COMMONWEALTH BANK OF AUSTRALIA v GREEN SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL MASON P, HANDLEY JA and SMART AJA 19 June, 24 September 1997 EQUITY — priority between equitable mortgages — postponement — release of title deed by holder of prior equity. The respondent, the holder of an unregistered mortgage, released the title deed to the mortgagor so that it could be delivered to a Bank which had lent money to the mortgagor. The mortgagor delivered the deed to the Bank which made a further advance on the security of a mortgage by deposit. The Bank appealed from the finding of Young J that the holder of the earlier equity had priority. By majority, Smart AJA dissenting: (1) Although Mrs Green held the earlier equity and was prima facie entitled to priority, her conduct in releasing the certificate of title induced the Bank to believe that there was no earlier interest. Her interest was therefore postponed. Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 applied. (2) Mrs Green knew that the mortgagor intended to use the deed as security and did nothing to retain her priority. The later security was within the apparent authority of the mortgagor, and was therefore entitled to priority. Abigail v Lapin [1934] AC 491 applied. Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326; Abigail v Lapin [1934] AC 491, applied. Mason P. I agree with Handley JA Handley JA. On 12 December 1988 Mrs Green took from the registered proprietor, Palansa Pty Ltd (the company), an unregistered mortgage over two blocks of land at Hornsby being the land in certificates of title folio identifiers 21/255127 and 16/240146. She obtained possession of both certificates of title and between 14 December and 19 May 1989 she lent $141,800 to the company under her mortgage. She owned one third of the issued shares in the company, the other two thirds being owned by Mr Phillip Haberle and Mr Allan Wright, the principals of the franchised Raine and Horne branch at Thornleigh. The company undertook the construction of a house on the land comprised in certificate of title folio identifier 16/240146 (the house block) to provide a residence for Mrs Green and her children. On 26 June 1989 the company gave an unregistered mortgage over the house block to the Bank to secure a loan of $130,000. The mortgage was executed under the common seal of the company witnessed by Messrs Haberle and Wright. Mrs Green released the certificate of title to the house block which was delivered to the Bank on or about 26 June. On 13 December 1989 the company granted the Bank an equitable mortgage by deposit over the land in certificate of title folio identifier 21/255127 (the vacant block) to secure a further loan of $20,000. The memorandum of deposit was executed under the common seal of the company witnessed by Messrs Haberle and Wright. The borrowed funds were used to complete the house and Mrs Green and her children went into possession in early 1990. The Bank was not informed that the blocks were encumbered. Mrs Green held the earlier equity and was prima facie entitled to priority, but the Bank contended that she had lost priority because of her subsequent conduct. 2 UNREPORTED JUDGMENTS Proceedings to determine the priorities between the competing equities of the Bank and Mrs Green were heard by Young J. His Honour held that the Bank's mortgage of 26 June 1989 over the house block had priority, but in a later decision he held that Mrs Green's mortgage had priority in respect of the vacant block. Mrs Green did not appeal against the first decision but the Bank appealed against the second. In his judgment dealing with the priorities over the house block, the Judge found that Mrs Green should be postponed because the Bank 'was lulled into the position where it reasonably considered that the property was unencumbered'. It would not have lent its money if it had known of Mrs Green's mortgage. Mrs Green had countersigned the company's acceptance of the Bank's letter of 26 May offering the loan of $130,000 which stated that the Bank required security over the house block, and she had released the certificate of title so that it could be lodged with the Bank. In his second judgment, the Judge found that the facts were 'nowhere near as strong in favour of the Bank', the certificate of title did not appear to have come from Mrs Green, the company's acceptance of the Bank's offer of the further loan was not signed by Mrs Green and she knew nothing about that further loan. Mr Forster SC for the Bank submitted the Judge's second decision was vitiated by factual error, as he had overlooked some evidence from Mrs Green. In her affidavit of 19 February 1991, she said: 15. In approximately May 1989 