CATCHWORDS REAL PROPERTY - Priorities - Land in Norfolk Island subject to two mortgages registered under Convevancing Ordinance 1913 - agreement to qrant second mortgage to plaintiff on discharge of reqistered second mortgage - Notification of Interest lLoddaed - third mortgage registered - property sald to.purchaser with notice of agreement - purchaser financing transaction by mortgage - constructive notice of martaagees - whether plaintiff entitled to priority. - Conveyancing Ordinance 1913 (Norfolk Island) - whether equitable interests in land mav be created. EQUITY - Notice - effect of notice of agreement to grant mortaage - defendants not entitled to ignore claim of plaintiff - Constructive Trust - receipt of monevs on settlement by mortgagee with notice of prior claim - Specific Performance - agreement to grant mortgage "in the form prepared by" solicitors for intending moartaagee - whether concluded agreement - whether sufficiently certain - whether capable of specific performance MORTGAGE - Agreement to grant mortgage - whether creating equitable mortgage - availability of specific performance Conveyancing Ordinance 1913 (Norfolk Island) ss.3. 4, 12 Powers of Attorney Ordinance 1959 (Norfolk Island) s.1l Axelsen v. O'Brien (1949) 80 C.L.R. 219 ref''d ta Godecke v, Kirwan (1973) 129 C.L.R. 620 ref'd to Hermann v. Hodges (1873) 16 Eq, 18 ref'd to Ashton v. Corrigan (1871) 13 Eq. 76 ref'd ta Whitlev v. Challis (1892) 1 Ch. 64 cons Farmer v. Pitt (1902) 1 Ch. 954 ref'd ta MARTINS AGENCIES LIMITED v. COMMONWEALTH TRADING RANK & ORS. No. SC 1 of 1985 Coram: Fox CJ. 13 May 1986 Sydney IN _THE SUPREME COURT OF NORFOLK TSLAND * Denattetinns ' NO. SC 1 of 1985 BETWEEN : MARTINS AGENCIES LIMITED Plaintiff AND: COMMONWEALTH TRADING BANK OF AUSTRALIA First Defendant AND: NOEL JOSEPH MAY and JACQUELINE MAY Second Defendants AND: COMMONWEALTH SAVINGS BANK OF AUSTRALIA Third Defendant AND: NOEL JOSEPH MAY and JACQUELINE MAY Counter Claimants AND: COMMONWEALTH TRADING BANK OF AUSTRALTA First Counter Defendant AND: COMMONWEALTH SAVINGS BANK OF AUSTRALIA Second Counter Defendant IVENS FRANCOTS BUFFETT Third Party MINUTE OF ORDER JUDGE : FOX CI. DATE OF ORDER: 13 MAY 1986 WHERE MADE: SYDNEY THE COUPT ORDERS THAT: 1. I) te A ae esh ees yy ie deanetantaan ¢ Plaintiff file and serve short minutes of order to qive effect to the reasans for judqment on or before 21 Mav 1986.,, Defendants qive notice of any alterations or additions they wish within seven days of short minutes being filed. Documents may be served directly on counsel who appeared at the hearing. Stand over for further hearing in Sydney an 29 May 1986. Direct that hereafter only continuing parties be shawn in documents relating to the proceedings. IN_THE SUPREME COURT OF NORFOLK ISLAND whe aside, ) No. SC 1 of 1985 BETWEEN : MARTINS AGENCIES LIMITED Plaintiff AND: COMMONWEALTH TRADING BANK OF AUSTRALIA First Defendant AND: NOEL JOSEPH MAY and JACQUELINE MAY ' Second Defendants AND: COMMONWEALTH SAVINGS BANK OF AUSTRALIA Third Defendant AND: NOEL JOSEPH MAY and JACQUELINE MAY Counter Claimants AND: COMMONWEALTH TRADING BANK OF AUSTRALIA First Counter Defendant AND: COMMONWEALTH SAVINGS BANK OF AUSTRALIA Second Counter Defendant AND: IVENS FRANCOIS BUFFETT Third Party CORAM: FOX CJ. DATE: 13 MAY 1986 REASONS FOR JUDGMENT FOX Cd. Qn 27 March 1981 certain land in Norfolk Island was sold and conveyed to Mr. and Mrs. N. Conlan ("the Conlans"). At the time of purchase they gave two mortgages over the land, a first mortgage toa the Commonwealth Savings Bank of Australia ("the Savings Bank"), and a second mortgage to Mr. W. Sanders ("Sanders"). Subsequently, on 19 June 1981, the plaintiff, Martins Agencies Limited, signed default judgment in the Supreme Court against Mr. Conlan in the sum of $54,240.92. On 31 August 1981 an agreement was entered into between Martins Agencies Limited and the Conlans. As its effect is at the centre of this case I set it out in full: "AGREEMENT THIS AGREEMENT is made the 3lst day of August 1981 between MARTINS AGENCIES LIMITED of Taylors Road, Norfolk Island (herein called the company) of the one part and NIGEL CONLAN of Selwyn Pine Road, Norfolk Island (herein called the debtor) of the second part and SUZANNE ELIZABETH CONLAN of the same address (herein called Mrs. Conlan) of the third Voie ie ww 5 part AND WHEREAS A. B. c. The company was plaintiff and the debtor was defendant in action no. 3 of 1981 in the Supreme Court of Norfolk Island. The plaintiff entered final judqement in the action against the defendant for $54,240.92 on 19th June, 1981. The parties have discussed a schedule of repayment for the judgement debt. NOW THIS AGREEMENT WITNESSES that in consideration of the forbearance of the company from executing the said judgement the debtor and Mrs. Conlan agree as follows: 1. aT nae ds They agree to give