Australia & New Zealand Banking Group Ltd, Re [1991] QSCFC 86 [1993] 2 Qd R 477

I'C r\ rv \J() r - V l 1 IN THE SUPREME COURT OF QUEENSLAND 10 FULL COURT O.S.No. 1364 of 1990 BEFORE; Mr. Justice McPherson SPJ __ Mr. Justice Ryan I REVISED COPIES ISSUED ' Mr. Justice Dowsett j Court Reporting Bureau" ! BRISBANE, 8 AUGUST 1991 L-0i !fL_6'SEP'199i j (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Chief Court Reporter ,Court Reporting Bureau.) 10 30 IN THE MATTER OF The Property Law Act as amended IN THE MATTER OF Australia & New Zealand Banking Group Limited Applicant -and- IN THE MATTER OF Divine Holdings Pty. Ltd. -and- IN THE MATTER OF Tom Edwards -and- IN THE MATTER OF Bill of Mortgage No. T330535T First Respondent 30 Second Responden MR. JUSTICE RYAN: Mr. Justice McPherson has authorised me to say that in his opinion the question for the opinion of the court as to whether the applicant bank is entitled to exercise its power to sell without first giving to the second respondent notice pursuant to s.84 of the Property Law Act should be answered "yes", and the second respondent, Edwards, 50 should be ordered to pay the applicant's costs of and incidental to this special case. I publish his reasons. In my opinion the question of law, namely whether the applicant is entitled to exercise its power of sale without first having given a notice pursuant to s.84 of The Property 40 50 60 •ft2J4r-Govt. Printer, Qld. l [1991] QSCFC 86 -- 1 of 44 -- 1 t 10 20 Law Act to the second respondent should be answered "yes". I would order the second respondent to pay the applicant's costs of the special case to be taxed. I publish my reasons. MR. JUSTICE DOWSETT: I agree that the question should be answered "yes" and with the proposed order as to costs. I publish my reasons. 10 MR. JUSTICE RYAN: The special case is answered as follows that the applicant bank is entitled to exercise its power of sale without first giving to the second respondent notice pursuant to s.84 of the Property Law Act. The Court orders that the second respondent pay the applicant's costs of the special case. 20 30 30 40 /' ''I 50 50 60 60 jvt. Printer, Qld. 2 -- 2 of 44 -- IN THE SUPREME COURT OF QUEENSLAND FULL COURT O.S. No. 1364 of 1990 BETWEEN: IN THE MATTER OF THE PROPERTY LAW ACT AS AMENDED -AND- IN THE MATTER OF AUSTRALIA AND NEW ZEALAND AND BANKING GROUP LIMITED (Applicant) -AND- IN THE MATTER OF DEVINE HOLDINGS PTY LTD (First Respondent) -AND- IN THE MATTER OF TOM EDWARDS (Second Respondent) -AND- IN THE MATTER OF BILL OF MORTGAGE NO. T330535T MCPHERSON S.P.J. RYAN J DOWSETT J Reasons for judgment delivered by McPherson SPJ , Ryan J and Dowsett J on the 8th August, 1991. All concurring as to the orders. "THE COURT ANSWERS THE QUESTION "IS THE APPLICANT BANK ENTITLED TO EXERCISE ITS POWER OF SALE WITHOUT FIRST GIVING TO THE 2ND RESPONDENT. A NOTICE PURSUANT TO S.84 OF THE PROPERTY LAW ACT?" IN THE AFFIRMATIVE. ORDER THE SECOND RESPONDENT, TOM EDWARDS, TO PAY THE APPLICANT'S COSTS OF AND INCIDENTAL TO THIS SPECIAL CASE". -- 3 of 44 -- IN THE SUPREME COURT OF QUEENSLAND FULL COURT O.S. No. 1364 of 1990 Before the Full Court Mr Justice McPherson S.P.J. Mr Justice Ryan Mr Justice Dowsett IN THE MATTER of THE PROPERTY LAW ACT AS AMENDED - and - IN THE MATTER of AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (Applicant) - and - IN THE MATTER of DEVINE HOLDINGS PTY . LTD. (First Respondent) - and - IN THE MATTER of TOM EDWARDS (Second Respondent) - and - IN THE MATTER of BILL OF MORTGAGE NO. T330535T JUDGMENT - MCPHERSON S.P.J. Delivered the Eighth day of August 1991 CATCHWORDS Torrens system - Mortgages - Short lease of land - Default by mortgagor - Short lessee entitled to redeem - Real Property Act 1862-1989 ss*44, 52 - Real Property Act 1877 - 1988, s.11; Property Law Act 1974-1989, ss.4(1), 5(1) (b) , 77(1)(b)(i), 84(1) (a) . Counsel: W. Sofronoff Q.C. with him Philippides for the Applicant D. Fraser for the Second Respondent Solicitors: Walsh Hallighan Douglas t/a for MacDonnells for the Applicant Morrow & Co. for the Second Respondent Hearing Dates: 14 and 15 March, 1991 -- 4 of 44 -- OF QUEENSLAND FULL COURT O.S. No. 1364 of 1990 IN THE MATTER of THE PROPERTY LAW ACT AS AMENDED - and - IN THE MATTER of AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (Applicant) - and - IN THE MATTER of DEVINE HOLDINGS PTY . LTD. (First Respondent) - and - IN THE MATTER of TOM EDWARDS (Second Respondent) - and - IN THE MATTER of BILL OF MORTGAGE No. T330535T JUDGMENT - MCPHERSON S.P.J. Delivered the Eighth day of August 1991 This is a Special Case stated by the parties under 0.38, r.1 of The Rules of the Supreme Court. It raises an interesting and unusual question of law affecting Torrens system land. The question is whether a short-term lessee or tenant of registered land is entitled to redeem a registered mortgage given by the lessor as proprietor of the land. If he is, then, says the lessee, he should be given the notice of default in accordance with s.84(1)(a) of the Property Law Act 1974-1989 before the mortgagee exercises power of sale under the mortgage. Notice IN THE SUPREME COURT -- 5 of 44 -- 2 under that section has been duly given to the mortgagor but not to the lessee. The reason why it is said that notice should be given to the lessee is that s.84(1)(a) requires that notice be served on the mortgagor, and "mortgagor" is defined in s.4(1) of the Act, "unless the contrary intention appears", as including: "any person from time to time deriving title to the equity of redemption under the original mortgagor, or entitled to redeem a mortgage, according to his estate, interest or right in the mortgaged property." An unregistered short-term lessee or tenant of land under the Real Property Act 1861-1989 is said to satisfy this description or, at any rate, the latter part of it, as being a person "entitled to redeem". There is no doubt that this was - still is - the position under the general law. As everyone knows, in its classical form a mortgage of land under the old system involves an outright transfer of title to the mortgagee subject to a right to reconveyance upon repayment of the loan. Even after the time for repayment has passed equity views the mortgagor as retaining a right of redemption until it is destroyed by foreclosure in Chancery. This "equity of redemption" has a double aspect, embracing both a personal right to redeem as well as an interest in the land, which during Lord Harwicke 's term as Lord Chancellor (1736-1757) came to be recognised as an estate in land capable of being disposed of, settled or devised like any other such species of property : see R.W. Turner : The Equity of Redemption (1931), at 64ff. Professor E.I. Sykes regrets the use of the expression "equity of redemption" to describe both the personal right to redeem as well as the mortgagor's equitable estate or -- 6 of 44 -- 3 interest in the land : see The Law of Securities. 