Mr Phillip Haberle requested that I return to him the certificates of title. We had a conversation to the following effect: He said "the Bank wants the deeds". I said "why"? He said "the Bank needs them for security". I was aware that the Bank would be advancing money to Palansa Pty Ltd but I was not aware of the nature of the security being offered other than that the deeds were required by the Bank. 16. I handed the certificates of title to Mr Haberle. The Judge did not reject this evidence, and it seems, with respect, that it was simply overlooked. The Court should accept it and it was supported by the evidence of Mr Wright. The evidence of Mr Haberle on this question was equivocal, and on other matters, where they were in conflict, Mrs Green was preferred. Mr Haberle appears to have retained the certificate of title for the vacant block until September when it was used by the company to obtain a temporary loan of $10,000 for other purposes. This was paid off in November and the certificate released into Mr Haberle's possession. In December the certificate was re-delivered to the Bank as security for the $20,000 loan. The Bank's claim to priority on these facts was very much stronger than its claim on the facts as the Judge understood them. The case is one where the holder of the prior equitable mortgage, having obtained possession of the certificate of title, released it to the mortgagor so that it could be used as security for another loan. Properly understood the case is within the principles stated by Mason and Deane JJ in Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 at 339: ... Where the owner of the later equitable interest is led by conduct on the part of the owner of the earlier interest to acquire the later interest in the belief or on the supposition that the earlier interest did not then exist, priority will be accorded to the later interest. URJ COMMONWEALTH BANK OF AUSTRALIA v GREEN (Handley JA) 3 In Dixon v Muckleston (1872) LR 8 Ch 155 at 160, in a passage quoted with approval in Abigail v Lapin & Anor [1934] AC 491 at 506-7, Lord Selborne said that conduct by the holder of the prior equity which might cause it to be postponed to a later one might involve an express representation or 'his own wilful and unjustifiable neglect'. He continued: By one or other of those means he may have armed another person with the power of going into the world under false colours; and if it be really and truly the case that by his act, or his improper omissions, such an apparent authority and power has been vested in that other person, he is bound upon equitable principles by the use made of that apparent authority and power. Acommon example of such conduct illustrated in Cash Resources Australia Pty Ltd v BT Securities Ltd [1990] VR 576, and the cases cited at 583-5, is where an equitable mortgagee has allowed his mortgagor to retain or regain possession of the title deeds and been postponed to a subsequent equitable encumbrancer who has obtained possession of those deeds. These principles apply in the present case and entitled the Bank to priority in respect of the vacant land as well. The same result flows from another principle accepted in Abigail v Lapin at 507-9, derived from Brocklesby v Temperance Permanent Building Society [1895] AC 173 at 180 where Lord Herschell at 180 said: Where a person has ... been intrusted with the possession of title deeds with authority to raise money upon them, the owner of the deeds cannot take advantage of any limitation in point of amount which he has placed upon the authority as against a lender who had no notice of it. Mrs Green handed over the certificates of title because the Bank wanted them as security. She trusted Mr Haberle and the company and did nothing to ensure that her mortgage retained its priority. Mrs Green may have only authorised, or intended to authorise, Mr Haberle to borrow further funds on second mortgages, but he was given possession of the certificates of title. The statement of the Privy Council in Abigail v Lapin at 508 is therefore applicable: The case ... becomes one of an agent exceeding the limits of his authority but acting within its apparent indicia. Mrs Green appeared in person but was given leave to file written submissions after the hearing. Written submissions signed by counsel were later filed. One of the points taken in those submissions was that the Bank had constructive notice of Mrs Green's prior equity because she was in possession. The principle is not available on the facts. Mrs Green did not go into possession of the house block until early in 1990 (AB 85) and was not in possession of either block in December 1989 when the Bank took its equitable mortgage by