the company security as follows: (a) A second mortgage over Portion 27b8, Norfolk Island in the form prepared by Messrs. McIntyres, Solicitors. The company agrees that if the debtor observes the other terms and conditions of this agreement it will aqree to remain postponed to the position of second mortgagee over that land behind a first mortgage up to but not exceeding $19,000.00 on terms not more prejudicial to its position as second mortgagee than the existing first mortgage, registered no. 7863. (bh) A bill of sale in the form prepared by Messrs.McIntyres, Solicitors over: {i) The items listed in the schedule to the bill of sale dated lst August, 1980 from the debtor and Mrs. Conlan to Norfolk Estates Limited, ranking behind that bill of sale but only until that bill of sale is discharged; and (il) All of the debtor's stock in trade now and from time to time in the future used in his business "Central Service Station", being a first charge on the same. (c) Upon discharge of the existing second mortgage over the property Portion 2112. Norfolk Island. ta grant a second mortgage over that property to the company in the form prepared by Messrs. McIntyres. Solicitors. The company and the debtor agree that the terms of repayment to be reflected in these securities and which the debtor also hereby agrees are: 4, (a) To reduce the iudgement debt by not less than $1,300.00 in every month to lst February, 1982. (b) Not including payments in reduction of the judgement debt made to the date of this agreement. to pay a total of not less than $10,000.00 on or before Ist November, 1981. (c) To pay the balance of the judgement debt on or before lst February, 1982; but if the debtor has paid a total of $20,000.00 by that date (not including any amounts paid in reduction of the debt before the date of this agreement), the company without prejudice to its rights agrees that if the debtor so requires on or before lst February, 1982 it will meet with the debtor during February, 1982 to discuss a mutually satisfactory timetable for the repayment of the balance of the judgement debt. If all other conditions of this aqreement and of the securities have been met then the balance of the principal sum will not be due until lst March, 1982, or, if an alternative timetable of payments is agreed, the debtor's obligations shall be in accordance with that timetable. (ad) The judgment debt shall carry interest at the rate from time to time charged at the Bank of N.S.W., Norfolk Island on commercial overdrafts of the size of the halance of the principal sum from time to time owing, payable from judgement to final repayment, calculated on monthly rests and paid on the Ist day of each month during that period. Forms of securities to be prepared by Messrs. McIntyres will contain such terms and conditions as in that firm's opinion are usual, or desirable for the protection of the company. If the debtor and Mrs. Conlan sell in good faith Portion 27b8 or the business which the debtor conducts on that land, or bath. the company will agree to the sale and the debtor and Mrs. Conlan will pay to the company on settlement all proceeds of the sale remaining after payment out of the first mortgage and of the direct costs and expenses of sale. If the first mortgagee of Portion 27b8 or of the business, or both. exercises any power of sale in the first mortgage, or the said bill of sale, the debtor and Mrs. Conlan agree that all monies which thev may be entitled to receive from that sale will be paid to the company on sale or settlement. 6. Money paid to the company under Clauses 4 or 5 will not be considered to be monies paid under Clause 2 of this agreement but will be separate and additional reduction of the judgement debt. This clause authorises the company to receive all such sums directly from the person who should pay them to the debtor. 7. For so long as the debtor and Mrs. Conlan comply with all of the terms of this agreement and the company will forbear to execute its final judgement against the debtor. 8. The parties will file terms of settlement. including a provision that the terms shall not be disclosed. DATED the 31st day of Auqust 1981. MARTINS AGENCIES LIMITED by its Attorney JAMES DUNCAN McINTYRE ¢.D.McINTYRE NIGEL CONLAN N.CONLAN SUZANNE ELIZABETH CONLAN 5. CONLAN MEMORANDUM I am the donee of the power of attorney described helow pursuant to which I have executed this document. I declare that I have received no notice of revocation of that power of attorney nor of the death of the donor. Power of attorney dated: 9th July 1981 Reqistered No. - Donor: MARTINS AGENCIES LIMITED Donee: JAMES DUNCAN McINTYRE SIGNED by the Donee at Norfolk Island on the 3lst dav of August 19 in the presence of: J.D.McINTYRE Witness: P. (indecipherable)." Provisions which are particularly relevant are clauses l(c) and 3. The mortgage