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High Court of Australia |
Harold Alfred Templeton (Registrar of Titles of Victoria) Appellant; and The Leviathan Proprietary Limited Respondent.
H C of A
On appeal from the Supreme Court of Victoria.
16 December 1921
Knox C.J., Higgins and Starke JJ.
Owen Dixon (with him Reginald Hayes), for the appellant.
Weigall K.C. and Gregory (with them Latham), for the respondent.
Owen Dixon, in reply.
The following written judgments were delivered:—
Dec. 16
Knox C.J.
[After stating the facts as above set out, His Honor continued:—] The question for our decision is whether the Registrar of Titles was justified in refusing to register the transfer and memoranda of mortgages. On the face of the certificate of title the share formerly belonging to the testator in the property was vested in the said Nathaniel Lewis Levy, John Levi, Solomon Oswald Nelson and Algernon Benjamin Sanders as proprietors in fee simple without any indication that they held the share as trustees.
It was argued for the appellant, the Registrar of Titles, that the facts within his knowledge as Registrar showed that the transaction was a breach of trust, and that consequently he was justified in refusing to register the documents; that he knew from the order of Cussen J. that the vendors were trustees, and from documents in his office what were the trusts of the will and that two of the trustees held all the shares in the purchasing company. The contract, it was said, disclosed breaches of trust (a) in investing the purchase-money on second mortgage, (b) in investing the purchase-money on a contributory mortgage and (c) in investing the purchase-money on a security with an insufficient margin. To this contention the respondent answered that even apart from the order of Cussen J. the Registrar of Titles went beyond his duties and powers in refusing to register the document, his only concern being to see that the transferors were identical with the registered proprietors of the land, and that if their identity was established the Registrar had no right to refuse registration even if he knew that the registered proprietors were trustees and that the transaction was a breach of trust. The respondent further contended that in any event, the transaction having been authorized by the order of Cussen J., it was the duty of the Registrar to register the documents necessary to carry it out.
The principal questions discussed during the argument may be stated as follows:—(1) Leaving out of consideration the order of Cussen J. of 24th September 1920, does the transaction between the trustees and the company constitute a breach of trust on the part of the trustees? (2) Is it the duty or within the power of the Registrar of Titles to refuse to register a dealing which he believes on the facts within his knowledge as Registrar to be a breach of trust? (3) Does sec. 179 of the Transfer of Land Act 1915 operate before registration to confer a clean title on persons dealing with a registered proprietor when the transaction amounts to a breach of trust on the part of the registered proprietor? (4) Had Cussen J. jurisdiction to make the order of 24th September 1920? (5) If so, (a) what persons are bound by this order; and (b) what is its effect? (6) Is the respondent within the protection of sec. 76 of the Conveyancing Act 1915? I proceed to deal with these questions.
It was argued that the agreement to leave the balance of purchase-money outstanding on second mortgage must be regarded not as an investment of money but as a means of realizing an asset belonging to the trust estate. I am unable to accede to this argument. Under the will the duty of the trustees was (1) to sell the real estate and (2) to invest the proceeds in the manner specified by the will. If this transaction was not a sale, the trustees had no power to enter into it. If it was a sale, it was their duty to invest the proceeds of sale in their names or under their control in an authorized investment. The effect of the transaction into which they entered, if carried out, will be to deprive the trust estate of its undivided half share in the land and to get in exchange for it a contributory second mortgage without any margin of security and not falling due for ten years. It is difficult to conceive a clearer breach of trust.
Under secs. 55 and 233 (III.) of the Transfer of Land Act 1915 the duty is cast on the Registrar in certain cases to protect the rights of persons whose interests are not shown on the register; and I can see nothing in the Act to support the contention that in every other case the Registrar is bound to register a dealing, although he knows that the effect of his doing so may be to exclude or destroy the interests of persons having equitable rights against the registered proprietor.
It follows that the respondent, having actual notice that the transaction to which it was a party was a breach of trust, and not having got on the register, can derive no protection from the provisions of sec. 179 of the Act.
As I am of opinion that the transaction was a breach of trust, that the order of Cussen J. was not binding on the absent beneficiaries, and that the defect as to parties was not cured by sec. 76 of the Conveyancing Act, it follows that in my opinion the appeal should be allowed, and the order for mandamus discharged.
Higgins J.
This is an appeal from an order absolute for mandamus directed to the Registrar of Titles. The Supreme Court of Victoria has directed the Registrar to register (1) an instrument of transfer of land in Bourke Street, Melbourne, as for £96,000 to the Leviathan Company from Nathaniel Lewis Levy (registered proprietor of one undivided moiety) and from the same Nathaniel Lewis Levy together with John Levi, Solomon Oswald Nelson and Algernon Benjamin Sanders (I shall call these Sanders' trustees), registered proprietors of the other moiety; (2) an instrument of first mortgage of the same land from the Leviathan Company to the National Mutual Life Association to secure the repayment of £55,000 lent; (3) an instrument of second mortgage of the same land from the Leviathan Company to Sanders' trustees to secure £38,000 balance of the purchase-money. These three instruments—one transfer and two mortgages—are dated 22nd October 1920 and were lodged for registration on 25th October, together with the two certificates of title—one moiety in the name of Nathaniel Lewis Levy, the other moiety in the names of Sanders' trustees. Shortly afterwards an order made by Cussen J. in Chambers on originating summons (24th September 1920) was lodged in support of the application for registration.
It is of great importance to fix clearly what were the documents presented to the Registrar in order to find what he would see in them and whether he was justified in hesitating as to registration. Primâ facie, it is the duty of the Registrar to register any instrument presented in proper form and signed by a person competent in law, and according to the title as appearing on the register, to effect the dealing represented by the instrument.