deposit. Another point invoked the judgment of Mason and Deane JJ in Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326, especially at 342-3, and submitted that the Bank's further advance of $20,000 was not reasonably foreseeable as a consequence of Mrs Green delivering the certificate of title to the vacant block to Mr Haberle in May 1989. There was a further submission that the discharged loan of $10,000 exhausted the authority of Mr Haberle and the company to deal with that certificate of title. The reported decisions demonstrate that misuse of the apparent authority conferred by possession of a title deed is likely to occur. In the case of Torrens title land, the unlimited apparent authority conferred by possession of a certificate of title continues so long as there is no caveat on the title. There is no support 4 UNREPORTED JUDGMENTS either in principle or in the reported decisions for the view that such apparent authority is exhausted by a loan which is later discharged. In my judgment therefore the appeal succeeds and the Bank is entitled to a declaration that its mortgage over the vacant block ranks prior to the mortgage of Mrs Green. Whatever may have been the position with the $10,000 loan, there is no finding or evidence that the $20,000 loan was a fraud on Mrs Green. The certificate of title was used for the general purposes disclosed to her when she handed it over to Mr Haberle in May 1989. The loan was used to complete the house for the benefit of Mrs Green who went into possession soon afterwards. In all probability the expenditure increased the value of the house block, possibly by more than the amount expended, for the benefit of Mrs Green, as well as the Bank. Since preparing the above reasons I have had the benefit of reading the reasons for judgment of Smart AJA in draft form. His Honour relies on the absence of any acceptance of the $20,000 mortgage signed by Mrs Green, in conjunction with the Bank's conduct prior to the $130,000 loan, as grounds for preferring Mrs Green's equity in the vacant block to that of the Bank. The findings of Young J relating to the loans over the house block led him to conclude that Mrs Green had 'lulled' the Bank into the belief that the property was unencumbered. If, as the Judge held, the Bank had reasonable grounds for this belief in May, it would be reasonable for the Bank to hold the same belief in December unless additional information had become available to it in the meantime, but none did. The Bank, which had reasonable grounds for believing it had the only mortgage over the house block, had no grounds for thinking that the vacant block was encumbered, especially when it was given the relevant certificate of title. In my opinion the following orders should be made: (1) Appeal allowed with costs. (2) Declaration made by Mr Justice Young on 3 April 1995 set aside. (3) In lieu thereof declare that the Commonwealth Bank as mortgagee of the land comprised in folio identifier 21/255127, pursuant to the letter of simple deposit dated 13 December 1989, has priority to the extent of $20,000 plus applicable interest and costs over the interest in such land held by the plaintiff. (4) The plaintiff to pay the Bank's costs of the notice of motion of 30 January 1995. (5) The respondent is to have a Certificate under the Suitors" Fund Act. SMART AJA. Mrs Green was employed in a modest position by Phillip Anthony William Haberle and Allan Wright, two real estate agents who carried on business under franchise as Raine and Horne Real Estate (Thornleigh). In October 1988 she was due to receive her share of the proceeds of sale of the former matrimonial home. She had to provide a home for herself and the children. Haberle and Wright had a plan as to how she might do this. It would advance their financial interests and effectively top up her funds. Mr P J Giumelli had been the Manager of the Thornleigh branch of the Commonwealth Bank at Thornleigh since 1987. Raine and Horne Real Estate Thornleigh conducted their regular banking business with the Bank's Thornleigh branch and Giumelli had many dealings and much contact with Haberle and Wright over the period July 1987-May 1989 over the telephone, over the bank counter and in his office. They lunched and entertained each other on occasions. URJ COMMONWEALTH BANK OF AUSTRALIA v GREEN (SMART AJA) 5 Initially, Haberle and Wright were the only real estate agents who banked with the Thornleigh branch and Giumelli regarded them as being a good source of potential new business. The initial plan propounded by Haberle and Wright appears to have been to purchase two blocks of land, build a house on one, and re-subdivide part of the block on which the house was built