Theodore v Mistford & Anor [2003] QCA 580

SUPREME COURT OF QUEENSLAND

CITATION: Theodore v Mistford & Anor [2003] QCA 580

PARTIES: MARIE MARGARET THEODORE (plaintiff/appellant) v MISTFORD PTY LTD ACN 050 406 650 (first defendant/first respondent) / MAX EGERTON VINES AND VALERIE LYNETTE VINES / (second defendants/second respondents)

FILE NO/S: Appeal No 11225 of 2002 / DC No 147 of 1998

DIVISION: Court of Appeal

PROCEEDING: General Civil Appeal

ORIGINATING COURT: District Court at Maroochydore

DELIVERED ON: 24 December 2003

DELIVERED AT: Brisbane

HEARING DATE: 25 August 2003

JUDGES: McMurdo P, Jerrard JA and Philippides J / Separate reasons for judgment of each member of the Court, McMurdo P and Philippides J agreeing as to the orders made, Jerrard JA dissenting in part

ORDERS: 1.Allow the appeal to the limited extent of setting aside the orders made at first instance on the counter-claim / 2.Allow the parties until 27 January 2004 to make submissions as to the appropriate orders to be substituted in the counter-claim and as to the costs of the appeal and trial

CATCHWORDS: Chang v Registrar of Titles (1976) 137 CLR 177, cited / Dalgety & Co. Ltd. v Gray (1918-19) 26 CLR 249, cited / Kearn Corporation Ltd v Walter Reid Trading Pty Ltd (1987) 163 CLR 164, cited / Neville v Wilson [1997] Ch 144, cited / Oughtred v Inland Revenue Commissioner [1960] AC 206, cited / Re Wallis & Simmonds (Builders) Ltd [1974] 1 All ER 561, cited / Ryan v O'Sullivan [1956] VLR 99, considered / Stern v McArthur (1988) 165 CLR 489, cited / Tanwar Enterprises Pty Ltd v Couchi [2003] ACA 57, cited / Theodore v Mistford Pty Ltd & Ors (No 2) [2002] QDC 296, considered / United Bank of Kuwait plc v Sahib and Ors [1996] 3 All ER 215, cited / Walton Stores v Maher (1988) 164 CLR 387, cited / Water Board v Moustakas (1988) 180 CLR 491, cited / WhisPrun Pty Ltd v Dixon [2003] HCA 48, cited / United Bank of Kuwait PlC v Salib [1997] Ch 107, discussed

COUNSEL: D A Savage SC, with M J Taylor, for the appellant / F W Redmond for the respondents

SOLICITORS: North Coast Law for the appellant / Klar and Klar for the respondents

1. McMURDO P: I have benefited from reading the reasons for judgment of Jerrard JA in which the facts and issues are set out. I will repeat only those facts necessary to explain my own reasons for reaching a different conclusion on some issues.

Background facts

2. The following facts are not in dispute. The appellant, Mrs Theodore, owned land in Buderim. In May 1996, the male respondent, Mr Vines, was approached by the appellant's son, Mr Glen Theodore, who was interested in purchasing the respondents' business, Air Monitoring Services, which conducted atmospheric and environmental tests for the presence of unwanted substances, primarily asbestos. Extensive negotiations took place between Mr Theodore and the respondents' solicitor, Mr Klar, on behalf of the respondents, culminating in an agreement to enter into an instalment contract whereby Mr Theodore's company, Mobile Lab Pty Ltd, ("Mobile"), would complete the purchase by an initial payment when a written contract was executed, with the balance and interest to be paid over a specified period, such balance to be secured by Mr Theodore's guarantee, supported by an unregistered mortgage in favour of the respondents over the Buderim land.¹ On 18 July 1996, Mr Theodore attended the office of the appellant's solicitor with a handwritten authority executed by the appellant authorising the release of the title deed of her Buderim land to him. He received the title deed, deposited it with Mr Klar and obtained a receipt for it.² A contract for the sale of the business from the respondents to Mobile, with Mobile's obligations guaranteed by Mr Theodore, was prepared, executed and completed on 22 July 1996.³ That contract included cl 4.3(v):

"That the Purchaser in support of the Guarantee contained in Clause 37 of the Standard Conditions shall procure the lodgement with the Vendor's Solicitors on or before the Date for Completion of a stamped copy of this Agreement, the unencumbered Title Deed to the freehold vacant land … and a mortgage thereover in favour of the Vendor, such mortgage to be prepared by the Vendor's Solicitors (at the cost of the Purchaser) and to be unregistered while the Purchaser complies with the obligations on its part contained herein."