Now, the transfer purports to be in consideration of (1) £58,000 paid by the company, as to one-half to Nathaniel Lewis Levy and as to the other half to Sanders' trustees; and (2) £38,000 intended to be secured by a second mortgage over the said land.
The first mortgage, to the National Mutual, for £55,000 is in the usual form, giving the mortgagee power on any default for seven days to sell, or to enter and demise. The mortgage debt is repayable on 30th September 1925. The second mortgage, in favour of Sanders' trustees (Nathaniel Lewis Levy is not mentioned separately as to his separate right), is not repayable (in due course) until 1st June 1925 as to £8,000 or until 1st June 1930 as to £30,000.
The order on originating summons is headed: "In the matter of the trusts of the will and codicil of Lewis Sanders late of Bourke Street" &c. "merchant tailor." It shows that three of the four Sanders' trustees were plaintiffs (including Nathaniel Lewis Levy) and one trustee (Algernon Benjamin Sanders) was a defendant; that counsel appeared for the plaintiffs; that other counsel appeared for Algernon Benjamin Sanders, Frederick Roy Sanders, Zara Octavia Glass, Estell May Sanders, Caroline Sanders and Abigail Nelson; and other counsel for Lylie Nelson, Dorothy Levi, Sybil Levi, Hubert Levi, Richard Glass and Nancy Glass. Although the three last-named parties are described in the heading as infants, there is nothing on the face of the order to show that they appeared by any guardian ad litem, or that there was any affidavit made (as is usual) by the guardian or by a solicitor, or any opinion of counsel on behalf of the infants recommending that the order should be made. There was no such affidavit in fact made, no such opinion in fact given.
Then the order declares "that it is for the benefit of the infant defendants and all other grandchildren of the testator who may hereafter be born and who may become entitled to share in the residue of the testator's estate and all other persons entitled to share in the said residue that the conditional contract dated twenty-eighth day of June one thousand nine hundred and twenty and made between the plaintiffs and the defendant Algernon Benjamin Sanders of the first part and the said Nathaniel Lewis Levy of the second part and the Leviathan Proprietary Limited of the third part for the sale to the said Leviathan Proprietary Limited of the land in the two certificates be carried out and that the plaintiffs and the defendant Algernon Benjamin Sanders as executors and trustees of the will and codicil of the testator are hereby authorized to carry the said contract into effect according to the terms thereof."
So far the Registrar would learn, from the order submitted and the instruments, that the four proprietors mentioned in one of the certificates were trustees of the will of Sanders, that infants born and possibly to be born were interested under the will, and that in the opinion of the learned Judge it was for the benefit of all interested under the will that a certain conditional contract should be carried out, and that the order purported to authorize the trustees to carry the contract into effect. The Registrar would also learn that the purchasers of land for £96,000 are allowed to get the legal estate as registered proprietors on payment of £3,000 only, to pay £55,000 by a first mortgage of the proprietors' own land to a stranger, and to pay the balance, £38,000, after ten years under a second mortgage of that land. In other words, the estate of Sanders as the result of the transaction would have exchanged its undivided moiety of valuable city land for a second mortgage of that land payable in 1930 (or, rather, for a half share in that second mortgage). This extraordinary result alone, even if we overlook other obvious considerations, justified the Registrar in holding his hand and in making inquiries. Under sec. 225 of the Transfer of Land Act the Commissioner can by summons require information and the production of relevant documents, and, without such a summons, the applicants produced to hïm the conditional contract referred to in the order on the originating summons, as well as the will of Sanders.
The contract produced is dated 28th June 1920. It is made between Sanders' trustees, Nathaniel Lewis Levy and the Leviathan Company. It contains an agreement to sell the land to the company for £96,000, payable as to £1,000 on the execution of the agreement, £57,000 after judicial sanction to the performance of the contract, £8,000 on 1st June 1925 and £30,000 on the 1st June 1930. The company is to be at liberty to make payments in the meantime on account, not less than £3,000 at a time. The vendors were to transfer the land to the company free from an existing mortgage when the company paid the £57,000, and to let the company give to the National Mutual the first mortgage for £55,000, and the company is to give to the vendors a second mortgage to secure the balance of £38,000. The purchaser is to enjoy the rents and profits, and to pay rates, as from 1st June 1920. The widow of the testator consented in writing to the sale on the terms of the contract, and also two sons out of four (the others were out of the jurisdiction) and four daughters and two adult granddaughters. Under the will and codicil of Sanders, Algernon Benjamin Sanders (a son and one of the trustees of the will) was to become partner in the tailoring business carried on with Nathaniel Lewis Levy in the buildings on the land. The real estate is devised to the trustees upon trust to sell, and from the proceeds of sale and the personal estate numerous legacies were to be paid and the residue is to be invested in the names or under the legal control of the trustees in Government securities, &c., or on mortgage of Victorian real estate. Subject to an annuity of £800 for the widow, the property and income are distributable among the testator's children or their issue. I set out only the points that seem material for the present purpose.
It is to be noticed, in passing, that the contract approved in the order, and which the trustees are authorized to carry into effect, is not a mere contract for sale—it involves also a contract for investment of the trust moneys. The investment for £38,000, at all events, (half of which belongs to the estate) is to be on second mortgage, a contributory mortgage, with practically no "mortgagee's margin" for security. Assuming the purchase-money, £96,000, to be the fair value of the land (counsel for the trustees have urged that it is more than the value), the sum of the first and second mortgages is £93,000. If there should be default for seven days in payment of interest by the company the first mortgagee can sell, and the second mortgagees are helpless unless they can redeem; and they may not be at the time in a position to redeem. Assuming that trustees selling for a gross sum of money may give a long term for the payment of the balance of the purchase-money, they must take the same precautions as to mortgage, legal estate, sole control, and "mortgagees' margin" for security, as if they actually received the purchase-money from the purchaser A and lent it out to B. It is impossible to conceive that any Court of equity would refuse to treat the provision for investment of the trust moneys (£19,000 in this case) as being other than a glaring breach of trust in itself.