and the vacant block thereby producing the house block and 2 vacant blocks which could be sold. Mrs Green was to provide the money to buy the land and meet part of the construction costs with Haberle and Wright supervising the construction using sub-contract labour and procuring approval of the subdivision A shelf company, known as Palansa Pty Ltd was used. Mrs Green was to obtain the house and the profits were to be divided between Haberle, Wright and Green. The plan favoured the men. Mrs Green was vulnerable after her divorce and she and Mr Wright were, at one stage, romantically attached. On 25 October 1988 Palansa (probably per Haberle or Wright & Haberle) saw Giumelli and made application for a loan of $10,000 for one week. Giumelli was told that Palansa was to be used as a vehicle to transact a property investment business and that the three directors were Haberle, Wright & Green. Giumelli recorded that Palansa was purchasing the house block for $59,000 on which it intended to erect a home and sell it and that Mrs Green expected settlement of the sale of her home within 2 weeks. The proceeds were to fund the purchase of the land and the bulk of the building costs. The loan moneys were advanced. The bank accepted a Deed of Guarantee signed by Haberle, Wright & Green. Within a few days of 12 December 1988 Palansa (per Haberle and Wright) executed a mortgage in favour of Mrs Green in respect of the house block and the vacant block. She said that no amount was inserted in the mortgage at that stage as it was not clear how much would be lent. An amount of $141,800 was inserted later. The mortgage was not registered. She advanced the following sums to Palansa: 14/12/88 $ 67,000 27/1/89 1,300 15/2/89 50,000 3/3/89 8,000 1/5/89 5,500 19/5/89 10,000 $ 141,800 The settlement moneys received by Mrs Green had been invested with European and Australian Finance Co Ltd, an associated company of the bank. As money was needed Giumelli telephoned Haberle and an amount was nominated or agreed. Haberle spoke to Mrs Green who then telephoned Giumelli and made arrangements for the money to be transferred, signing the necessary cheque. The transfer to Palansa of the house block was registered at the Land Titles Office on 21 December 1988 and that of the vacant block on 2 March 1989. It is not clear when either certificate of title was delivered to Mrs Green. The second certificate could not have been delivered before early March. It would have issued to Palansa. While there is evidence that both certificates of title were in Mrs Green's possession about late May 1989 there is conflicting evidence on the point and it may have been only that for the house block. Giumelli was to conclude his period at Thornleigh on Friday, 26 May 1989. On 25 May 1989 6 UNREPORTED JUDGMENTS Haberle and Wright saw Giumelli and on behalf of Palansa sought a loan of $130,000 to complete the erection of a residential investment property on the house block. The contact noted by the bank was Haberle. The bank recorded the major shareholders as Haberle, Wright and Green. From Giumelli's note it appears that Haberle and Wright were the moving parties. The note reads: The company was formed late last year by Messrs Haberle and Wright to purchase vacant land at Hornsby on which to erect a home for investment purposes. Messrs Haberle and Wright are the operators of our R/E connection Raine & Horne Thornleigh (Masscherlook & Associates P/L T/AS). In addition to the lot that is the subject of this application the company has also purchased the adjoining lot upon which an investment property will be erected at a latter date. Both lots are unencumbered. At a much latter stage it is intended to subdivide a portion of the rear of each lot to provide a third lot, which could be sold to reduce borrowings. Income from the three shareholders of the company together with proposed rent from the home to be constructed of $250 p/w is more than sufficient to cover repayments on the loan sought. Initially Mrs Green will occupy the property on completion and will pay the rent of $250 p/w. The home is being constructed on an owner/builder basis with an engineer supervising construction of the foundations due to the difficulty of the block. Messrs Haberle and Wright are well versed in building requirements etc and have the necessary ability and technical backup if required to successfully complete the project. Accordingly, although outside my D/L/A in view of the owner/builder nature of the project I have approved the loan sought subject to satisfactory costing of the project by Property Valuation's Dept. Copy to Region for information. Giumelli has recorded the assets and liabilities of Haberle and Wright. Each