Vasiliou v Marchesi

REASONS FOR JUDGMENT 1 One question for determination by the judge was whether the appellant as settlor had done everything that was necessary for him to have done to perfect a gift of land to the trustee of his family trust. The land was under the operation of the Transfer of Land Act 1958 (Vic). Each parcel was subject to a registered first mortgage and the mortgagee was in possession of the duplicate certificate of title. The appellant had executed a deed of gift in favour of the trustee and may have, at least constructively, delivered to the trustee duly executed transfers of the land. The judge said that this was not sufficient to perfect the gift. He was of opinion that: "Without the consent of the mortgagees of each of the properties having first been obtained, the transfers could not have been registered. Accordingly, the [appellant] would not have done all that was necessary to place the vesting of the legal title within the control of [the trustee]." The question for determination by the Full Court is whether this conclusion is correct. 2 The answer to the question is to be found in s 86 of the Transfer of Land Act, a provision that has always been in the Torrens legislation in Victoria but to which the judge was not taken. Section 86 provides: "When any instrument subsequent to a first mortgage is made by the registered proprietor of any land and such proprietor or the person entitled to the benefit of the subsequent instrument desires the registration of the subsequent instrument the first mortgagee if he holds the certificate of title concerned shall, upon being requested so to do by the proprietor or person entitled as aforesaid but at the cost of the person making such request, produce such certificate of title to the Registrar." The original marginal note, now heading, to the section reads: 'First mortgagee to produce title for registration of subsequent instrument.' 3 The purpose of the section is to be understood against the following background. In relation to general law land, if the land was mortgaged the mortgagee was entitled to possession of the title deeds. In Postlethwaite v Blythe (1818) 2 Swans 256, 258; (1818) 36 ER 613, 614 Lord Eldon said: "I take it to be contrary to the whole course of proceeding in this Court to compel a creditor to part with his security till he has received his money. Nothing but consent can authorise me to take the estate from the Plaintiff before payment." This strict rule was relaxed, at least to an extent. If the legal owner tendered the amount due to the mortgagee and the tender was refused, the owner could pay the money into court and obtain an order for the delivery of the title deeds: Bank of New South Wales v O'Connor (1889) 14 App Cas 273, 283. See also Chichester v Marquis of Donegall (1870) 5 Ch App 497. 4 When the Torrens legislation was enacted, the common law rule was overturned. Probably the reason was that the rule could not readily apply to a system of title to estates and interests in land by registrations: Robinson, Transfer of Land in Victoria (1979) p 348. At any rate, in Re Armitage; Ex parte Andrews (1891) 17 VLR 77, 79 A'Beckett J explained that: "The [Transfer of Land] Act did not intend that the mortgagor having given a first mortgage should be deprived of the power of alienation." As alienation could only be effected by the registration of a transfer, s 86 provided the means by which the transferee could compel the production of the duplicate certificate of title so that the transfer could be registered. So critical is the section to the scheme of registration created by the Transfer of Land Act that it overrides any covenant by the owner not to deal with the land until the mortgage has been discharged: In re Armitage, supra; St Kilda Road Pty Ltd v Parker Simmonds Securities Limited [2001] VSC 412. 5 In view of s 86 the trustee did not need the consent of the mortgagees to register the transfers. The result is that the judge was in error. 6 It is not possible for us finally to dispose of the case. The respondent points out that several issues were not dealt with by the judge. In relation to the gift the respondent had argued below that the appellant did not intend to gift the land to his family trust - a difficult argument in the face of the deed of gift, the establishment of a trust to receive the gift, the execution of the transfers and more - and that the transfers had not been "delivered" to the trustee - an equally difficult argument bearing in mind the appellant's solicitor also acted on behalf of the trustee and had written to the mortgagee requesting production of the duplicate certificates of title so that the transfers could be registered. Nonetheless he asks to have those points dealt with. The respondent had also put an alternative case, namely that as trustee in bankruptcy he had, through the appellant, a right of indemnity over the land in respect of unpaid trust debts. All these matters will have to be looked at again at a further hearing. That hearing cannot be before the judge who decided to recuse himself. The case will be remitted to the docket of another judge for retrial. In this connection it is not appropriate to do what the respondent suggests and order that the evidence at trial stand as evidence in the re-trial. It is not appropriate because it will not permit the docket judge to deal adequately with the credit issues that will inevitably arise. 7 The appeal will be allowed, the orders of the judge will be set aside and there will be a new trial. I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Heerey, Finkelstein & Jessup.