4th ed., at 52; but that is how the matter stands. Once it is conceded that a mortgagor can transfer or assign his equity of redemption, it follows that an assignee acquires the equitable estate in the land so transferred. Hence to that extent he acquires the mortgagor's right to redeem. A lessee or tenant is by virtue of his lease or tenancy an assignee of equity of redemption. That, in consequence, he has a right to redeem seems first to have been acknowledged by Lord Mansfield in Keech v. Hall . (1778) 1 Doug. 21; 99 E.R. 17. Speaking of the case of a lease by the mortgagor of the mortgaged property, his Lordship said in effect that one would expect the mortgagee after default to recognise the lease if it were advantageous; it would in such circumstances be in his interest to do so. If a continuation of the lease was not advantageous, he said, "the tenant may put himself in the place of the mortgagor, and redeem himself, or get a friend to do it". In Pearce v. Morris (1869) L.R. 5 Ch.App. 227, at 229, 230, a right to redeem was said to subsist in any person interested in the equity of redemption; and in Tarn v. Turner (1888) 29 Ch.D. 456, the Court of Appeal in England, affirming Kekewich J., held that a lessee from the mortgagor was entitled to redeem. In that instance there were evidently some provisions in the lease that made it unattractive to the mortgagee to preserve the lease given by the mortgagor. For reasons like those identified by Lord Mansfield in Keech v. Hall and by Kekewich J. in Tarn v Turner (1888) 39 Ch.D. 456, 461, cases in which a lessee's right to redeem has been considered have been few. It was not until the decision in -- 7 of 44 -- 4 Tarn v. Turner that more than a purely theoretical justification was offered for allowing the lessee a right of redemption. The reason, as Cotton L.J. suggested in the latter case (39 Ch.D. 456, at 464-465), is that redemption is the only way the lessee has of relieving himself from the effect of the mortgage. "Here is a man", says his Lordship, "who has a certain interest in the equity of redemption, and he may be prejudiced by the action of the mortgagee insisting on his rights as legal owner of property". Being entitled to possession in law, the mortgagee is entitled to evict the lessee; and in order to protect him against that prejudice, the lessee is permitted to redeem if he wishes. Lopes L.J. agreed. "The position of the plaintiff", he said (39 Ch.D. 456, 470), "is this; that unless he is allowed to redeem he may be evicted by the defendant" . In those circumstances, being the assignee, if of only part of the estate of the mortgagor, the lessee was held entitled to redeem. With these matters in mind I turn to the facts of the present case. In the Special Case they are stated somewhat briefly. The second respondent Mr Edwards and his late wife owned registered land in the vicinity of Cairns. On 21 January 1988 they as "vendor" contracted in writing to transfer it to the first respondent Divine Holdings Pty. Ltd., to which I will refer as the "developer". The contract contained a covenant by the developer as purchaser to subdivide and develop the land, so as to create group title lots of which two were to be transferred to Mr and Mrs Edwards. In the meantime, according to the contract, "from the time of completion until the date of delivery of the conveyance of the said lots to the vendor or until the day -- 8 of 44 -- 5 being three (3) years from the date of completion of this contract (whichever is the later)...", Mr and Mrs Edwards as vendor were to be entitled to occupy the house on the land and its curtilage; to let it; and to receive the rents from it. Settlement of the contract was effected on 25 January 1988; but the developer failed to develop the land as promised; and on 13 December 1988, there was a declaration in the Supreme Court for specific performance of the contract. It has not been carried out, the developer having become insolvent. Unfortunately for Mr Edwards, the developer had on 21 January 1988 executed a bill of mortgage in favour of the applicant Bank. It was registered on 18 February 1988, which was also the occasion on which the transfer from Edwards to the developer was registered. No doubt registration of the mortgage followed immediately after registration of the transfer. The sequel to this unfortunate tale can be imagined. The developer has defaulted under the registered mortgage. On 20 September 1990 the applicant Bank served upon it notice under s.84(1)(a) of the Property Law Act . The default has not been rectified. There is nothing in the material to suggest that, if offered the opportunity, Mr Edwards would redeem the mortgage; but, as I have said, he claims by virtue of s.84(1)(a) and the definition of "mortgagor" ,in s.4(1) to be entitled to do so; and, in consequence, to be a "mortgagor" whom the mortgagee was bound under s.84(1)(a) to serve with notice of default. There is no reason for doubting that, had the subject land been under the old system, Mr Edwards as lessee from the developer as mortgagor would on the authority of Tarn v . Turner -- 9 of 44 -- 6 have been a, person entitled to redeem the mortgage. For the applicant Bank it was submitted, that it nevertheless did not follow that the Bank was bound to give him notice of default pursuant to s.84(1 )(c). The definition of "mortgagor" in s.4(1) as including a person entitled to redeem is, by the terms of that subsection, made subject to a "contrary intention" appearing from the legislation. It would, it was submitted, be remarkable if the legislative intention was to require the statutory form of notice of default to be given to persons whose interests were traditionally not consulted before sale, and who would often be difficult to identify. The definition in s.4(1), or its equivalent in s.2(vi) of the Conveyancing Act 1881 (Eng.), has not been construed as applying to other statutory contexts in the legislation concerning mortgages : see, for example, Re Errington [1894] 1 Q.B. 11 and Ramsay v. Brown [1922] G.L.R. 71, involving the analogue s.78(1) of the Property Law Act in Queensland; see also Brunker v. Perpetual Trustee Co. Ltd. (1937) 57 C.L.R. 555, 604, with reference to the equivalent of s.80(1) of the Queensland Act. Historically, the submission continued, a power of sale on default was something that, until the enactment of the Conveyancing Act 1881 (Eng.), was conferred on the mortgagee, if at all, by the instrument of mortgage and not by statute. In that context, equity considered the power as oppressive if it was exercisable without notice : see Miller v. Cook (1870) L.R. 10 Eq. 641 , 647; and it was common for mortgages to provide for notice of default before sale to be given to the mortgagor and assigns. In that event, failure to give such notice to an -- 10 of 44 -- 7 O o o assignee, such as a second mortgagee, meant that the power was not properly exercised; for, said Fry J. in Hoole v. Smith (1881) 17 Ch.D. 434, 436, "the object of the proviso was that any assign might be at liberty to intervene and pay off the mortgage, and no one could be more interested than the second mortgagee in this right of intervention" . In all of this I find very little to support the contention that, in relation to the default notice requirement of s.84(1)(a), a contrary intention appears so as to displace the application of the definition of "mortgagor" in s.4(1), and thus exclude the need to give such notice to a person, like a lessee, entitled to redeem the mortgage. The matter does not, however, rest there. This is not a case of land under the old system title but of land registered under the Torrens system. Mortgages of such land do not take the form of outright transfer with proviso for reconveyance, but of a registered statutory charge in favour of the mortgagee leaving title to the land in the name of the mortgagor as registered proprietor : Real Property Act 1861-1989, s.60. In consequence, it has been much debated whether it is proper to speak in the case of such a mortgage of an "equity of redemption" . In company with the corresponding provisions of Torrens statutes in other States, s.60 continues to refer to the power of mortgagee of land under that Act "by suit or other proceedings in equity to