In addition to these facts the Registrar found among the documents filed by the Leviathan Company in his office of Registrar-General of the State a return as to the allotment of shares in the company. This showed that the said Nathaniel Lewis Levy and Algernon Benjamin Sanders, as partners in the tailoring business carried on in the building, had sold to the company the business and assets in consideration of 35,000 £1 shares in the company fully paid up; and that these two were the only shareholders at the date of the return.
The result of the complex transaction, then, seems to be as follows:—A limited proprietary company, consisting of two persons carrying on business on the premises who hold all the shares fully paid up, buys the land for £96,000. Both of these persons are trustees of Sanders' will. They pay £55,000 with moneys borrowed from a stranger on first mortgage of the land, and they promise to pay the balance, £38,000, within ten years, the balance being secured by second mortgage. The mortgages, taken together, are for an amount nearly equal to the total purchase-money, and there is practically no margin of security for the investment. If the land decrease in value, the vendors will (apart from the company's covenants) lose the land, and also the purchase-money payable for it; if the land increase in value, the increment goes to the company and its shareholders—not to the vendors.
I propose to consider presently the effect of the order on originating summons; but apart from the effect of that order I am clearly of opinion that the Registrar was right in refusing to register these three instruments tendered, inasmuch as on the face of the documents submitted they constituted a breach of trust, an improper dealing within the meaning of sec. 233 (III.). It is true that no King's caveat or other caveat had been lodged under that section, and that no copy of the will and codicil had been deposited under sec. 55; but these devices are treated as merely means to the end of preventing improper dealings, and it has been repeatedly held that the Registrar may simply refuse to register (In re British Bank of Australia[21]; R. v. Registrar of Titles; Ex parte Briggs[22]; Ex parte Equity Trustees Executors and Agency Co.[23]). The Registrar has to discharge not merely ministerial but also judicial duties; and it is his duty to "prevent instruments from being registered which in law, as well as fact, ought not to be placed on the register" (Registrar of Titles v. Paterson[24]; Ex parte Bond[25]; R. v. Registrar of Titles; Ex parte Briggs[26]; Ex parte National Trustees Executors and Agency Co. of Australia[27]). It is not his duty to require proofs negativing any fraud or improper dealing where there is nothing on the face of the documents submitted to suggest it (Ex parte Wisewould[28]; Ex parte Equity Trustees Executors and Agency Co.[29]; Ex parte Campbell[30]; Hosken v. Danaher[31]) or to inquire into unregistered interests as to which the purchaser or person dealing with the registered proprietor is relieved from inquiry under sec. 179. But in this case the proposed transaction on its face is a breach of trust, and improper; and the burden of showing that the instruments ought to be registered falls on the applicant for the mandamus.
I have next to consider the effect of the order on originating summons. This order purports to give authority to the trustees to carry the contract into effect; and if the order is good on its face, if it is within the jurisdiction of the Supreme Court, it is not for the Registrar to question its propriety (Assets Co. v. Mere Roihi[32]). The Registrar has no appellate jurisdiction over the Supreme Court; he has to obey the Court. If the order is wrong, it can be set aside by the Full Court or the High Court or His Majesty in Council, and not otherwise. But if the order authorizing the trustees to carry out such a transaction in breach of trust is beyond the jurisdiction of the Supreme Court, the order is not a protection to the Registrar or to the assurance fund (sec. 250, &c.).
Now, it is clearly laid down that the Court cannot authorize a trustee to do that which the trustee could not do himself. In In re Hazeldine's Trusts[33] Farwell L.J. cites with approval these words of Law L.C. of Ireland[34]:—"In the exercise of its jurisdiction for the administration of trusts this Court, I apprehend, has no power to make or authorize any leases or other dispositions of trust property which the trustee could not have made himself. The Court, in such a case, whether it assumes the place of the trustee, or guides him in the discharge of his duties, is still confined within the limits of the trust as constituted by its author, and has no authority to go beyond those limits. Its business is to execute the trusts, not to alter them." The Court has jurisdiction to execute the trusts or to guide the trustee in the execution; but it has no jurisdiction to transgress the trusts or to authorize the trustee to transgress them. Order LV., r. 3 (e) and (f), is cited as enabling the learned Judge to make this order on originating summons, but the effect of r. 3 is misapprehended. It provides that trustees may take out as of course an originating summons returnable in Judge's Chambers for relief of a certain kind—that is to say, the determination without an administration of the estate or trust of any of the following questions or matters: "(e) Directing the ... trustees to do or abstain from doing any particular act in their character as such ... trustees; (f) the approval of any sale, purchase, compromise, or other transaction." Under the old practice, if the trustees came face to face with some one difficulty, the Court would have had to order that the trusts of the will be carried out by (or under the direction of) the Court; and after such a decree the trustees had to get the sanction of the Court for (practically) every step. To save such useless expense and delay, these rules enable the trustees to ask the guidance of the Court as to the specific difficulty without throwing the whole administration into Chancery. But, as has been shown in Suffolk v. Lawrence[35], the rule "only authorizes a direction to trustees to do or to abstain from doing some act within the scope of their trust"; and "sub-sec. (f) refers to the approval of any sale which could be made by the ... trustees ... and which, but for this order, the ... trustees might have been obliged to make at their own discretion, or for which they could have obtained the direction of the Court only in a proper administration action. I do not think that the rule gives the Court any power to direct a sale in a case in which it had no power to do so previously" (per Pearson J. in In re Robinson; Pickard v. Wheater[36]). Therefore this order, so far as it purports to authorize the trustees to carry out the conditional contract—to place the trust money on second mortgage, a contributory mortgage, and without any margin of value for security—is beyond the powers of the Judge on originating summons. It would also be beyond the powers of the Court even in an action; for under the Supreme Court Act (sec. 16) the Court has only "such power and authority to do exercise and perform all acts matters and things necessary for the due execution of such equitable jurisdiction as was possessed by the Lord High Chancellor of England in the exercise of similar jurisdiction within the realm of England" on 6th January 1852. The Lord Chancellor had no such power as is here assumed, to give authority to trustees to depart from their trusts. He could enforce and supervise and direct the mode of execution of trusts; he could not release trustees from their obligations. Under the will of Sanders, there was a trust to sell the real estate, i.e., to sell for a gross sum of money; the money was to be applied in payment of legacies, and the residue was to be invested in the names or under the legal control of the trustees on (inter alia) mortgage of Victorian real estate. This means, in my opinion, first mortgage, under the sole control of the trustees, with a proper margin of value for security, and repayable within a reasonable time. Here, the term of the second mortgage is ten years. That this objection to the order goes to the root of jurisdiction is shown by Buckley J. in In re Morrison[37]. There was under the will a trust to sell and invest, but not on company shares or debentures. A proposal was made to convert a business in which the testator was a partner into a limited company, and to give to the estate shares and debentures of the company. The proposed arrangement was, as assumed by the Judge, highly beneficial. But Buckley J. said there was "not jurisdiction to approve the agreement." It either amounted to a sale and investment on unauthorized securities, or an exchange of the property of the testator for other property which the trustees were not authorized to hold. There was "no power in the Court in the administration of the estate to do that which, if done by the trustees, would be a breach of trust" (see also In re Crawshay[38]).