3. The contract was completed but without compliance with cl 4.3(v): although the title deed of the Buderim land had been lodged with Mr Klar, the appellant did not give a mortgage prepared by Mr Klar over the Buderim land so that no such mortgage was lodged with Mr Klar. At about the time of settlement of the contract, Mr Klar gave Mr Theodore copies of the deed of guarantee and the mortgage, requesting that he have them signed by the appellant.⁴

Section 11, Property Law Act 1974 (Qld)

4. The learned primary judge found that the appellant, in authorising Mr Theodore to provide the title deeds as security, must have anticipated a term such as cl 4.3 of the contract,⁵ that Mr Theodore was acting as her agent when he signed the contract⁶ and that, despite the absence of writing signed by the appellant, s 11(1)(a) Property Law Act 1974 (Qld)⁷ ("the Act") did not apply to prevent the respondents' claim against the appellant, because an agreement to enter into a mortgage does not thereupon create an interest in land within s 11.⁸

5. His Honour was not referred to this Court's decision in Riches v Hogben⁹ where an executory contract, an oral agreement to purchase a house and land in the future, was found to be a contract for the disposition of land within s 59 of the Act and thus unenforceable unless the contract, or some memorandum or note of it, was in writing.¹⁰ The learned primary judge relied on the reasoning of Giles J of the New South Wales Court of Appeal, with whom Mason P agreed, in Baloglow v Konstanidis & Ors.¹¹Baloglow may well be distinguishable on its facts but, in any case, this Court should follow Riches v Hogben unless persuaded it is plainly wrong. The phrase "interest in land" is ordinarily understood to include both the legal and equitable estate in land and any right, charge, power or privilege over or in connection with the land. There is no reason why any narrower meaning should be given to that phrase in s 11 of the Act. The phrase "interest in land" in that section includes an equitable interest such as an equitable mortgage,¹² and, ordinarily, an agreement to enter into an equitable mortgage.¹³Parker & Anor v Glenninda Pty Ltd¹⁴ is also authority from this Court supporting the conclusion that an executory agreement to create a mortgage is an interest in land under s 11 of the Act and must be in writing.

The judge's finding that the appellant gave Mr Theodore authority to lodge the title deed as security

8. That does not mean the appellant is successful in her appeal. Despite the appellant's contrary submissions, I agree with Jerrard JA that the learned primary judge was entitled to find on the evidence that the appellant gave authority to Mr Theodore to lodge the title deed of her Buderim land with Mr Klar as security to enable Mr Theodore to purchase the respondents' business.¹⁶ The learned primary judge was not obliged to accept the appellant's denial that she did not authorise her son to deposit the title deeds. The appellant gave evidence that she authorised Mr Theodore to advise the respondents' solicitor that she was "prepared to go in on a deed of guarantee and mortgage" to help him achieve the business. She was aware of the negotiations between the respondents and her son, as to the sale of the business. She subsequently authorised the release of the title deed to Mr Theodore on 18 July 1996 and the deed was lodged later that day with Mr Klar. She said that "Unfortunately, I acted with my heart and not my head in Glen's direction". She consulted her own solicitors about the matter in August 1996. By then, she was aware that Mr Theodore had lodged the title deed with Mr Klar as security for the purchase of the business but she made no demand for its return until November 1997. Irrespective of any Jones v Dunkel¹⁷ inference arising from the appellant's omission to call Mr Theodore, these matters in combination allowed the primary judge to conclude by inference that the appellant gave Mr Theodore authority to lodge the deed with Mr Klar as security for the purchase of the business.

Equitable mortgage by lodging the title deed

9. Did Mr Theodore's lodging of the title deed with Mr Klar, authorised as he was by the appellant, create an equitable mortgage? On the accepted evidence, all parties, including the appellant, intended the lodging of the title deed at the time of lodging to be security for the purchase price of the business. This gives rise to a presumption that the land was then charged in equity as security for the balance of the purchase price: see Matthews v Goodday¹⁸ and Land Title Act 1994 (Qld), s 75(1). There is no sound reason why an equitable mortgage will not arise from the deposit of deeds belonging to a third party rather than the debtor¹⁹ provided, as here, this is done with the third party's knowledge. The creating of an equitable mortgage by the lodging of title deeds is an exception to the requirements of s 11(1)(a) of the Act and does not fail for absence of written form.²⁰ This differs from the position in England where Leggatt, Peter Gibson and Phillips LJJ in United Bank of Kuwait PlC v Salib²¹ held that s 2 of the Law of Property (Miscellaneous Provisions) Act 1989 (UK), which requires disposition of interests in land to be in writing, overturned the former rule that a deposit of title deeds created a valid equitable charge on the basis that it amounted to an act of part-performance of the agreement to mortgage. In Queensland, s 75(1) Land Title Act 1994 was enacted after s 11 of the Act, demonstrating the clear legislative intent to preserve the rule that an equitable mortgage may be created by the mere lodging of a certificate of title, inferentially even where there is nothing in writing from the mortgagor. It seems there is no comparable United Kingdom provision to s 75(1) Land Title Act 1994 (Qld).

