarded as inducing any person subsequently dealing with the registered proprietor to regard the title as clear of any outstanding equitable interest or whether this principle is only applicable where the later person proposing to deal with the registered proprietor can, in all the circumstances then existing, safely so deal with him." His Honour went on to demonstrate that Butler v Fairclough established only the limited and not the general principle. The effect of a failure by the holder of an equitable interest to lodge a caveat will depend upon the particular circumstances. A critical point of distinction between the circumstances under consideration in Butler v Fairclough and those under consideration in J & H Just (Holdings) Pty Ltd v Bank of New South Wales is that the party whose conduct in failing to lodge a caveat was under consideration was in the former case an unregistered second mortgagee who did not have the certificate of title, and in the latter case an unregistered first mortgagee who did have the certificate of title. 34On the present facts each party did not act prudently to protect its own interests, but took far longer to take any significant action than a careful person would have taken. Mr Taleb used up time from 28 January to 26 November 2010; the bank used up time from 18 October to 7 December 2010. The bank is a sophisticated business organisation with staff whose whole duty is to attend to such business, and NAB had every opportunity to understand fully what was involved. To me it seems very strange that NAB was held up for 7 weeks from protecting its $1,500,000 advance by dithering about a refund of stamp duty on the Westpac mortgage; chasing farthings while sovereigns rolled away. 35Their imprudent conduct is adverse to each party in appraisal to decide which is the better equity. There were significant differences in the consequences of imprudent conduct. If Mr Taleb had lodged a caveat at a time which was prudent it is extremely unlikely that NAB's competing interest would exist; some other arrangement would have been made, and it would not have been possible for Mr Kay to impose on NAB by not revealing his dealings with Mr Taleb; NAB would not have made the advance or would have insisted that Mr Taleb be paid out or deferred. But for Mr Taleb's imprudent behaviour there would be no conflict. 36On the other hand NAB's delay has caused it a great deal of trouble but has caused no difficulty for Mr Taleb. His conduct of his affairs and his delay in lodging the caveat were not affected in any way by NAB's delays and inattention. 37The significance of the absence of a caveat available on search in competitions of equitable interests has often been decisive, but is not necessarily so. A caveat is not a notice to the whole world of the existence of the interest or of the claim to it: it is not a provisional registration. Priority is not necessarily lost by not lodging a caveat, but the failure enters into consideration of priorities: J & H Just (Holdings) v Bank of New South Wales (1971) 125 CLR 546, Barwick CJ at 552. Not lodging a caveat leaves the owner in a position to misrepresent the state of his title and to do so with success. That has often been an element in decisions on priorities, but it is not necessarily conclusive. The position of the Bank of New South Wales in J&H Just had strengths which Mr Taleb's case does not have. The principle was stated by Barwick CJ in that case at 554-555: Whilst it may be true in some instances that "the register may bear on its face a notice of equitable claims", this is not necessarily so and whilst in some instances a caveat of which the lodgment is noted in the certificate of title may be "notice to all the world" that the registered proprietor's title is subject to the equitable interest alleged in the caveat this, in my opinion, is not necessarily universally the case. To hold that a failure by a person entitled to an equitable estate or interest in land under the Real Property Act to lodge a caveat against dealings with the land must necessarily involve the loss of priority which the time of the creation of the equitable interest would otherwise give, is not merely in my opinion unwarranted by general principles or by any statutory provision but would in my opinion be subversive of the well recognized ability of parties to create or to maintain equitable interests in such lands. Sir Owen Dixon's remarks in Lapin v Abigail (1930) 44 CLR 166, at p 205 with which I respectfully agree, point in this direction. Of course, there may be situations in which such a failure may combine with other circumstances to justify the conclusion that "the act or omission proved against" the possessor of the prior equity "has conduced or contributed to a belief on the part of the holder of the subsequent equity, at the time when he acquired it that the prior equity was not in existence" cf per Knox CJ in Lapin v Abigai l (1930) 44 CLR, at pp 183-184 This is the relevant principle to apply if it is claimed that the priority of a prior equitable interest has been lost in competition with a subsequent equitable interest. "In general an earlier equity is not to be postponed to a later one unless because of some act or neglect of the prior equitable owner. In order to take away any pre-existing admitted title, that which is relied upon for such a purpose must be shown and proved by those upon whom the burden to show and prove it lies, and. . . it must