foreclose the right of the mortgagor to redeem the. . .mortgaged lands". In Queensland, where proceedings for foreclosure remain a curial matter (see Stevens v. Hoberg (No. 2) [1952] Q.W.N. 13), there is perhaps less reason for refusing to give full weight to these words than in States -- 11 of 44 -- 8 where foreclosure is a process now confided to the Registrar of Titles. Decisions where the question has been considered whether a Torrens system registered mortgagee has an "equity of redemption" are numerous. They include Greig v. Watson (1881) 7 V.L.R. (Eq.) 78; Browne v. Cranfield (1925) 25 S.R. (N.S.W.) 443; Perry v. Rolfe [1948] V.L.R. 297; Re C.L. Forrest Trust [1953] V.L.R. 246; Van Den Bosch v. Australian Provincial Assurance Association Ltd. (1968) 88 W.N. (Pt.1) (N.S.W.) 357; Addison v. Billion [1983] 1 N.S.W.L.R. ,586; and ex parte Prackert [1987] 2 Qd.R. 560. Something in the nature of an "equity of redemption", or the right to take proceedings to redeem, is recognised in most, if not all, of these decisions. For my part I cannot see why such proceedings should be denied that character. Although the mortgagor retains title to the land at law, and so has more than an equitable estate, there is no reason for refusing to recognise at least the first of the two aspects of the equity of redemption referred to by Professor Sykes. The Torrens system mortgagor has the personal right to redeem, even if it is understood as meaning no more than a right to have the mortgage cleared from his registered title once it is satisfied. Whether in consequence all principles and doctrines identified with the equity of redemption in its classical form are to be carried over to the Torrens system mortgagor and his land is quite another matter. Because of differences between mortgages under the two systems, the application of equitable principles to the statutory form of Torrens mortgage can proceed only by what Professor H.L. Hart has described as "analogy and -- 12 of 44 -- 9 P o u u shift of meaning". Some rules may be apt, suitable, and capable of being applied; others are not. It is necessary to recall that the question we are here investigating is whether a lessee or tenant of a mortgagor of registered land is entitled to redeem the mortgage. It may perhaps be doubted whether such a lessee or tenant can fairly be described as an assignee of the equity of redemption; that is, as an assignee of the equitable estate in land that a mortgagor under the old system is considered as retaining despite the conveyance to the mortgagee. But even if the description is not inapposite under the Torrens system, there is no compelling reason for extending the protection of equity to such a lessee. In Tarn v. Turner the Court of Appeal thought it necessary to do so because the tenant would otherwise be evicted by the mortgagee, and there was no means of protecting his interest in the land except by recognising him as having the right to redeem. The legal regime prevailing under the Torrens system is in important respects quite different from that governing land under the old system. The protection afforded to or withheld from lessees or tenants of registered land proceeds on principles and statutory provisions that in some instances bear little resemblance to those of the system that it displaced in Queensland. , A brief conspectus of the system is useful. To begin with, we should consider leases granted by the mortgagor after entering into the mortgage. As to them, s.52 of the Real Property Act expressly provides that no lease of registered land executed after registration of a bill of mortgage shall be "valid and -- 13 of 44 -- 10 binding against the mortgagee" unless the mortgagee consented to the lease before its registration. As regards leases granted before registration Of the mortgage, the mortgagee of land under the Torrens system is bound by the lease if it is registered, but (subject to an exception in favour of short tenancies) not otherwise. That follows from the two statutory requirements that, to be effective at law, a lease for a term exceeding three years must be registered : Hill v. Cox (1882) 1 Q.L.J. 78; and that a registered mortgagee holds his estate or interest in the land subject to all such estates or interests as are registered, but free from all unregistered estates or interests : Real Property Act 1861 . s.44; cf. Tessmann v. Costello [1987] 1 Qd.R. 283. It is true that even a lease for a term exceeding three years (a long lease) may prevail at law against the registered proprietor who granted it : see Josephson v. Mason (1912) 12S.R. (N.S.W.) 249; but that is because it counts as a personal "equity" created by and enforceable against the registered proprietor whose conduct gave rise to it. As regards a registered mortgagee like the applicant, which had no part in or responsibility for bringing the lease into existence, the general rule prevails. Hence, under s.44 the registered mortgagee takes free of the interest of the unregistered lessee : cf. Tessmann v . Costello [1987] 1 Qd.R. 283. Unregistered short leases or tenancies not exceeding three years stand on a different plane from both registered and unregistered long leases. That is because s.11 of the Real Property Act of 1877-1988 specifically declares that, notwithstanding s.44 of the Act of 1861, the estate of a -- 14 of 44 -- 11 registered proprietor is not to be paramount or to have priority over a tenancy from year to year or for any term not exceeding three years created before or after the issue of the certificate of title of that registered proprietor. In Friedman v. Barrett. ex parte Friedman [1962] Qd.R. 498 this was held to protect only the short tenancy itself and not an associated equity such as an option to renew. By parity of reasoning, the right, estate or interest, recognised only in equity, of such a tenant to redeem a registered mortgage granted by the lessor would not be protected or prevail against the mortgagee by virtue of s.11 of the Act of 1877. It is, however, probably not necessary to decide this point. The duration of the lease created under the written contract dated 21 January 1988 was until the date of the conveyance of the two lots to the vendor, or until three years from the date of completion of the contract, "whichever is the later". The better view is, I think, that it is therefore not a tenancy "for any term not exceeding three years" within the protection of s.11 of the At of 1877. Although an unregistered long lease, it is no doubt enforceable against the developer as registered transferee and proprietor on the principle in Josephson v. Mason : but, because of s.44 of the Act of 1861, the applicant Bank as registered mortgagee took and holds its interest free from both the equitable estate or interest created by the agreement for lease with the developer as well as other incidents of that estate or interest including any equity of redemption that would be recognised under the general law; -- 15 of 44 -- 12 The result therefore is, in my opinion, that the second respondent Edwards did not, by virtue of his lease under the contract of 21 January 1988, acquire an equity of redemption enforceable and exercisable in this case against the applicant Bank as registered mortgagee. To revert now to the definition of "mortgagor" in s.4(1) of the Property Law Act he is, although deriving title under the original mortgagor, not "entitled to redeem [the] mortgage, according to his estate, interest or right in the mortgaged property". His estate or interest as lessee in equity, although enforceable against the