Counsel for the company, however, have placed much reliance on the case of In re New[39], as showing that the Courts in England have sanctioned departure from the trust. It might be sufficient to say that New's Case was admittedly very exceptional, and that the exceptional facts do not exist in this case. Briefly, a testator held shares in a prosperous colliery company, and by his will directed his trustees either to hold the shares or to sell them and invest the proceeds on certain usual trust securities. Under a reconstruction scheme of the shareholders, it was proposed that shareholders in the existing company should exchange their shares for fully paid and more realizable shares in a new company. The Court sanctioned the exchange of the shares by the trustees for the shares and debentures in the new company, but only on the undertaking of the trustees to apply to the Court for leave to further retain the shares and debentures if they should desire to retain them for more than one year. The Court refused to authorize the retaining of the shares and debentures as a permanent investment. Romer L.J. said[40]: "As a rule, the Court has no jurisdiction to give, and will not give, its sanction to the performance by trustees of acts with reference to the trust estate which are not, on the face of the instrument creating the trust, authorized by its terms"; and he based the exceptional order made in this case on the fact that the will had not made any provision for the emergency which had arisen. Mere benefit to the estate was not enough. This case and others were reviewed by Kekewich J. and by the Court of Appeal in In re Tollemache[41]. Kekewich J. said that this extraordinary jurisdiction was not exercised if there were no urgency (and there is no urgency alleged in the present case), or if it would create a new trust in lieu of that being administered; and he refused to sanction the proposed change of investment not authorized by the instrument of trust, for the mere reason that it would be for the advantage of the beneficiaries—following Morrison's Case[42]. On appeal, the refusal was affirmed, Romer L.J. saying that In re New shows how far the Court will go, and beyond that point it will not go. The position in In re New seems analogous to that of trustees who are directed to invest on mortgage of real estate, and who cannot find a suitable investment; for the Court will sanction the leaving of money waiting investment in some substantial bank, even at interest (see Lewin on Trusts, 12th ed., 330). At all events, the extraordinary jurisdiction, such as it is, cannot be extended to such a case as the present, where the investment is not merely temporary until a regular investment can be found, and where the Judge bases his order not on urgent grounds or temporary purposes but solely on the benefit to the persons interested or to be interested. The order must be construed as other instruments, and the maxims Expressio facit cessare tacitum, Expressio unius exclusio alterius, apply.
There is, of course, the presumption that, where a superior Court of Record makes an order, the facts existed which could give it jurisdiction; but it is only a presumption. Where any order is made by an inferior Court, the burden lies on the party upholding the order to show that the facts were sufficient; where the order is made by a superior Court, the burden lies on the party impugning the order (per Holroyd J. in R. v. All Saints[43]; Gosset v. Howard[44]; Mayor &c. of London v. Cox[45], per Willes J.). I am assuming in favour of the company that the presumption in favour of jurisdiction applies to the order of a Justice made in Chambers under the special power conferred by Order LV., r. 3; but the point is by no means clear (see Gossett v. Howard[46]). Here it is not pretended that facts existed such as were proved in In re New[47]; and if we are at liberty to examine the affidavit in support of the order on the originating summons, as counsel for the company invited us, it is clear that the allegations were pointed to the mere issue of benefit and to the expediency of getting the sanction of the Court because "the company is so closely connected with two of the trustees." The order is based on a finding that it is for the benefit of the infants and others entitled to share in the residue to carry out the conditional contract, and on that finding alone; the conditional contract, if set out in full in the order, would be seen, obviously, to cover an investment which would be a clear breach of trust, and as it is the duty of the Court to carry out the will of the testator, not to substitute its own will, the order is, in my opinion, invalid. The Registrar's objections are confined to the investment, but the transfer as for £96,000 incorporates expressly as part of the consideration the second mortgage, and the first mortgage to the National Mutual is essential to the payment of the £58,000.
