5207/01 - TORRE v JONAMILL PTY LIMITED
JUDGMENT
1 These proceedings concern competing claims to a fund of $46,888.88 created by agreement between the plaintiff, Julie Torre ("Ms Torre") and the first defendant, Jonamill Pty Limited ("Jonamill"). The fund is held in the form of an interest bearing bank deposit by the second and third defendants. They are the respective solicitors for Ms Torre and Jonamill.
2 It is necessary to describe briefly the background to and nature of the agreement. In December 1993, Ms Torre became one of several co-owners of real property at Summerland Point. She and her two daughters held, as joint tenants, an undivided one half share in that property, the other undivided one half share being held by Jacques Briand ("Mr Briand") and Marie Josephine Briand ("Mrs Briand") as joint tenants. In the latter part of 2001, the property was, by consensus of the five co-owners, sold for a price of $350,000 which was paid in cash on completion which occurred on 24 August 2001. A sum of $185,000 was, on completion, paid to Aussie Home Loans which thereupon delivered a discharge of a registered mortgage held by it. Mr Briand and Mrs Briand were, as among the co-owners, entitled to $82,500 (subject to completion adjustments), being one-half of the balance after payment of the mortgagee. It was from that entitlement that the fund of $45,888.88 was set aside and invested by the solicitors for Ms Torre and Jonamill.
3 Ms Torre had, over a period of several years before the sale, lent money to Mrs Briand and, to a lesser extent, Mr Briand. They, in February 1994, executed in favour of Ms Torre a form of mortgage in respect of their undivided share in the property at Summerland Point the title to which was under the provisions of the Real Property Act 1900. That mortgage remained unregistered, there being, at all material times, the registered mortgage to Aussie Home Loans which no doubt held the certificate of title. Mrs Briand, it appears, encountered particular financial difficulties since, at some time before April 2001, Jonamill obtained judgment against her in the sum of $45,888.88 in the Local Court at Manly. Jonamill, as judgment creditor, then proceeded to levy execution against Mrs Briand's interest in the Summerland Point property and caused a copy of the writ to be served upon the Registrar-General who, in turn, entered particulars of it on the relevant folio of the register on 5 April 2001. This entry was discovered by the purchaser's solicitor in the course of the conveyancing transaction.
4 Competing claims then arose in relation to the interest of Mr Briand and Mrs Briand as between Ms Torre as the holder of the unregistered security granted by them and Jonamill as the judgment creditor of Mrs Briand. In order to ensure that the sale of the property was not lost and completion could occur, the vendors came to an arrangement with Jonamill under which it agreed to have notification of its writ of execution removed from the title to the property on the footing that $45,888.88 would be withheld from the part of the net proceeds of the sale that would otherwise accrue to Mr Briand and Mrs Briand; that that sum would be invested by the solicitors for Ms Torre and Jonmill as already outlined; and that such moneys as were secured by Ms Torre's mortgage immediately before completion would be paid to her out of the fund, with Jonamill receiving the balance, if any.
5 It is probably not entirely correct to say, as I have, that this agreement existed at the time of completion of the sale. At that time, as I understand it, Jonamill asserted a claim in priority to that of Ms Torre as mortgagee and the arrangement was for the retained fund to be disbursed according to the way in which those priorities were eventually resolved. By the time the matter came to trial, it was acknowledged by Jonamill that its position as judgment creditor, even with its writ of execution recorded on the title to the property, was postponed to that of the holder of an equitable mortgage. It was further acknowledged that the effect of the parties' agreement was as I have earlier stated, that is, that Ms Torre should have first call on the fund to the extent of the moneys secured by her mortgage and that the balance, if any, should pass to Jonamill. That being so, the crucial question concerns the extent of Ms Torre's secured debt at the time of completion of the sale of the property on 24 August 2001.
6 The central issue agitated before me was whether the sum that was secured by and owing under Ms Torre's mortgage at the time of completion of the sale is properly regarded as having been $100,000 (as she contends), or whether an inquiry should be ordered to determine the extent of the moneys secured. When the issue is stated in this way, it becomes clear that if Ms Torre does not succeed in showing that the sum secured was $100,000, the appropriate course will be to order an inquiry.
