Scott v Bagshaw [2002] FCA 276

FEDERAL COURT OF AUSTRALIA

Scott v Bagshaw [2002] FCA 276 JOHN JOSEPH SCOTT v LEITH GORDON BAGSHAW & ORS NG 684 of 1994 WHITLAM J 20 MARCH 2002 SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NG 684 of 1994

BETWEEN: JOHN JOSEPH SCOTT

APPLICANT

AND: LEITH GORDON BAGSHAW

FIRST RESPONDENT

JUDITH HAMPTON BAGSHAW

SECOND RESPONDENT

PHILLIP GREGORY JEFFERSON

and JAY ARSCOTT STEVENSON

as Trustees of the Bankrupt Estate

of Leith Gordon Bagshaw

THIRD RESPONDENTS

JUDGE: WHITLAM J

DATE OF ORDER: 20 MARCH 2002

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. The applicant bring in short minutes of order to give effect to these reasons for judgment. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NG 684 of 1994

BETWEEN: JOHN JOSEPH SCOTT

APPLICANT

AND: LEITH GORDON BAGSHAW

FIRST RESPONDENT

JUDITH HAMPTON BAGSHAW

SECOND RESPONDENT

PHILLIP GREGORY JEFFERSON

and JAY ARSCOTT STEVENSON

as Trustees of the Bankrupt Estate

of Leith Gordon Bagshaw

THIRD RESPONDENTS

JUDGE: WHITLAM J

DATE: 20 MARCH 2002

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 The applicant, John Scott, seeks a declaration that he is entitled to an equitable charge over land located at Terrigal in New South Wales and at Mildura in Victoria and over the proceeds of the sale of land located at Para Wirra in South Australia. The first and second respondents, Leith Bagshaw and his wife Judy Bagshaw, are the registered proprietors of the land at Terrigal and Mildura. Mr Bagshaw was the registered proprietor of the land at Para Wirra. He is a bankrupt, and the third respondents are the trustees of his bankrupt estate. This proceeding was remitted by a Full Court for my determination of such issues as may be necessary in the light of that Court's reasons. 2 Loans were made to the Bagshaws to assist with the purchase of the land at Terrigal and Mildura. These loans were arranged by one Ken Livingstone and made by him in Mr Scott's name. Mr Livingstone was also Mr Bagshaw's accountant. The same solicitor was retained in respect of these transactions by the Bagshaws and by Mr Livingstone on behalf of Mr Scott. His name was Clive Austin. Mr Austin's files are in evidence, and he also gave evidence. From that evidence the following key events may be uncontroversially chronicled. 3 The Terrigal property was a residential flat at 39 Beaufort Road. Its purchase price was $65,000 and Mr and Mrs Bagshaw agreed to buy it when contracts were exchanged on 30 July 1985. One week later, on 7 August 1985, Mr Bagshaw was notified that a planning consent sought by him had been given for development of four townhouses on a block of land at 2-4 Canyon Road, Baulkham Hills in New South Wales. Soon afterwards, on 16 August 1985, Mr Bagshaw offered to buy industrial land at 1110-1112 Benetook Avenue, Mildura for $175,000 on behalf of a purchaser "to be nominated". 4 On 10 September 1985 Mr Livingstone told Mr Austin that he would provide the money for the purchase of the Terrigal flat. The sum of $60,000 was received from Mr Scott in Mr Austin's trust account on 20 September 1985. The purchase was completed on 26 September 1985, and Mr Austin signed the transfer on behalf of the Bagshaws. 5 Meanwhile, the contract submitted by the vendor of the Mildura land had been received by Mr Austin on 11 September 1985. It contemplated a settlement by 31 October 1985. The vendor's solicitor pressed Mr Austin about an exchange during October, and Mr Bagshaw telephoned Mr Austin several times requesting that the contract and "paper work" be sent to Mr Livingstone. On 7 November 1985 Mr Austin spoke by telephone to Mr Livingstone who said that, when the deeds for land at Para Wirra owned by Mr Bagshaw were provided to him, he would provide the balance of the purchase moneys for the block at Baulkham Hills, that he would also advise the terms upon which the moneys were to be advanced, that he would "be able to deal with the Mildura property", and that he had so "advised" Mr Bagshaw. Mr Austin wrote two letters to Mr Bagshaw on 7 November 1985. One confirmed that the certificate of title to the Terrigal property would be forwarded to Mr Livingstone as "part of the security for an advance to you by the Scott Family Trust". The other letter was about the contract for the proposed Mildura purchase, but Mr Austin pointed out that Mr Livingstone had said that the provision of finance for that purchase depended on his assessment of the security afforded by the Para Wirra land. On 8 November 1985 Mr Livingstone telephoned Mr Austin to say that he wanted caveats on the Terrigal, Baulkham Hills and Para Wirra lands, that he did not want a mortgage, that he had given Mr Bagshaw the contract for Mildura and the cheque for Baulkham Hills. 