10. The respondents pleaded that an equitable mortgage was created by deposit of the certificate of title.²² Although it does not seem to have been the respondents' primary contention at trial, or indeed, on this appeal, the facts upon which that claim was based were established at the trial and, other than as stated in these reasons, not disputed. Mobile and Mr Theodore as guarantor defaulted under the contract in not making the payments for the purchase of the business. The debt owed to the respondents under the contract was secured by an equitable charge on the appellant's Buderim land and the respondents are entitled to the benefit of the equitable mortgage.

ORDERS:

1. Allow the appeal to the limited extent of setting aside the orders made at first instance on the counter-claim.

2. Allow the parties until 27 January 2004 to make submissions as to the appropriate orders to be substituted in the counter-claim and as to the costs of the appeal and trial.

3. JERRARD JA: In this appeal Mrs Marie Theodore asks the court to set aside orders made by the District Court on 14 November 2002, whereby the appellant and her son Glen were held jointly and severally liable to pay the respondents the sum of $69,904.88, together with costs, and the appellant was ordered to execute both a Deed of Guarantee and Indemnity and a Mortgage in the respondents’ favour, those securities guaranteeing and securing the payment of $69,904.88 by her son. Those orders were made on the respondents’ successful counter claim in proceedings brought by the appellant, whose claim was dismissed with costs.

Background Matters

14. The land the appellant was ordered to Mortgage in the respondents’ favour is at Lot 65 Ballinger Road at Buderim. She had purchased it from Glen Theodore (the first third party in the trial proceedings) and her son in law in November 1995 for either $40,000.00 or $42,000.00. The Certificate of Title was received by the appellant’s solicitors in December 1995 who thereafter held it for her pending instructions to do otherwise. On 18 July 1996 she gave written authority to them to release it to Glen Theodore, which the solicitors did.

15. That occurred in the following circumstances. Glen Theodore had negotiated in May and June of 1996 for the purchase by a company he controlled (the second third party) of the business trading as Air Monitoring Services, then carried on by the first respondent (the first defendant at the trial); its two directors are the second respondents who were the second defendants at the trial. The defendants’ solicitor, a Mr Klar, conducted negotiations with Glen Theodore on the defendants’ behalf, and during those negotiations Glen Theodore told Mr Klar, on or about 25 June 1996, that there was a block of vacant land (Lot 65) registered in Mr Theodore’s mother’s name but to which his mother held the title as trustee for Mr Theodore, it being (he said) really his block of land put in his mother’s name to keep the land “out of property settlement proceedings, which were either on foot or about to commence between him and his wife, from whom he had recently separated”²³. No evidence at the trial supported that claim by Glen Theodore, the only evidence being the appellant’s evidence of purchase by herself from her son and son in law and of her beneficial ownership of the land.

16. Glen Theodore and Mr Klar arrived at an agreement that the business be purchased for $66,500.00 of which $19,900.00 was to be paid when a written contract was executed, $12,000.00 was to be paid on or before 22 July 1997, and two sums of $17,300.00 each were to be paid respectively on or before 22 January 1998 and on or before 22 July 1998. Interest was to be paid on the balance outstanding from time to time.

17. Glen Theodore endeavoured to arrange finance from the ANZ Bank. The appellant’s husband had been an Area Manager with that bank, and she regarded it as a “natural thing for me to do to go to” that bank, which she did with her son Glen on 18 July 1996, when they attended the Maroochydore Branch and spoke with a Mr Costello, the Lending Manager at that branch. The appellant’s evidence was that she had decided that if the bank would lend Glen the money to purchase that business she was prepared to accede to Glen’s request that he let her use the title deed to Lot 65 as security for that loan with the bank.²⁴ For that reason the appellant authorised Glen Theodore in writing to collect the certificate of title from her solicitors on 18 July, and they took it with them to the ANZ.

“(v) that the Purchaser in support of the Guarantee contained in Clause 37 of the Standard Conditions shall procure the lodgement with the Vendor’s Solicitors on or before the date for Completion of a stamped copy of this Agreement, the unencumbered Title Deed to the freehold vacant land at Lot 65 Ballinger Road Buderim and a Mortgage thereover in favour of the Vendor, such Mortgage to be prepared by the Vendor’s Solicitors (at the cost of the Purchaser) and to be unregistered while the Purchaser complies with the obligations on its part contained herein.”