to be aqiven was not to secure repayment of a loan, but to secure agreed payments in reduction of the existing judqment debt. Mrs. Conlan was not the iudament debtor, but entered into the aaqreement substantially by way of indemnity or surety. It is not necessarv to examine her precise position. On 27 October, 1981, the solicitors for Martins Agencies lodged with the Reaqistrar of Land Titles a document entitled "Notification of Interest". The Reaistar kept a reqister pursuant to the Convevancing Ordinance 1913 ("the Ordinance"). and the document was enrolled in it, with the consecutive number 8362. The conveyance and mortgages earlier referred to had the numbers 8143, 98144 and 8145 respectively. The notification was as follows: "Form Approved ADMINISTRATOR NO. 8362 - NOTIFICATION OF INTEREST - NORFOLK ISLAND TAKE NOTICE that MARTINS AGENCIES LIMITED of Taylors Road, Norfolk Island claims an interest in the land described in the schedule pursuant to the aqreement dated 31st August. 1981 which it entered into with NIGEL CONLAN of Selwyn Pine Road, Norfolk Island and SUZANNE ELIZABETH CONLAN his wife whereby for the purpose of securing the same referred to in that agreement they agreed inter alia that: 'Upon discharge of the existing second mortgage over the property portion 2112 Norfolk Island, to grant a second mortgage over that property to the company' (being Martins Agencies Limited) 'in the form prepared by Messrs. McIntyres, Solicitors'. Other relevant provisions of that agreement may be ascertained upon enquiry to Martins Agencies Limited at their office in Taylors Road, Norfolk Island THE SCHEDULE All that parcel of land on Norfolk Island known as Portion 2112 (also called Lot 1 of Section 25) containing 2529 square metres more or less COMMENCING at a point on a north eastern boundary of Selwyn Pine Road being the southern most corner of portion 136g (also called Lot 11 of Section 24) and bounded thence by part of the south eastern boundary of that portion bearing 46° 32' 10" for 61.11 metres to a south western boundary of portion 2115 (also called Lot 5 of Section 25) thence by that boundary bearing 136° 52' 10" for 50.29 metres to the north western boundary of portion 2114 (also called Lot 2 of Section 25) thence by part of that boundary bearing 226° 32' 10" for 34.95 metres to a north eastern boundary of Selwyn Pine Road thence by part of that boundary and part of the first mentioned boundary of that road bearing 280° 59' 50" for 28.715 metres and 297° 9° 50" for 28.54 metres respectively to the point of commencement. Recorded and enrolled at the Registrar's Office, Norfolk Island this 27 day of October 1981 at 10.30 a'clock in the forenoan and numbered No. 8362 DEPUTY REGISTRAR (a plan of the land was then set out) DATED the 27 day of OCTOBER 1981. THE COMMON SEAL of MARTINS AGENCIES LIMITED was here affixed by previously authority of the Board of Directors and in the presence of: MARTINS AGENCIES LIMITED COMMON SEAL W.A.B,. Secretary J.M.B. Director DEPUTY REGISTRAR REGISTRAR OF TITLES NORFOLK ISLAND" : Vogt Me smet et Naam ee SRE fee Do 5S Ph Se EAB ae ACE my pee RR Sey ami oe The 8. Ordinance does not make anv provision for the lodqment, or enrolling, or recording of a document such as this. Sections 3, 4 and 12 of the Ordinance are as follows: "Ss 3. s.4(1) (2) s.12 No land shall be sold, mortgaged, ar leased (except for a period less than one year). or otherwise dealt with or disposed of except in accordance with these enactments. Whenever it 1s desired to deal with any land by way of conveyance upon sale, mortgage, lease or otherwise, or to make any other disposition of land, the parties or intending parties to the transaction, or their duly constituted attorneys, shall attend before the registrar of lands at his office; whereupon the said registrar shall fill up, or cause to be filled up, in duplicate (and in case of a lease in triplicate) the appropriate form as set out in Schedule I hereto. making such alterations in and additions to the same as he may think necessary, and such forms so filled up shall be executed by all the parties aforesaid, or their duly constituted attorneys, and attested by the said registrar, wha shall hand one part to the purchaser, mortgagee, lessee. or other person, or his attorney, and in case of a léase another part to the lessor or his attorney, and shall retain one other part to be kept of record at the office of the said registrar. No conveyance as aforesaid made after the lst dav of January, 1898, shall be valid or admitted in evidence unless so prepared, siqned and attested as aforesaid: Provided that where none of the forms aforesaid are appropriate to the disposition proposed to be made, a new form may, with the approval of the Administrator, be substituted. A person who, at the time of dealing with land under this Ordinance