Much stress has been laid by counsel for the company on sec. 179 of the Transfer of Land Act, as entitling the company to get the instruments registered "except in the case of fraud." But, so far as the investment is concerned, the sanction is inapplicable, as the company is not a person "contracting or dealing with or taking or proposing to take a transfer from the proprietor of any registered land lease mortgage or charge." The mortgages presuppose the registration of the company as proprietor, and the mortgage to which the Registrar objects is a mortgage made by the company after the company becomes proprietor. Sec. 179 seems to be purely negative in effect. It prescribes that certain equitable principles as to notice of unregistered interests and as to the duty of the person dealing with the registered proprietor to make inquiries are not to apply to land under the Act; but it does not exempt the purchaser or other person dealing with the registered proprietor from all equitable principles, such as Qui prior est tempore potior est jure, nor does it exempt him from the consequences of knowing participation in a dealing which is improper. Therefore, when a proprietor, B, is under an equitable obligation to A as to the land and by contract with C comes under an obligation to C, of the two equitable obligations that of A prevails—until registration of C. If C become registered, his right prevails over the right of A by virtue of sec. 72, not of sec. 179, and therefore the duty of the Registrar to take every care before he registers is imperative. If he register an improper dealing, he may render the assurance fund liable to make good the loss to A.
For these reasons I am of opinion that, unless sec. 76 of the Conveyancing Act applies, the order of Cussen J. on originating summons is invalid for want of jurisdiction, that the Registrar was justified in refusing to register the mortgages and that the rule absolute for mandamus is wrong. Neither the Supreme Court nor a Judge thereof had power to authorize the trustees to take an investment which was not authorized by the will, or to accept in effect a second mortgage of the land—a contributory mortgage too with no proper margin for safety, in place of a title in fee simple to the undivided moiety of the land itself. I prefer to base my opinion on this ground of final substance; but I concur with my learned brothers in their view that the order on the originating summons, even if there were power to make it, is not a protection to the Registrar as against the two sons of the testator who were out of the jurisdiction and not parties to the summons. The rule is clearly laid down by Farwell L.J. in Brydges v. Brydges[48]:—"The Court has no jurisdiction, inherent or otherwise, over any person other than those properly before it as parties or as persons treated as if they were parties under statutory jurisdiction (e.g., persons served with notice of an administration decree or in the same interest with a defendant appointed to represent them), or persons coming in and submitting to the jurisdiction of their own free will, to the extent to which they so submit ... The Courts have no jurisdiction to make orders against persons not so before them merely because an order made, or to be made, may or will be ineffectual without it." This principle as to parties is a matter of jurisdiction of the Court (In re Shephard; Atkins v. Shephard[49]). It is not necessary to consider whether the order would be binding on infant beneficiaries, present or future.
But there is still a question as to the effect of sec. 76 of the Conveyancing Act 1915: "(1) An order of the Court purporting to be under any statutory or other jurisdiction shall not as against a purchaser be invalidated on the ground of want of jurisdiction or of want of any concurrence consent notice or service whether the purchaser has notice of any such want or not." This section differs from the English section from which it is taken (sec. 70 of 44 & 45 Vict. c. 41) in an important particular, the effect of which was probably not sufficiently considered by the draughtsman; for the Victorian Act applies not merely to an order made under any statutory or other jurisdiction, but to an order "purporting" to be so made; and the consequences may be very unexpected. But, whatever the effect of the section, it does not, in my opinion, apply to the impugned transaction here—the second mortgage from the company to the trustees. The order is not to be invalidated "as against a purchaser"; and "purchaser, unless a contrary intention appears, includes a lessee or mortgagee or an intending purchaser lessee or mortgagee or other person who for valuable consideration takes or deals for property" (sec. 3). The section, in short, is meant to secure the title of the person who takes property or an interest therein—land, lease, mortgage, &c.,—not to exonerate the person who gives title, where the transaction involves a breach of trust or improper dealing. There is much to be said, too, for the view that the order referred to in the section is to be treated as valid so far as regards the parties to the action only (see Jones v. Barnett[50]), but the provision that the order is not to be invalidated for "want of any concurrence consent notice or service" is puzzling. It is doubtful also, whether this order in Chambers can be treated as an order of the Supreme Court for the purpose of sec. 76—see sec. 3 ("Court"), secs. 6, 12, 21, 22, 25, 75, &c. The distinction between Court and Judge in Chambers seems to be recognized throughout the Act. But I prefer to rest my judgment on the ground that sec. 76 does not apply to a complex of transactions such as we find in the conditional contract.
I think it only fair to add that I see no ground for thinking that the parties to this transaction had any intention to defraud the infants, in the sense of seeking to get a pecuniary advantage at their expense.
Starke J.
The rule absolute for mandamus must, in my opinion also, be discharged. The case requires a consideration of (1) the proper functions and duties of the Registrar of Titles, (2) the jurisdiction of the Supreme Court, (3) the parties bound by the order of Cussen J. dated 24th September 1900, (4) the effect of the Conveyancing Act 1915, sec. 76. It is indeed unfortunate that we have not the reasoned opinion of Cussen J. upon any of these points. The parties have presented aspects of the case to us which were not brought to the attention of that learned Judge nor considered by him.
Considerable argument was heard to the effect that it was the duty of the Registrar of Titles to register any instrument recognized by the Transfer of Land Act, when it was executed by the registered proprietor of any title appearing on the register book. But the Act is not, in my opinion, an Act simply to facilitate the registration of documents: its purpose is to simplify title, and to enable the registration of title. Trusts or notices of trusts may not be entered upon the register book (Transfer of Land Act 1915, sec. 55); but they are not swept away and destroyed—though considerable protection is given against unregistered instruments to persons dealing with registered proprietors of titles appearing upon the register (sec. 179). It is not, I think, necessary or desirable in this case to determine the full scope and extent of sec. 179 of the Transfer of Land Act, for a transfer of the land from proprietors who are trustees to a company in which two of the trustees are, according to the evidence, the principal, if not the only, shareholders, cannot be afforded protection by reason of any of the provisions of that section. And it is the company which seeks to compel the registration of the transfer to it and of the instruments of mortgage depending upon that transfer.