6 On 12 November 1985 the sum of $86,000 was received in Mr Austin's trust account from Mr Scott on account of the Baulkham Hills purchase. On 19 November 1985 the sum of $25,000 was received from the same source on account of the Mildura purchase. 7 The contract in respect of the Mildura land was completed by nominating Mr and Mrs Bagshaw as purchasers, was dated 25 November 1985, and was forwarded by way of exchange that day with a trust account cheque for the balance of the deposit to the vendor's solicitor. The sum of $160,000 was received from Mr Scott in Mr Austin's trust account on 6 December 1985, and the purchase was completed on 7 December 1985. 8 The contract for the purchase of the Baulkham Hills land is not in evidence. However, the price was $95,000 and the purchase was completed on 19 December 1985. Mr Austin executed the transfer on behalf of Mr Bagshaw. 9 On 9 January 1986 Mr Austin wrote to Mr Livingstone enclosing the certificate of title for the Terrigal property and noting that it formed "part of the security in relation to the advance to Mr and Mrs Bagshaw by the Scott Family Trust". He also advised that a caveat had been "lodged on the title noting the interest of the Scott Family Trust". On 10 January 1986 Mr Austin wrote to Mr Livingstone confirming instructions to prepare for execution by Mr and Mrs Bagshaw an agreement acknowledging the amount of their loans outstanding as at 31 December 1985 and mortgages over the Terrigal and Baulkham Hills properties. Mr Austin also confirmed his instructions that such mortgages were not to be registered, but that he was to arrange for caveats to be lodged over those properties and the Mildura and Para Wirra land. Accordingly Mr Austin enclosed with the letter a loan agreement and mortgage documents for execution. Copies of the caveats lodged on the Terrigal and Baulkham Hills properties together with the two certificates of title to the Para Wirra land were also sent to Mr Livingstone under cover of that letter. 10 In accordance with his instructions, Mr Austin also wrote on 10 January 1986 to his agents in Adelaide and Melbourne to arrange the lodging of caveats. On 15 January 1986 Mr Austin wrote to Mr and Mrs Bagshaw asking that they execute the instrument of transfer required for the Mildura land. On 20 January 1986 a caveat was lodged in favour of Mr Scott as trustee of the Scott Family Trust over the land at Para Wirra. On 24 January 1986 the Bagshaws were registered as proprietors of the Mildura land and a caveat was lodged over that land on behalf of Mr Scott claiming an "interest as Mortgagee". 11 On 21 February 1986 Mr Livingstone wrote to Mr Austin informing him that "despite writing to Mr Bagshaw all the documents still have not been properly executed". On 4 April 1986 Mr Austin's Melbourne agent advised that the mortgage referred to in the caveat over the Mildura land was required for stamping. On 26 May 1986 Mr Austin informed his agent that the "security documents" referred to in the caveat had not been executed. The caveat was accordingly withdrawn before entry on 28 July 1986. On 8 August 1986 Mr Austin wrote to Mr Livingstone forwarding the certificate of title for the Mildura property "for safekeeping". 12 On 4 August 1987 six new certificates of title were issued in substitution for one of the original certificates of title in respect of the Para Wirra land. Mr Scott's caveat was recorded on the new certificates. 13 On 16 February 1988 Mr Bagshaw agreed to sell the Baulkham Hills property for $150,000. The sale was completed on 6 May 1988. The purchaser provided part of the purchase price in the form of a bank cheque in Mr Livingstone's favour for $100,000. Mr Austin deposited this cheque in the Scott and Slattery Clearing Account and then wrote to Mr Livingstone on 13 May 1988, enclosing the deposit slip and pointing out that he was "unaware of the exact position concerning the outstanding loans". 14 The picture that emerges from the above evidence is of conventional equitable mortgages by deposit of title deeds. The only difficulty is that Mr Scott now holds only the certificate of title for the Terrigal property. The explanation is that the certificates of title for the Mildura and Para Wirra properties were apparently handed over on or about 22 October 1992 to Mr Bagshaw, who signed a letter of that date addressed to Mr Scott acknowledging their receipt. 15 The Full Court remarked that it was unable to impute to me a finding that Mr Scott or the Scott Family Trust had never been nominated to Mr Bagshaw as the lender. I may say, therefore, that I think it is clear Mr Scott was so nominated to Mr Bagshaw. Mr Livingstone said that he used the expression Scott Family Trust as a "code word" to refer to Mr Scott. Mr Austin's correspondence reflects this device. In any even, I am, of course, bound by the inference drawn by the Full Court, namely that Mr Scott was nominated as lender. 