on behalf of another person, is the attorney of that other person by wirtue of an instrument registered, or deemed to be registered, under the Powers of Attorney Ordinance 1959 shall, for the purposes of this section with respect to that dealing with land, whether tht instrument is under seal or not. All conveyances, leases, mortgages, or other dealings with or dispositions of land heretofore or hereafter epee oem ist eo PE wo made shall be valid and effectual notwithstandina the same have not been made under seal, but only signed by the parties thereto or their attorneys instead of being sealed as well as signed." The proviso at the end of s.4(1) is not applicable to the Notification of Interest. No evidence was given about the use of the words "Form Approved", and "Administrator" in the dacument. It appears nevertheless that many documents of a like nature have been filed, at least in recent years. It also appéars that a number of dispositive documents. apparently approved as to farm by the Administrator, differ considerably from the forms set out in the Schedule to the Ordinance. The mortgages to the defendant banks are examples. On 18 June 1982, a third mortgage to secure a personal loan was given to the Commonwealth Trading Bank ("the Trading Bank") and was lodged (No. 8615). A point was taken about the non-registration of the power of attorney under which Mr. McIntyre signed the agreement for the plaintiff, but in my view it has no substance (see.sli(1) of the Powers of Attorney Ordinance 1959). Among other considerations, the document has since been registered (s.11(2)), albeit after action commenced, and in my view that 1s sufficient. Mr. and Mrs. May ("the Mays") orally agreed to purchase the property from the Conlans for $50,000 (there was not at any amore, 10. stage a written contract) and obtained a loan of $29,000 from the Commonwealth Savings Bank secured by a mortgage over the property to finance their purchase. On 25 June 1982, a series of transactions took place. A document setting out the various transactions was tendered by the plaintiff, without objection, and is reproduced: "Settlement 25/6/82 Purchase Price Less Deposit Paid Balance payable on settlement Funded by Housing loan by CSB (No.2-347184-02) Provided by May from their a/cl162-184 On settlement these moneys were paid to: CSB to discharge Mortgage No.8144 from Conlans WW Sanders to discharge Mortgage No.8145 from Conlan CTB in part satisfaction of Mortgage No.8615 from Conlans (securing Personal Loan No.130-756) As at 25/6/82 amount required ta repay Personal Loan (and thereby discharge Mortgage No.8615) was:- *xGross Less Rebate Net Received from proceeds of sale Paid in cash by Conlan see $50,000 $49,800 $29,000 20,000 $49,800 $41,159.08 5,000.00 3,640.92 $49,800.00 $ 4,848.00 $ 782.84 $ 4,065.16 $ 3,640.92 $ 224.24 ll. Paid from Bob Hickey trust A/C (being deposit monevs released on settlement) S 200.00 $ 4,065.16" According to the terms of the aqreement with the plaintiff. 1t was only on the discharge of the second mortgage to Mr. Sanders that the obligation of the Conlans to give a second mortgage took effect. A problem arises because. although that event occurred, no opportunity existed for a formal mortgage, in accordance with the agreement. to be given. The mortgage then to be given would be to secure payment of moneys as provided by the agreement. It is agreed that at all relevant times there had been some amount owing under the agreement. Instruments of discharge of the mortqages granted by the Conlans having heen recorded. if effect were now to be qiven to the mortgage claimed by the plaintiff, it would in my view rank as a first mortgagee, (i.e. owner of the legal estate). and the size of the judgment debt still outstanding (as to which there is no evidence) might mean that the value of the equity of Mr. and Mrs. May would be diminished, possibly to the point of extinction. It may be that the loan of $29,000 from the Savings Bank would also be adversely affected in this way. Mr. and Mrs. Conlan have left the Territory and their present whereabouts is unknown. Thev were not made parties to the present litigation; no point has been made on this score. Sat Site 12. The case for the plaintiff is in substance that the aqreement with the Conlans contained an aagreement for a mortgage of the subtect land. that thus an equitable mortaaqe was or came to be created. that the Trading Bank had constructive notice of the relevant terms of the agreement when the third mortaage of 18 June 1982 was aiven. and that all defendants had at least constructive natice of them when the completion of sale took place on 25 June 1982. so that, in the event, the title of the Mavs was subiect to an equitable mortaage in favour of the plaintiff 'entitling 1t to have a leqal estate). and that the Savinags Bank (as