7 It is necessary to look in some detail at the mortgage. It is in the form approved by the Registrar-General. Ms Torre is named as mortgagee. Mr Briand and Mrs Briand are together named as mortgagor and the following words appear after their names and descriptions:
"as joint tenants of an undivided half share mortgages to the mortgagee all the mortgagor's estate and interest in the land specified above and covenants with the mortgagee that the provisions set out in Annexure A hereto Memorandum No V179498 filed in the Land Titles Office are incorporated in this mortgage …"
8 There is thus, obviously enough, an intention to incorporate and adopt covenants by the mortgagor in the terms of both provisions in the mortgage's own annexure A and those in filed memorandum V179498. The annexure A is brief. It reads:
"The Mortgagor hereby acknowledges receipt of the sum of $26,706.25 and covenants with the Mortgagee to observe the provisions of any lending agreement made between the Mortgagor and the Mortgagee by virtue whereof the sum aforesaid has been advanced."
9 Filed memorandum V179498 begins, in clause 1A, with the words "The principal sum shall be deemed to include" and then goes on to give in its paragraphs (a) to (e) a wide-ranging "all moneys" description referring to present and future advances and other indebtedness of various kinds together with interest. Clause 1B then says:
"Such moneys and interest will be paid at such time or times and in such manner as may at any time and from time to time be agreed in writing between the mortgagee and the mortgagor and in default of such agreement on demand which may be made at any time and from time to time."
10 So much for the mortgage itself, its annexure and the filed memorandum referred to in it. It is then necessary to mention a variation of mortgage dated 14 December 1995. The operative part of this document reads:
"The principal sum is increased to $53,000.00."
11 A second variation of mortgage is dated 11 August 2000. Its operative part reads:
"The principal sum is increased to $100,000.00."
12 With the exception of the filed memorandum (which was lodged by Beswick & Beswick, solicitors, in 1984), none of these documents has been lodged at the Land Titles Office, but each is executed by the parties to it and attested appears to be duly stamped. It is, I think, accepted that both the mortgage and the two variations are in registrable form.
13 This last factor forms the basis for a submission made on behalf of Ms Torre that she was properly to be regarded as the holder of an equitable mortgage of the undivided half share of which Mr Briand and Mrs Briand were registered as proprietor. Mr Armfield of counsel, who appeared for Ms Torre, based that submission on Milroy v Lord (1862) 4 DeG F & J 264 and Anning v Anning (1907) 4 CLR 1049. The evidence shows that advances were made by Ms Torre both before and after the execution of the mortgage and it may be accepted that it was given for valuable consideration with the result that there is implied an enforceable contract that by Mr Briand and Mrs Briand to afford Ms Torre the position of a legal mortgagee, with the result that she became, as she asserts, an equitable mortgagee.
14 The next step in the submissions made on Ms Torre's behalf is, however, not so easy. As I understood Mr Armfield's submissions, it is said that Ms Torre, as equitable mortgagee, was, by virtue of the series of unregistered instruments, to be regarded as enjoying security, in that form, in respect of a fixed and certain debt of $100,000, that being the level to which the second variation of mortgage, according to its terms, increased the "principal sum". On this argument, the "principal sum" most recently described in an executed variation is conclusively presumed to be the debt owing by the mortgagor to the mortgagee and secured by the mortgage.
15 The instrument of variation was obviously prepared by reference to s.91(1)(c) of the Conveyancing Act 1919 but in the form approved for use in varying a mortgage affecting land under the provisions of the Real Property Act. Section 91(2) of the Conveyancing Act says that a memorandum under s.91(1)(c) which increases or decreases "the amount secured by the mortgage", if indorsed on or annexed to the mortgage, signed by the persons to be bound and attested by one witness, operates as a deed. Section 91(6) deals with mortgages under the Real Property Act:
"Subject to the memorandum referred to in subsection (1) being in or to the effect of an approved form within the meaning of the Real Property Act 1900, paragraphs (b), (c), (d) and (d1) of that section apply to mortgages under that Act and, upon lodgment of such a memorandum for registration, the Registrar-General shall make such recordings in the Register kept under that Act as may be necessary to give effect to the memorandum."
16 There is a question as to the meaning of "mortgages under that Act" (referring to the Real Property Act) in this provision of the Conveyancing Act and whether the expression includes an unregistered mortgage of the kind involved in this case.
17 The term "mortgage" is defined by the Real Property Act as meaning "any charge on land (other than a covenant charge) created merely for securing the payment of a debt". Section 56(1) provides:
"Whenever any land or estate or interest in land under the provisions of this Act is intended to be charged with, or made security for, the payment of debt, the proprietor shall execute a mortgage in the approved form."