20. The date for completion was 22 July 1996 and thus although Glen Theodore had provided the unencumbered Certificate of Title to Lot 65, the contract was settled without the provision of the mortgage of that land promised by the purchaser in Clause 4.3(v); and also without the provision of any executed deed of guarantee and Indemnity by the appellant, although one had been prepared for the appellant’s signature on that date, guaranteeing the payment of the balance of the purchase moneys. The provision of that guarantee by her is not a term of the contract although it was obviously envisaged by Mr Klar, who gave Mr Theodore execution copies of the deed of guarantee and bill of mortgage on 22 July 1996, requesting that he have those signed by the appellant. Mr Theodore assured Mr Klar that he would. The learned judge made the finding, not challenged by any party on the appeal, that Glen Theodore was manipulative and probably dishonest²⁸.

21. The appellant had had no dealings or contact with Mr Klar or any of the vendors. Her evidence was that as at 22 July 1996 she had no knowledge at all of the mortgage document or deed of guarantee; the learned trial judge found that the appellant had authorised her son to deal with the deed “in such a way as to enable him to complete the purchase of the business from the defendant which included the provision of security over the land”²⁹, and that the appellant “must have anticipated a term such as Clause 4.3 of the Contract.”³⁰ The appellant’s evidence of her ignorance as at 22 July 1996 of the proposal that she give a guarantee, and of the further proposal that she sign a mortgage, gained some support from the correspondence between herself and the vendor’s solicitors after that date; but her subsequent conduct (including that correspondence) was considered by the trial judge to be sufficient evidence of ratification or acquiescence³¹ post 22 July 1996 of her son’s conduct on and before that day, assuming she had not known that day of the proposal she execute those documents.

22. Mr Klar’s evidence was that the vendors had settled without obtaining an executed Mortgage from the appellant (or any guarantee from her) because Mr Klar’s instructions were to proceed in the absence of those documents, his client having originally wanted everything finalised by the end of the financial year (30 June 1996) and if not as soon as possible thereafter. Settlement occurred despite Mr Klar’s view that it was indeed desirable to have the executed mortgage and guarantee, together with the title deed, by settlement. Mr Klar explained that his clients had trusted Mr Theodore.

The pleadings

26. In those, the appellant sought a declaration the respondents held the certificate to Lot 65 as constructive trustee for her benefit, an order that those defendants be restrained from withholding possession of it from her, and damages for its wrongful possession. That pleading alleged that Glen Theodore had delivered the title deed to Mr Klar on 22 July 1996 without the plaintiff’s authority, and that despite demand the defendants had failed to return it.

27. The defendants pleaded in the counter claim that the appellant and the first and second third parties had represented that the second third party would procure the lodgement of the certificate of title to the land and a mortgage in favour of the defendants, and had thereby represented that the appellant and those third parties had then intended or agreed to mortgage that land in favour of the defendants, thereby inducing the defendants to assume that there was a binding agreement for a mortgage and in reliance on which representations to defendants entered into the contract of sale. The defendants pleaded that by the deposit of the certificate of title on 18 July 1996 the appellant created a mortgage “either legal or equitable”, and further pleaded that “in the event that the Mortgage be held to be equitable the defendant/plaintiff by counter claim specific performance thereof”. The defendants also pleaded the appellant was estopped from “denying the mortgage”, that being the mortgage pleaded to have been created by the deposit of the certificate of title, and pleaded ratification of, and acquiescence by the appellant in, the actions of her son in so lodging the certificate of title with Mr Klar. They also pleaded that if Glen Theodore was not authorized to lodge the certificate of title with Mr Klar, the conduct of the third parties and the appellant was misleading and deceptive within the meaning of s 52 of the Trade Practices Act 1924.

28. The cross claimant defendants pleaded that first third party, Glen Theodore, had failed to pay the instalments or interest due, judgment had been entered against him for $51,536.40 in the Magistrates Court, and that he had failed to pay the judgment sum. The cross claimant asked for specific performance “of the mortgage” (that created by the deposit), or damages in lieu thereof. The cross claimant did not plead that the appellant was a party to the contract entered into on 22 July 1996, or had herself agreed to execute a mortgage or guarantee, whether by an agent or otherwise; and the cross claim did not particularise the acts by the appellant necessary for specific performance of the equitable mortgage pleaded from the deposit of the title deed. The pleading did not identify the debt secured by the equitable mortgage. As to the guarantee, the cross claimant’s pleading did not allege any representation by the appellant, or either of the third parties, of an agreement or intent that the appellants would provide one, nor any assumption by the defendant induced by the appellant or either third party that that there was any binding agreement for the provision of any guarantee, and the cross claim did not ask that the appellant execute one. The orders made by the learned trial judge for execution of a guarantee accordingly went beyond those sought by the cross claimants in their pleadings.

