Hall v Richards [1961] HCA 34; (1961) 108 CLR 84 (9 June 1961)

HIGH COURT OF AUSTRALIA

HALL v. RICHARDS [1961] HCA 34; (1961) 108 CLR 84

Bankruptcy

High Court of Australia
Dixon C.J.(1), Kitto(2), Taylor(3), Menzies(4) and Windeyer(5) JJ.

CATCHWORDS

Bankruptcy - Torrens Title land - Sequestration of estate of registered proprietor - Judgments obtained against registered proprietor - Caveats in respect of judgments lodged against land prior to commencement of bankruptcy - No security on land thereby obtained - "Secured creditor" - "Lien" - "Charge" - Sale of land after sequestration by mortgagee - Surplus proceeds of sale paid to trustee in bankruptcy - Caveators not entitled to surplus in priority to other creditors - Real Property Act, 1862 (Tas.), ss. 82, 83, 94 - Real Property Act, 1886 (Tas.), s. 22 - Bankruptcy Act 1924-1958 (Cth), ss. 4, 60, 92.

HEARING

Hobart, 1961, February 15, 16;
Melbourne, 1961, June 9. 9:6:1961
APPEAL from the Supreme Court of Tasmania.

DECISION

June 9.
The following written judgments were delivered: -
DIXON C.J. I have had the advantage of reading the judgment of Kitto J. with

KITTO J. The order under appeal was made by the Supreme Court of Tasmania (Burbury C.J.) sitting in the exercise of federal jurisdiction in bankruptcy. By the order, the Court answered certain questions upon which the trustee in bankruptcy of one Homann had sought directions. The facts which gave rise to the questions were few. In 1956 the bankrupt, being the registered proprietor of an estate in fee simple in certain land in Tasmania under the provisions of the Real Property Acts of that State (the Act 26 Vict. No. 16 as amended), mortgaged the land to a first and a second mortgagee, and both mortgages were registered under the Act. Thereafter and before the commencement of the bankruptcy certain creditors of Homann, having obtained judgments against him for divers sums of money, entered caveats in respect of the mortgaged land. Each caveat forbade the registration of any memorandum of transfer or other instrument affecting the land until the caveat should be by the caveator or by order of the Supreme Court or a judge thereof withdrawn, or until the lapse of fourteen days from the date of service of notice of such intended registration. Each caveat was noted on the certificate of title by the Recorder of Titles. A sequestration order was later made against the judgment debtor, and then the second mortgagee, in exercise of his power of sale and (evidently) with the concurrence of the first mortgagee, sold and transferred the land. After payment of the expenses of sale and of the moneys owing to the respective mortgagees, a surplus remained. This surplus was paid to the trustee in bankruptcy; but the judgment creditors who had entered caveats, their respective judgments being still wholly or partly unsatisfied, claimed to be secured creditors in respect of it. (at p87)

2. The first of the questions submitted to the Supreme Court is whether the caveators have been secured creditors since the registration of the transfer by the second mortgagee. The other questions are consequential. The appellants were among the caveators who desired that the first question should be answered in the affirmative, and by an order of Burbury C.J. they were appointed to represent the class. The learned Chief Justice then heard the application and, declining to be bound by an earlier Tasmanian decision, Re Price; Ex parte Tinning (1931) 26 Tas LR 158 , held that the caveators were not secured creditors, that they were not entitled to any priority over other creditors in the distribution of the funds in the hands of the trustee, and that the surplus remaining from the mortgagee's sale should be paid to the general body of creditors, including the caveators, pro rata. Hence this appeal. (at p87)

3. The caveats were entered under a provision contained in s. 22 of the Real Property Act, 1886 (50 Vict. No. 8) as amended by s. 6 of the Real Property Act, 1934 (25 Geo. V. No. 52), by which a judgment creditor of any person registered as the proprietor of land under the Principal Act (the Act of 1862) is enabled to enter a caveat in the manner prescribed by s. 82 of the 1862 Act. The practice, procedure, and mode of dealing with a caveat entered under s. 22 are made the same as if the judgment creditor claimed an estate or interest in the judgment debtor's land within the meaning of s. 82; and the Court or judge, in deciding on the validity or otherwise of the caveat, is to be guided by the rules of law and equity as to upholding or setting aside a judgment. The effect of the caveat is by clear intendment assimilated to that of a caveat under s. 82, and accordingly, so long as the caveat remains in force, no transfer or other dealing (i.e. by the registered proprietor) is to be entered in the register book until after notice to the caveator of the intended dealing. If he receives such a notice, his caveat will lapse at the expiration of fourteen days unless he obtains an order of the Supreme Court or a judge to the contrary: s. 83 (4). (I speak of the Act as it stood before its amendment by the Act No. 21 of 1960.) That gives him at least fourteen days in which to issue a writ of fi. fa. If he issues such a writ, he does not thereby bind or affect the land (see sub-s. (1) of s. 94 of the 1862 Act, as enacted by the 1893 Act, 57 Vict. No. 5, s. 16); but under the ensuing sub-sections of s. 94 he may pursue a course which for three months will ensure that if a transfer by the sheriff on a sale under the fi. fa. is presented for registration it will be entered in the register book and take effect so as to make the transferee the registered proprietor of the land. (In these provisions the expression "the land" presumably means the estate or interest of the execution debtor (or other party against whom the process is issued) as it exists, or perhaps as it exists on the register, at the time of the service of the process on the Recorder.) The course which produces this result consists in the service on the Recorder of a certified copy of the fi. fa., accompanied by a statement specifying the land sought to be affected thereby. Thus s. 22 of the 1886 Act, while recognizing that a judgment creditor has not, as such, any estate or interest in the judgment debtor's land, enables the creditor effectually to forbid any disposition by the debtor which would remove the debtor's estate or interest in the land from the reach of a fi. fa. to enforce the judgment. In this sense the caveat may be said to "bind" the land to answer a future execution: The Colonial Bank of Australasia v. Riddel (1893) 19 VLR 280 ; Re Anderson Mitchell & Co. Pty. Ltd. (1928) 23 TasLR 35 . (at p88)