My brother Higgins has examined the function and duty of the Registrar in relation to the registration of instruments under the Transfer of Land Act, and I am in complete agreement with him. Nothing more is therefore required than to express my concurrence in his opinion on the subject.
The jurisdiction of the Supreme Court to make the order authorizing the carrying out of the conditional contract, which has been the subject of so much debate, is by far the most important question in the case. But we must remember, and keep constantly present to our minds, that we are not sitting on appeal from the order made by Cussen J., and that we are not considering whether that order was a provident or an improvident exercise of jurisdiction or whether the learned Judge misunderstood or misinterpreted the law. The question is: Had the Supreme Court jurisdiction to decide the case, or was its order a nullity? (See Mayor &c. of London v. Cox[51]).
The Supreme Court is a Court of general jurisdiction within the territorial limits of Victoria, and (except the County Court to a limited extent) no other Court in Victoria has jurisdiction to determine questions relating to the administration of trusts (Supreme Court Act 1915, sec. 16). Therefore it is clear to me that the Supreme Court had jurisdiction to determine the question which came before Cussen J. upon originating summons. No doubt there are expressions in the books to the effect that the Court of Chancery has no jurisdiction "to break the trusts of a will" (see In re Hurst; Hurst v. Hurst[52]; In re Hazeldine's Trusts[53]). But the applications constantly made to Courts now exercising the jurisdiction of the Court of Chancery, to sanction various acts or proposed acts of administration, justify the conclusion that the question whether those acts can or cannot be done is within the jurisdiction of such Courts. A Judge of a Court of general jurisdiction may give an erroneous decision; he may misinterpret a will or a statute, or misunderstand a principle of law, or arrive at a conclusion in point of fact which cannot be justified upon the evidence adduced before him: but all this is matter for correction upon appeal. The judgment is not a nullity; it is conclusive, at least as between the parties to the proceedings and their privies, unless modified upon appeal.
The learned counsel for the company did not seriously contend that the conditional contract entered into between the company and the trustees of Sanders' will could be supported by reference to any express trust in the will of the testator. Rather, they relied upon a state of facts which rendered the contract necessary if anything was to be preserved to the beneficiaries of the trust estate. According to the argument, the trustees might lawfully have entered into the contract in the circumstances, but for protection appealed to the Court, which then sanctioned and authorized the transaction upon the principle illustrated by In re New[54] and other cases. It may be that Cussen J. extended the principle beyond its proper limits in this case, and gave a wrong decision both upon the facts and the law, but we cannot, in this proceeding against the Registrar for a mandamus, either correct that decision or treat the order as a nullity. So far as the parties bound by the order are concerned, it finally concludes them and their privies as to the authority and duty of the trustees to the extent expressed in the order.
Mr. Dixon endeavoured to convince us that the order of Cussen J. did not authorize any transaction which was beyond the powers of the trustees of the will, but simply enabled trustees, despite their personal interest, to enter upon an authorized transaction. A proper and complete answer to this argument is, in my opinion, that the order authorized the trustees to carry a particular contract into effect according to its terms. So far as the contract is authorized by the will, the order is protective; so far as it is beyond the authority of the will the order—despite any error of the Court—is an authority to the trustees, or at least a determination of their powers and duty as trustees under the will, which parties bound by the order cannot controvert. A disposition was shown at the Bar to treat In re New[55] as an authority enabling the sanction of the Court to be given to any act which appeared beneficial to persons interested in trust estates. I do not for one moment suppose that Cussen J. acted upon any such view. It is unnecessary in this case to consider the true limits of the principle applied in In re New, but perhaps I may add that the opinions given in the case recognize that the authority of the Court should be exercised within very narrow limits, and should not be brought into play merely because the act is for the benefit of the persons interested in the trust estate (Cousins v. Cousins[56]). This brings me to the point: Who are bound by the order of Cussen J.?
The Registrar, acting under the guidance of the Commissioner, was, I must say, thoroughly justified, upon the materials presented to him, in challenging the registration of the instruments produced to him for that purpose.
The order of Cussen J. was drawn up by the parties with singular want of care, but we have thought it right to look at the record and the materials upon which the order was founded in order to see if all the beneficiaries of the testator Sanders, whose interests are affected by the order, were properly before the Court, and bound by the order. If beneficial interests are outstanding, the Registrar, for the reasons assigned by my brother Higgins, is justified in refusing registration of the instruments presented to him. There are several beneficiaries who are not named as parties to the proceedings before Cussen J., namely, Arthur Henry Sanders, a son, residing in South America, another son, Nathaniel Lionel Sanders, residing in London, and a grandson, Cecil Maurice Nelson, also residing in London. It is said that they are bound because the remaining children of the testator are sued as beneficiaries under his will and codicil on behalf of themselves and all other children of the testator other than the trustee Algernon Benjamin Sanders, and certain infant grandchildren of the testator were sued as beneficiaries under his will and codicil on behalf of themselves and all other grandchildren of the testator other than certain named grandchildren. The infant grandchildren appeared by their guardian ad litem, though it does not so appear in the order of Cussen J.