Challenges to findings of fact

30. The appellant challenged a number of the findings of fact and inferences drawn by the learned trial judge. I respectfully consider that all findings of fact made were ones reasonably open to the learned judge, and specifically the critical finding that the appellant did authorise her son to provide the certificate of title to Mr Klar. That finding is consistent with the fact she was ultimately prepared herself to advance $30,000.00 to him to help with the purchase of the business, and is a finding based in part on the learned judge’s assessment of the appellant.³⁵ The assessment was that the appellant was highly intelligent, an astute and alert witness, and that it was more probable than not that at the time her son purchased that business the appellant acted with her heart and not her head, and had since then convinced herself she did not give her son authority to deal with the deed which authority she in fact did grant. That finding is also consistent with the length of time it took for the appellant to demand the return of the certificate of title, and the fact that when she ultimately took that step by letter dated 25 November 1997, she did not even then claim in it that her son had lacked her authority to give Mr Klar the title deed.

31. The respondents’ further argument – and the finding implied by the learned judge - that the appellant had authorised her son as her agent to agree on her behalf that she would execute a mortgage gained support from an admission by the appellant in cross examination, in a passage in which she also made some denials apparently inconsistent with that admission. The passage in full was:

“But you knew about these negotiations? - - Yes, I knew that he was wanting to purchase a business.

And he kept you informed about the progress of the negotiations? - -He told me about going down and not being enough money, and having to have extra security. That’s all he told me.

And you authorised him to advise the defendant’s solicitors that you were prepared to go in on a deed of guarantee and mortgage? - - Yes.

And that you were prepared to authorise your son to deposit a certificate of title? - - Never.

But in the alternative, you authorised your son to simply take that certificate of title and deposit it with Klar and Klar? - - I never did that.”³⁶

That was a significant admission but it was accompanied by other denials. It entitled the defendants to a finding that they had established their pleaded representation that the appellant and her son would agree to a mortgage. It was not an admission that the appellant had agreed with the respondents to grant one.

The argument on appeal

32. With due respect to the respondents’ arguments and the finding of the learned trial judge, I consider this appeal can be disposed of without difficulty. This is because I respectfully agree with the submissions by senior counsel for the appellant that, irrespective of whatever authority the appellant gave her son, Clause 4.3(5) was at all times merely an agreement by the purchaser (not Glen Theodore, but guaranteed by him) to procure the lodgement with Mr Klar of a mortgage and an unencumbered certificate of title. Neither the purchaser nor Mr Glen Theodore could claim or give any interest in Lot 65, and there was no agreement in Clause 4.3(v) by anyone to enter into a mortgage, or that one would be entered into. Clause 4.3(v) makes no reference to the provision of any guarantee by the appellant; neither the purchaser nor the guarantor could enter into any mortgage; and the only agreement made was to procure the lodgement of mortgage and unencumbered certificate of title with Mr Klar. While Glen Theodore achieved compliance with one of those promises, he and the purchaser were at all times in default on the promise to procure a mortgage; and I agree with the submission that there is a world of difference between the latter promise and one to grant a mortgage. In that regard the appellant’s submission actually reflects the pleadings by the respondents. Those did not allege any promise made by the appellant through her son to grant a mortgage. The fact that the respondents went ahead without making the purchaser produce a mortgage from the appellant does not result in their having any case against her giving them any title to her land.

33. It was submitted (apparently as a precaution) that an agreement to procure a mortgage was an agreement to create an interest in land, and thus caught by s 11.1(a). That submission relied on Dalgety & Co. Ltd. v Gray (1918-19) 26 CLR 249 at 255, but in that case the plaintiff’s promise was to execute a mortgage over identified real property, which the plaintiff intended to buy with the money raised by the mortgage the defendant promised to procure. The case resembles Riches v Hogben in that the party promising execution of a mortgage was expected by both parties to acquire a title capable of mortgage. In contrast, in this matter neither the purchaser nor guarantor promising to procure a mortgage had any expectation of a title.

Mortgage by deposit of Title Deed

34. The appellant’s senior counsel submitted that the promise guaranteed by Glen Theodore was to procure an executed mortgage from the appellant, and not to procure an equitable mortgage created by the deposit of the certificate of title. That an equitable mortgage could still be created in that fashion is clear from s 75 of the Land Title Act 1994, but in the appellant’s submission that was certainly not the agreement under which the respondents took that certificate of title. Rather, it was agreed that the respondents would have an equitable mortgage by reason of their having an unregistered executed mortgage, and the certificate of title was understandably required by them to remove any risks to their unregistered mortgage arising from the appellant retaining the title deed and the capacity to create other interests; and it followed deposit of the certificate was not required as an equitable mortgage.