4. It is because they occupied this favourable position at the commencement of the bankruptcy that the appellants say they are secured creditors. The Bankruptcy Act (Cth) (s. 4) defines "secured creditor" to mean a person holding a mortgage, charge, or lien over the property of the debtor, or any part thereof, as a security for a debt due to him from the debtor. The appellants did not hold any mortgage over their debtor's land, and they do not contend that they had any "charge" or "lien" over it unless their right in virtue of their caveat, to block dealings by the debtor while their judgment remained unsatisfied, fell within the meaning of one or other of those terms. They do contend, however, that the right, being given to them by the Real Property Acts as a means for or towards the enforcement of their judgment, satisfies the notion of a "charge" or "lien", as those words are used in the Bankruptcy Act. It must be remarked at once that even if such a right were properly to be described either as a "charge" or as a "lien", the appellants have not succeeded in explaining how, when the right came to end in consequence of the transfer of the land by the mortgagees, it was replaced by a right of any kind in respect of the surplus proceeds of sale. Inherent in its nature, one would suppose, was an incapability of conversion into a right in respect of any other property than the land itself. If so, that is an end of the case. It seems desirable, however, to consider the appellants' contention that while the land stood registered in the name of the bankrupt they had a "charge" or "lien" upon it in virtue of their caveat; for the proposition that they had such a security is basic to their case, and the bulk of their argument has been directed to it. (at p89)

5. In particular the appellants fix upon the word "lien", both as having a wider meaning than "charge" and as being more appropriate in general connotation to describe a right to prevent alienation. But in truth it is the word "charge" which is the wider, and it is that word which has been held to require the greater attention in the cases which come nearest to the present. I refer to the cases concerning the "binding" effect of a garnishee order or a writ of fi. fa.; for it is in those cases that particular attention has had to be given to the "binding" effect of a step taken towards enforcement of a judgment, and it is the "binding" effect of the caveat which is relied upon here for the conclusion that the appellants had a "charge" or "lien". The case of Holmes v. Tutton (1855) 5 Bl & El 65 [1855] EngR 45; (119 ER 405) , which forms a convenient starting point, dealt with both. A judgment creditor had obtained and served an order attaching a debt owing to the judgment debtor. Thereafter the judgment debtor became a bankrupt, and the doctrine of relation back did not carry the commencement of the bankruptcy as far back as the service of the order. The Bankruptcy Act in force was the English Act of 1849, s. 184 of which provided (so far as material) that no creditor having security for his debt should receive upon such security more than a ratable part of the debt, except in respect of any execution served and levied by seizure and sale upon, or any mortgage of or lien upon, any part of the property of the bankrupt. The Common Law Procedure Act, 1854, provided that the service of an order of attachment on the garnishee should bind debts due to the judgment debtor (s. 62), that if the debt should not be paid and should be not disputed the judge might order execution (s. 63), and that if the debt should be disputed process in the nature of a writ of revivor to obtain execution against the garnishee might be authorized (s. 64). The Court held that the "binding" effect of the garnishee order consisted only in this, that the garnishee could not pay his original creditor or anyone claiming under him; that that gave the judgment creditor "security" in the broad sense in which s. 184 of the Bankruptcy Act used the term; but that it did not give him a "lien" within the meaning of that Act, and that accordingly he had to share pro rata with the other creditors. As in the present case, it was argued that the word "lien" and the word "bind" really express the same idea. The Court replied that the word could not be used so largely as to mean any right which the party acquires to have things seized or attached realized in due course of law. "We construe the word 'bind'" the Court said, "as not changing the property or giving even an equitable property, either by way of mortgage or lien, but as putting the debt in the same situation as the goods when the writ was delivered to the sheriff. We take the word 'bind' to mean that the debtor, or those claiming under him, shall not have power to convey, or do any act, as against the right of the party in whose favour the debt is bound; and we construe it as not giving any property in the debt, in the nature of a mortgage or lien, but a mere right to have the security enforced: in other words, we think that the very distinction contemplated between securities and liens applies, and that the present is an instance of that species of security mentioned in the Act as not being a lien." (1855) 5 El & Bl, at p 80 (119 ER, at p 411) . (at p90)

6. It is worth pausing here, because the argument presented to us on behalf of the appellants relied so strongly upon the word "lien", treating it as if it were a general term comprehending even a negative right extending only to the forbidding of dealings with property while a debt remains unpaid. The history of its use in bankruptcy legislation is all against so wide an interpretation, as may be seen most clearly from the judgments of Taunton J. and Littledale J. in the important case of Giles v. Grover [1832] EngR 61; (1832) 9 Bing 128, at pp 181, 182, 246 [1832] EngR 61; (131 ER 563, at pp 583, 584, 607) . There the right of an execution creditor, even after seizure, was held to be no lien. It was specifically contrasted not only with the possessory lien of a wharfinger and a factor, but with the very thing in which the appellants in the present case have sought an analogy with their own rights as caveating judgment creditors, namely a lien upon title deeds. (at p90)

