Equitiloan Securities Pty Ltd v Registrar of Titles [1996] QSC 29 [1997] 2 Qd R 597

2.~1?-Z, _ Sc 70/e>2.1 _I+_, State Reporting Bureau TRANSCRIPT OF PROCEEDINGS (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bureau.) SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION DOWSETT J No 518 of 1995 EQUITILOAN SECURITIES PTY LTD (FORMERLY MC MORTGAGE SERVICES PTY LTD) ACN 051 165 587 and REGISTRAR OF TITLES and YELANGI PRESCHOOL AND KINDERGARTEN ASSOCIATION INC BRISBANE .. DATE 16/02/96 JUDGMENT 1 REVISED CCPIES iSSUED S~ate Reporting Bureau .-- --:> ~-- IDate .) / o ; c1t:: Applicant First Respondent Second Respondent -- 1 of 13 -- 160296 dfc/mls (Dowsett J) HIS HONOUR: This is an application for judicial review of a decision of the Registrar of Titles to correct an alleged error in the register pursuant to section 15(1) of the Land Title Act 1994. The application is brought by a mortgagee who, prior to the correction, had been registered as such but as a result of the correction lost that registration. The reason for the so-called correction of the register was associated with the receipt by the Registrar of a letter, dated 10 May 1985, from the solicitors for the registered proprietor of the land, asserting that the mortgage was a forgery. This letter did not come to the attention of the Registrar personally until after the mortgage had been registered. He then purported to exercise the power pursuant to section 15(1) to correct the register by expunging the registration of the mortgage. The mortgagee now seeks a review of that decision, and I have heard cross-examination and submissions from counsel for the applicant and counsel for the Registrar of Titles. I am presently hearing submissions from counsel on behalf of the registered proprietor. The point presently being advanced on behalf of the registered proprietor is that one of the two persons who signed the mortgage in conjunction with the application of the seal of the registered proprietor was not authorised to do so pursuant to the rules of the registered proprietor. There is no evidence to this effect. There is an assertion in a letter sent to the Registrar by the solicitors for the registered proprietor that one of the signatories was not so authorised, but there is no evidence to that effect. The matter is significant as going to the validity of the 2 JUDGMENT 10 20 30 40 50 60 -- 2 of 13 -- 160296 dfc/mls (Dowsett J) mortgage and also as to whether or not the mortgagee and the Registrar of Titles were entitled to act upon the basis that the mortgage was valid. There is also an argument that because the word "director" was inserted next to each name, both of those parties ought to have been on notice of an irregularity because there are in fact no directors provided for in the rules of the registered proprietor. Mr Crowley, for the registered proprietor, has now sought to call evidence at this late stage as to the persons making up the Management Committee of the registered proprietor. I have declined to allow that upon the basis that the application comes too late. Directions were given in this matter at an earlier stage, and it was adjourned from the chamber list to the civil list. If the identities of the signatories were to be material facts in these proceedings then appropriate facts should have been deposed to prior to this time. Further, it would be unfair, in my view, to the present applicant to allow canvassing of that issue at this stage because there are circumstances in which persons who are not members of the Management Committee may be authorised to participate in the sealing of a document on behalf of the registered proprietor. It is true that rule 27(b) asserts that no employee shall be entitled to be elected or appointed or otherwise hold a position or office on the Management Committee, but that does not exclude the possibility that an employee might be nominated pursuant to rule 25. If this was to be a live issue the applicant ought to have been allowed an opportunity 3 JUDGMENT 10 20 30 50 60 -- 3 of 13 -- 160296 dfc/mls (Dowsett J) to investigate that matter and it does not take much imagination to come to the conclusion that in that situation, the mortgagee might also have been seeking to rely on some sort of estoppel. I do not for a moment say that there are any facts presently disclosed to me which would establish such an argument, merely that it is a matter that would probably have been investigated. In the circumstances, it seems to me that it is too late to broaden the factual basis of these proceedings, and I will refuse the application. HIS HONOUR: This is an application pursuant to section 20 of the Judicial Review Act to review a decision by the Registrar of Titles, purportedly pursuant to section 15(1) of the Land Title Act 1994. That section provides as follows: "The registrar may correct any register kept by the registrar if the registrar is satisfied that- (a) the register is incorrect; and (b) the correction will not prejudice the rights of the holder of an interest recorded in the register." The circumstances in which the case arises are that on 29 August 1994 the present applicant lodged a mortgage with the Registrar of Titles for registration. That mortgage had apparently been executed on behalf of the registered proprietor of the land, the present second respondent. The Registrar of Titles is the first respondent. 