mortgagee from the Mavs) ranked as second mortaaqee. It is submitted that the third mortaage, to the Tradina Bank. was or became subject to the mortaage to the plaintiff, and the monevs received bv it on settlement are held on a constructive trust for the plaintiff. The defendants deny on a number of arounds that an equitable mortaage was created, and that it had the effect claimed. The fact that all the defendants had notice of the aqreement has not been in dispute. (See Coote on Mortgages, 9 ed.. Vol.2 pp.1317,1318 regarding the contents of the agreement). The Mavs were in fact specifically notified by the plaintiff's solicitor of its claim shortly before the sale taok place, and then warned that thev should not settle without making arrangements with the plaintiff about the Notification of Interest. The terms of the warning were as follows: Mr .Mcintyre: "Martins Agencies have put a notification of interest on the title to that house. You will find it when vou get vour search. They are entitled to have a second mortgage as soon as the present second mortgage to Bill Sanders is discharged." He CMr.May] said something like: 'Oh ves, all right. or some acknowledgement like that.' I said, The purpose of this call is to advise vou not to complete any purchase from Nigel Conlan until vou have made arrangements with Martins Agencies about the notification of interest". All must be taken to have been aware that qiven a short interval of time, a formal document could and probably would have been prepared and filed. It is not disputed that the aaqreement relied upon (if it was a valid agreement) was supported by valuable consideration. It seems to be accepted. or, if not accepted. it seems clearly to be the case, that fundamentally the system of title in the Territorv is the "common law" or "old" system. This situation 15. of course, subject to the operation of the Conveyancing Ordinance. That Ordinance does not provide for indefeasibility in the Torrens Title sense, or for prioritv and, as I have noted. the forms, if inappropriate, are variable at the discretion of the Administrator. There is however a dispute as to the meaning and operation of the Conveyancing Ordinance, as relevant to this case. The Territory has. since 1860, had formal requlation of 14. dealings in land. The first such enactment took place on 12 October 1860, when Sir William Denison, then Governor of New South Wales, proclaimed "Laws for Requlatinag the Transfer of, and Dealings in Land. in Norfolk Island" pursuant to the power aqranted to him bv an Order in Council of Queen Victoria, of 24 June 1856. Under this Order in Council Norfolk Island was declared a distinct and separate settlement. for which the Governor of New South Wales was given power ta make laws. The purpose of the enactment was to provide the newly-arrived settlers from Pitcairn Island with a simple method of determining title to land. The Enclosure to Despatch No.8 from Sir William Denison to the Principal Secretary of State for the Colonies. (12 Julv 1859, British Parliamentary Papers Vol.24 pp.479-80) reads in part as follows: "Memorandum addressed to the Inhabitants of Norfolk Island relative to Registration of Property As' the whole of the island has now been surveved and divided into allotments averaging 50 acres or thereabouts, and as one of these allotments will be handed over to each of the families now upon the island, it becomes a matter of necessity that some simple and definite rules should he established, by which all proceedings with reaard to the establishment of rights to property, to its transference from hand to hand. to the mode in which 1t shall descend to the children of its possessor, shall be requlated." On 15 January 1897. an Order in Council was proclaimed, dealing with the annexation to New South Wales of Norfolk Island. Under the new arrangements, the earlier law was repealed. and laraelv re-enacted. The law, which took effect on 1 January 1898. differed from the earlier in several respects. It was expressed to applv to 15, land to be "sold mortaaqed or leased" whereas the earlier law had referred to "all transactions of whatever nature (except leases...not exceeding twelve months)" affecting land in Norfolk Island. The prohibition on alienation of land to anv person not permitted to reside on Norfolk Island which had appeared in the 1860 enactment did not re-appear. The provisions of the present Convevancina Ordinance. which have been set out in part, take their content from the proclamation of 1897. This law was amended twice, (N.S.W. Government Gazettes, of 6 September 1904 and 30 May 1906). but the amendments are not of present relevance. In 1913, all laws of Norfolk Island were repealed bv a proclamation of Sir Gerald Strickland. then Governor of N.S.W., published on 24 December 1913. The Convevancing Law was re-enacted