7. When the Bankruptcy Act 1869 was passed, the word "security" ceased to be used in the wide sense it had borne in the earlier Act. The creditor referred to as a "secured creditor", and allowed as such to enforce rights which he possessed for the recovery of his debt out of property which otherwise belonged to the bankrupt instead of being required to share pro rata with the general body of creditors, was defined as he is now defined in the Australian Act. Upon the new definition the case of Emanuel v. Bridger (1874) LR 9 QB 286 was decided. In that case, as in Holmes v. Tutton (1855) 5 E1 & B1 65 [1855] EngR 45; (119 ER 405) , a garnishee order had been made before the bankruptcy of the judgment debtor; but the decision went the other way. The judgment creditor was held to be a "secured creditor" for two reasons: first, the making of a garnishee order, the Court held, resembled rather an actual seizure of goods under a fi. fa. than a mere delivery of a fi. fa. to the sheriff; and secondly, the word "charge", which was considered to have a wider meaning than "lien", was held sufficient to comprehend the rights acquired by a judgment creditor upon the making of a garnishee order in his favour. (at p91)

8. In the meantime the Courts had been examining more closely than had been done in Holmes v. Tutton (1855) 5 E1 & B1 65 [1855] EngR 45; (119 ER 405) the nature of the "binding" effect produced, on the one hand, by the delivery of a fi. fa. to the sheriff and, on the other hand, by an actual seizure of goods by the sheriff. This they had done in such cases as Slater v. Pinder [1851] EngR 13; (1871) LR 6 Ex 228; (1872) LR 7 Ex 95 ; Ex parte Rocke; In re Hall (1871) LR 6 Ch 795 ; and Ex parte Williams; In re Davies (1872) LR 7 Ch 314 ; and as a result the position had been reached which may be stated shortly as follows. A fi. fa. "binds" the execution debtor's goods - it did so at common law from the date of the teste and since the Statute of Frauds it binds them (as between the creditor and third parties) from delivery of the writ to the sheriff (see now Sale of Goods Act, 1896 (Tas.), s. 31); but this means only that no dealing with any of the goods which belong to the debtor when the writ becomes binding can alter the fact that they are goods which the writ requires the sheriff to seize and sell. It gives the creditor neither property in the goods nor possession of them (and consequently no lien in the sense of the Bankruptcy Acts), and as against an assignee in bankruptcy of the debtor it gives the creditor no right at all with respect to the goods: all the creditor has as against the assignee is his judgment; and it was early enacted, by s. 9 of 21 Jac. c. 19, that that, though called a security, should gain him no greater right to get more than a ratable portion of his debt. But seizure by the sheriff under the fi. fa. is different. Though it does not give the execution creditor any property in the goods seized, it places those goods in custodia legis, the sheriff having the special property in them which is necessary for their safe custody and "to render the execution of his public duty useful to the judgment-creditor", as Tindal C.J. put it in Giles v. Grover [1832] EngR 61; (1832) 9 Bing 128, at p 267 [1832] EngR 61; (131 ER 563, at p 615) . By the seizure the creditor acquires a legal right to have the sheriff's duty performed in respect of the particular goods: that is, a right to have them sold and to be paid out of the proceeds of sale; and a "binding" effect which goes as far as that is enough to constitute a "charge" and make the creditor a "secured creditor" within the definition, so that if it were not for such provisions as those of s. 92 of the Australian Act he might realize his security (under s. 60 (3)) by completion of the execution (McQuarrie v. Jaques [1954] HCA 76; (1954) 92 CLR 262, at pp 273, 306 ). The analogy in the case of a garnishee order is obvious. Such an order, though not working an assignment or giving the judgment creditor any proprietary interest in the debt, yet gives him positive rights with respect to it which a creditor having no more than a judgment does not possess; not merely a negative right to prevent the judgment debtor from accepting payment of the debt or disposing of it, but positive rights for the recovery of what is owing on the judgment, namely a right to give a valid receipt and discharge for the money, and a right in case on non-payment to obtain execution against the garnishee: In re Combined Weighing and Advertising Machine Co. (1889) 43 Ch D 99, at pp 105, 106 . (at p92)

9. To turn to the case of the appellants is to see the contrast at once. The entry of their caveat gave them no new positive rights. It ensured that they would have time in which to exercise against the land in question the right, which they possessed antecedently, to enforce their judgment by means of a fi. fa.; but that is all. That was a right, incidentally, which by force of s. 92 must come to an end on the bankruptcy of the judgment creditor; and in that fact alone there is a formidable answer to the whole of the appellants' contention in the case. But let that be put aside. The appellants had no other right or remedy for the recovery of their money out of the land than any other judgment creditor had. The legal effect of the caveat, as has often been said of caveats under the ordinary caveat provisions of Torrens legislation, was that of a statutory injunction, serving merely to keep property available in case the judgment creditor should wish to have execution against it; and it is clear on the authorities abovementioned that to apply the term "lien", or even the term "charge", to anything which has no greater effect than that is to depart from the terminology of the Bankruptcy Act. (at p92)

