A solicitor held a charge over the property of his former clients as security for payment of fees. The property was subject to a first registered mortgaged. A subsequent purchaser of the property granted a mortgage to their bank (“the Bank”). A discharge of the first mortgage was exchanged at settlement. When the solicitor became aware that the property had been sold he lodged a caveat. When the Bank tried to register the discharge of the first mortgage, the transfer of title and its mortgage, it was prevented from doing so by the caveat. A lapsing notice was issued to the solicitor. The solicitor applied for an extension of the caveat pursuant to s 74K of the Real Property Act 1900 (“the Act”). The new owners were not joined to the proceedings (they should have been).
One issue was whether the Bank’s interest in the property had priority over the solicitor’s, as a result of s 43A of the Act. Another issue was whether the solicitor’s equitable interest was ranked after the Bank’s equitable interest.
Section 43A of the Act provides protection to the holder of a registrable dealing from notice of other interests in the land, before registration of the dealing, by deeming it to be a legal estate.
Justice Ball discussed the authorities concerning whether a dealing is registrable:
In IAC Finance v Courtenay, Ms Austin sold property she owned to the Courtenays. The purchase price was payable over time and, to secure its payment, the Courtenays mortgaged the property back to Ms Austin. The relevant memorandum of transfer and mortgage were lodged for registration by Ms Austin’s solicitor, Mr Easton. Subsequently, however, Mr Easton withdrew them and purported to sell the land to Denton Subdivisions Pty Limited (Denton). Denton, in turn, mortgaged the property to IAC (Finance) Pty Limited (IAC) and Hermes Trading & Investment Pty Limited (Hermes). The transfer to Denton and the mortgages to IAC and Hermes were presented for registration but had not been registered at the time proceedings were commenced. The Courtenays commenced proceedings seeking a declaration, in effect, that their interest took priority over those of Denton, IAC and Hermes. Denton, IAC and Hermes sought, among other things, to rely on s 43A. The High Court held that they were not entitled to do so.
Dixon CJ simply expressed the view that “[w]hatever be the meaning of s 43A, it cannot give priority to the later dealing over the earlier in circumstances like this”.
Kitto J held that s 43A, in the circumstances in which it applied, gave a person the same protection as that person would obtain on registration of the relevant dealing. However, his Honour took the view that “the purported withdrawal of the transfer by Ms Austin’s solicitor, being unauthorized, left the application for registration on foot notwithstanding the physical removal of the document from the Registrar-General’s custody”. Consequently, s 43A could not confer a priority on Denton (or IAC and Hermes).
Taylor J reached the same conclusion by a different route. His Honour held that s 43A only gave the purchaser the protection available to a legal owner at common law. On this approach, s 43A only protected a bona fide purchaser who took for value and without notice. His Honour held that Denton was on notice of the Courtenays’ interest because his solicitor was aware of the transfer that had been lodged in their favour. His Honour dealt (at 590-1) with the claims by IAC and Hermes in the following terms:
“The final question is concerned with the position of Denton’s proposed mortgagees – I.A.C. and Hermes. The learned trial judge has held that they parted with their money without notice of Courtenay’s interest and no reason appears for challenging this finding. In these circumstances they claim, independently of Denton, to be entitled to a degree of protection pursuant to s. 43A. But I agree with the learned trial judge that this claim must fail. That section clearly contemplates the position of a person dealing with a registered proprietor for it speaks of “the estate of interest in land under the provisions of this Act, taken by a person under an instrument registrable … under this Act” and an instrument would only be so registrable if executed by the registered proprietor. But I.A.C. and Hermes dealt only with Denton and their respective instruments would become registrable only upon registration of Denton’s memorandum of transfer. That being so, the additional submission made on their behalf must fail and, accordingly, all three appeals should, in my view, be dismissed.”
The trial judge (Hardie J) put the same point in these terms Courtenay v Austin (1961) 78 WN (NSW) 1082:
“The claim of each mortgagee is under an instrument in registrable form but not immediately registrable; such instrument was executed, not by Miss Austin the registered proprietor, but by the Denton Company claiming under a transfer in registrable form from Miss Austin; in one case the transfer was about to be lodged for registration, and in the other case it had already been lodged for and was awaiting mortgage registration. The question as to whether the mortgage instrument comes within the description in the sub-section of “an instrument registrable” under the Act does not appear to have been considered in any reported decision. Having regard to the language of s. 43A and its relationship to s. 43 and the other provisions of the Act, I am of opinion that neither of the mortgage instruments executed by the Denton Company and handed over on settlement of the respective mortgage transactions was “an instrument registrable” under the Act within the meaning of s. 43A.”
The approach adopted by Taylor J that the instrument must be ‘immediately registrable’ has been accepted as the correct approach: Jonray (Sydney) Pty Ltd v Partridge Bros Pty Ltd (1969) 89 WN (Pt 1) (NSW) 568; Meriton Apartments Pty Ltd v McLaurin & Tait (Developments) Pty Ltd (1976) 133 CLR 671.
Justice Ball held that the transfer from the registered proprietors to the purchasers was immediately registrable, even without discharge of the first mortgage. The Bank’s interest was different, being derived from the purchaser’s interest who were not the registered proprietors. The Bank did not gain the protection of s 43A, in accordance with the principles stated by Taylor J in IAC Finance v Courtenay (1963) 110 CLR 550. However, the solicitor was not entitled to prevent the registration of the transfer and as a result was not able to prevent the registration of the Bank’s mortgage.
The effect of the registration of the purchaser’s interest was to extinguish the solicitor’s interest in the property pursuant to s 42 of the Act. It followed that the Bank’s registered mortgage could not be subject to the solicitor’s interest either.
Justice Ball would not have made the orders sought by the solicitor anyway because the purchasers, whose interest was affected, had not been joined: see News Ltd v Australian Rugby Football League Ltd (1996) 139 ALR 193 at 298.
Justice Ball ordered the solicitor’s caveat to be withdrawn.