amount to something tangible and distinct, something which can have the grave and strong effect to accomplish the purpose for which it is said to have been produced: per Lord Cairns LC in Shropshire Union Railways and Canal Co v R (1875) LR 7 HL 496, at p 507 The Act or default of the prior equitable owner must be such as to make it inequitable as between him and the subsequent equitable owner that he should retain his initial priority. This in effect means that his act or default must in some way have contributed to the assumption upon which the subsequent legal owner acted when acquiring his equity": Lapin v Abigail per Dixon J (1930) 44 CLR, at p 204 38In the present case the absence of a caveat was causative of NAB's difficulty because it left the means of deception with Mr Kay. In my judgment Mr Taleb's not having lodged a caveat in due time, and not having done so in time to influence NAB's decisions, has the effect that notwithstanding his priority in time he does not have a better equity than NAB, and that the bank has the better equity. 39I regard it as relevant for the competition of priorities that the transaction in which NAB paid out the Westpac mortgage and became or was intended to become a registered first mortgagee with credit which in effect replaced the finance earlier provided by Westpac, did not operate to the prejudice or disadvantage of Mr Taleb, whose interest at all times from the beginning was postponed to the interest of a registered first mortgagee. Objectively the payment out of Westpac was an accidental circumstance in Mr Taleb's dealings with Hock A Car Investments: the first mortgage would remain unless Hock a Car Investments paid out Westpac, and that could not happen without the substitution of another financier, in this case NAB under arrangements for NAB to stand in a similar position to Westpac. What I have said is subject to a qualification, in the circumstances only a slight qualification, as the amount paid out to Westpac was only $1,341,534.85 whereas the finance made available to Hock A Car Pty Ltd was $1,500,000. If the transaction had taken a different form, different only in form and not in substance, in which NAB paid Westpac to transfer its mortgage to NAB, Mr Taleb's priority would not have been advanced or diminished. Viewed objectively, the form which the transaction took is no more than an accidental circumstance. However considerations which I have set out earlier show that NAB has priority even if this element had not been present. 40Counsel for NAB argued that the bank's position was aided by section 43A of the Real Property Act 1900 . That section relates to protection against notice. Under the general law a bona fide purchaser who took the legal estate in land without notice of a competing equitable interest was protected against that equitable interest. Under the general law the purchaser's title was complete when he received the vendor's conveyance and paid the purchase money. Under the Torrens System the legal title is not complete until the transfer is registered. With registration the effect of sections 43 and 42 is that the transferee is in the same position as was achieved on delivery of the conveyance under the Old System. Section 43A ameliorates the disadvantage which this interval produces, and it does so by enhancing, to a small degree, the defence available to the bona fide purchaser of the legal estate who does not have notice of a competing equitable interest. The effect of section 43A is to advance the time when the purchaser has protection against notice to a time earlier than obtaining legal title by registration under the Real Property Act . When the mortgage was stamped, perhaps several days before lodgment for registration on 7 December, NAB was in all respects except for the existence of the caveat in the position indicated by section 43A(1), that its interest was deemed to be a legal estate; with the consequence that it was protected against the notice which it received slightly later as a result of the Registrar General's requisition. T he bank first received notice that Mr Taleb claimed an interest either when the requisition was made on 7 December or when a search was made on 9 December 2010; necessarily after lodgment of the mortgage for registration. The NAB had no occasion to search the Register on or after 26 November 2010, so it cannot be said that it had notice or constructive notice of the caveat, or of the interest it claimed. 41In my opinion the mortgage was not registrable until it was stamped. This is the conclusion which Windeyer J was reluctant to reach in Diemasters Pty Ltd v Meadowcorp Pty Ltd (2001) 52 NSWLR 472, [2001] NSWSC 495 at [22]. In the present case I must come to a conclusion and s301 of the Duties Act 1997 dictates the conclusion that the mortgage was not registrable. 42At the time of lodgment of the NAB mortgage for registration, which I infer happened on 7 December 2010, the mortgage was registrable in all respects except one; it was stamped, it was duly executed, and it was accompanied by the Certificate of Title and the Westpac discharge. The only circumstance which prevented its being registered was that Mr Taleb's caveat had been lodged; as a consequence of this it was the Registrar General's duty to refuse to register the dealing; section 74H of the Real Property Act 1900. 