10. The reports abound with comparable cases. An appointment by a court of a receiver of moneys receivable in respect of the debtor's interest under a will, or in debenture stock, although (as is expressly recognized again and again in these very cases) it has the effect of an injunction and prevents the judgment debtor from receiving the moneys, yet gives the judgment creditor neither an interest in the property nor any special right to resort to it, and accordingly confers no such lien or charge as would make him a secured creditor in bankruptcy: Flegg v. Prentis (1892) 2 Ch 428 ; In re Potts; Ex parte Taylor (1893) 1 QB 648, at pp 652, 661 ; Tyrrell v. Painton (1895) 1 QB 202, at p 206 ; In re Marquis of Anglesey; Countess de Galve v. Gardner (1903) 2 Ch 727, at p 731 ; In re a Debtor; Ex parte Peak Hill Goldfield Ltd. (1909) 1 KB 430, at p 434 ; In re Beaumont; Woods. v. Beaumont (1910) 79 LJ Ch 744 ; Stevens v. Hutchinson (1953) Ch 299, at pp 304, 305 . Similarly, an order appointing a receiver of the stock-in-trade etc. of a judgment debtor's business creates no security; In re Dickinson; Ex parte Charrington & Co. (1888) 22 QBD 187 ; In re Pearce; Ex parte Official Receiver (1919) 1 KB 354 ; and the same is true of an order appointing a receiver in respect of a ship or its cargo: In re Lough Neagh Ship Co.; Ex parte Thompson (1896) 1 IR 29 ; Croshaw v. Lyndhurst Ship Co. (1897) 2 Ch 154 ; and of a writ of sequestration issued as a process of contempt for disobedience of an order for the payment of money: In re Pollard; Ex parte Pollard (1903) 2 KB 41 ; Coles v. Coles (1957) P 68, at pp 73, 74 . (at p93)

11. In the foregoing I have accepted the appellants' concession that they had no lien or charge by virtue of their judgment alone. In s. 94 (1) of the Real Property Act, 1862, both as originally enacted and as it now stands, the assumption is implicit that a judgment (for the payment of money) does not by itself bind or affect land under the Act. That this is so is, I think, clear. Dr. Sykes has pointed out in a learned article The Effect of Judgments on Land in Australia (1953) 27 Australian Law Journal 226, at p 227, that in the absence of statutory provision, such as was made in the United Kingdom by s. 13 of the Judgments Act, 1838 (1 and 2 Vict. c. 110), a judgment for the payment of money never did create a charge or lien on the judgment debtor's land, in the sense of vesting in the judgment creditor an interest in the land. It enabled him, by virtue of the Statute of Westminster the Second (13 Edw. 1 c. 18) and later legislation, to obtain a writ of elegit commanding the sheriff to cause lands of the debtor (originally only one-half of his lands) to be delivered to the creditor to be held by him until the judgment debt and interest should have been levied: Williams on Real Property 23rd ed. (1920) p. 288; Chitty's Forms, 10th ed. (1866) pp. 352, 353. If and when the judgment creditor obtained possession of land as a result of the writ he became tenant of that land by elegit; but until that event he had as judgment creditor no proprietary interest in any of the debtor's lands: the right to issue the writ gave him neither jus in re nor jus ad rem: Brace v. Marlborough (Duchess) [1728] EngR 100; (1728) 2 PWms 491, at p 491, 492 [1728] EngR 100; (24 ER 829, at p 830) ; Ex parte Knott (1806) 11 Ves Jun 609, at p 617 [1806] EngR 42; (32 ER 1225, at p 1228) ; Bond v. McClay (1903) St R Qd 1, at p 7 ; contrast In re Hobson (1886) 33 Ch D 493 . True, the right was often referred to as conferring a "judgment lien" but the word "lien" as used in this connexion bore a different meaning from that which it has in bankruptcy legislation. It referred only to the fact that, according to the construction which was placed upon the statutes, no disposition of any of the lands which were the debtor's at the date of the judgment or might become his subsequently could remove them from the reach of a writ of elegit. In a sense, this was a "binding" of the land; but only in the sense in which that term is used to describe the effect, in respect of goods, of the delivery of a fi. fa. to the sheriff. There was clearly no lien, and not even a charge, in the bankruptcy sense of the words. In the United Kingdom, as has been mentioned, a judgment creditor was for the first time given a charge on the judgment debtor's land by s. 13 of the Judgments Act, 1838 (1 and 2 Vict. c. 110). This enactment did not extend to Tasmania, or Van Diemen's Land, as it then was. Provisions of similar effect have been made in Tasmania by enactments which in their present form are to be found in s. 11 of the Registration of Deeds Act, 1935 (26 Geo. V. No. 24); but they apply only to land not under the Real Property Acts. It is hardly surprising that no corresponding provision has been made in respect of land under the Torrens system, for such a provision would run counter to the principle of the conclusiveness of the register book which is at the heart of that system: see ss. 33 (2) and 40 of the Real Property Act, 1862. Instead there are, in recognition and application of that principle, the provisions of s. 94 as to executions, to which I have referred. (at p94)

12. I have not found it necessary to consider whether s. 4 of the New South Wales Debts Act, 1813 (54 Geo. III c. 15), which was passed by the Imperial Parliament before the separation of Van Diemen's Land, abolished the writ of elegit in the colony: see Millard on Real Property 5th ed. (1939) p. 190. (at p94)