bv that proclamation, and took substantially the same form as the 1897 enactment. Amendments made since then are immaterial for present purposes. It was submitted that the agreement in question was not effective to create anv equitable interest or estate in land because jt was not recorded, or enrolled, in accordance with the Ordinance. In fact no form in the Schedule was appropriate to it. It was submitted that equitable interests. no matter how arising, could not exist unless the Ordinance had been complied with. Alternativelv, it was put that an equitable interest arising under a document could not frenrsy 16. exist without compliance with the Ordinance. Tt is a bia step to sav that equitable interests cannot subsist unless the machinery of the Ordinance has been followed. If that had been intended. very clear lanquade would have been used, but the possibility cannot be imagined. Other leaislation is inconsistent with it. See Mortgagors' Relief Ordinance 1934. 5.3: dudicature Ordinance 1960 secns.3(b) and 8: Interpretation Ordinance 1979 s.12(2), definition of ""estate"; s.2 of the Land (Subdivision) Ordinance 1957, definition of "sub-division". In this regard. I can see no relevant difference between an equitable interest arising under a will or settlement or by way of constructive trust, and one arising under an agreement. What s.4 has in mind is a disposition inter vivos, and probably of legal interests or estates only. It is possible that a disposition by instrument of an equitable estate can come within it (and s.3), but that question does not arise. I should observe that the first mortaage to the Savings Bank uses the operative words "mortgage and release". and "to hold subject to redemption", which accord with those used for a mortgage in Schedule 1 to the Ordinance. Most of the rest of the document is guite different. being verv much lenathier than the prescribed form. The second mortgage, to Sanders, which was by deed. recites that by the: earlier document the Conlans had "assured" to the said Commonwealth Trading Bank the land "in fee simple by way of mortgaqe." (The recital 1s in error in so far as it refers to the Trading Bank). The operative words in the second document were "the mortaagor as 17, beneficial owner herebv conveys...unto the mortqaqee...to hold the said premises unto the mortgagee in fee simple subject to the said prior mortaage...1if then subsisting...and subject to the proviso for redemption hereafter contained...". This document bears the endorsement. in tvping. "Form approved". "Administrator". There is no evidence that anv of the documents were approved under 5.4(1) of the Ordinance, although the endorsements on the mortgages to both banks carry detail from which it may be inferred that there was approval in those cases. The operative words in the third mortaqage were "hereby mortgages and releases...to hold the land and improvements subject to redemption...". There is a reference to prior mortaages at the end of the document under the heading "Encumbrances" where brief particulars of both the first mortgage and the second mortqage (to Sanders) are given. Two questions arise at the outset. One 1s whether the aqreement reflects a consensus between the parties. The other 18 whether it 15. in relevant respects, sufficiently certain and definite. It 1s not disputed that clause 3 has relation, inter alia, to clause l{c). Clause l(c) says that the mortaqage is to be "in the form" prepared by Messrs. McIntvres. In the context "form" is obviously intended to include content. At that point there is therefore an aqreement to qive a mortgage with some terms unstated except that the intended mortgagee's solicitors are to determine what they are to be. Clause 3 emphasises this situation. The terms are 1a. not expressed to be what a court determines are usual. but the solicitors for the intended mortaaqee are to fix terms which are "usual, or desirable for the protection of the company". The latter part of this provision seems to me to be tantamount to saving that the terms are to be those determined by the intending mortgagee. Perhaps a qualification of reasonableness is to be implied. and what is "usual" may be subject to court determination (see Hermann v. Hodges (1873) 16 Eq. 18; Ashton v. Corrigan (1871) 13 Eq. 76). It has not been arqued that the solicitors are under any duty in determining the content of the clauses. other than one owed to their client, and I do net discern anv. On the other hand, principal matters are agreed upon. The property is specifically referred ta. The timing and rate of repayment are regulated by clause 2. and the rate of interest is fixed under clause 2(d). There is an initial uncertainty as to what amount will be payable when the mortgage comes into operation. but the substance of the matter is that the security 1s for performance