developer as mortgagor, does not prevail against the applicant Bank as registered mortgagee, and so gives him against that party no enforceable estate, interest or right in registered land corresponding under the general law to the estate described as an equity of redemption. That being so, Mr Edwards is not a "mortgagor" within the meaning of s.84(1)(a) who was required to be served with notice of default under that section. Although what I have said is I think sufficient to dispose of this appeal, an attempt was also made by the second respondent to present his claim before us on a broader basis. This was that, qua the two prospective group title lots that were intended to emerge from the development project - or perhaps as regards the whole of, the land - Mr Edwards was beneficiary under an express or resulting trust and as such entitled to an equitable interest in the subject land. So much may readily be conceded in his favour, whether his equitable interest is seen as arising for reasons like those accepted in Timber Top Realty Ptv. Ltd, v. Mullens [1974] V.R. 312; or by virtue of the express -- 16 of 44 -- 13 provisions of the unit trust that was built into the transaction at its outset; or of the claim that Edwards is entitled to an equitable charge in the nature of a purchaser's lien over or in respect of the land (cf. ex parte Lord [1985] 2 Qd.R. 198). Whatever the form in which the right may be cast or characterised, it remains in the end an equitable estate or interest, and hence one that, in the absence of fraud or circumstances giving rise to a "personal equity" against the applicant Bank, cannot prevail against its registered interest as mortgagee of the land. For this purpose, notice or even knowledge of the equitable interest will not, without more, suffice : see Friedman v. Barrett , ex parte Friedman [1962] Qd.R. 498, 503-504, 511-513. Some assistance was sought to be derived from the decisions in Corozo Ptv. Ltd, v. Westpac Banking Corporation (No. 2) T19881 2 Qd.R. 481 and ex parte Australian Co-operative Development Society Limited [1978] Qd.R. 395, both of which were said to represent instances in which effect was given to unregistered equitable claims or interests as against the title of a registered mortgagee. In my opinion the second of these two decisions does not bear out the principle contended for. The registered first mortgagee in that case was left with surplus proceeds of sale of the mortgaged property after its own mortgage debt had been discharged. Hoare J. held that the statutory trust imposed upon that surplus by s.88(1)(c) of the Property Law Act extended to unregistered as well as registered subsequent mortgages and encumbrances over registered land. Any other decision would have been astonishing. Ascribing the character -- 17 of 44 -- 14 of trustee to a satisfied mortgagee is certainly no new thing, nor is it one that was recognised for the first time by s.88(1) or other comparable legislation : see R.W. Turner : The Equity of Redemption , at 167; Cholmondelev v. Clinton (1820) 2 J.& W. 1, 185; 37 E.R. 526, 594. Whether or not expressed in statutory form, as in s.88(1 ) it is, a trust attaches to surplus proceeds of sale remaining in the hands of a mortgagee after satisfying his claims; and does so even where the subject matter and the mortgages are regulated by a system requiring registration, like that of the Merchant Shipping Acts : see The Benwell Tower (1895) 72 L.T. 664. The explanation lies in the legal position of the mortgagee once his claim is satisfied. He then becomes "a mere indifferent stakeholder. The real contest lies between the competitors for the estate, which...must continue subject to the mortgage till paid off; when paid off, the mortgage title ends, and then and not before, the implied trust, to surrender the estate to the person entitled to demand it, begins. If there is a question who that person is, it must be contested not by the mortgagee, but by the parties concerned, and between them the title must be decided in the same manner and by the same principles. . .as it would have been had no mortgage existed" : per Sir Thomas Plumer M.R. in Cholmondelev v. Clinton , above. Competing claims to money remaining after satisfying the mortgage debt are ordinarily disposed of under 0.75 of The Rules of the Supreme Court after paying the money into court pursuant to s.102 of the Trusts Act 1973. The contest that follows, in which as trustee the former mortgagee has no part, raises no question of title or priority to an interest in registered land -- 18 of 44 -- 15 by virtue of the mortgage, which at this stage will have been removed or be awaiting removal from the register. Whether questions arise between competitors for the fund in court will depend upon the respective claims of those parties and the evidence they adduce in support of them. The point is that in deciding ex parte Australian Co-operative Development Society Limited [1978] Qd.R. 395, Hoare J. in no way gave effect to an unregistered equitable interest in land at the expense of the registered estate or interest of a registered mortgagee, or of the exercise of powers deriving from such an estate or interest. The same perhaps cannot be said of the decision in Corozo Ptv. Ltd, v. Westpac Banking Corporation (No. 2) [1988] 2 Qd.R. 481 , in which it was held that an unregistered transferee of registered land that was subject to a registered mortgage was "entitled to redeem", and hence empowered under s.94(1) of the Property Law Act to require the mortgagee to transfer the mortgage to a third person as directed. In reaching this conclusion, de Jersey J., whose judgment was concurred in by the other two members of this Court, emphasised ([1988] 2 Qd.R. 481 , 482) that s.94 of the Act "does not in terms refer only to registered mortgagors; the inclusive definition of 'mortgagor' in s.77(2)(c) does not import such a limitation into s.94; and the terms of the definition of 'mortgagor' in s.4 of the Act are plainly apt to include those whose interests are unregistered". With respect, it may be that to some extent this overlooks the provisions of s.5(1)(b) of the Property Law Act . By s .77(1)(b)( i ) the provisions of Part VII - Mortgages, in which -- 19 of 44 -- s.94 appears, are to apply to "land and any mortgage of land which is subject to the provisions of" the Real Property Acts, as defined. The effect is to include such land as a subject matter of the provisions of Part VII, doing so in such a way as to apply those provisions to both registered land and mortgages of registered land. While, however, s.77(1) (b) ( i ) identifies such land and mortgages of it as being within the scope of Part VII, the section does not define the extent to which, or the manner in which, the provisions of Part VII are to apply to that land. That is a function left to s.5(1)(b) of the Property Law Act, which, while stating generally that the Act applies to land under the provisions of Real Property Acts (that is, registered land), then proceeds to qualify its application to such land by adding explicitly "but subject to the provisions of those Acts". The cumulative effect, as I see it, of ss .77(1)(b )( i) and 5(1 )(b) is that while the provisions of Part VII of the Property Law Act apply to mortgages of registered land, they do so subject to the provisions of the Real Property Acts , and only to the extent allowed by those provisions. In the case of an unregistered transferee of mortgaged land, s.44 of those Acts provides that a proprietor holds his registered estate or interest free of estates or interests