contains the generous sum of $40,000 as the value of the equity of each in Palansa. There is a summary of the assets of Mrs Green but no statement of her liabilities. Mrs Green is shown as having an asset comprising an equity of $40,000 in Palansa Pty Ltd This is remarkable. She had contributed $141,800 to Palansa as the bank and Giumelli well knew. There is no reference to the loan by her to Palansa. It is not included in her assets. It is probable that the value of the house block and the work done exceeded $120,000. There has been appropriated to Haberle and Wright an equity of a value in Palansa which they did not have and her assets have been mis-stated. Giumelli knew, as he conceded that it was Mrs Green who was providing the money to Palansa for the purchase of the land and the cost of the building. The loan was approved by Giumelli although, as he records, it was outside his delegated lending authority. On 26 May 1989 the bank (per Giumelli) wrote to Palansa confirming approval of a Residential Investment Property Loan of $130,000 to assist with the construction of a home on an owner builder basis at 16 Lowanna Place, Hornsby (the house lot). Approval was subject to the bank's usual terms and conditions, a satisfactory security position being obtained, a satisfactory owner/building costing and an on completion valuation. The security required was: 'Mortgage over property situated at Lot 16 Lowanna Place, Hornsby.' No security was required over the vacant block. The bank required Haberle, Wright and Green to sign the letter of offer accepting the terms and conditions contained in it and they did so. It was put to Mrs Green by counsel for the bank that she had seen the letter on or about 26 May 1989. Mrs Green could not recall the exact date but she did remember signing it. Mrs Green said that when it came to signing the document URJ COMMONWEALTH BANK OF AUSTRALIA v GREEN (SMART AJA) 7 she did not read it. When she asked what it was all about she was told 'Just sign it'. She said 'it was all hurry, hurry.' As an employee of Haberle and Wright, Mrs Green was in an invidious position. Haberle could not recall saying to Mrs Green that they had to hurry because Giumelli was leaving the Thornleigh branch of the bank. Giumelli was leaving and did leave that branch. There was an obvious flurry by Haberle and Wright to obtain a loan approval before Giumelli left. According to Haberle and Wright while Mrs Green did not attend the meeting with Giumelli she participated in discussions about seeking the loan. She was aware of the loan's approval and the details. Paragraphs 14, 15 and part of 16 of Mrs Green's affidavit relate to the mortgage given by Palansa to her and read: After the Mortgage was executed it was handed to me and kept by me at my home. The Certificates of Title in relation to the above mentioned properties were handed to me at a later date, sometime early in 1989. In approximately May 1989, Mr Phillip Haberle requested that I return to him the Certificates of Title. We had a conversation to the following effect: He said, 'The bank wants the deeds.' I said, 'Why?' He said, 'The bank needs them for security.' I was aware that the bank would be advancing money to Palansa Pty Ltd but I was not aware of the nature of the security being offered other than that the deeds were required by the bank. I handed the Certificates of Title to Mr Haberle. I had no part in the application for or granting of a residential property investment loan to Palansa Pty Ltd by the Commonwealth Bank of Australia, Thornleigh Branch. In her cross examination this passage appears: Q— I put to you when Mr Haberle asked you for deeds in May 1989, you knew the bank required them for security? A— I just didn't even think about it because I already had a mortgage and that's why I said 'why'. I handed them over because I trusted him. I know he said that they wanted them for security.' She had given this explanation a little earlier: ... they just told me to do this and to do that and to hand the documents back. I suppose I was pretty vulnerable at the time, having just separated from my husband and everything. So I was 'off the air' By contrast Haberle, after referring to para 14 of Green's affidavit, stated in para 14 and 15 of his affidavit. Ihave no recollection of the certificates of title for the two blocks of land being given to Green. My recollection is that they were kept by the Commonwealth Bank at Thornleigh in safe custody for Palansa. However, it may be that the certificates of title were given to Green for safekeeping after the purchase of the two lots by Palansa but there was no mortgage document given to Green at that time because the mortgage was only by Palansa