of clause 2. If it is thought necessary or appropriate. the amount remaining unpaid at the future date can then be determined. Although all the terms of the mortgage are not specifically agreed upon, the method of arriving at them is. and in my view it does not matter that it is left to one party, or its solicitors. to arrive at then. Fundamental matters were agreed, and the consensus was complete. (See Axelsen v. O'Brien (1949) 80 C.L.R. 219: Godecke v. Kirwan (1973) 129 C.L.R. 620.) The agreement was in nature such that a court of equity 19, would enforce it. The plaintiff may have been able to proceed for equitable relief as soon as there had been default under it. and anv necessary demands made. Completion of a document (with additional terms) was anticipated, but nothing more was required of the mortgagors beyond their siaqnature. and if necessary, an officer of the Court could have been appointed to execute it for them. Although strictly unnecessary, I should add some observations on this subject. When it comes to an agreement for a formal mortgage, the Courts have long proceeded ona principle of giving effect to intention, notwithstanding the terms are vaque or indefinite (see Fisher and Lightwood's Law of Mortgage 9 ed. pp.11,12). Thus, ina deposit of title deeds giving rise to an implication that a formal document is tao be executed. the detailed terms of the mortqaae have to be constructed: if not bv agreement, by the Court (see Coote on Mortaages 9 ed. (1927) p.88.) Where some terms are mentioned. others often have to be supplied. Whitlev v. Challis (1892) 1 Ch. 64 turned on another point but none of the three Lord Justices (Lindley, Bowen and Fry L.JJ.) seemed to find any difficulty with the agreement that the second mortaqage there provided for "shall be in such form and contain such powers, covenants and provisions as the solicitor or counsel Cof the mortaagee] should advise or require" (see also Farmer ve. Pitt (1902) 1 Ch.954). In Ashton v. Corrigan (supra) specific performance was decreed of an agreement to execute a mortgage in "the usual form, containing an absolute power of sale and all the usual trusts, powers and covenants, subject to all prior changes". This decision seems to have had the approval of Lord Selborne L.C. who. 20, sitting at first instance. decreed specific performance of an agreement to execute a mortgage "with an immediate power of sale" Hermann v. Hodges (supra). The report does not refer to there being any other agreed terms of the mortgage. The mortgage was not to take effect until the existing second mortgage was discharged. As I read the agreement, it was not to bea mortgage subject to the second (really a third mortgage), but to be in effect a replacement mortgage. There is evidence that the Conlans had at that stage refused to agree to the giving of a third mortgage. Any decree made before the discharge of the existing second mortgage would have had to be conditional in operation. or, at least, a mortgage to be granted under it would have had to be limited to take effect in the future event. On the other hand, some other relief in equity, such as an injunction to restrain action which would negative the effect of the agreement for the second mortqage would have been available. The term "second mortaqage" in relation to old svstem land refers to the conveyance of the equity of redemption expectant upon the first mortgage. What was therefore being agreed was that the equity of redemption then held by Sanders would be conveyed. Although the equity could not be conveyed immediately, there may, from the outset have been an equitahle mortqage or an equitable charge in favour of the plaintiff. I do not have to decide this question, but the effect of the arrangement was in my view that the mortgqagors were not free to encumber the equitable estate or interest expectant on the second mortgage, i.e. that to Sanders. 21. The parties to the settlement of 25 June 1982 are to be taken to have been aware of the aaqreement for the mortaage, and its legal incidents. Their attempt to overtake. or nullify, this agreement would not be supported by a court of equity. During settlement the second mortgage (to Sanders) was redeemed. On that occurring (if not before), the plaintiff was entitled to specific performance of the relevant part of the agreement, and at the very latest. it then became an equitable mortgage. This must be taken to have occurred before the purported transfer of the legal estate to the Mays. All that the Conlans could then convey was an equity of redemption. {The form of the Schedule to the Ordinance is relevant here. It states that the transferors "sell and convey...to hold...in as full and ample manner as [the transferor] could have held the same...".) Further, particularly, as moneys were not available to pay off all mortgagees, the