that are not registered. In consequence it seems to me to be difficult to maintain that such an unregistered transferee is entitled to insist upon his equitable estate or interest being recognised so as to require a registered mortgagee to submit to his own registered interest being extinguished or under s.94 transferred to the holder of that unregistered interest. The case exemplified by Corozo is -- 20 of 44 -- 17 one in which, unlike ex parte Australian Co-operative Development Society Limited , the registered estate or interest of a mortgagee comes into competition with an entirely unregistered and at best equitable estate or interest of another. Under those circumstances one would expect that the registered interest would prevail under the provisions of s.44 of the Act of 1861. I am aware that in Van Den Bosch v. Australian Provincial Assurance Association Ltd. (1968) 88 W.N. (Pt.1) (N.S.W.) 357, 362-363, Else-Mitchell J. recognised a right to redeem as capable of subsisting in an unregistered transferee taking by purchase from the devisee of a registered mortgagor. See also Addison v. Billion [19831 1 N.S.W.L.R. 586. The decisions turned on the presence in s. 62(2) of the New South Wales Real Property Act 1900 of a provision expressly acknowledging such a right on the part of the mortgagor "or of any person claiming through him". There is no precise statutory equivalent in Queensland sufficient to override the provisions of s.44, or, indeed, of s.43 of the Real Property Act of 1861 making registration a prerequisite to the passing of an estate. Of course, estates and interests in registered land may nevertheless pass in equity; but in doing so they in general bind only registered proprietors whose conduct gave rise to them. It may be added that the provision in the definitions in s.3 of the 1861 Act which says that describing a person as mortgagor is deemed to include his assigns seems to me to be directed primarily to the interpretation of that term in registered instruments; it is not definitive of a case like this, in which the instrument of lease from the mortgagor has never been registered. -- 21 of 44 -- 18 In Corozo Ptv. Ltd, v. Westpac Banking Corporation (No. 2) the Court was evidently not referred to s.5(1)(b) of the Property Law Act. No mention of it or of its effect appears in the reasons for judgment in that case. For this among other reasons, I would not be willing to extend the principle of that decision to the present case, where, as I have suggested, the equitable rights of an unregistered lessee for more than three years, such as the second respondent Mr Edwards are, by reason of s.44 of the Real Property Act of 1861, unenforceable against the registered mortgagee. It follows that as against the applicant Bank he does not have the right to redeem, so as to bring him within s.84(1)(a) of the Property Law Act as a "mortgagor" on whom notice was required to be served under that provision. In my opinion the question for the opinion of the Court, which is whether the applicant Bank is entitled to exercise its power of sale without first giving to the second respondent a notice pursuant to s.84 of the Act, should be answered "Yes". The second respondent Edwards should be ordered to pay the applicant's costs of and incidental to this Special Case. -- 22 of 44 -- IN THE SUPREME COURT OF QUEENSLAND FULL COURT O.S. No- 1364 of 1990 Before the Full Court Mr. Justice McPherson S.P.J. Mr. Justice Ryan Mr. Justice Dowsett IN THE MATTER of THE PROPERTY LAW ACT AS AMENDED - and- IN THE MATTER of AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (Applicant) - and - IN THE MATTER of DIVINE HOLDINGS PTY . LTD . (First Respondent) - and - IN THE MATTER of TOM EDWARDS (Second Respondent) - and - IN THE MATTER of BILL OF MORTGAGE NO. T330535T JUDGMENT - RYAN J. Delivered the Eighth day of August, 1991. Counsel: Mr. W. Sofronoff Q.C. with Miss A. Philippides for Appellant Mr. D. Fraser for Respondent Solicitors: Walsh Halligan Douglas T/A for MacDonnells for Appellant Morrow & Co. for Second Respondent Hearing Dates: 14-15 March 1991. -- 23 of 44 -- -- 24 of 44 -- IN THE SUPREME COURT OF QUEENSLAND FULL COURT O.S. No. 1364 of 1990 IN THE MATTER of THE PROPERTY LAW ACT AS AMENDED - and- IN THE MATTER of AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (Applicant) - and - IN THE MATTER of DIVINE HOLDINGS PTY . LTD . (First Respondent) - and - IN THE MATTER of TOM EDWARDS (Second Respondent) - and - IN THE MATTER of BILL OF MORTGAGE NO. T330535T JUDGMENT - RYAN J. Delivered the Eighth day of August, 1991. The question of law on which the opinion of the Court is sought is whether the applicant bank is entitled to exercise a power of sale as mortgagee without first having given a notice pursuant to s. 84(1) of the Property Law Act to the second respondent. The second respondent and his wife were, prior to 25 January 1988, the registered proprietors of certain land. By a contract made on 21 January 1988, they agreed as vendors to transfer the land to the first respondent as purchaser. The contract contained special conditions. So far as is relevant, they are as follows : -- 25 of 44 -- 2 (a) The purchaser covenants that it will after completion make all necessary applications to any local or public authorities to cause the land to be developed into a group title subdivision under the Building Units and Group Titles Act and to complete the same within three years from the date of completion and to cause inter alia two new group title lots (identified as lots A and B) ... The purchaser covenants to cause a separate certificate of title to be issued for each of the said lots and to convey the same to the vendor or to whomsoever the vendor directs. The purchaser further covenants to build a properly constructed road in accordance with the local government requirements in the group title subdivision to permit access to the two proposed group title lots. (b) The vendor shall from time of completion until the date of delivery of the conveyance of the said lots to the vendor or until the day being three years from the date of completion of this contract (whichever is the later) be entitled to occupy the house (and its immediate curtilage) situated on lot B free of rent and shall if he so desires be at liberty to let the house and receive the rents therefrom (subject to the prior approval in writing of the purchaser) . Settlement of the contract was effected on 25 January 1988, and the first respondent became registered proprietor of the land on 18 February 1988. The first respondent did not make the necessary applications required by the special condition. On 13 December 1990, ) ;) -- 26 of 44 -- 3 de Jersey J. declared that the contract was one which ought to be specifically performed and carried into execution. The land has not been subdivided, and the first respondent has not transferred the lots to the second respondent or as directed by him. It is then stated in the Special Case: "The second respondent is now and has continuously since settlement of the contract been in possession of a house on part of the land as tenant from the first respondent ." The case was argued before us on the basis that the second respondent was the tenant of the first respondent pursuant to the contract made on 21 January 1988; and that he had been in occupation of the house since settlement on 25 January 1988. The duration of that lease was from the time of completion until the date of delivery of the conveyance of the two lots to the second respondent or until three years from the date of completion of the contract (whichever was the later). The first respondent granted to the applicant a charge over the land by bill of mortgage bearing date 21 January 1988. The mortgage was registered on 18 February 1988. The mortgage confers a power to sell the land upon certain terms . The first respondent committed a default under the mortgage prior to 20 September 1990. On or about that day the applicant served on the first respondent a notice in the form required by s. 84(1) (a) of the Property Law Act 1974-1986. The default referred to in the notice was not remedied at any material time. The applicant has not served any notice pursuant to s. 84(1) of the Property Law Act on the second respondent and disputes its obligation to do so. -- 27 of 44 -- 4 Section 84(1) (a) provides inter alia that a mortgagee shall not exercise the power of sale conferred by this Act or otherwise unless and until notice requiring payment of the amount the failure to pay which constituted the default under such instrument of mortgage has been served on the mortgagor. Section 4 (1) provides that in the Act unless the contrary intention appears, "mortgagor" includes any person from time to time deriving title to the equity of redemption under the original mortgagor, or entitled to redeem a mortgage according to his estate, interest or right in the mortgaged property. Two questions arise for consideration. One is whether the second respondent comes within the definition of "mortgagor" as being a person entitled to redeem the mortgage according to his estate, interest or right in the mortgaged property. The other is whether, if he does come within that definition, a contrary intention appears in the Act. Any person interested in the equity of redemption is entitled to redeem: Pearce v. Morris (1869) 5 Ch.App. 227 at 229. That a tenant has a right to redeem is established by Tarn v. Turner (1889) 39 Ch.D. 456. The headnote to that case states that prior to the Conveyancing Act . 1881, a mortgagor, without the consent of his mortgagee, contracted in writing to grant T a lease of the mortgaged premises for a term of years . T entered into possession under the contract, and subsequently, on notice from the mortgagee, paid rent to him. The mortgagee having refused to concur in the lease to T, held (affirming the judgment of Kekewich J) that T was entitled to redeem the mortgage. Kekewich J stated that it had always been held since -- 28 of 44 -- 5 the doctrine of redemption had been worked out in Courts of Equity that any person entitled to an interest carved out of the fee simple was entitled to come in and redeem, subject to any other equities paramount which affected the estate. Cotton J. said that the interest which T got from the mortgagor made him to a certain extent an assignee of the equity of redemption, and therefor entitled to all the rights which appertained to the owner for the time being, however small his interest in the equity of redemption might be with regard to duration of time. The position in that case, as explained in the judgment of Cotton LJ, was that T had got by demise an interest in the equity of redemption. The mortgagee was not bound by any contract to grant him a lease and could insist on his rights as legal owner of the property to turn him out. But Courts of Equity would direct the mortgagee to divest himself of the legal estate and not to insist on such legal rights as he had. The only way for the tenant to relieve himself from the effect of the mortgage was to redeem, and if he wished to do so he could. That case was decided under the general law. If the same facts had arisen in respect of land under the Real Property Acts , it would be necessary to have regard to s. 52 of the Real Property Acts 1861, which contains a proviso that no lease of mortgaged or, encumbered land executed subsequently to the registration of any bill of mortgage or bill of encumbrance shall be valid and binding against the mortgagee or encumbrance unless such mortgagee or encumbrance shall have consented to such lease prior to the same being registered. But the crucial question which requires consideration is whether it can be said that the -- 29 of 44 -- 6 second respondent in this case was entitled to redeem the mortgage. The peculiarity of phraseology in referring in the closing sentence of s. 60 of the Real Property Act of 1861, to the words "foreclose" and "redeem" was commented on in an early decision of this Court, Trust and Agency Co. v. Markwell (No. 2) (1874) 4 QSCR 50 at p. 53, by Cockle C.J. It has been commented upon in many subsequent judgments. In Anderson v. Liddel (1968) 117 CLR 36 at 48, Kitto J. described a mortgagor's interest as a legal interest subject to a charge and therefore as not being, in a strict sense, an equity of redemption or any other form of equitable interest. However, in Re Forrest Trust [1953] VLR 246, it was pointed out in the joint judgment of Gavan Duffy and Dean JJ that it would be wrong to think that the word "redemption" was inapplicable to a mortgage under the Real Property Act . It was true that in the case of a mortgage under the general law, the question of redemption only arose where the mortgagor had already lost by forfeiture his right at common law to reconveyance of the property mortgage, and the substantive relief given by a court of equity in a suit for redemption was an order for reconveyance on the settlement of the outstanding accounts; and that was not the position in the case of a mortgage under the Real Property Acts . But the right to have property freed from a charge on payment of the moneys charged on it could properly be described as a right to redeem, and that described the right of a mortgagor under a Real Property Act mortgage. Herring CJ expressed the same view. He stated (at p 256):- "When the Legislature introduced the statutory mortgage under the Transfer of Land Act ... it -- 30 of 44 -- 7 o o o u introduced a registered charge to take effect as a security, which conferred on the creditor merely a group of powers to secure the money lent, such as to sell, to take possession etc., whilst leaving the owner what he is meant to be, owner subject to his fulfilling his obligations. The group of powers thus conferred included the power of sale, that had become an almost universal feature of mortgages under the general law at the time the Act was first introduced, and the powers and rights, which a mortgagee in such a mortgage usually acquired by reason of the conveyance of the mortgagor ' s land to him . . . The nature of a mortgage under the Act being what I have described, it necessarily followed that there was inherent in it a right on the part of the mortgagor, upon his fulfilling his obligations under the mortgage, to have the land freed from he mortgage and from all the powers and rights of the mortgagee, which formed a substantial curtailment of the mortgagor's dominion over the land. This is a right to redeem in the sense in which equity understood that term." The question is therefore whether the second respondent had the right to have the property freed from the charge. The relevant right if it exists must be a right as against the mortgagee. Section 44 of the Real Property Act 1861 provides that, except in the case of fraud and with certain other exceptions which are not presently relevant, the registered proprietor of land or of any estate or interest in land shall hold the land free from all estates or interests not notified by entry or memorial on the folium of the register book. There is nothing in the case stated to suggest that the lease from the first respondent