t sa ——" CATCHWORDS BILLS OF SALE - crop lien - valuable leaves on trees on mortgaged land - whether registration of security as crop lien necessary. LANDLORD AND TENANT - emblements - whether right given by attornment clause in mortgage - scope of right - when lost. Bilis of Sale and Other Instruments Act 1955-1986 (Q.), ss.6(1), 6(3), 31, 32 Official Trustee in Bankruptcy v. Westpac Banking Corporation Limited Qld G114 of 1987 PINCUS J. BRISBANE 3 NOVEMBER 1987 = ANOV $987 AusTaAsa FA PAING 241, 1arPy IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY ) QLD G114 of 1987 GENERAL DIVISION ) BETWEEN: OFFICIAL TRUSTEE IN BANKRUPTCY Applicant AND: WESTPAC BANKING CORPORATION LIMITED Respondent MINUTES OF ORDER JUDGE MAKING ORDER: PINCUS J. DATE OF ORDER: 3 NOVEMBER 1987 WHERE MADE: BRISBANE THE COURT DECLARES THAT: 1. The respondent as mortgagee is entitled to security over the crop of dubosia leaves on the land the subject of these proceedings and the applicant has no right to remove or sell the same. THE COURT ORDERS THAT: 1. The application is otherwise dismissed; 2. The applicant pay the respondent's costs of and incidental to the application to be taxed. i Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY ) QLD G114 of 1987 GENERAL DIVISION ) BETWEEN: OFFICIAL TRUSTEE IN BANKRUPTCY Applicant AND: WESTPAC BANKING CORPORATION LIMITED Respondent PINCUS J. 3 NOVEMBER 1987 REASONS FOR JUDGMENT This is a dispute between the Official Trustee and a bank about entitlement to agricultural produce growing on mortgaged land. Some reference to the procedural history of the case is necessary. The applicant, the Official Trustee, applied for an injunction against the respondent bank to protect his interest in a crop of leaves growing on trees on the mortgaged property. He was successful in obtaining an interim injunction, and then an injunction until trial. The respondent recently came before me in an interlocutory way seeking a discharge of the injunction on grounds which did not appear very substantial. During the course of argument, it emerged that the point at issue between the parties is now almost wholly a legal one. Counsel sensibly agreed to the course of having that legal point decided, rather than engaging in any further interlocutory skirmishes. The questions which are, by consent, proposed for determination are as follows: l. Whether Westpac (the respondent) is entitled, under its mortgages, to the crop on the land referred to therein? 2. Whether the answer to (1) is affected by the determination of the question of fact as to whether the trees were planted prior to the granting of the said mortgages? No argument was directed to the second question, and it was, at least implicitly, agreed that I need answer only the first. The mortgages referred to in the question are registered Torrens System mortgages which, although elaborate in form, commence in the usual way by mortgaging "all the estate and interest of the mortgagor" in the defined land. The evidence shows that there are mature trees called dubosia trees on the land, the leaves of which are capable of being treated to yield a drug called scopalamine. There are about 24,000 trees on the property and the value of the leaves is said to be substantial. The leaves are ordinarily harvested annually, and the trees in question are between two and four years old. In consequence of default by the mortgagors, who are of course bankrupt, the respondent bank took possession of the land and proposed to sell the mortgaged property, including the trees and the leaves. Counsel for the applicant, the Official Trustee, argues that the respondent is not entitled to the leaves in that the applicant has a right to enter upon the mortgaged land for the purpose of harvesting the leaves as emblements. Alternatively, the applicant says that the mortgages, insofar as they relate to the leaves, are void against the applicant under statute. 1. Emblements Counsel for the applicant says that as each mortgage contains an attornment clause, the bankrupts were tenants of the respondent mortgagee and have the right every tenant has to emblements. It 1s necessary to quote from only one of the attornment clauses, namely that included in the mortgage given by the bankrupts on 6 July 1982. By it the "said mortgagor", which means both of them: "doth hereby attorn and become tenant from week to week to the Bank of the said land at a weekly rental equal in amount to the interest from time to time payable by him..." Counsel for the applicant says that, although the attornment clause is undoubtedly inserted for the benefit of the mortgagee, to facilitate obtaining possession, it works by way of estoppel against the mortgagee; he cannot deny that the mortgagor (although really the owner of the land) is the tenant of the mortgagee (although the mortgagee has in reality only a statutory charge). Counsel for the respondent bank says there can be no question of the mortgagors (or the Official Trustee, standing in their shoes) entering to harvest the crop of leaves, for a number of reasons. I find it necessary to deal with two of them only. Firstly, it has been settled for centuries that the right to emblements depends on the termination of the tenancy's not being due to the act or default of the tenant: see Oland's Case (1602) 77 E.R. 235 at p.236. A more modern explanation of the rule is to be found in Bulward v. Bulward (1819) 106 E.R. 437 at p.438 per Abbott C.J.: "The general rule of law applicable to cases of this description 18, that where a tenant of land has an uncertain interest which 1s determined either by the act of God or the act of another, there he shall have emblements: but that is not so where the tenancy is determined by his own act ... As where the lessee surrenders, or a woman who is a tenant durante viduitate marries, or the estate determines by forfeiture, condition broken etc. In all these cases they are not entitled to emblements." The relevant law has become largely obsolete because the rights of agricultural tenants are now dealt with by statute. But it is the common law upon which the applicant relies and, in my view, it is clear enough that, the "landlord" having taken possession in consequence of the "tenant's" default, there can be no right to emblements. Secondly, the right arises only with respect "to cultivated crops such as corn, hemp and flax, and