4 JUDGMENT 10 20 30 40 50 60 -- 4 of 13 -- 160296 dfc/mls (Dowsett J) On 11 May 1995, whilst the mortgage was still awaiting registration, the solicitors for the second respondent wrote to the Registrar of Titles in this form:- "Fraudulent Mortgage CT number 690737, volume 3306, folio 227; registered proprietor Yelangi Preschool and Kindergarten Association Inc; mortgagee MC Mortgage Services. We act for the Yelangi Preschool and Kindergarten Association Inc, the registered proprietors of the above title. A recent audit of the Association revealed that the property had been mortgaged. We're instructed that this mortgage was fraudulent. The fraud has been reported to the Criminal Investigation Branch, Queensland Police Service, Taringa (Detectives Ian Hansen and Barry Zerner). The purpose of this letter is at this stage to give you immediate notice of this fraud. We anticipate that any further relevant necessary documentation would be forthcoming as soon as possible. Would you please note your records accordingly." This letter was received on 11 May 1995 and filed without any action being taken in connection with it. On 24 May 1995 an amendment to the mortgage was lodged for registration. On 14 June 1995 the Registrar received a further letter on behalf of the second respondent, asserting that the mortgage had been executed fraudulently. However, on the same day, just after he received that letter, the mortgage and the amendment to the mortgage were registered. Later that day the Registrar removed the mortgage and amendment from the register without giving any notice to the present applicant of his intention to do so. In so doing, he was purporting to act pursuant to section 15 of the Land Title Act. On 5 JUDGMENT 1() 20 30 40 50 60 -- 5 of 13 -- 160296 dfc/mls (Dowsett J) 15 June 1995 the Registrar also lodged a caveat against dealing with the property pursuant to the power conferred upon him by section 17. The Registrar has sworn that when a letter is received involving allegations of forgery or fraud which may prejudice a person, it is his invariable practice immediately to inquire of the person making the allegation for details of the allegation so that he can consider whether it is appropriate for him to register a caveat pursuant to section 17. This is a reference to section 17 ( 2) ( e) (ii), . which in effect provides that the Registrar may so caveat to prevent a dealing with a lot which may prejudice any person because of fraud or forgery. He also swears that whilst awaiting any such material he makes an administrative note in the computer records which constitute the register so that before there is any dealing with the property, the matter will be referred to him. He can then, if he thinks it appropriate, lodge a caveat pursuant to section 17 as an emergency and temporary measure. He also says that if he forms the view that there is a serious issue concerning fraud or forgery, it is his practice to lodge a Registrar's caveat to hold the position, and so to allow the person claiming fraud or forgery to lodge his own caveat or to take other steps to establish his rights. He says that he does not seek to form any concluded view as to whether there is forgery or fraud in this course of conduct. 6 JUDGMENT 10 20 30 40 50 60 -- 6 of 13 -- 160296 dfc/mls (Dowsett J) He says that letters such as the letter of 10 May 1995, as a matter of office routine, are brought to his attention at the time of receipt, or at least promptly thereafter, but for some reason this did not occur with the present letter. He did not become aware of the allegations of fraud, as I have said, until 14 June. It is the applicant's submission that the correction of the register effected by the Registrar to remove the registered mortgage was in excess of the power conferred by section 15(1) and was therefore void. Alternatively it is submitted that the Registrar, in making his decision, made an error of law or alternatively, acted in the absence of appropriate evidence. It probably does not matter which of these three bases is adopted in the circumstances of