to the second respondent was registered, or that it was in registrable form. The lease is not one for a term not exceeding three years; it is for a term which may exceed three years. Accordingly as an unregistered lease for a term which may exceed three years it is void at law: Hill v. Cox (1882) 1 QLJ 78. It may be that having entered before the registration of the mortgage, the second respondent holds as a tenant from year to -- 31 of 44 -- 8 year, and that as such, his tenancy will be protected under s. 11 of the Real Property Act of 1877. But s. 11 protects only the tenancy itself, and not the tenancy with all its incidents: Friedman v. Barrett [1962] Qd R 498; and in my view protection of the tenancy does not require, or involve, according to the tenant the right to redeem the mortgage. It may also be that, under the doctrine of Walsh v. Lonsdale (1882) 21 Ch D 9, equity would compel execution of the lease in specific performance of the agreement to lease. The result would be as stated by Knox CJ and Starke J in York House Ptv Ltd v. FCT (1930) 43 CLR 427 at p. 436: "If the agreement can be specifically enforced, the landlord has the same rights as if a lease had been granted, and the tenant is protected in the same way as if a lease had been granted. There is thus the equivalent of a lease, and the tenant is the lessee in equity" See also National Trustees and Executors Co. v. Bovd (1926) 39 C.L.R. 72. But to protect the tenant in the same way as if a lease had been granted would not give him any rights as an unregistered lessee which would be enforceable against a registered mortgagee. It was submitted for the second respondent that he had a proprietary interest in the property on several other grounds. First, it was said that a beneficiary holding his interest as a unit holder in a unit trust has a proprietary interest in the property: Charles v FCT 1954) 90 CLR 598 at 609; Cosha and Duppe Property Ptv Ltd v. Duppe (1986) VR 90 at 96; Commissioner of Stamps v. Softcorp Holdings Ptv Ltd (1987) 465 ASR 382 at 386. In the stated case, it is said that the first respondent has at all material times since 25 January 1988 held no interest in the O O o -- 32 of 44 -- 9 land as trustee pursuant to the terms of a unit trust deed; that it holds the trust property upon trust absolutely for the unit holders; that the beneficial interest in the trust property is divided into 700,000 units, each conferring an equal interest in the trust property; and that the second respondent holds 200,000 units in the unit trust. Secondly, it was said that the second respondent was entitled to a purchaser's lien, arising by operation of law: Ex parte Lord (1985) 2 Qd R 198. Alternatively, it was said, the second respondent had a vendor's lien, or that he was entitled to an interest as purchaser, his interest in the land being commensurate with his ability to obtain a decree of specific performance: Stern v. McArthur (1987-1988) 165 CLR 489 at 522. All of these claims amount to assertions that the second respondent had an equitable interest in the land. But, even if it is accepted that he did, this would not suffice to overcome the crucial difficulty which confronts the second respondent in this case, namely that he must establish that he has a right which is enforceable against the registered mortgagee. If he is unable to do this, I cannot see how he can make out a claim that he is entitled to redeem the mortgage, and so that he is a mortgagor on whom notice must be served pursuant to s. 84(1) (a) of the Property Law Act . The final submission on behalf of the second respondent was that notice to him was required to be given under the instrument of mortgage by virtue of the definition of mortgagor. The instrument of mortgage contains a clause that the expression "the mortgagor" used therein includes if the mortgage is given by one -- 33 of 44 -- 10 person that person his executors administrators and transferees, and if the mortgage is given by more persons then those persons jointly and every two or more of them jointly and each of them severally and their respective executors administrators and transferees and if a company is a mortgagor includes that company its successors and transferees. In Hoole v. Smith (1881) 17 Ch. 434 to which we are referred, a mortgage contained a power of sale with a proviso that the mortgagee was not to execute the power without giving notice to the mortgagor or his assigns. The mortgagor assigned his equity of redemption by way of mortgage to a second mortgagee. It was held that the second mortgagee was entitled to receive notice of the first mortgagee's intention to exercise his power of sale. Fry J. stated that, as the word "assigns" was used in the power of sale as an alternative for the mortgagor, it was impossible to hold that it was sufficient for the mortgagee to serve the mortgagor alone after he had assigned his equity of redemption. The object of the proviso was that any assign might be at liberty to intervene and pay off the mortgage, and no one could be more interested than the second mortgagee in this right of intervention. There is nothing in the definition of "mortgagor" in the instrument of mortgage under consideration in this case which can be taken as requiring the mortgagee to give notice to the second respondent . Nothing that I have written affirms that the definition of "mortgagor" in s. 4 of the Property Law Act is inapplicable to that expression where it is used in s. 84. It is unnecessary to -- 34 of 44 -- consider that question. It is enough for the purpose of deciding this case to say that an unregistered tenant of land is not entitled to redeem a registered mortgage, and is not a mortgagor to whom notice must be given under s. 84(1) (a) of the Property Law Act . I would answer the question of law, namely whether the applicant is entitled to exercise its power of sale without first having given a notice pursuant to s. 84 of the Property Law Act to the second respondent: Yes. I would order the second respondent to pay the applicant's costs of the Special Case to be taxed. -- 35 of 44 -- o o o o -- 36 of 44 -- IN THE SUPREME COURT OF QUEENSLAND FULL COURT O.S. No. 1364 of 1990 Before the Full Court Mr. Justice McPherson S.P.J. Mr. Justice Ryan Mr. Justice Dowsett IN THE MATTER of THE PROPERTY LAW ACT AS AMENDED - and- IN THE MATTER of AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (Applicant) - and - IN THE MATTER of DIVINE HOLDINGS PTY . LTD . (First Respondent) - and - IN THE MATTER of TOM EDWARDS (Second Respondent) - and - IN THE MATTER of BILL OF MORTGAGE NO. T330535T JUDGMENT - DOWSETT J. Delivered the Eighth day of August, 1991 Counsel: Mr. W. Sofronoff Q.C. with Miss A. Philippides for Appellant Mr. D. Fraser for Respondent Solicitors: Walsh Halligan Douglas T/A for MacDonnells for Appellant Morrow & Co. for Second Respondent Hearing Dates: 14-15 March 1991. -- 37 of 44 -- o o o o -- 38 of 44 -- IN THE SUPREME COURT OF QUEENSLAND FULL COURT O.S. No. 1364 of 1990 IN THE MATTER of THE PROPERTY LAW ACT AS AMENDED - and- IN THE MATTER of AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (Applicant) - and - IN THE MATTER of DIVINE HOLDINGS PTY . LTD. (First Respondent) - and - IN THE MATTER of TOM EDWARDS (Second Respondent) - and - IN THE MATTER of BILL OF MORTGAGE NO. T330535T JUDGMENT - DOWSETT J. Delivered the Eighth day of August, 1991. I have read the reasons prepared by McPherson ACJ and Ryan J.. Although I am in general agreement with those reasons, I prefer to dispose of this matter on a slightly different basis. Section 84 of the Property