to Green in early to mid 1990. I have no recollection of the conversation alleged by Green in paragraph 15 of her affidavit sworn 19 February 1991. Even if Green did have the safekeeping of the certificates of title at that time, I doubt that the conversation took place because the Commonwealth Bank did not require both certificates of title as security in May 1989, only the certificate of title for Folio Identifier 16/240146. It is rational and probable that he would have asked for the certificate of title to the house block. He could have asked generally for the certificates of title but Haberle doubted this as the bank did not require that to the vacant block. Of more 8 UNREPORTED JUDGMENTS importance is whether she had and gave both certificates to Haberle. He does not deal with this point directly but he seems to be implying that she probably did not do so. Mr Wright stated that the title deed for the vacant block was given to the bank at the time of an extension of the existing mortgage for extra money to complete the house, that is, the extra $20,000. Mr Wright stated that the bank held a first mortgage over the house block and that it asked later for the deeds to the vacant block which Mrs Green held at the time which she supplied to them. Mr Wright was confused about the lot numbers. I have allowed for this and the brief summary refers to the position as Wright meant to convey it. The judge found that the certificate of title to the vacant lot would not appear to have come from Mrs Green. That finding would appear to have been based on Haberle's affidavit. The bank contended that the judge's finding was wrong and did not accord with the evidence of Mrs Green and Mr Wright. The judge did not discuss the evidence on the point in his reasons. However, he stated that he had reviewed the whole of the relevant material. It is possible that Mrs Green did not receive the certificate of title to the vacant block. The judge saw all the witnesses and the impressions which they made as they gave their evidence were important. The judge was less than enamoured of the conduct and evidence of Wright and Haberle. The main thrust of the hearing was directed to the events of May and June 1989 and the mortgage to the bank for $130,000. The later extension of the mortgage appears to have been a subsidiary issue. Mrs Green was unrepresented at the trial and this placed her at a marked disadvantage. This was evident when she attempted to cross examine the bank's witnesses. Mrs Green may not have appreciated the importance of investigating the history of the dealings with the certificate of title to the vacant block. The judge was better placed than I am to assess the situation. All these factors have increased my diffidence about disagreeing with the judge but the balance of the evidence favours the view that Mrs Green probably did receive the certificate of title to the vacant lot and probably handed it to Haberle or Wright in about May 1989 or at a later stage. The other alternative is that she left it in their hands and did not attempt to obtain it from them. The judge accepted that Mrs Green was unaware of the extension of the mortgage and further monies being advanced. She was also unaware that a few months before the extension of the mortgage the certificate of title to the vacant lot had been wrongly used as security for a short period (a couple of months) for the overdraft of Haberle and Wright. I have benefited by reading the reasons of Handley JA. I do not disagree with the statements of principle contained in those reasons. One of the troubling aspects of the case is that Mrs Green would not, and could not be expected to, be familiar with the rules as to equitable priorities and the effect of releasing either or both certificates of title. Nor could she be expected to know that she should have notified the bank of her mortgage. These factors are not decisive. Giumelli agreed that he was aware that Mrs Green was putting money 'into the proposition'. He insisted that he 'was not aware that there was any mortgage involved in it.' Giumelli agreed that Mrs Green's assets had decreased from $141,000 to $40,000. However, he contended that he had to look at the company structure which involved three shareholders with an equal number of shares. He said that at the stage of receiving the loan application and approving the loan it did not URJ COMMONWEALTH BANK OF AUSTRALIA v GREEN (SMART AJA) 9 strike him that Mrs Green had advanced $141,000 as he was not concerned with that. He claimed that he had to accept what Haberle and Wright as officers of the company, told him and that they said that the lots were unencumbered. With companies obtaining a loan direct on