43So far as I have been able to discover, with the assistance of counsel, the extensive law on section 43A has not examined whether, within section 43A, a dealing is "registrable...under this Act" if its registration is prevented by the existence of a caveat, and there is no other circumstance preventing its registration. Counsel referred me to several cases in which s43A has been considered and there has been a caveat on the title, but in none of them did the Court consider whether the existence of a caveat means that the instrument is not registrable. The cases are: Drulroad Pty Ltd v Gibson (Hodgson J, Supreme Court of New South Wales, 8 July 1992, unreported) where a mortgagee was disentitled to the protection of s43A because it was found to have constructive notice of a claim in a caveat: Finlay v R & I Bank of Western Australia Ltd (1993) NSW ConvR 55-686, J & H Just (Holdings) Pty Ltd v Bank of New South Wales at first instance: Helsham J (1969) 90 WN (Pt 1) (NSW) 571, and Weller v Williams (2010) 14 BPR 27,453. 44The exposition of Taylor J in IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550 at 583 - 585 is authoritative notwithstanding other views in judgments in that case: see Meriton Apartments v McLaurin & Tate (Developments) Pty Ltd (1976) 113 CLR 671 at 676. Taylor J did not have occasion to address the standing of a caveat in this connection, and it has not to my knowledge been addressed anywhere since. 45Whether a caveat would in fact prevent registration of a dealing depends on the terms of the caveat. In Weller v Williams (2010) 14 BPR 27,453 registration was impeded by a caveat but the relation between the caveat and section 43A does not appear to have been relied on. That litigation was inconclusive; it was not appropriately constituted as to parties and the only order of substance was one for withdrawal of the caveat. 46Section 74H(1) in mandatory terms prohibits the Registrar General from recording any dealing prohibited by a caveat without written consent of the caveator. In my view it plainly follows that in the absence of a caveator's consent, the NAB mortgage was not "...registrable... under this Act" at the relevant time, which began when the mortgage was stamped. I find it surprising that no earlier judicial consideration of such an obstacle has been found, but I act on what appears to me to be the plain effect of section 43A(1) taken with section 74H(1). 47I see some support for my conclusion in the decision of C. McLelland CJ in Eq in Re Rush and the Real Property Act (1962) 80 WN (NSW) 58. This decision was given between the decision of Courtenay v Austin (1961) 78 WN NSW 1082 by Hardie J at first instance and the decision of the High Court in IAC (Finance) Pty Ltd v Courtenay which affirmed it on appeal. McLelland CJ in Eq considered a predecessor of section 74H, then Section 74 which provided: "So long as any caveat remains in force prohibiting the transfer or other dealing with land, the Registrar General shall not, except with the written consent of the caveator or his agent, enter in the register-book any memorandum of transfer or other instrument purporting to transfer or otherwise deal with or affect the land, estate or interest in respect to which such caveat is lodged: provided that nothing in this section shall prevent the entry in the registrar-book of a memorandum of transfer or other instrument presented for registration before and awaiting registration at the time of the lodgment of the caveat and not afterwards withdrawn." 48In that case a mortgage was lodged on 22 August 1961, after a caveat had been lodged the terms of which forbad dealings including the mortgage. That caveat later lapsed, but before it lapsed another caveat was lodged, so it was for decision whether within the meaning of the proviso the mortgage was "awaiting registration" at the time of the lodgment of the second caveat. C. McLelland CJ in Eq referred to a passage in the judgment of Hardie J in Courtenay v Austin at 1094 in which Hardie J explained the proviso to section 74 as supplemental to section 43A and the protection which it gives. This view of the operation of the section and the proviso might be thought to carry an implication that a dealing would not be registrable under the Act within the meaning of section 43A if its registration was forbidden by a caveat, and that it was appropriate for legislation to relieve this position to some extent where the caveat was not lodged until the instrument was awaiting registration. I find this line of thought too attenuated to indicate the correct construction of Section 43A, but it gives me some slight support. I should address it however because there are few if any occasions where the interaction of section 43A and a caveat has been considered. 49My conclusion is that because of the existence of the caveat NAB did not ever achieve the protection of section 43A. 50I turn to consider whether the deed of acknowledgement does confer an equitable interest on Mr Taleb. Section 23C (1) of the Conveyancing Act 1919 , continuing provisions in the earlier Statute of Frauds , prescribes: "(a) no interest in land can be created or disposed of except by writing signed by the person creating and conveying the same..." Necessarily the writing must show an intention to create an interest in land; what the writing means is shown by what is implied in its terms as well as by what is expressed by its terms. The creation of an interest is adverse to what would otherwise be a property right, so that the intention to create it must appear clearly. 