this particular case. If the Registrar is to use the power conferred upon him by section 15(1), he must be satisfied of two matters: firstly, that the register is incorrect, and secondly, that his proposed correction will not prejudice the rights of the holder of an interest recorded in the register. The first requirement is that there is an error on the face of the register. I do not mean that the error must necessarily be apparent on the face of the register. I mean, rather, that there must be an error in the register I would have thought that this was the only reasonable interpretation of section 15 ( 1 )(a), but Mr McGill S. C., who appears for the Registrar, has taken a different view. He submits that where an entry 7 JUDGMENT 10 20 30 40 50 60 -- 7 of 13 -- 160296 dfc/mls (Dowsett J) has been made in the register as a result of an error in the procedures adopted within the Registrar's office, section 15(1) authorises intervention and that it is not necessary to show that the entry in question is, in fact, incorrect. With all respect, I find that a most remarkable proposition. I am quite unable to see any way in which section 15(1)(a) can be construed as meaning anything other than that the Registrar must be satisfied that there is an error in the register. That there may have been an irregularity in the process of registration is irrelevant. The section does not deal with the procedures of the Titles Office, but with the status of the register. The second requirement is that he be satisfied that the correction will not prejudice the rights of the holder of an interest recorded in the register. Once again, I would have thought that the words were very clear. He must be satisfied that anybody who holds an interest recorded in the register will not be prejudiced by such an amendment as he proposes to make. In the present case, it is clear that the present applicant was prejudiced by the cancellation of the registration of his mortgage. entitled, Whereas with a registered in general, to the benefits mortgage, it was of the so-called indefeasibility provisions contained in section 184, it is now no longer entitled to those benefits. From a practical point of view, the most serious disadvantage, as I would see it, is that now, his entitlement to re-registration will depend 8 JUDGMENT 10 20 30 50 60 -- 8 of 13 -- 160296 dfc/mls (Dowsett J) entirely upon the outcome of proceedings in the action by the present second respondent against the applicant to establish that the applicant was a party to the fraud and forgery. If the second respondent establishes that the applicant was such a party then obviously, the applicant's priority will be deferred to the claims of the second respondent. This will be so whether or not the applicant is registered as mortgagee. In either case its title will be subject to any pre-existing equity resulting from its conduct. On the other hand, if at the trial the second respondent is successful in establishing that the transaction was a forgery or fraud but is unable to sheet those allegations home to the applicant, the applicant will then stand in the order of priority as an equitable interest holder only. In all probability, its priority will be deferred to the interests of the holder of the legal estate, the present second respondent. There are undoubtedly other respects in which registration is to be preferred. It is simply impossible to say that not to be registered as mortgagee is no more prejudicial than to be so registered. Mr McGill has advanced another view. He has referred to what may have been precursors to this section where they appeared in the old Real Property Act and analogous legislation. Section 11(4) of the Real Property Act conferred a power of correction upon the Registrar but provided in the concluding words of the subsection:- " •.• every certificate of title so corrected and every entry so corrected or supplied shall have the like validity and effect as if such error had not been made or such entry omitted except as regards any assurance or instrument which may have been entered in the register book previously 9 JUDGMENT 20 30 40 50 60 -- 9 of 13 -- 160296 dfc/mls (Dowsett J) to the actual time of correcting such error or supplying such omitted entry." No doubt there is a similarity between the effect of those words and the effect of section 15(1)(b), although at first glance, it is not obvious. Mr McGill submits that on one reading of the words of exception in the Real Property Act, they could arguably apply to benefits taken under the very error which is being corrected. He submits that such a result would make a nonsense of the section and that such a view has never been taken of those words. It would make a nonsense of section 