New South Wales Supreme Court CITATION : Garnock & (3) Ors v Black & (4) Ors (No. 2) [2005] NSWSC 1218 HEARING DATE(S) : 21 November 2005 and 22 November 2005 JUDGMENT DATE : 2 December 2005 JURISDICTION : EQUITY DIVISION JUDGMENT OF : Lloyd AJ DECISION : 1. The amended summons is dismissed. 2. Costs are reserved. 3. The exhibits may be returned. CATCHWORDS : STATUTES: - Acts of Parliament - operation and effect of statures - operation and effect of ss 105-105D of the Real Property Act 1900 (NSW) - REAL PROPERTY:- Torrens system - writ for the levy of property - effect of registration Real Property Act 1900 (NSW) s 43A, s 105, s 105A, s 105B, s 105D LEGISLATION CITED : Civil Procedure Act 2005 (NSW) s 112 CASES CITED : Cooper Brooks v Federal Commissioner of Taxation (1081) 147 CLR 297 Bruce Lachlan Garnock - First Plaintiff Sarah Jane Garnock - Second Plaintiff Robert Leonard Luff - Third Plaintiff Lynette Anne Luff - Fourth Plaintiff Stuart Alexander Black - First Defendant PARTIES : Vaughan Lee Chapman - Second Defendant Andrew Phillip Carter - Third Defendant The Sheriff of New South Wales - Fourth Defendant Marilyn Claire Smith - Fifth Defendant FILE NUMBER(S) : SC 5164 of 2005 A J Grant - Plaintiffs COUNSEL : J Stoljar and K Dawson - First, Second and Third Defendants N/A - Fourth and Fifth Defendants JMA Legal - Plaintiffs SOLICITORS : Stephen Blanks & Associates - First, Second and Third Defendants N/A - Fourth and Fifth Defendants LOWER COURT JURISDICTION : - 7 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION Lloyd AJ Friday, 2 December 2005 5164/05 BRYCE LACHLAN GARNOCK & (3) ORS v STUART ALEXANDER BLACK & (4) ORS JUDGMENT (No. 2) 1 HIS HONOUR: The basic facts of this case are set out in my interlocutory judgment of 21 November 2005: see Garnock & (3) Ors v Black & (4) Ors [2005] NSWSC 1217. 2 The plaintiffs are the purchasers of the land known as "Wanaka". The plaintiffs' transfer and associated documents are unable to be registered because of the recording in the Register of the writ for the levy of property: see ss 105(2) and 105A(2) of the Real Property Act 1900 (NSW). 3 The first three defendants, Messrs Black, Chapman and Carter, are creditors of the registered proprietor of the land, Mrs Smith, the fifth defendant in these proceedings. The first three defendants caused the writ to be recorded by the Registrar-General. The fourth defendant is the Sheriff of New South Wales, who has taken no part in these proceedings. 4 The plaintiffs seek a declaration that they are entitled to priority over any interest in the land held by the first three defendants; an injunction restraining them and the Sheriff from executing the writ against "Wanaka"; and an order that the first three defendants execute and lodge with the Registrar-General an application for cancellation of the recording of the writ: see s 105D of the Real Property Act. 5 The case is about the operation and effect of ss 105 – 105D of the Real Property Act, relating to the recording of writs in the Register. The relevant provisions for the purpose of the present case are as follows: 105 Recording of writ in Register (1) A writ, whether or not it is recorded in the Register, does not create any interest in land under the provisions of this Act. … (2) Subject to subsections (3), (5) and (6), the Registrar-General may record a writ in the Register pursuant to an application in the approved form which: (a) identifies, by reference to a folio of the Register or to a registered dealing, the land in respect of which the recording is sought, (b) is accompanied by a sealed copy of the writ, (c) incorporates, or is accompanied by, a statutory declaration that, to the satisfaction of the Registrar-General, identifies the judgment debtor named in the writ with the registered proprietor of the land comprised in that folio or registered dealing, and (d) is lodged before the date shown on the writ as the date on which the writ expires. … 105A Effect of recording writ (1) Subsection (2) does not apply to a dealing affecting land in respect of which a writ is recorded under section 105 where the dealing is: (a) a transfer giving effect to a sale under the writ, … (q) an application under section 105D for cancellation of the recording of a writ, … (2) Where a writ is recorded under section 105 and a dealing (other than a dealing to which, by the operation of subsection (1), this subsection does not apply) that affects the land to which the recording relates is lodged for registration within the protected period, the Registrar-General shall not, during the protected period, register the dealing unless the writ is referred to in the dealing as if it were a prior encumbrance. … (9) In this section, protected period , in relation to a writ, means the period: (a) that begins when the writ is recorded in the Register, and (b) that ends at the expiration of 6 months after the writ is recorded in the Register, or on the expiration of the writ, whichever first occurs. 