35. On this point, counsel for the respondents submitted on the appeal that an equitable mortgage had been created on 18 July 1996 by that deposit, but that mortgage, in his submission, had been subsumed by the contract executed on 22 July. Thus the respondents did not rely on the appeal on the equitable mortgage pleaded in their counter claim, but instead on the agreement of 22 July rather than the act of deposit on 18 July. Although the respondents thereby abandoned on the appeal any reliance on their pleaded claim that a mortgage was created by deposit, it is necessary to consider that matter further.

36. This is because if an equitable mortgage had been created by the deposit of the certificate of title, then I do not understand how that security would have been lost to the respondents simply because they agreed on 22 July 1996 to take a better and more specific security, which they did not in fact get. As to whether one was created, in Ryan v O'Sullivan [1956] VLR 99, Dean J held that it was settled that an equitable mortgage of land under (the Transfer of Land Act (1954) Vic) could be effected by a deposit of the certificate of title as a security for a debt,³⁷ and that the proper remedy of a mortgagee in equity was foreclosure, but the judgment doubted that an equitable mortgage by deposit of title deeds carried an implied obligation on the mortgagor’s part to execute a legal mortgage. The mortgagor’s obligation was described instead as being to do all that is necessary to vest the legal title in the mortgagee in the event of default, and thereby to give the mortgagee all the rights that the mortgagee would have if the mortgage were legal.

37. Accepting those principles, there still remains the important observation made by Sykes in The Law of Securities (at p 145),³⁸ namely that while the significance of the act of deposit is that once a court concludes that there was an agreement to give security over land the obstacle of the Statute of Frauds is removed, the mortgagee still has to prove the agreement and the terms thereof. The conclusion that there was an agreement to give security over land is described in , (in a passage cited by Templeman J in [1974] 1 All ER 561 at 564), as an inference derived from a deposit of title deeds by an owner with his creditor and which is inferred from the relation of debtor and creditor subsisting between those parties. Templeman J in the same judgment cited from a statement in Halsbury’s Laws of England to the effect that the deposit is a fact which lets in evidence of an intention to create a charge that would otherwise be inadmissible, and which raises a presumption of charge throwing upon the debtor the burden of rebutting it. The position was described by Gibson LJ in [1996] 3 All ER 215 as being that the deposit by way of security as treated both as prima facie evidence of a contract to mortgage, and as part performance of that contract.

Part Performance

40. Apart from the problem that part performance was neither pleaded nor argued at the trial, and accordingly there was neither specific evidence led on that topic nor cross examination about it, the respondent did not identify the part performance upon which they would rely to evidence the agreement for an equitable mortgage. Senior counsel for the appellant suggested those would in all probability be the respondents' acts of part performance of the contract by them to sell the business, and counsel for the respondents did not identify any other acts to be relied on.

41. Were the respondents to be given the leave sought on the appeal, namely to amend their pleadings in some un-particularised way so they could argue on appeal a point not taken at the trial – and in the teeth of the requirements specified in Water Board v Moustakas (1988) 180 CLR 491 at 498, and recently repeated in WhisPrun Pty Ltd v Dixon [2003] HCA 48 at [51] – any imaginable particulars would run into the difficulties identified by McPherson J (as he then was) in Riches v Hogben at first instance,⁴¹ and Williams J (as he then was) on the appeal.⁴² This was that what is required by the common law of Australia is that acts of part performance relied to establish the contract being executed by the deposit of the certificate of title must be “unequivocally, and in their own nature, referable to some such agreement as that alleged” (the learned judges cited authority). Whatever part performance was relied upon, the deposit of the appellant’s certificate of title would be more logically referable to a quite different agreement, namely one in which she was a purchaser at least in part of the business being sold. The vendor’s part performance in proceeding with the sale is at least equally consisted with an agreement that any security resulting from deposit of the certificate was for the appellant’s purchase of her interest in the business.

42. Accordingly, I am satisfied that no good purpose would be served by giving the respondent leave as sought to amend their pleadings now, quite apart from the fact that proceedings at the trial would in all likelihood have actually been conducted differently had part performance been pleaded then. Leave should be refused; and the respondents were correct in not pressing on the appeal the pleaded claim that an equitable mortgage resulted from the deposit of the certificate.