51A caveat and the consequence of lodging a caveat exist only as part of the Torrens system of title by registration in which legal interests, not equitable interests in land are registered; except where the legislation itself authorises interests which in the older system would be equitable interests to appear on the register. The authorisation to lodge a caveat is conferred by statute law; section 74F (1) of the Real Property Act 1900 is the principal authorisation. A registered proprietor cannot authorise or require the Registrar General to record lodgment of a caveat or to make any other entry in the register, except in specific cases for which the legislation provides. The Registrar General acts under duty imposed by Statute, and is not able to deal with a caveat only because others have agreed that he should do so. It often happens that the registered proprietor gives consent under section 74F (6) to a caveat; the effect of this is only to dispense with the requirement that the Registrar General give notice of lodgment of the caveat to the registered proprietor. Consent does not authorise lodgment. 52Courts recurringly encounter contractual provisions to similar effects to clause 1.3 by which registered proprietors purportedly authorise other persons to register a caveat. Many times it has been contended that this authorisation impliedly creates an equitable interest in the nature of a charge over the land. There have been many cases at first instance where such documents have been scrutinised and it has been decided that there is or is not an implication that it was intended to create an equitable charge. Appellate decisions are uncommon. Each such case is a decision on the interpretation of the particular contractual provision under consideration. 53The principle on which consideration should start was stated by Handley JA in Murphy v Wright [1992] NSW Conv R 55-652 "Section74F (1) of the Real Property Act enables a person who claims to be entitled to an estate or interest in any land to lodge a caveat against the title. A registered proprietor cannot by contract confer a right to lodge a caveat where no caveatable interest exists. See Tooth & Co v Barker (1960) 77 WN (NSW) 231 at 233, 242-3. If the clause only confers a contractual right it will be ineffective. However the existence of this right suggests that the Lender was intended to have an equitable charge which would support a caveat." 54In Murphy v Wright the clause in question after referring to security documents said: "In the event of default by the borrowers in payment of moneys due under the Security Documents or in performance or observance of any covenants therein then the Lender shall in addition to the rights set out herein or in the Security Documents be entitled to attach the debt due to any of the assets of the Guarantor or Guarantors whether such assets be real or personal and further the parties hereto agree that in the event of such default the Lender may register a caveat against any property registered in the name of any or all of the Guarantors until the Moneys secured are repaid." That is to say, in that case there was much more material than a simple authorisation to lodge a caveat upon which to discern whether or not there was an intention to create a charge. In that case the majority (Priestley JA and Handley JA) concluded that there was such an intention, for reasons stated in markedly different terms; while Sheller JA dissented and would have upheld the primary judge, Brownie J. With respect I would say that in Murphy v Wright context made a strong case for implication but implication was not made readily, and the difference of opinion shows the difficulties of the subject. The implication must exist in reality; it cannot be spun out of no more than reference to a caveat. 55In Troncone v Aliperti [1994] NSW Conv R 55-703, the Court considered a loan agreement which included: "5. The Debtor authorises the Creditors to lodge a Caveat on any property owned by the Debtors to protect his interest." 56Mahoney JA was of opinion that the caveat should not be set aside because: "The right, by the enforcement of an express or implied negative covenant, to restrain a dealing with land is in my opinion an interest in land within this branch of the law" and decided to the effect that the caveat should remain, although as his Honour said: "... it is not necessary to determine what is the precise nature of the interest in the land which, by this implied grant, was passed to the creditors." 57In my understanding the implication which Mahoney JA drew from the document was not that there was a charge over the land, but that there was an implied negative covenant to restrain dealing with the land. Priestley JA agreed. Meagher JA agreed and also went further to say that the interest granted was a charge, a conclusion which, I would respectfully say, the other members of the Court of Appeal avoided. Meagher JA said: "First, once one reaches the conclusion that Mr Aliperti did intend to grant each of his lenders an interest in his land, that interest in the circumstances can only be an equitable charge. "Secondly, since the clause in question was of obvious importance of the parties to the transaction, one can assume it was not intended to be meaningless; and, unless one construes it as granting a charge, it would be meaningless." 