13. In my opinion the appellants' argument fails, and the appeal should be dismissed. (at p95)

TAYLOR J. This is an appeal from an order made by the Supreme Court of Tasmania sitting in the exercise of jurisdiction conferred upon it by s. 18 of the Bankruptcy Act 1924-1958. The order was made upon a summons for directions pursuant to the Act and it was concerned with the manner in which a sum of money remaining after a mortgagee's sale should be applied in the administration of a bankrupt's estate. The bankrupt, Herbert Paul Franz Homann, had presented a debtor's petition on 15th August 1958 and on that day a sequestration order was made. Part of his assets, namely, realty of which he was the registered proprietor pursuant to the Real Property Act 1862 (as amended), was subject to two registered instruments of mortgage and in February 1959 the second mortgagee duly exercised his power of sale. Having sold the land he, first of all, discharged the first mortgage, then retained sufficient moneys in his hands to discharge the indebtedness of the bankrupt under the second mortgage and, thereupon, accounted to the Official Receiver for a balance of 458 pounds 15s. 4d. But, in addition to the two mortgages noted upon the relevant certificate of title, notice of a number of caveats - twenty-nine in all - appeared. These caveats had been lodged between 21st February 1957 and 2nd May 1958 by persons and companies who had obtained judgments against the bankrupt for money sums before the sequestration of his estate. The caveats were lodged pursuant to statutory provisions to which I shall presently refer and no doubt they were lodged in reliance upon the decision in Re Price; Ex parte Tinning (1931) 26 TasLR 158 , which held that a judgment creditor who had lodged a caveat pursuant to the provisions referred to was a "secured creditor" within the meaning of the Bankruptcy Act. What the effect of the decision was in the circumstances of that case does not readily appear and is somewhat difficult to understand but in the present case it was presented by the appellants as authority for the proposition that the moneys now in the hands of the Official Receiver should be applied primarily in discharge of their judgment debt and, pro tanto, to the exclusion of the other creditors in the estate. I should add that eleven of the caveats mentioned had been lodged before that of the appellants but the claims in respect of which these caveats were lodged had been satisfied by payment prior to the commencement of the bankruptcy. But, although some of the judgment debts of the remaining seventeen caveators had been reduced by that time, substantial sums were still owing in respect of them. (at p95)

2. The legislative provisions with which the argument in the case has been primarily concerned are s. 94 of the Real Property Act, 1862, and the sections of that Act which provide for the lodging of caveats together with s. 22 of the Real Property Act, 1886. By s. 82 of the first mentioned Act any settlor of land under the provisions of the Act, transferring such land to be held by a trustee, or any beneficiary, or other person, claiming an estate or interest in any such land may, by caveat, in the prescribed form forbid the registration of any instrument affecting such land either absolutely or until after notice of an intended dealing. The caveat is required, among other things, to contain a sufficient description to identify the estate or interest therein claimed by the caveator. Section 83 makes familiar provision with respect to notification of the caveat and with respect to the manner in which the registered proprietor may take proceedings for its removal. It also provides that, except in the case of a caveat lodged by a settlor or beneficiary, every such caveat shall, unless an order to the contrary be made by the Supreme Court, be deemed to have lapsed upon the expiration of fourteen days after notice given to the caveator that such registered proprietor has applied for the registration of any dealing with the land. No entry is to be made in the register book affecting the land in respect of which a caveat is lodged so long as the caveat remains in force (s. 84). It will be seen that there is nothing on the face of these provisions to authorize the lodging of a caveat by a judgment creditor. But by s. 22 of the Real Property Act, 1886 provision was made enabling this to be done. By that section it is provided that it shall be lawful for the judgment creditor of any person registered as the proprietor of land under the Real Property Act to enter a caveat in the manner prescribed by s. 82 thereof and, by sub-s. (2), the practice, procedure, and mode of dealing with any such caveat is, in all respects, to be the same as if such judgment creditor claimed an estate or interest in such person's land within the meaning of that section. Finally, it is provided that the Court or judge, in deciding on the validity or otherwise of such caveat, shall be guided by the ordinary rules of law and equity as to upholding or setting aside a judgment. These latter words introduce difficulties of their own which, to some extent, were debated during the argument but it is unnecessary for us to pursue them in this case. The provisions of s. 94 of the Real Property Act, 1862 are of such importance that it is desirable that they should be set out in full: "s. 94. Sale under fi. fa., decree, or order of the Supreme Court, or under warrant of execution. - (1) No execution shall bind or affect any estate or interest in land under this Act. (2) The Recorder, on being served with a certified copy of any writ of fieri facias issued out of the Supreme Court, or of any direction, decree, or order of such Court, or of any warrant of execution issued under the Local Courts Act, 1896, or of any direction or order of any court of competent jurisdiction, directing or authorizing the sale of any estate or interest in land held under this Act, accompanied by a statement signed by any party interested, or his attorney, solicitor, or agent, specifying the land sought to be affected thereby, shall, after marking upon such copy the time of such service, enter the same in the register book. (3) After any such estate or interest in land so specified shall have been sold under any such writ, direction, decree, or order, or warrant of execution, the Recorder shall on receiving a transfer thereof in such form as the case requires under this Act (which transfer shall have the same effect as if made by the registered proprietor), enter such transfer in the register book, and on such entry being made the purchaser shall become the transferee, and be the registered proprietor of such land. (4) Unless and until such service as aforesaid no sale or transfer under any such writ, direction, decree, or order, or warrant of execution shall be valid as against a purchaser or mortgagee, notwithstanding the same was actually lodged for execution at the time of the purchase or mortgage, and notwithstanding the purchaser or mortgagee had actual or constructive notice of the lodgment of such writ, direction, decree, or order, or warrant of execution. (5) Upon production to the Recorder of sufficient evidence of the satisfaction of any writ, direction, decree, or order, or warrant of execution, a copy whereof shall have been served as aforesaid, he shall cause an entry to be made in the register book of a memorandum to that effect. (6) On such entry being signed by the Recorder, such writ, direction, decree, or order, or warrant of execution shall be deemed to be satisfied, and the same shall cease to bind, charge, or affect any such estate or interest in such land as aforesaid, unless a transfer upon a sale thereunder shall be produced for registration, within three months from the day on which the copy was served." (at p97)