not to things such as fruit trees and timber": Megarry and Wade, "The Law of Real Property", 3rd Ed. p.111. The leaves here in question fall, it was not seriously disputed, into the latter category. Counsel for the applicant argued that there is a difference on this point between the English and the Australian cases and relied on the New South Wales decision of Cullan v. Pearse (1864) 3 S.C.R. (N.S.W.) 200. That concerned a question whether a contract for sale of a crop of oranges, the purchaser having the right to pick them, required a writing under the Statute of Frauds. The case was decided on the basis that a contract which allows a purchaser to enter and pick fruit confers no interest in the land, not on a view that the old rule I have just mentioned does not exist. It is true that Stephen C.J. exhibited some impatience with the "minute and unsubstantial" distinction between different sorts of annual production of land (p.204) but that distinction 1s far too well established to be ignored. I am therefore of the view that, assuming in favour of the applicant that the attornment clauses are capable of giving the mortgagor a right to emblements, no such right exists here, because the bankrupts lost possession on account of their default and because of the nature of the produce in question. Crop Liens and Legislation Under the Bills of Sales and Other Instruments Act of 1955 (Q.), provision is made for the grant of crop liens by 38.31. The applicant's argument was that if a crop lien is not granted under the Act and subsequently registered, then s.7(1) comes into effect; it says: "Subject to subsection two of this section, an unregistered instrument, executed after the commencement of this Act, shall not have any effect as to the chattels comprised therein or subject thereto, against any person other than the grantor and grantee." The argument is that, insofar as the mortgages would apart from the Act give security in respect of the crops, they constitute unregistered instruments and are ineffective against the applicant trustee. In my opinon, s.7(1) has no application because' the leaves in question are not "chattels" within the meaning of s.7(1). The word "chattels" is defined in the Act by a definition which reads in part as follows - see s.6(1): "Furniture, goods, chattels, and other articles capable of complete transfer by delivery, and (when separately assigned or charged) fixtures: The term does not include - (iii) Growing crops when assigned with any interest in the land on which they grow ..." Although the drafting is not as clear as one would wish, in that the bracketed words "when separately assigned or charged" apply only to fixtures and not chattels, the intention appears to be that growing crops are not caught except when separately assigned. The conclusion that that 1s the legislative intention is reinforced by s.6(3) which reads as follows: "No fixtures or growing crops shall be deemed to be separately assigned or charged by reason only that they are assigned by separate words, or that power is given to sever them from the land or building to which they are affixed, or from the land on which they grow, if by the same instrument any freehold or leasehold interest in the land or building to which fixtures are affixed or in the land on which such crops grow, is also conveyed, mortgaged or assigned to the same persons or person." It seems evident that the purpose of not deeming certain sorts of assignments and charges of growling crops to be separate assignments or charges is related to the definition of "chattels"; I can find nothing else in the Act which gives any point to $.6(3), insofar as it applies to growing crops. It follows that the definition of "chattels" should be read so as to exclude growing crops when assigned with any interest in the land on which they grow or when not separately assigned or charged within the meaning of s.6(3). Here, s.6(3) clearly catches the mortgage, insofar as 1t operates to charge the trees and their produce as part of the land; see Bagnall v. Villar (1879) 12 Ch.D. 812. It follows, in my opinion, that the provisions of s.7(1) are inapplicable. It should be added that the definition of "crop", which I do not trouble to quote, appears wide enough to catch produce such as the leaves here in question. Section 32 of the Act, subject to a matter which requires no mention, says that: "...- no lien upon crops shall prejudicially affect the rights of any ... mortgagee of any land whereon the crops over which the lien is granted are growing, unless and so far as the ... mortgagee has consented in writing to such instrument." Sub-section 3 requires the grantee of a crop lien to pay a certain sum to the mortgagee before selling any crops over which the lien is granted. The crop lien provisions of this statute were not intended to destroy the well-established rights of mortgagees of the land in respect of growing crops, as the provisions just mentioned make clear. Nor is 1t necessary that any document be registered under the crop lien provisions on the Bills of Sale and Other Instruments Act of 1955 where a mortgage of land on which crops are to be, or are being, grown 1s given . To summarize: 1. The attornment clauses in the mortgages do not assist the applicant trustee, because the mortgagee took possession in consequence of default, and because of the nature of the produce in issue. 2. In its operation as affecting crops, the ordinary form of Torrens mortgage does not require registration as a crop lien. It follows that ques understood counsel to agree affirmative answer to question dismissed. The orders will ther tion 1 should be answered "yes". I that in the event of my giving an 1, the whole application should be efore be: 1. Declare that the respondent as mortgagee is entitled to security over the crop of dubosia leaves on the land the subject of these proceedings and the applicant has no right to remove or sell the same. 2. Application otherwise dismissed with costs. 1 certify that this and tha Xx Preceding ages ere 4 trug coo of 442 reacc ic 'or ecomant be-sn of cis Urrcur Me Suc ice Pacus Assoc.até@ Dat Counsel for the Applicant: Solicitors for the Applicant: Counsel for the Respondent: Solicitors for the Respondent: Date of Hearing: ed 3 Novembey IGE 7 Mr. A.J.H. Morris Messrs. Clarke & Kann Mr. P.A. Keane Messrs. Feez Co. Ruthning & 21 October 1987