second mortqage to the plaintiff must be taken as having arisen before the third was discharged, with the consequence that the latter was postponed to the plaintiff. The third mortaage was however redeemed, on payment of most of the debt to it. It was submitted that as the purchase monevs came from the Mays (largely derived from the Savings Bank) there was, on payment, a constructive trust in their favour or. in favour of the Savings Rank, respecting the fee simple. I mistrust the use of the term constructive trust in this context. or at least the incidents sought to be attached to it. The fact was that the mortgages had to be redeemed and until this was done the Conlans could not convev the fee simple, as apparently had been agreed. The legal estate was at the 22. outset in the Savings Bank. as first mortgagee from the Conlans. Upon redemption of the first mortgage, the legal estate was held by that Bank for subsequent incumbrancers, (Coote's Law of Mortgages, 8th ed. »VYol.l p.54). A question then arises whether, notwithstanding the purported redemption of the;third mortgage, the moneys received were properly pavable to the plaintiff. T see no answer to the submission that they were. By not having notice of what was being done, the plaintiff was deprived of the opportunity of completing documentation. or seeking temporary equitable relief. sa as to maintain 1ts right, but those circumstances did not adversely affect its position. The Conlans of course intended that the Trading Bank, as third mortgagee, should receive the moneys paid to it. There are two related bases upon which the moneys should be regarded as properly payable to the plaintiff. One is that in a redemption or foreclosure action this course would be followed. The other is that while the Conlans' intention was to pay the Trading Bank, their more fundamental intention must have been to clear the property of the mortgages, and on a simple basis of priority. or lack of entitlement in the Trading Bank, the moneys had to go to the plaintiff. soa far as an amount was then due to it. The defendants have pleaded laches, acquiescence and delay. The substance of their defence is based on the evidence that a director or officer of the plaintiff had told its solicitor in the week 21-25 June 1982 that he had heard a rumour that Mr. Conlan was about to sell his home to Mr. May. The parties of course included the 23. réspective wives. It was after this, but before settlement, that the plaintiff's solicitor rang Mr. May to agive him the warning already referred to. It is said that in that conversation the plaintiff, through its solicitor, indicated that it had no objection to a sale, as such, but was merely desirous of seeing that, as mortgagee, it receive the surplus after the first and the existing second mortgagees had been paid out. It is submitted that a motive for not seeking to stop the sale was that instead of receiving the net proceeds of sale. it would, as first mortaagee after the sale, retain its security, but as first mortgagee, and could in this way recover the whole of the amount owing to it. This is of course an argument that assumes a result along the lines that I have found, but it is difficult thereby to substantiate the defence pleaded. The plaintiff promptly gave notice to the intending purchasers. If they had acknowledged the plaintiff's interest. as second mortgagee (after Sanders) it would have received a relatively small sum, if 1t had agreed to a discharge at that time. However, it did not agree, there was no redemption action, and the first two mortgages by arrangement were redeemed. The automatic result was that the plaintiff's interest was advanced. so that it became, in equity, first mortgagee. This would be the result in any case, where, for whatever reason, a mortgagor were to redeem earlier mortgages. What happened in fact was an attempt to exclude the plaintiff. In my opinion, the defence fails. I should give the parties an opportunity to speak to the form 24. of relief. The plaintiff should bring in short minutes on or before 21 May, andthe defendants should within seven days of these being filed and served give notice of any desired alterations or additions. Those documents may be served directly on counsel who appeared at the hearing. The matter is stood over for further hearing in Sydney on 29 May. The counter claims in the proceedings have been dismissed by consent. A third party claim was also dismissed by consent. For the future, I direct that the title to the proceedings be altered accordingly, so as to show continuing parties onlv, in the capacity of plaintiff and defendants. aoe os, se d the-Tiwery Aree (22) t certify that this ar 1s npreceding paces are a true copy of x m Reasons for Juégment here im of bis Lonour { | ur. Justice fox ; Rhian Kane f Associate | pated: /3 Mag /986 i enn