The agreement to mortgage

43. The respondents contended that the contract was correctly described by the learned trial judge as an agreement by the appellant (made by her authorised agent) to mortgage the land. I have explained that I take a different view, namely that the agreement was that the purchaser and guarantor would procure the appellant to do that; but assuming that the learned trial judge was correct, the respondents accepted that the decision in Riches v Hogben is authority that the agreement to mortgage the land created an equitable interest in it for the respondent. Their counsel submitted that the fact that it was executed without the provision of the promised mortgage meant that compliance with that condition had been waived by them. Counsel then submitted that this waiver resulted in s 11(1) of the Property Law Act not applying, because the effect of the respondents’ waiver was that the appellant had not promised to provide a mortgage then and there, but by their waiver had agreed to provide it on some future occasion.⁴³

44. I do not see how they escape the application of s 11(1)(a) of the Property Law Act as they submit, by reason of their waiver of compliance with Clause 4.3(v). If the contract was an agreement to grant a mortgage it remained such an agreement after the respondents waived the insistence that this be done on 22 July 1996. It became by that waiver an agreement to grant one within a reasonable time fixed by notice thereafter.⁴⁴

45. Section 11 provides

“11 Instruments required to be in writing

(1) Subject to this Act with respect to the creation of interests in land by parol –

no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by the person’s agent lawfully authorised in writing, or by will, or by operation of law; and

a declaration of trust respecting any land must be manifested and proved by some writing signed by some person which is able to declare such trust or by the person’s will; and

a disposition of an equitable interest or trust subsisting at the time of the disposition, must be manifested and proved by some writing signed by the person disposing of the name, or by the person’s agent lawfully authorised in writing, or by will.

(2) This section does not affect the creation or operation of resulting, implied, or constructive trusts.”

46. Section 59 provides as follows:

”59 Contracts for sale etc. of land to be in writing

No action may be brought upon any contract for the sale or other disposition of land or any interest in land unless the contract upon which such action is brought, or some memorandum or note of the contract, is in writing, and signed by the party to be charged, or by some person by the party lawfully authorised.”

47. The learned trial judge held s 11(1)(a) inapplicable, relying on the decision in Baloglow v Konstanidis & Ors. In that case two solicitors, the authorized representatives of two partners who were in dispute, met and agreed on terms of settlement of those partnerships disputes, and agreed that one partner, who held the title to the partnership land, (and thus on trust for himself and his partner)⁴⁵, would transfer that land to the other partner. A written note was made of the solicitors’ discussion, and a deed reflecting those was then drawn. One partner refused to execute it. Mason P and Priestley JA held that the partner on whose behalf it was agreed by the authorised agent that that partner would transfer the land, as part of a larger agreement (which required that the partners each take a number of steps), was not thereby creating or disposing of an interest in land within the meaning of s 23C of the Conveyancing Act 1919 (NSW), which section corresponds to s 11(1)(a) of the Property Law Act 1974 (Qld). They held that partner was promising to hold the land on trust for both partners until such time as the partner making the promise to transfer received what he was to get under the agreement, when he would complete whatever conveyancing steps were necessary. Only at that point, their Honours held, there would be a disposition within the meaning of s 23C(1)(a).

48. They had held that s 23C(1)(a) applied to personalty as well realty,⁴⁶ and that the trust which came into existence when that agreement was made was either a resulting, implied, or constructive trust within the meaning of s 23C(2) (corresponding to s 11(2)) and was thus not subject to s 23C(1). They held that the provision corresponding to s 11(1)(c) did not apply, because there was no disposition of an equitable interest subsisting at the time of that disposition, the correct analysis being that the equitable interest arising from the trust created by the agreement was created by it and not previously subsisting.⁴⁷ They also held that a specifically enforceable agreement to assign an interest in property creates an equitable interest in the assignee, constituting the assignor an implied or constructive trustee for the assignee. The learned judges relied for that proposition on the statements by Lord Radcliffe in Oughtred v Inland Revenue Commissioner [1960] AC 206, the decision in Neville v Wilson [1997] Ch 144 at 157, and textbook authority. At [120] of the judgment, their Honours relied on those observations in Oughtred v Inland Revenue Commissioner to support the application of s 23C(2).