105B Registration of transfer pursuant to sale under writ (1) A transfer pursuant to a sale under a writ is registered when it is recorded in the Register and the Registrar-General may make a like recording on the relevant certificate of title or duplicate registered dealing when it becomes available to the Registrar-General. (2) Upon the registration of a transfer referred to in subsection (1), the transferee holds the land transferred free from all estates and interests except such as: (a) are recorded in the relevant folio of the Register or on the relevant registered dealing, (b) are preserved by section 42, and (c) are, in the case of land comprised in a qualified folio of the Register, subsisting interests within the meaning of section 28A. … 105D Cancellation of recording of writ (1) The Registrar-General may cancel a recording in the Register of a writ if application for the cancellation of the recording is made in the approved form and: (a) the application incorporates or is accompanied by: (i) a withdrawal of the writ signed by the judgment creditor, and (ii) a statutory declaration that satisfies the Registrar-General that the writ has not been executed by sale of the land to which the application relates, (b) (Repealed) (c) the application incorporates or is accompanied by evidence that satisfies the Registrar-General that the writ has been satisfied otherwise than by sale of the land to which the application relates, …. 6 In my previous judgment I considered the effect of s 112 of the Civil Procedure Act 2005 (NSW): 112 Effect of judgment and writ of execution on land (1) A writ of execution against land binds the land, as from the time the writ is delivered to the Sheriff, in the same way as a writ of execution against goods binds the property in the goods. (2) Despite subsection (1), a writ of execution does not affect the title to land acquired by a person in good faith and for valuable consideration unless, when the person acquires title, he or she has notice that such a writ has been delivered to the Sheriff and remains unexecuted. (3) A judgment in any action at law does not of itself bind or affect any land. The Plaintiffs' Submissions 7 Mr A J Grant, appearing for the plaintiffs, made the following submissions: (a) the plaintiffs are entitled to priority over Messrs Black, Chapman and Carter; (b) when the plaintiffs exchanged the contract with Mrs Smith on 15 July 2005, they acquired an equitable estate in and beneficial ownership of "Wanaka"; (c) on completion on 24 August 2005 they acquired a legal estate by dint of s 43A if the Real Property Act; (d) they also acquired on completion a "dealing registrable", being a duly stamped transfer, and the certificates of title; (e) neither the issue of the writ nor its registration bound or affected the land (s 105(1) of the Real Property Act) and thus did not create any interest in "Wanaka"; (f) the writ only bound the land upon delivery to the Sheriff on 26 August 2005 (s 112 of the Civil Procedure Act); (g) accordingly the plaintiffs acquired a legal estate pursuant to s 43A or, alternatively, at least an equitable estate on completion of the purchase on 24 August 2005, which has priority over the right arising on delivery of the writ to the Sheriff on 26 August 2005. Further submissions were made regarding the effect of the recording of the writ. Conclusion 8 The position is governed, in my opinion, by s 105A(2) of the Real Property Act noted above. Having recorded the writ, Messrs Black, Chapman and Carter are entitled to the statutory procedures by which the Sheriff can effect a sale of the land and a purchaser from the Sheriff is entitled to have the transfer recorded: s 105B. 9 I accept the submission of Mr J Stoljar and Ms K Dawson, appearing for Messrs Black, Chapman and Carter, that s 43A of the Real Property Act is irrelevant to these proceedings. The "deemed" legal estate to which that section refers could only have been acquired when a "dealing registrable" was taken by the plaintiffs, which was after the recording of the writ. The plaintiffs in the present case have failed to establish that they have taken under a "dealing registrable". As pointed out by Mr Stoljar and Ms Dawson in their submissions, the transfer obtained by them is not registrable because it does not refer to the writ "as if it were a prior encumbrance" as required s 105A(2), because the writ had by then already been recorded. 10 Importantly, however, the recording of the writ does not create any interest in the land: s 105(1). Accordingly, there is no priority dispute between competing interests in land in the conventional sense. 