3. It was, perhaps, open to argument that the provisions to which we have referred were intended to be fully supplementary to those contained in the Registration of Deeds Act, 1935 with respect to the registration of judgments against the owners of land held under old system title. Section 11 of that Act provides that, subject to that section, "every judgment whereby any sum of money is made payable . . . shall, when registered, be a charge upon the lands of the judgment debtor". Registration is effective for a period of five years but it may be renewed in the manner provided by the section. But it is clear that the provisions of the Real Property Acts to which we have referred do not contain any counterpart of the operative words of the Registration of Deeds Act which purport to create a "charge" - whatever that expression may mean in the context in which it is used (cf. the discussion in (1939) 12 Australian Law Journal 454 and (1939) 13 Australian Law Journal 19, 50, 111 on this subject). It is true that the provisions of s. 94 operate to bind the land in the hands of the judgment debtor in the sense that he may not deal with the land whilst the caveat remains in force. But there are no words appropriate to create a charge in favour of the judgment creditor in the sense that the lodging of the caveat is to operate to confer upon him any interest by way of security or otherwise in the registered proprietor's land. However, to establish that the lodging of a caveat does create such an interest the decision in Re Price; Ex parte Tinning (1931) 26 TasLR 158 was relied upon. In that case the judgment creditor lodged a caveat pursuant to s. 22 abovementioned and some months later the debtor became bankrupt. Thereupon the trustee applied to the Court for directions as to whether the judgment creditor was a secured creditor within the meaning of the Bankruptcy Act. Nicholls C.J. held that he was. After referring to the procedure by which the judgment creditor became entitled to enter a caveat his Honour went on to say: "It will suffice to say that this caveat, until removed, stands as a clog on the proprietor's right of alienation, and that so long as the judgment creditor has the right to levy on the land there is no ground for removing it. He has the power to levy. He also has prevented dealings with the land. These two facts go far in the direction of giving him the powers of a mortgagee" (1931) 26 TasLR, at p 159 . At a later stage he said: "After examining the rights conferred by a number of different kinds of liens and charges, both common law and equitable, and whether arising out of agreement, created by a will or settlement, conferred by custom or by law, I find my consideration of the matter at an end. I do not see what class of lien or charge there is which, when the holder has no estate or interest in the land itself, gives him any more than the caveator judgment creditor has. He has, by right of his judgment, power to levy on the land for his debt, and he has exercised a right to prevent dealings with the land, thereby keeping it available for his levy. In my opinion these rights amount to a statutory charge or lien" (1931) 26 TasLR, at p 160 . In the result his Honour held that the judgment creditor was a secured creditor within the meaning of the Act, that is to say, "a person holding a mortgage, charge, or lien on the property of the debtor or any part thereof, as a security for a debt due to him from the debtor". (at p99)

4. It is unfortunate that the learned Chief Justice was not referred to other provisions of the Bankruptcy Act which, it seems to me, make it quite clear that the question whether the judgment creditor was entitled in priority to the trustee in bankruptcy could not be resolved merely by inquiring whether the judgment creditor fell literally within the terms of this definition. I will presently refer to these other provisions but before doing so it is of some interest to consider the effect which his Honour's decision would have if applied to the circumstances of the present exceptional case. First of all, it must be conceded that if the appellants became entitled, by virtue of their caveat, to a charge on the land in question then each of the successive seventeen caveators became entitled to like interests. What then is the position if, as the learned Chief Justice suggests, the appellants' charge might have been enforced by causing execution to issue? They did not, of course, do so, but if they had all that could have been levied upon was the right, title and interest of the judgment debtor in the land and, of course, a sale under the writ would necessarily have been subject to any encumbrances then noted on the title which would have included the charge created by the lodging of any caveat prior to execution. Indeed, in conformity with this notion, s. 94 of the Real Property Act, 1862 provides that after the sale of any interest in land under a writ of execution the Recorder shall on receiving a transfer (which transfer shall have the same effect as if made by the registered proprietor), enter such transfer in the register book, and on such entry being made the purchaser shall become the transferee and be the registered proprietor of such land. That being so, it is difficult to see how the existence of the right to levy by execution could provide any foundation for the proposition that the lodging of the caveat by the judgment creditors created a charge upon the whole of the interest of the registered proprietor in the land at the time the caveat was lodged, as distinct from a charge on his interest in the land at the time of execution. This, of course, would mean that the lodging of a caveat could not confer upon the judgment creditor any right in priority to the subsequent caveators. (at p99)

5. Secondly, it should be noticed that the sale which took place was a sale by the second mortgagee who, pursuant to s. 55 of the Act, was entitled to convey the lands to the purchaser freed and discharged from all liability on account of any mortgage or encumbrance registered subsequently to his own. So that if, as was contended, the appellants' claim to a charge upon the land depended solely upon the lodging and subsistence of their caveat, their claim must, of necessity, be taken to have been defeated by the subsequent destruction of the caveat. (at p100)

6. Faced with these difficulties the appellants contended, though faintly, that their judgment bound the judgment debtor's land from the time when judgment was entered. On this point it is, I think, sufficient to say that it is apparent from an examination of the provisions of 54 Geo. III, c. 15, the Proclamation of the Governor of New South Wales made on 18th January 1817 and 6 Geo IV, No. 22 (N.S.W.) and subsequent legislation that this proposition cannot be maintained. Nor, would any such conclusion be consistent with the provisions of s. 11 of the Registration of Deeds Act, 1935 or with those of sub-s. (1) of s. 94 of the Real Property Act, 1862. (at p100)