11(4) if the very correction which is authorised is to be rendered virtually nugatory by the words of the exception. For that reason alone, section 11(4) should not be so construed. Mr McGill submits that the same reasoning should 10 20 be applied to section 15 ( 1 ) ( b) • It should not be read so as 30 to protect a person who takes a benefit pursuant to the very error which is to be corrected. I can see no justification in the language of· section 15(1) for that conclusion. It may be that section 15(1) reflects some of the 40 considerations discussed in cases such as Fraser v. Walker [1967] A.C. 569, but whether that be so or not, I can see no reason for bringing the accumulated baggage of the Real Property Act and its analogues in other jurisdictions to the task of construing section 15. The wording is different, and so the regime in which the section operates is, in some respects, different. My own view is that section 15(1)(b) should be construed according to its words and given· its natural meaning. There is no justification for excluding the party whose registration will be affected by a correction as not 60 10 JUDGMENT -- 10 of 13 -- 160296 dfc/mls (Dowsett J) being the holder of an interest for the purposes of section 15(1)(b). The Registrar could not have been satisfied of either of the matters of which he was required to be satisfied before exercising his power under section 15(1). His purported exercise of that power was therefore a nullity. There was another argument advanced by the second respondent on the issue of prejudice. He drew attention to the fact that on the mortgage, each of the signatories has been described as a director. He points out that the rules of the body corporate, which is the second respondent, do not provide for directors but for a Management Committee. He says, therefore, that anybody reading the mortgage with knowledge of the rules should have been put on notice that there was a possible irregularity in the execution. The second respondent argued that as the mortgage was not properly executed, the applicant was not entitled to registration, and therefore, had not suffered prejudice by being deprived of registration. This argument is not made out on the material, assuming that it is otherwise valid. Although there is an assertion in one letter that one of the signatories was an employee, there is no evidence leading me to the conclusion that the mortgage has not been properly executed. Rule 25 provides for the application of the common seal of the body corporate and requires that it be signed by a member of the Management Committee and countersigned by the secretary or a second member of the Management Committee or by some other person appointed by the Management Committee 11 JUDGMENT 10 20 30 40 50 -- 11 of 13 -- 160296 dfc/mls (Dowsett J) for that purpose. Section 27 provides that no employee of the Association shall be entitled to be elected or appointed or otherwise hold a position or office on the Management Committee. It is said that if one of the signatories was an employee, he was not entitled to be a member of the Management Committee and therefore not entitled to execute the mortgage. Of course, that proposition overlooks the fact that there is power conferred by rule 25 to appoint a person who is not a member of the Management Committee as a signatory. If the second respondent wished to challenge the validity of the execution in these proceedings, it was in the best position of all parties to do so. It chose not to lead any evidence on this issue, and I cannot see that it can rely upon a mere assertion that one of the signatories was an employee as showing that the execution was invalid. HIS HONOUR: I declare that the decision by the Registrar of Titles on 14 June 1995 to correct the register by deleting registration of the mortgage lodged on 29 August 1994 and the amendment lodged on 24 May 1995 is void. I order that the · declaration be set aside. Liberty to apply for such further order as the parties may be advised. HIS HONOUR: I order that the Registrar of Titles, the first respondent, pay the applicant's costs of these proceedings 12 JUDGMENT 10 20 30 40 50 60 -- 12 of 13 -- 160296 dfc/mls (Dowsett J) including reserved costs. An application is made on behalf of the second respondent for an order for costs against the Registrar of Titles. It seems that the second respondent sought to be joined in these proceedings. It seems also that the second respondent was the party which stood to benefit from the actions taken by the Registrar. In those circumstances it would be inappropriate to award costs against the Registrar in favour of the second respondent. I decline to make such an order. 13 JUDGMENT 10 20 30 4C 50 60 -- 13 of 13 --