Law Act provides "1 . A mortgagee shall not exercise the power of sale conferred by this Act or otherwise unless and until - (a) default has been made in payment of the principal money or interest or any part thereof secured by the instrument of mortgage, and notice requiring payment of the amount the failure to pay which constituted the default under such instrument of mortgage has been served on the mortgagor ...; or -- 39 of 44 -- 2 (b) default has been made in the observance or fulfilment of some provision contained in the instrument of mortgage or implied by this or any other Act and on the part of the mortgagor, or of some person concurring in making the mortgage, to be observed and performed, and notice requiring the default to be remedied has been served on the mortgagor ..." In s. 4 of the Act , the term "mortgagor" is defined as follows :- "... any person from time to time deriving title to the equity of redemption under the original mortgagor, or entitled to redeem a mortgage, according to his estate, interest, or right in the mortgaged property; f f It may be assumed for present purposes that the second respondent is lessee or tenant from the first respondent of certain land which is mortgaged to the applicant. The applicant has given notice under s. 84, but not to the second respondent. It is asserted that such notice is necessary because equity accords to a lessee from a mortgagor under an old system mortgage an interest in the equity of redemption. It is submitted that a lessee or tenant of mortgaged land under the Real Property Act has a similar interest. Cotton L.J., in Tarn v . Turner (1888) 39 Ch.D. 456 at pp. 464-5, said:- "(The tenant) is a man who has a certain interest in the equity of redemption, and he may be prejudiced by the action of the mortgagee insisting on his rights as legal owner of the property. The answer must be - Yes, that is quite true, but if the tenant likes to redeem he can do so. The interest which he got from the mortgagor makes him to a certain extent an assignee of the equity of redemption, and therefore entitled to all the rights which appertain to the owner for the time being, however small his interest in the equity of redemption may be with regard to duration of time." At p. 468 Fry L.J. said;- -- 40 of 44 -- 3 "Therefore, it appears to me that according to the general law of the land a person who claims as lessee under a mortgagor after the mortgage, and has thereby derived an interest in the equity of redemption has the right to redeem." Lopes L. J. at p. 470 said: "It is clear that the assignee of the mortgagor can redeem; and I can see no difference between the assignee of the whole estate of a mortgagor and an assignee by demise such as the plaintiff is in this case. The plaintiff has an interest in the equity of redemption and can therefore redeem." The second respondent submits that he is similarly interested and therefore entitled to notice pursuant to s. 84. This would be an inconvenient result because a mortgagee will very often have no knowledge of tenancies created after the mortgage unless he has been asked to consent to them. There is little point in giving notice to a lessee. In these days, only rarely would a lessee's interests be served by his redeeming such a mortgage. The argument depends upon the lessee being a person, "deriving title to the equity of redemption under the original mortgagor", or "entitled to redeem ... according to his estate interest or right in the mortgaged property" . It is necessary to consider briefly the nature of the entitlement to redeem in the case of a mortgage under the Real Property Act . A mortgagor of land under the Act retains legal title to the land and is therefore able to deal with it as owner. This includes the right to lease or otherwise create tenancies. In the case of an old system mortgage, the mortgagor does not retain the legal title, which passes to the mortgagee. However in equity, the mortgagor retains an estate in the land which is described as the equity of redemption. To enforce this right, the mortgagor tenders the amount owing under the mortgage and -- 41 of 44 -- 4 receives a re-conveyance. If the mortgagee refuses to re-convey, the mortgagor may take proceedings to enforce his equity. Where the mortgagor is in default, the mortgagee may call on him to pay the amount due. In default of his so doing, the mortgagee may extinguish the equity of redemption by way of a foreclosure action. Traditionally, before ordering foreclosure, a court of equity extends to all parties interested in the equity of redemption an opportunity to redeem. It is in this context that Tarn v . Turner (supra) must be considered. The Real Property Act contemplates foreclosure actions and therefore redemption actions. See s. 60. For this reason, the Court has developed procedures for redemption and foreclosure. Some examples are to be found in the cases cited by McPherson- ACJ. The existence of these procedures should not be taken as indicating that a mortgagor's rights under a Real Property Act mortgage are the same or similar to those under an old system mortgage. Clearly this is not so. In the case of a mortgage of land under the Act, the right to redeem must be derived from such contractual rights as are conferred by the mortgage itself (including any implied terms, e.g. as to payment and discharge) and from the general equitable proposition, "Once a mortgage always a mortgage". In other words, the transaction being one of security for the discharge of an obligation, upon the discharge of that obligation, the security must be released. Recent developments in Australia concerning the extent of the power in equity to relieve against forfeiture have strengthened rather than weakened this general proposition. Redemption and foreclosure in connection with -- 42 of 44 -- 5 mortgages of land under the Act are procedures designed to enforce or terminate this right. Whatever the nature of the right to redeem under the Act , there is no reason in principle why a lessee or tenant should have an interest in it. It is the mortgagor who has dealt with the mortgagee, and it is the mortgagor who is entitled to have the encumbrance on his title removed upon discharge of the secured obligation. Whilst under an old system mortgage, a tenant or lessee may be an assignee of part of the equity of redemption, that cannot be so in the case of a tenant holding from a mortgagor of land under the Real Property Act . A Torrens mortgage is a charge upon the title, the mortgagor retaining the legal title and the entitlement to deal with it. If he chooses to do so, he disposes of part of that title and not part of the equity of redemption. It is not possible to describe a tenant or lessee as, "deriving title to the equity of redemption", or as being, "entitled to redeem a mortgage according to his estate, interest or right in the mortgaged property". The rights of a lessee or tenant vis-a-vis a mortgagee are otherwise dealt with in the Act . There is no compelling reason for giving a broad meaning to s. 84 of the Property Law Act . The reasoning in Tarn v. Turner (supra) does not apply to a lessee or tenant claiming under a Torrens mortgagor. For the reasons which I have given, the definition of / "mortgagor" in s. 4 is inappropriate to extend the meaning of that term as urged by the second respondent, nor does he have any other entitlement to notice under s. 84. I would therefore answer the question posed, "yes". I would order the second respondent to pay the applicant's costs of the-special case. -- 43 of 44 -- o -- 44 of 44 --