7. Returning then to the decision in Re Price; Ex parte Tinning (1931) 26 TasLR 158 it is necessary to point out that in the circumstances of that case, the judgment creditor did not at the time when the question arose have any right to issue execution. He did not, as the learned Chief Justice assumed, "by right of his judgment (have) power to levy on the land for his debt" (1931) 26 TasLR, at p 160 . It is true that the Bankruptcy Act in general terms defines "secured creditor" to mean "a person holding a mortgage, charge or lien on the property of the debtor, or any part thereof, as a security for a debt due to him from the debtor". But even if, in the face of the observations which have already been made, it be thought that the appellants fall within the literal terms of this definition standing by itself other provisions of the Act make it abundantly clear that such a prima facie view cannot be entertained. By s. 60 (1) of the Act it is provided that upon sequestration the property of the bankrupt shall vest in the Official Receiver named in the order and shall be divisible among the creditors of the bankrupt in accordance with the provisions of the Act. Thereupon it provides that after sequestration, except as directed by the Act, no creditor to whom the bankrupt is indebted in respect of any debt provable in bankruptcy shall have any remedy against the property or person of the bankrupt in respect of the debt or shall commence or take any fresh step in any action or other legal proceeding, unless with the leave of the court and on such terms as the court imposes. This provision is, of course, subject to the qualification contained in sub-s. (3) that it shall not affect the power of any secured creditor to realize or otherwise deal with his security. These words are relied upon by the appellants but they furnish no support for their contentions. To levy by execution on the right, title and interest of a judgment debtor in land of which he is the registered proprietor is not equivalent to a realization by an encumbrancee of his security. Execution is limited to a levy upon the debtor's interest, if any, in the land, to be ascertained after taking into consideration the encumbrances to which the land is subject. But if there remains any residual doubt it is put at rest by the provisions of s. 92 of the Bankruptcy Act which place restrictions upon the rights of creditors to execute upon the goods or lands of a debtor who subsequently becomes bankrupt. By this provision a creditor who has issued an execution against the goods or lands of a debtor is not entitled to retain the benefit of the execution against the trustee in bankruptcy unless he has completed the execution before sequestration and before notice of the presentation of any petition by or against the debtor or before notice of the commission of any available act of bankruptcy. Quite clearly this provision applies to all judgment creditors including any who have registered their judgments under the Registration of Deeds Act or who have lodged caveats under the Real Property Act, and it will be seen that it applies to executions where the writ has issued before sequestration. But if we are to give effect to the appellants' contention it would mean that a judgment creditor who has not proceeded to the point of execution would be in a stronger position than one who had but who had not yet completed it or if, having completed it, had done so with notice of the presentation of the petition or with notice of the commission of any available act of bankruptcy. I think it is clear that s. 92 was designed as a special provision to govern the rights of execution creditors and it affords a clear and unambiguous indication that the Act does not regard or treat judgment creditors as secured creditors for the purposes of the Act. It is, of course, also clear from what has already been said that the appellants are not now entitled to levy by execution upon what was formerly the judgment debtor's interest in the lands in question. That interest is now vested in the Official Receiver and is not available as the debtor's property upon which a levy may be made under an execution. (at p101)

8. For the reasons which have been given, I am of the opinion that the appeal should be dismissed and, in the circumstances of the case, it should be dismissed with costs. (at p102)

MENZIES J. This appeal is primarily concerned with the question whether the appellants were secured creditors in the bankruptcy of Herbert Paul Franz Homann, whose estate was sequestrated upon his own petition on 15th August 1958. Burbury C.J. held they were unsecured creditors. (at p102)

2. Before his bankruptcy and while Homann was the registered proprietor under the Real Property Act (Tas.) of certain land subject to a first and a second mortgage, caveats were lodged forbidding the registration of any memorandum of transfer or other instrument affecting this land by about thirty judgment creditors including the appellants. These caveats were lodged pursuant to s. 22 of the Real Property Act, 1886, which authorizes a judgment creditor to lodge a caveat in the manner provided by s. 82 of the Real Property Act, 1862 and provides that the practice, procedure and mode of dealing with such a caveat "shall in all respects be the same as if such judgment creditor claimed an estate or interest in such person's land within the meaning of that section". This, it appears, was a recognition that whereas a claim to an estate or interest in land is ordinarily necessary to enable a person to caveat, no such claim and no interest in land is required to enable a judgment creditor to caveat. After the sequestration order the second mortgagee, in collaboration, it seems, with the first mortgagee, exercised the statutory power of sale given to him by the Real Property Act, 1862 (s. 54). The Recorder did not give the caveators notice of the application to register the second mortgagee's transfer, which was in due course registered, as was a discharge of the first mortgage, and a new title was issued. The purchase price was applied by the second mortgagee in payment of the expenses of sale and of the money secured by the first and second mortgages, and the surplus 458 pounds 18s. 4d. was paid to the Official Receiver. The appellants' contention is that as unsatisfied judgment creditors who had lodged caveats, they had charges or liens upon the bankrupt's land, and when it was sold by the second mortgagee, by virtue of those liens or charges, they as the earliest caveators whose claims against the debtor remained unsatisfied became entitled to receive the whole of the surplus proceeds of the sale as secured creditors of the bankrupt. (at p102)

3. It should be stated that as the appellants had not taken any steps to execute their judgments, the provisions of s. 94 of the Real Property Act relating to sales of land under writs of fieri facias and the registration of titles to effectuate such sales have no direct application here. (at p102)