16 The case pleaded by Mr Scott has been abandoned. He now relies on his part performance of oral agreements to grant him a charge over the properties. The existence of such an agreement in respect of the Terrigal property may be readily inferred from the course of Mr Austin's dealings on behalf of the Bagshaws and Mr Livingstone. In addition, Mr Livingstone gave evidence that Mr Bagshaw agreed to provide a mortgage over that property. Neither Mr Bagshaw or Mrs Bagshaw gave evidence. Mr Livingstone's evidence stands uncontradicted, and I accept it. Mr Scott still holds the certificate of title furnished to Mr Livingstone as security. 17 So far as the other three properties are concerned, I think it is plain that an oral agreement was concluded on 7 or 8 November 1985 between Mr Livingstone and Mr Bagshaw in respect of Mildura and Baulkham Hills purchases. In addition to the security over those properties, the agreement required Mr Bagshaw to provide by way of equitable mortgage the certificates of title in respect of his land at Para Wirra. I am satisfied that Mr Bagshaw must have known that Mr Scott was nominated as the lender and security holder. 18 The doctrine of part performance has been explained in ANZ Banking Group Ltd v Widin (1990) 26 FCR 21 by Hill J at 33-38. The performance which has to be shown must be performance of the person seeking to enforce the agreement, that is, Mr Scott. In the present case it is undisputed that the loans were made. They were made via the one solicitor acting for both the lender and the purchaser or purchasers. Without more, such acts are unequivocally and in their own nature referable to a contract of the general nature alleged by Mr Scott. There can be no serious suggestion that it was intended that the loans should be unsecured. The only question is what security. (The subsequent "discharge" of the equitable mortgage over the Baulkham Hills property is, of course, consistent with the agreement alleged.) I think it is clear that the agreements provided for caveats, not registered mortgages. The lodging of the caveats called for no action on the Bagshaws' part, but Mr Austin would hardly do so if it were contrary to their instructions. 19 The position of Mrs Bagshaw is no different to that of Mr Bagshaw. Mr Austin said that he spoke to her and obtained her instructions in respect of the Terrigal property. The transfer of the Mildura property required her signature. Mr Austin tendered against her in his case the admissions she made in earlier interlocutory proceedings to the effect that Mr Bagshaw acted as her agent and with her authority in respect of any joint purchase, including its financing. Mrs Bagshaw is bound by Mr Bagshaw's agreement on her behalf. It would be absurd and unconscionable were it otherwise. 20 The delivery of the title deeds was also sufficient to create the equitable mortgages, Mr Bagshaw submits that Mr Scott may not rely on the letter dated 22 October 1992 to explain why he no longer holds certain certificates of title. But that is precisely all that letter does. It would not matter whether or not the letter was acknowledged by Mr Bagshaw. The terms of that letter were not, of course, pleaded by Mr Scott. There was no reason why they should be. (In fact, whilst Mr Bagshaw's defence, somewhat unusually, did dispute the authenticity of some documents annexed to Mr Livingstone's affidavit it made no such allegation in respect of that letter. Nor was Mr Livingstone cross-examined on it.) 21 The third respondents submit that Mr Scott's claims in respect of the equitable charges are brought out of time because the limitation periods in respect of such actions are available only where the relevant mortgage or charge is in writing. No authority was cited for that proposition, and I reject it. 22 It follows that, in my opinion, Mr Scott is entitled to the declarations he seeks. The form of those orders and any further conduct of this proceeding must now be addressed. A second Full Court decided that this proceeding involves the exercise of bankruptcy jurisdiction so far as Mr Bagshaw is concerned. I am informed from the Bar table that, since this proceeding was commenced, Mrs Bagshaw has also been made bankrupt. Mr Scott may now need leave under s 58(3)(b) of the Bankruptcy Act 1966 in respect of Mrs Bagshaw, which may, first, involve giving notice to her trustee. The taking of any accounts in respect of Mr Scott's loans to the Bagshaws need not take place in this proceeding so long as