Estoppel

53. As well finding that the appellant was party to an agreement to provide a mortgage and guarantee, the learned trial judge inferentially found for the respondents on the estoppel pleaded in the cross claim. The learned judge referred⁵⁶ to the judgment of Brennan J in Walton Stores v Maher (1988) 164 CLR 387 at 428-429, where His Honour listed the matters he considered necessary for the establishment of an equitable estoppel. The learned judge then made findings in the respondent’s favour on each of the matters specified by Brennan J (as His Honour then was).⁵⁷

54. I respectfully consider His Honour erred in finding, as he appeared to have done, that the appellant was estopped from claiming her interest in the certificate of title, because I consider with respect that the facts elsewhere found by the learned judge and the evidence relied upon established that the respondents relied on the representation by Glen Theodore that he was the beneficial owner of Lot 65. Mr Klar specifically swore that that was his appreciation at the time, which Mr Klar thought was born out by the fact that Glen Theodore had been readily able to produce the duplicate Certificate of Title to him. There is no evidence at all that the appellant was aware of that misrepresentation by her son or had authorised him to make it. Thus the respondents relied on misleading representations by Glen Theodore for which the appellant was not responsible. It is not unconscientious⁵⁸ for the appellant to act in disregard of that representation, one which was critical to the contract being executed when it was.

55. It was critical because if Glen Theodore had revealed that the appellant was the beneficial owner of that land, and that he was causing her not only to lend him $30,000.00 to proceed with the contract, but also persuading her to offer her certificate of title as security for his indebtedness, and when no demonstrable benefit to the appellant could be seen, the respondents would have been put on inquiry as to the appellant’s circumstances and understanding of what she was doing⁵⁹. Mr Klar may well have considered it sensible to ensure the appellant had independent advice before letting his client take security over her property, that being a very different step to their taking security over Glen Theodore’s property. If, as represented by Glen Theodore, it was beneficially owned by him, then having the appellant sign the mortgage was a formality that could not affect her.

56. Accordingly, although I respectfully consider that none of the attacks upon the findings of fact by the learned judge have merit, the appellant must succeed in this appeal in overturning both the inferential finding of an estoppel against her and the actual finding that she was party to an agreement that she provide a mortgage and guarantee. There was no such agreement, and if there was (as to a mortgage) it was caught by s 11(1)(a).

● dismiss the respondents’ application for leave to amend the pleadings;

● the appeal be allowed and the orders made in the District Court on 14 November 2002 on both the appellant’s claim and the respondent’s counter claim set aside, and in lieu thereof the following orders be made:-

● on the appellant’s claim as plaintiff, that the respondents forthwith deliver to her solicitors the duplicate certificate of title pertaining to Lot 65 on RP 817375 and the appellant’s claim against the respondents be otherwise dismissed; and

● on the respondent’s counter claim, that those counter claims are dismissed;

● that the respondents pay the appellant’s costs of and incidental to the trial, to be assessed on a standard basis;

● the respondents pay the appellant’s costs of the appeal assessed on the standard basis.

59. PHILIPPIDES J: I have had the advantage of reading the reasons for judgment of McMurdo P and Jerrard JA.

60. The learned trial judge found that the agreement in question was one whereby the appellant, through her authorized agent, agreed to mortgage land at Buderim owned by the appellant. The learned trial judge also found that the provisions of s 11 of the Property Law Act 1974 (Qld) did not apply to the agreement. I agree for the reasons set out by Jerrard JA and the additional reasons of McMurdo P that his Honour erred in finding that s 11 of the Act had no application. The provisions of s 11 of the Act were not satisfied in this case. I do not wish to add anything further on that matter.

61. I nevertheless consider that the appellant’s claim fails and the respondents should succeed on their counterclaim for the reason identified by McMurdo P, that an equitable mortgage was created by the lodging of the appellant’s title deeds. The learned trial judge found that the appellant had authorised her son, Mr Theodore, to lodge the title deed as security for the purchase of the respondents’ business. That was a finding which was open to the learned trial judge. The equitable mortgage so created does not fall within s 11 of the Act. In reaching this conclusion I respectfully adopt what is stated by McMurdo P in her Honour’s reasons for judgment.

62. I would generally refuse the appellant’s appeal. As regards the orders on the counter claim, I agree with the proposed orders of McMurdo P.

Footnotes

1. Theodore v Mistford Pty Ltd & Ors (No 2) [2002] QDC 296, para [4]. ↩

2. Ibid, para [8]. ↩

3. Ibid, para [5]. ↩

4. Ibid, para [9]. ↩

5. Ibid, para [47]. ↩

6. A finding disputed by the appellant. ↩

7. "(1) Subject to this Act with respect to the creation of interests in land by parol- ↩

8. See fn 1 , para [51]. ↩

9. [1986] 1 QdR 315. ↩

10. Kelly SPJ at 318-319 (followed by Cooper J in SEA Food International Pty Ltd v Theng Pew Lam & anor [1998] 130 FCA, 27 February 1998, p 43) and Williams J (as he then was) at 330-339, especially at 339. ↩

11. [2001] NSWCA 451. ↩

12. Adamson v Hayes (1973) 130 CLR 276. ↩

13. But see s 75(1) Land Title Act 1994 (Qld). ↩