Skosples v Perpetual Trustees Victoria Ltd [2004] VSC 336

5. The judgment which the first defendant has obtained was obtained in proceedings instituted after notice of the interest claimed by the plaintiffs as purchasers, was given to the first defendant.

8. Nevertheless, the terms in which such notice was given were such as to concede the priority of the first defendant's interest. The plaintiff's solicitor wrote to the first defendant by letter dated 13 April 2004 advising of the purchase by the plaintiffs of the property and after canvassing some aspects of the history of the matter, stated:

"We advise that we have now lodged a caveat against the title and the purpose of this letter is to advise you of our client's claim against the property. We have explained to our clients that their failure to protect their interest and lodge a caveat at the date of purchase, will result in your mortgage having a first claim on this property."

12. As I have stated, the current proceedings take issue with the priority of the first defendant's interest and indeed with its very existence.

15. Before saying something more about them, I should record that it is agreed by counsel that the matter raises issues of disputed fact and law, which cannot be finally resolved in the Practice Court and that the matter should be referred to the Listing Master.

18. It is contended by the first defendant, however, that any stay of the warrant, pending determination of the summons, should be conditioned upon the plaintiffs paying the amount recoverable under the mortgage into court. This amount is $151,556.

21. The plaintiff's case has two substantive bases, both of which, in my view, raise serious questions to be tried. It is first contended that the mortgage is void by reason of s.7 of the Sale of Land Act 1962. This contention gives rise to disputed questions of fact and law, including the following:

(a) As to whether the contract of sale was a terms contract, within the meaning of the relevant legislation and

(b) As to whether the mortgagee had constructive notice of the plaintiff's interest.

27. The last mentioned question will give rise to consideration of the provisions of s.7(7) of the Sale of Land Act. Although the effect of that section is itself not free from doubt, I shall simply record that the first defendant relies in particular upon the factor which is referred to in sub-s.7(d) which is the question of whether the mortgagee had made such searches, inquiries and inspections in the office of the Registrar of Titles as reasonably ought to have been made by it.

30. On the other hand, the plaintiffs rely in particular on the factors referred to in sub-ss.7(a) and 7(b) which refer to the knowledge that the mortgagee would have acquired, if it had made a proper inspection of the relevant land and made such inquiries as ought reasonably to be made by it of the mortgagor as to the rights of any person in possession of the relevant land.

33. In the present case, these issues give rise to relatively complex disputed questions of fact and I shall say no more about them.

36. It is next contended that the plaintiff's interest is subject to that of the first defendant, by reason of s.42(2(e) of the Transfer of Land Act (1958) and presumably that in these circumstances the sale would be futile although this last consideration was not explored in submission.

39. The relevant principle was stated by Gibbs ACJ, in the case of Barba v Gas and Fuel Corporation[1].

"In Burke v. Dawes, Dixon J. discussed as follows the effect of an earlier Victorian statutory provision which corresponded to s.42(2)(e):

`In Victoria these words have received an interpretation and an application as a result of which any person in actual occupation of the land obtains as against any inconsistent registered dealing protection and priority for any equitable interest to which his occupation is incident, provided that at law his occupation is referable to a tenancy of some sort, whether at will or for years.

Thus, a purchaser under a contract of sale, who at law is in possession as tenant at will of the vendor, has been held protected in respect of his equitable ownership as purchaser (Robertson v. Keith; Sandhurst Mutual Permanent Investment Building Society v. Gissing), a lessee in respect of an option of purchase contained in his lease (McMahon v. Swan) and a wife in respect of an equitable life interest claimed under an unsigned separation agreement made with her husband (Black v. Poole). A'Beckett J. decided the last named case in deference to previous decisions and against his own opinion, which he stated to be that 'those words were intended to refer to a tenancy as ordinarily understood arising out of an agreement under which the person in possession was allowed to occupy in consideration of some kind of rent or service of which the proprietor was to have the benefit.

The cases are collected and criticised by the late Dr. Donald Kerr in his work on The Australian Lands Titles (Torrens) System (1927), at pp. 75 et seq. But the interpretation has stood for nearly seventy years, and it would, I think, be most undesirable now to undertake the re-examination of its correctness.'

Similar views were expressed by Latham C.J. and by Evatt J. McTiernan J. agreed with the remarks of Dixon J. The fifth member of the Court, Starke J., was perhaps not so definite in the expression of his opinion but he did not disagree with what the majority of the Court said on this point. This question should therefore be regarded as settled." (citations omitted)

47. It seems to me that the principle for which the plaintiffs contend is therefore a settled principle, nevertheless its application on the facts of this case may once again give rise to a series of disputed factual questions.

50. It is unnecessary for me to attempt to summarise all of these for the purposes of resolution of the interlocutory question before me.

53. If it be accepted that the plaintiffs' application gives rise to serious questions, the conditions of the stay sought by the plaintiff or perhaps more accurately, the appropriateness of such conditions, turn upon questions of the balance of convenience. The effect of a stay pending further hearing of the summons in a venue where the disputed questions of fact can be resolved, will not deprive the first defendant of its security. Such a stay will simply restrain the first defendant from enforcing such security for the time being. It will remain the registered mortgagee. It will retain the judgment which it currently has for possession.

56. In my view, the just course is to grant a stay without requiring the plaintiffs to pay into court the amount which the first defendant claims, but subject, of course, to the usual undertaking as to damages, which Ms Harrison, counsel for the plaintiffs has proffered.

59. I am fortified in this conclusion by the fact that the municipal assessment of capital improved value of the subject property is some $225,000 which is a sum which comfortably exceeds the amount of the first defendant's claim and must be regarded as providing adequate security in relation to the undertaking proffered by the plaintiffs.

62. The situation with which I am confronted is to be distinguished from that of a case in which the effect of the order sought would be to deprive a secured creditor of its security. The relevant principle was stated by Hedigan J. in Nicholas John Holdings v. ANZ Banking Group[2] as follows:

"The general rule is that a court will not interfere on an interlocutory basis to deprive a secured creditor of the benefit of its security, except on terms that an equivalent safeguard is provided to it by the mortgagor borrower bringing in an amount sufficient to meet what is claimed by the mortgagee to be due: Inglis v Commonwealth Trading Bank of Australia [1972] HCA 74; (1971) 126 CLR 161, at 164-5 per Walsh J."

66. Accordingly, I will order that the Sheriff be directed to stay execution of warrant No. SP040052738 pending the determination of the summons in this matter, or further order of the court, and I will direct that the matter be referred to the Listing Master for further directions and listing as she deems fit. Subject to anything that counsel may say to me, I believe that this is an appropriate case in which to reserve costs.

[1] [1976] HCA 60; (1976) 136 CLR 120 at 140.

[2] [1992] VicRp 98; [1992] 2 VR 715 at 727