58In Coleman v Bone (1996) 9 BPR 16,235 at 16,239, McLelland CJ in Eq said: "So far as the "caveat" is concerned, it has been held by the Court of Appeal (in Troncone v Aliperti (1994) 6 BPR 13,291; NSW ConvR 55-703) that if in a contract between A and B, A grants B authority to lodge a caveat in respect of property of A, that grant carries with it by implication such estate or interest in the property as is necessary to enable that authority to be exercised. Where the authority to lodge a caveat is given in connection with an obligation by A to pay money to B, and there is no sufficient indication to the contrary, the implication is that the estate or interest granted is an equitable charge to secure payment to B of that money ( Troncone at BPR 13,293-4, ConvR 60,020 per Meagher JA)." 59In Iaconis v Lazar (2007) 13 BPR 24,937 Young CJ in Eq said: The current commercial enthusiasm for this sort of clause in a contract and for lodging a caveat was given a great boost by the decision of the Court of Appeal in Troncone v Aliperti (1994 ) 6 BPR 13,291. This decision has often been interpreted by persons seeking charges as meaning that every time there is an agreement that X can lodge a caveat over any property Y may own, that an equitable charge is created. It should be remembered, as McLelland CJ in Eq said in Coleman v Bone (1996) 9 BPR 16,235 at 16 and 239, that the true principle is that "Where the authority to lodge a caveat is given in connection with an obligation by A to pay money to B, and there is no sufficient indication to the contrary, the implication is that the estate or interest granted is an equitable charge to secure payment to B of that money." ([2007] NSWSC 1103 at [23]). 60With respect I do not agree with either of these observations. In my view the meaning conveyed by a contractual document, including what is conveyed by implication, must be understood by addressing the terms and the whole terms of the document in question, and there is no principle or true principle establishing what implication must be drawn in all cases from authority to lodge a caveat in connection with an obligation to pay money. In my opinion Mahoney JA did not state such a principle in Troncone v Aliperti and in my opinion there cannot be such a principle, because a principle of law of that kind would divert the court from addressing the terms of each document to discover what it means, by expression and by implication. 61The circumstances that there was a debt and that there is to be a caveat, together with the nature of the caveat, certainly direct attention to whether it was intended that the debt should be protected by a charge or some other interest. It is quite likely that there was some such intention in the mind of one party or of both, but if that intention is not found expressed or by implication in their document there is no equitable interest. Authorisation to lodge a caveat does not create by necessary implication the conclusion that there must have been an intention to create an equitable interest, and that there must have been the further intention that that interest should be a charge over the property. 62I referred to the purpose and uses of caveats in Express Loans & Finance v Hunter [2004] NSWSC 142 at [13]: "It is contended on behalf of the plaintiff that the agreement would be futile and ineffective if it did no more than it literally provides for. In my mind, this is incorrect. An impediment is placed in the way of a registered proprietor if a caveat is lodged, whether or not the caveat is effective, as its lodgement confronts the registered proprietor with problems and difficulties, whether or not it can be removed. To my mind the correct understanding of cl 10 is that its purpose was to enable the plaintiff to impede and obstruct the defendant's path as registered proprietor, without going any further." 63My experience with commercial documents has shown that the advantages sought by provisions such as these is not always the advantage of owning an equitable interest such as a charge; there are real advantages in having a caveat on the register and impeding the registered proprietor's dealings in that way, whether or not one owns an interest in the land; once a caveat is lodged it is a complicating factor and an impediment for the registered proprietor's dealings, and getting rid of the caveat involves a certain amount of difficulty. The conclusion that contractual authorisation to lodge a caveat means what it says and no more is not irrational at all. Registered proprietors may agree to put up with an inconvenience as a term of their dealings, and in my experience from time to time they do. 64In Redglove Projects v Ngummawal Local Aboriginal Council [2004] NSWSC 880 White J considered a number of cases where Troncone v Aliperti had been applied or considered, in which that decision has usually been characterised as a case of implied charge. White J did not accept this characterisation of the basis upon which Mahoney JA acted, and in my respectful view White J was plainly right in this conclusion, as appears from expressions of Mahoney JA which I have set out. White J also (at paragraph 35) dissented from the views of Mahoney JA upon which Mahoney JA did act: my views on that matter are not required for decision of the present case. In Bellissimo v JCL Investments Pty Ltd & Anor [2009] NSWSC 1260 White J considered a caveat based upon a contractual provision (set out at his Honour's paragraph 11) which related solely to lodgment of caveat and did not specify the interest which it was to protect. White