The joinder of grandchildren on behalf of themselves and all other grandchildren of the testator can only be taken to refer, in my opinion, to existing grandchildren, and not to grandchildren who are not in esse. A question therefore arises as to the representation of the possible interests of unborn grandchildren. According to the practice of the Courts of equity all persons having an interest in the subject matter of a suit ought to be made parties. That practice, however, was founded upon convenience, and gave way in cases where it produced inconvenience (Cockburn v. Thompson[57]; Willats v. Busby[58]). In cases, for instance, where the persons interested were so numerous as to make it inconvenient that all should be parties, then, if they had a community of interest, one or more were allowed to sue or be sued on behalf of all (Calvert on Parties, sec. 2, pp. 19 et seqq.; Duke of Bedford v. Ellis[59]). And "everybody interested, although not actually present, was bound by the decision, because he was present by representation" (Commissioners of Sewers v. Gellatly[60]; In re Calgary and Medicine Hat Land Co; Pigeon v. The Co.[61]). It was no doubt the duty of the Court in such suits to see that the absent interests were fairly and honestly represented. The principle of representation was adopted by the Judicature Act and Rules both in England and in Victoria (Rules of the Supreme Court, Order XVI., r. 9; Duke of Bedford v. Ellis[62]). But the Judicature Rules simplified and extended in many respects the practice of the Court of Chancery (In re Richerson; Scales v. Heyhoe [No. 2][63]).
The learned counsel who appeared for the company supported the order of Cussen J. by reference to Order XVI., r. 9, and Order LV., rr. 3 (a), (f) and (g), and 5 (A) (a) and 6. Order XVI., r. 9, simply applies the practice of the Court of Chancery to the Supreme Court of Victoria; it does not, in my opinion, enlarge the principle of representation acted upon in the Court of Chancery. There is some authority for saying that Order LV. only authorizes a direction to trustees within the scope of their trust (Suffolk v. Lawrence[64]; In re Robinson; Pickard v. Wheater[65]). A wider jurisdiction has, however, been constantly exercised (see In re New[66] and In re Tollemache[67]). The effect of the rules has been considered to some extent in May v. Newton[68]. The position as to cases within Order XVI., r. 9, is made clear. Apparently, "one might sue on behalf of all so as to bind the class," but "it seems proper, in order to bind absent parties, to obtain the direction" of the Court[69]. As to cases coming under Order LV., the law is not, I think, settled by anything that was said in May v. Newton. Order LV., however, deals, in my opinion, with the frame of the proceedings and not with the question of the persons bound by an order made under its provisions. Thus, r. 5 only directs that the persons to be served in the first instance with the summons (under rr. 3 and 4) shall be certain persons, and r. 6 empowers the Court to direct such other persons to be served as it shall think fit. But if the Judge does not in fact direct any further parties to be added, there is nothing in the rule which provides that those other parties are bound. An appeal must then be made to the practice of the Court in dealing with the representation of absent parties, or to other rules (if any) for that purpose. In order to bind absent parties, it would be wise, as Kay J. suggested in May v. Newton, to obtain a proper order of the Court for that purpose. But the propriety of this course does not dispose of the argument put forward in the present case, that the absent parties are properly represented in the proceedings. The argument fails, however, in my opinion, because the case is not one in which the doctrine acted upon by the Court of Chancery and embodied in Order XVI., r. 9, can rightly be applied. The parties were not so numerous that you could "never come at justice" unless the principle of representation were applied (Duke of Bedford v. Ellis[70]; Commissioners of Sewers v. Gellatly[71]; Calvert on Parties to Suits in Equity, pp. 39 et seqq.; Story on Pleadings, 6th ed., sec. 15 (a), pp. 153-154)). Neither in the originating summons, though it purports to be a representative proceeding, nor in the order of Cussen J., is there any suggestion that the persons interested are too numerous for all to be joined. And if we look to the affidavit we find that the children of the testator him surviving numbered nine, including one of the trustees, and the grandchildren seven.
It is the duty of the Court now to determine whether the absent parties are, under these circumstances, bound by reason of the principle of representation. Nothing in the order of Cussen J. concludes the matter: it is open to the sons and the grandchild to say that they are not bound by any order obtained in such proceedings; and, if it is open to them, the Registrar may properly rely on the same point. Further, I incline to the view that the principle of representation was wholly inapplicable to the subject of the proceedings in this case, namely, the sanction of a sale beyond the express powers of the trustees; but this point was not really argued, and I express no concluded opinion upon it. (See Calvert on Parties, p. 218; Phillipson v. Gatty[72]). Apart from the principle and the Rules of Court already referred to, the learned counsel for the company did not suggest that the sons and grandchild were bound by the order of Cussen J., and I have not myself been able to discover any other basis for supporting the view that they are bound. Unless a person was a party to a suit, or properly represented in that suit, or served with the decree in the suit, the decree did not bind him (Willats v. Busby[73]; Powell v. Wright[74]; Bennett v. Morris[75]). The decisions of Holroyd J. in Elms v. Glen[76] and In re Wilson[77] do not touch the matter now in dispute. A plaintiff may select the representative parties in a case to which Order XVI., r. 9, applies, but there remain behind, first, the duty of the Court on the hearing of the proceeding to see that the absent parties are properly represented, and, second, the question how far an order made in the proceeding operates to bind absent parties. The latter question depends upon the principle of representation as applied by the Court of Chancery and upon orders made by the Supreme Court pursuant to its Rules.
The argument for the Registrar of Titles also suggested that the interests of unborn grandchildren were not bound by the order of Cussen J. I do not consider it necessary to decide this question, but the following cases may prove useful if the point ever arises hereafter: In re Whiting's Settlement; Whiting v. De Rutzen[78]; Fussell v. Dowding[79]; McArthur v. Scott[80].
The result, therefore, is that two sons and a grandchild are not bound by the order of Cussen J.; and as these interests are outstanding, the Registrar was entitled, in my opinion, to refuse registration of the instruments tendered to him. Nor, in my opinion, does the Conveyancing Act 1915, sec. 76, affect the matter. The section is very sweeping in its terms, and difficult to construe. But Jones v. Barnett[81] is a sufficient authority for saying that an order of the Court cannot affect persons who are not named as parties to the suit or properly represented therein, and who are not bound by the order of the Court. Further, I would add that the order of the Court is not invalidated: it has full force and effect as to parties within the suit, notwithstanding any defects in the jurisdiction of the Court or in the authority of the Judge, or in the procedure adopted in the case. I desire to say, however, that in my opinion "an order of the Court" is not less "an order of the Court" because it is made by a Judge sitting in Chambers rather than in Court (see Parkin v. James[82]).