securities offered by it, as distinct from securities provided by a third party, it was not banking practice to ensure that the equal lady shareholder understood what was happening. He dealt with the officers of the company who were attending to the matter. It was the company which was giving the mortgage not an individual. While Giumelli may not have recalled as at 25/26 May 1989 the precise amount which Mrs Green had advanced he would have been aware of the approximate amount and that she provided all the money. He would have also been aware that Mrs Green worked for Haberle and Wright. The whole course of dealing between Giumelli on behalf of the bank and Haberle and Wright as related to Mrs Green smacks of dubious practice. On the bank's figures Haberle and Wright had each gained $40,000 and Mrs Green had lost $80,000. The bank knew that all the money had come from Green. Given the knowledge of Giumelli and the Bank, the circumstances and the relationship existing between Giumelli and Haberle and Wright, the approach taken by the Bank of not ensuring that Mrs Green understood what had happened and was happening was decidedly unsatisfactory and inequitable. Mrs Green did not appeal from the decision of the trial judge granting the mortgage over the house lot to the bank by Palansa for $130,000 priority over the mortgage by Palansa to her. The judge held that the prior interest of Mrs Green was postponed to the bank's interest because the equities were not equal. The judge held that Mrs Green was aware that the bank was being approached for finance of $130,000, she voluntarily gave up her certificate of title so that it could be lodged with the bank, she signed a document and she did not tell the bank about the mortgage which she held. However, she had no contact with the bank about the $130,000 mortgage given by Palansa to the bank other than the letter which she signed accepting the bank's terms and conditions. Absent an appeal by Mrs Green it is not possible to revisit the judge's findings and decision as to the priority of the $130,000 mortgage from Palansa to the bank. However, I would not ignore the course of dealing and the bank's conduct when considering the bank's appeal against the judge's decision holding that the mortgage by Palansa to Mrs Green had priority over the mortgage over the vacant lot by Palansa to the bank. The judge held that the facts as to the further $20,000 mortgage were not nearly as strong in favour of the bank. He thought that the certificate of title did not appear to come from Mrs Green, she did not sign any piece of paper to be given to the bank and she did not know that the bank was making a further advance. The bank complained that the judge had made a factual error in saying that the certificate of title to the vacant lot did not appear to come from Mrs Green. I have earlier discussed the evidence as to this point and indicated my conclusion that probably it either did so or was in the possession of Haberle and Wright and Mrs Green never sought or obtained it. I accept that allowing Palansa or Haberle and Wright to have possession of the certificate of title so it could give it to the bank tells against Mrs Green especially when the bank was given it by the company as the borrower. 10 UNREPORTED JUDGMENTS Arming the bank with the certificate of title or enabling it to be so armed and giving no notice of a prior mortgage is usually sufficient to displace the priority of the earlier unregistered mortgage. Unlike the $130,000 mortgage, the bank did not require Mrs Green to sign an acceptance of the terms and conditions of the $20,000 loan. This, coupled with the bank's conduct in May 1989, its knowledge of who had provided the money, and its knowledge of the relative positions of Haberle and Wright as the employers of Mrs Green and her not being told of the further loan lead me to the conclusion that the prior mortgage of Palansa to Mrs Green should be preferred in priority to the later $20,000 mortgage of Palansa. I would dismiss the appeal. (1) Appeal allowed with costs. (2) Declaration made by Mr Justice Young on 3 April 1995 set aside. (3) In lieu thereof declare that the Commonwealth Bank as mortgagee of the land comprised in folio identifier 21/255127, pursuant to the letter of simple deposit dated 13 December 1989, has priority to the extent of $20,000 plus applicable interest and costs over the interest in such land held by the plaintiff. (4) The plaintiff to pay the Bank's costs of the notice of motion of 30 January (5) The respondent is to have a Certificate under the Suitors" Fund Act. The respondent appeared in person. Counsel for the appellant: R G Forster SC Solicitors for the appellant: L E Taylor