4. In the circumstances stated, the first question is whether a judgment creditor who has lodged a caveat has thereby acquired a lien or charge on the debtor's land as security for a debt due to him from the debtor. If so, he is a secured creditor for the purposes of the Bankruptcy Act (see the definition of "secured creditor" in s. 4). The questions would then arise whether such a secured creditor could "realize or otherwise deal with his security" (s. 60 (3)) or whether ss. 92 and 93 would not require that the benefit of any execution that did proceed should go to the debtor's trustee in bankruptcy. The learned Chief Justice did not go beyond deciding that the appellants were not secured creditors, and the affirmation of his decision would dispose of this appeal. This, therefore, is the first matter for consideration. (at p103)

5. Although the actual course of legislation in or applicable to Tasmania is not easy to follow, there is no doubt that the result is that a judgment does not of itself give the judgment creditor security upon the lands of the judgment debtor. A judgment creditor is not ipso facto a secured creditor. This is clearly recognized by the Registration of Deeds Act, 1935 in relation to land under the old law, and by the Real Property Act, 1886 in relation to land under the Torrens System. If, therefore, the appellants became secured creditors, it must be because they went further and lodged caveats. As has already been indicated, s. 22 of the Act of 1886 does recognize that a judgment creditor may lodge a caveat notwithstanding that he has no estate or interest in the debtor's land, but the caveat does no more than forbid the registration of dealings with an estate or interest in land and does not itself create an estate or interest. In the ordinary case, as the learned Chief Justice points out, a caveat protects an existing estate or interest (Butler v. Fairclough (1917) 23 CLR 78 ; Abigail v. Lapin [1934] UKPCHCA 1; (1934) AC 491; (1934) 51 CLR 58 ) and although this cannot be said of a judgment creditor's caveat, it remains true that such a caveat does not create an estate or interest. When a caveat is lodged or is removed or is withdrawn or lapses, the estates in the land remain as they were; the lodging of a caveat does no more than bring into play the statutory prohibition forbidding the Recorder to register any memorandum of transfer or other instrument affecting the land in question until the caveat is withdrawn or lapses. So long as the judgments against him stand, a debtor cannot have a judgment creditor's caveat removed by an application under sub-ss. (2) and (3) of s. 83 of the Real Property Act, 1862 because of the effect of sub-s. (3) of s. 22 of the Real Property Act, 1886, but notice from the Recorder to the caveator of an intended registration would set time running against the caveat which would lapse within fourteen days in the absence of an order to the contrary under s. 83 (4) of the Real Property Act, 1862. The caveat, so long as it is in operation, however, does no more than prevent the registration of dealings. It is not an "instrument" and the caveator is not a "proprietor". (at p104)

6. It was decided by Nicholls C.J. in Re Price; Ex parte Tinning (1931) 26 TasLR 158 that a judgment creditor who entered a caveat under s. 22 of the Act of 1886 does thereby obtain a lien or charge on the land of the debtor that is affected by the caveat, and it is clear that in reaching this conclusion that learned Chief Justice was greatly influenced by two considerations. The first was that the caveator of a judgment creditor had a protected right to execute; the second that unless a caveat lodged under s. 22 did give the judgment creditor security, the lodging of a caveat would be entirely futile. The first consideration, however, takes no account of s. 92 of the Bankruptcy Act which does deny to a judgment creditor the right to continue with an incomplete execution; a fortiori there could be no execution commenced after bankruptcy. Furthermore there is no justification for regarding execution under a writ and the realization of his security by a creditor as synonymous. The second consideration assumes that a judgment creditor who has lodged a caveat and who receives notice of an intending registration cannot in any circumstances by proceeding under s. 94 of the Real Property Act, 1862 have the judgment debtor's interest in the land effectively sold under a writ of fieri facias. It has already been observed that where the judgment debtor has become bankrupt this cannot be done, but in other cases this is not to be assumed too readily. Section 94 is a difficult section that it is not necessary to examine exhaustively here. It negatives any execution lien; it provides for the effective sale of a judgment debtor's interest in land; and it gives to sales under writs served upon the Recorder some priority over competing dealings. It would seem that the purpose underlying s. 22 was to give a judgment creditor who caveats the opportunity, by obtaining and serving the Recorder with a writ of fieri facias pursuant to s. 94, to ensure that a transfer to effectuate a sale under the writ would as a rule take priority over a dealing lodged between the lodging of the judgment creditor's caveat and such a transfer. Whether it would do so in any particular case would depend upon the circumstances of the case, but Nicholls C.J. seems to me to have wrongly assumed that this could not happen. It is, of course, immaterial to the understanding of s. 22 that in this particular case no effective action under s. 94 could have been taken by the judgment creditors. It is not without significance, however, that the judgment creditors' caveats could in no circumstances have prevented the registration of the transfer that was here made by the second mortgagee, and once the caveats ceased to have any operation - as must have occurred - it would follow that any interest depending upon their existence would disappear with them, so that if the caveats did, contrary to the views here expressed, give the judgment creditors any interest in the debtor's land, those interests depending as they did upon the caveats would not survive the lapsing or exhaustion of such caveats. It would follow that when the purchase price was paid to the second mortgagee, the judgment creditors had no interest of any sort that could attach to the proceeds of the sale of the land, even if in other circumstances an interest in land deemed to arise from a caveat could upon sale of the land be treated as an interest in the proceeds of the sale. (at p105)

7. The conclusion that Burbury C.J. was right in deciding that the appellants were not secured creditors does, as has already been said, dispose of this appeal and it is not necessary to consider the appellants' further difficulties had a contrary conclusion been reached. The appeal should be dismissed with costs. (at p105)

WINDEYER J. I agree in the conclusion that follows from the judgments that have been delivered. In particular, I agree in the reasoning of Kitto J. I cannot usefully add anything to it. (at p105)

ORDER

Appeal dismissed with costs.