Appeal allowed. Order for mandamus discharged. Respondent to pay costs in the Supreme Court and in the High Court.
Solicitor for the appellant, E. J. D. Guinness, Crown Solicitor for Victoria.
Solicitors for the respondent, Snowden, Neave & Demaine.
[1] [1851] EngR 750; (1851) 14 Beav., 291.
[2] [1857] EngR 781; (1857) 1 DeG. & J., 464.
[3] (1888) 39 Ch. D., 660.
[4] (1899) 21 A.L.T., at p. 150; 5 A.L.R., 292, at pp. 293-294.
[5] (1890) 16 V.L.R., 149; 11 A.L.T., 182.
[6] (1888) 9 A.L.T., 183.
[7] (1913) V.L.R., at p. 551; 35 A.L.T., 69.
[8] (1894) 15 N.S.W.L.R. (Eq.), 207.
[9] (1887) 13 V.L.R., 80.
[10] (1909) V.L.R., 207; 30 A.L.T., 185.
[11] (1899) 17 N.Z.L.R., 773.
[12] (1884) 32 W.R., 899.
[13] (1886) 31 Ch. D., 247.
[14] (1901) 2 Ch., 534.
[15] (1908) 1 Ch., at pp. 40-41.
[16] (1882) 11 L.R. Ir., 35, at pp. 44-45.
[17] (1909) P., 187, at p. 191.
[18] (1887) 34 Ch. D., 347.
[19] (1888) 14 V.L.R., 9; 9 A.L.T., 160.
[20] (1899) 1 Ch., 611; (1900) 1 Ch., 370.
[21] (1899) 21 A.L.T., 148; 5 A.L.R., 292.
[22] (1913) V.L.R., 549; 35 A.L.T., 69.
[23] (1911) V.L.R., 197, at p. 213; 32 A.L.T., 183, at p. 188.
[24] (1876) 2 App. Cas., 110.
[25] (1880) 6 V.L.R. (L.), at p. 463; 2 A.L.T., 94.
[26] (1913) V.L.R., 549; 35 A.L.T., 69.
[27] (1898) 19 A.L.T., 222.
[28] (1890) 16 V.L.R., 149; 11 A.L.T., 182.
[29] (1911) V.L.R., 197; 32 A.L.T., 183.
[30] (1888) 9 A.L.T., 183.
[31] (1911) V.L.R., 214; 32 A.L.T., 190.
[32] (1905) A.C., at p. 203.
[33] (1908) 1 Ch., at pp. 40-41.
[34] (1882) 11 L.R. Ir., at pp. 44-45.
[35] (1884) 32 W.R., at p. 900.
[36] (1886) 31 Ch. D., at p. 249.
[37] (1901) 1 Ch., 701.
[38] (1888) 60 L.T., 357.
[39] (1901) 2 Ch., 534.
[40] (1901) 2 Ch., at p. 544.
[41] (1903) 1 Ch., 457, 955.
[42] (1901) 1 Ch., 701.
[43] [1828] EngR 255; (1828) 7 B. & C., 785.
[44] [1845] EngR 233; (1845) 10 Q.B., 411.
[45] (1867) L.R. 2 H.L., 239, at p. 259.
[46] (1845) 10 Q.B., at p. 454.
[47] (1901) 2 Ch., 534.
[48] (1909) P., at p. 191.
[49] (1890) 43 Ch. D., 131.
[50] (1899) 1 Ch., 611; (1900) 1 Ch., 370.
[51] (1867) L.R. 2 H.L., at p. 279.
[52] (1891) 29 L.R. Ir., 219.
[53] (1908) 1 Ch., at p. 41.
[54] (1901) 2 Ch., 534.
[55] (1901) 2 Ch., 534.
[56] (1906) 3 C.L.R., at p. 1200.
[57] [1809] EngR 474; (1809) 16 Ves., 321, at p. 325.
[58] [1842] EngR 581; (1841) 5 Beav., 193.
[59] (1901) A.C., 1, at pp. 8-9.
[60] (1876) 3 Ch. D., 610, at pp. 615-616.
[61] (1908) 2 Ch., 652, at p. 659.
[62] (1901) A.C., at p. 8.
[63] (1893) 3 Ch., 146.
[64] (1884) 32 W.R., 899.
[65] (1886) 31 Ch. D., 247.
[66] (1901) 2 Ch., 534.
[67] (1903) 1 Ch., 457, 955.
[68] (1887) 34 Ch. D., 347.
[69] (1887) 34 Ch. D., at p. 349.
[70] (1901) A.C., at pp. 8-9.
[71] (1876) 3 Ch. D., at pp. 615-616.
[72] [1848] EngR 118; (1848) 6 Ha., 26.
[73] [1842] EngR 581; (1841) 5 Beav., 193.
[74] [1844] EngR 415; (1844) 7 Beav., 444, at pp. 447, 449, 450.
[75] (1888) 14 V.L.R., 9; 9 A.L.T., 160.
[76] (1897) 23 V.L.R., 376; 19 A.L.T., 114.
[77] (1899) 25 V.L.R., at p. 199; 21 A.L.T., at p. 167.
[78] (1905) 1 Ch., at pp. 100-101.
[79] (1884) 27 Ch. D., 237, at p. 240.
[80] [1885] USSC 70; (1885) 113 U.S., 340, at p. 402.
[81] (1899) 1 Ch., 611; (1900) 1 Ch., 370.
[82] [1905] HCA 64; (1905) 2 C.L.R., 315.
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