J reviewed the available implications and concluded (at paragraph 18) that the likely intention was that the registered proprietor would not be permitted to deal with the land without the plaintiff's consent and that a negative covenant of that kind does not create an interest in land. 65In the Deed of Acknowledgement there is no reference to a charge, or to any steps which the creditor might take against the property in the event of non-payment of the debt, or in any event it all. The operative provisions of clause 1.3 come earlier; the reference to the property comes after the operative provisions have concluded. There is no other reference to the property, except as the address of the Debtor. In clause 1.3 the property is referred to parenthetically as ("the secured property") but there is no other use of that expression anywhere in the deed. This is not an operative provision, all it does is restate the reference to the address as a defined expression, yet that defined expression is not used. To refer to the property as "secured" is not to say that the creditor has security over it: the word "secured" does not indicate that in any way. If there were a mortgage or charge the creditor would be secured, not the property. In my opinion clause 1.3 shows an intention of the debtor, as it says in plain language, to grant to the creditor the right to register a caveat over the debtor's interest; it does not express or convey in any way an intention to give the creditor any interest, whether a charge or any other interest, in or over the debtor's property. The grant is to happen in the future, but no event or condition is stated in which it is to happen. All this is too insubstantial matter out of which to spin a filament of implication. 66In my mind to promote the contractual right to register a caveat, which was not exercised until 26 November into a present grant of an equitable charge, which was to exist whether or not the right to register a caveat was ever exercised, is more than implication can do. The concept of mortgaging the land or imposing a charge on it is not expressed or alluded to in the terms of the deed. There is nothing there except a fleeting unused parenthetical reference. 67For this reason, which it was not necessary to pursue for disposition of the merits between Mr Taleb and NAB, although it would have been sufficient, Mr Taleb is not in my opinion entitled to the declaration sought against second defendant. 68NAB claimed the benefit of Subrogation as it had paid out the mortgage of Westpac which was registered and indisputably had priority over Mr Taleb's interest. 69The present state of the law relating to Subrogation was considered extensively (and I would respectfully say, with characteristic high scholarship) by Santow JA in Highland v Exception Holdings Pty Ltd in Liq [2006] NSWCA 318. As Santow JA showed, the subject has been unfortunately clouded by reference in English Authorities, particularly Banque Financiere de la Cite v Parc (Battersea) [1999] 1 AC 221 where Lord Hoffman explained its origin in terms of Unjust Enrichment. This has become doctrine in England: see Cheltenham & Gloucester PLC v Appleyard [2004] EWCA Civ 291, [2004] All ER (D) 280. I regard the explanation of Subrogation in terms of Restitution and Unjust Enrichment as unfortunate because it cannot deal adequately with the interaction of Subrogation and mortgage securities; see Santow JA at 97 referring to my observations in Challenger Managed Investments Ltd v Direct Money Corp Pty Ltd [2003] 49 NSWLR 452 at [50]. This difference of view does not however diminish the well-established standing of Subrogation as a principle which prevents a party from obtaining advantage at the expense of another which in the circumstances of the case is unconscionable, and in particular which keeps alive a security which has been paid out in favour of a lender who paid it out anticipating that like security would be forthcoming for himself. The reference to keeping a previous security alive is a figure of speech; necessarily, it is no longer alive as the debt has been paid out, and it may be that a formal discharge of the security documents has been given. This is the fourth of the thirteen principles formulated by Neuberger LJ in Cheltenham & Gloucester PLC v Appleyard, drawing in this respect on the judgment of Walton J in Burston Finance Ltd v Spierway Ltd [1974] I WLR 1648 at 1652 and set out with approval, qualified by non acceptance of the asserted doctrinal basis: see Santow JA at [105] and [106]. 70In my opinion NAB is entitled in the circumstances to Subrogation and to be placed, as between itself and Mr Taleb, in the position it would be in if it had taken an assignment of the Westpac mortgage and that mortgage had not been discharged. Indeed, at the relevant times, it had not been discharged, and remained on the register; it was only discharged in pursuance of interlocutory arrangements for conversion of the security property into money. NAB would not be fully protected in respect of its claim by the doctrine of Subrogation but would be protected only to the extent to which its claim relates to the $1,341,534.85 which it paid Westpac on 15 October 2010, against delivery of the Westpac discharge. As NAB has succeeded in the competition with Mr Taleb on other grounds, it is not necessary for me base my disposition on Subrogation. 71For these reasons Mr Taleb is not entitled to declarations claimed in the summons.