11 I also accept the submission that s 43A of the Real Property Act only protects a purchaser who acquires land for value without notice. The plaintiffs will be deemed to be on notice of the writ if they fail to undertake searches that ought reasonably to be carried out. The plaintiffs' solicitors carried out an electronic search between 8:53 and 8:55 am on the day of settlement, but settlement did not occur until about 5 hours later. The evidence of a conveyancing expert, Mr N J Moses, is that the usual practice is to make a final search either simultaneously with settlement or as near as practically possible to the time of completion. He concluded that the actions of the plaintiffs' solicitor fell short of standard practice. It follows that the plaintiffs failed to undertake a search that ought reasonably to have been carried out. If they had done so then they would have discovered the recording of the writ. 12 I observe that the principal authorities on which the plaintiffs rely apply to a statutory regime that existed before the insertion of the present ss 105 to 105D into the Real Property Act. The outcome for which the plaintiffs contend would reintroduce the very mischief which these amendments were designed to meet, as explained by the Minister's second reading speech in September 1976: I now come to the last, and almost certainly the most important of the reforms contained in this bill. At the time when I introduced the bill I felt it was better to leave a detailed explanation of the subject until the second-reading stage; accordingly I now offer that explanation. The provisions to which I refer are to be found in proposed sections 105 to 105D. Since the commencement of the Real Property Act on 1st January 1863, it has generally been acknowledged that the machinery provided by that Act for giving effect to sales in execution has not worked effectively. The breakdown is largely due to a judicial decision in Coleman v. De Lissa in 1885 that, irrespective of the provisions of the Real Property Act, a transferee taking under a sale by the sheriff or other court official selling pursuant to a writ of execution acquired only the beneficial interest of the execution debtor, burdened by any unregistered interests which might exist. The result of this judicial ruling has proved disastrous. Upon such a sale, because potential purchasers are buying an asset whose value cannot be ascertained, the maximum bid is usually a couple of dollars, not sufficient to cover the advertisement and conduct of the sale. As a result the judgment creditor usually gets nothing of the amount owing to him; the judgment debtor loses ownership of the land without any reduction of the judgment debt; a purchaser from the sheriff or from the district court bailiff may get a windfall or more probably, if unregistered interests affect the land, gets nothing. The obvious solution is to provide, legislatively, that a purchaser at a sale in execution takes the estate or interest then appearing upon the register. The provisions of the bill are designed to implement this principle. 13 Finally, the language of s 105A(2) is plain and unambiguous. As Professor E I Sykes pointed out: "this provision supplies a special priority": Sykes & Walker; The Law of Securities, 5th ed, 1993, p 517. The subsection clearly means what it says and says what it means. I need only to refer to the well known statements in Cooper Brooks v Federal Commissioner of Taxation (1081) 147 CLR 297 at 304-305 per Gibbs J: It is only by considering the meaning of the words used by the legislature that the court can ascertain its intention. And it is not unduly pedantic to begin with assumption that the words mean what they say. … However, if the language of a statutory provision is clear and unambiguous, and is consistent with the other provisions of enactment, and can be intelligently applied to the subject-matter with which it deals, it must be given its ordinary and grammatical meaning, even if it leads to a result that may seem inconvenient or unjust. 14 In the present case the plaintiffs' dealing cannot be registered unless the writ is referred to in the dealing as a prior encumbrance. 15 It follows that the amended summons must be dismissed. It would also follow that the plaintiffs should pay the defendants' costs, but since costs have not been argued then that question will be reserved. Orders 16 I make the following orders: 1. The amended summons is dismissed. 2. Costs are reserved. 3. The exhibits may be returned. I hereby certify that the preceding 16 paragraphs are a true copy of the reasons for judgment herein of the Honourable Mr Justice D H Lloyd. Associate Dated: 2 December 2005 ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.