Monday, 27 August 2012

Have the problems migrating charges from ASIC to the PPS Register been fixed?

In the latest PPSR update (July - August 2012), ITSA notes the following matters regarding the migration of charges from the ASIC database to the PPS Register.

First, ASIC has published a list of approximately 6000 charges that were on the ASIC Register of Company Charges but were not migrated to the PPSR due to technical issues arising in the migration. See the ASIC website ( for more details.
The non-migrated charges should be registered on the PPSR before the end of the 24 month transitional period ending in January 2014 to ensure that they remain perfected security interests. If they are registered on the PPSR after the expiration of the transitional period, the start date for priority purposes will be the date of registration.
Secured parties that notify ITSA of registration of those charges on the PPSR may be eligible for a payment in respect of each relevant charge (subject to validation by ITSA). To apply, please read, complete and lodge the form 'Notification of re-registration of non-migrated security interests (including application for payment)' available via the link shown below.
ITSA recommends that secured parties submit notification forms no later than 31 October 2012.

Secondly, Data migration issues – Update
Implementation of the ASIC ACN/ABN data fix (known as CR089) was completed in June. This resulted in changes to 885,238 registrations migrated from the Register of Company Charges, to replace grantors identified on the PPSR by an ABN with the same grantors identified by an Australian Company Number (ACN), where the grantors had both an ABN and an ACN. As noted on the Announcements page at, among the registrations affected were 484 registrations that should have had grantors identified by ARBN (not ACN). The majority of the affected grantors are foreign companies, but included is a small set of Australian non-companies (for example, cooperatives) which should be identified by ARBN. A programmatic solution is being developed to substitute ARBN for ACN for the affected entities. This is expected to be implemented at the end of this month. In the meantime, users performing organisational grantor searches by ARBN should consider searching by entering the ARBN of the target grantor entity into both the ACN and ARBN fields on the PPSR.

The online version of the entire newsletter can be accessed at:

W G Stark
Hayden Starke Chambers

Friday, 24 August 2012

Are there any recent decisions about the enforcement of forged loan documents?

In  Commonwealth Bank of Australia v Perrin [2011] QSC 274 the Supreme Court of Queensland had to analyse whether a mortgage was enforceable because the wife's signature had been forged.

This case concerned the Perrin family. The case makes interesting reading – it’s a little like a soap opera.
A twenty something salon owner (the defendant) met a twenty something law student;
They married;
He did articles at Allens;
He then joined the legal practice of his 2 older brothers;
He left private practice and joined Billabong;
He becomes a multi-millionaire on the float of Billabong;
In 2007, their fortune was estimated by BRW at over $120million;
At some point in time, the Perrins demolished the family home (registered in Mrs Perrin’s name and on the Gold Coast in Queensland) bought the block next door and built a ‘larger’ house (said to be worth $10m+);
The facts recited in the judgment also refer to an affair between Mr Perrin, and the fact that Mrs Perrin is apparently now in a relationship with her ex husband’s former lover’s ex husband (in other words, the 2 jilted ex’s got together to console each other);
Unfortunately, Mr Perrin invested badly, and lost a lot of money. He became bankrupt.

The bank sued Mrs Perrin seeking to recover possession of the family home.

The judge found that Mr Perrin forged his wife’s signature on various mortgages over the family home and a guarantee of his indebtedness to the Bank.

Section 185(1A) of the Land Titles Act (Qld) provides:
(1A) A registered proprietor of a lot (the relevant mortgagee) who is recorded in the freehold land register as a mortgagee of the lot or an interest in the lot does not obtain the benefit of section 184 [indefeasibility] for the relevant mortgagee's interest as mortgagee if  
(a) the relevant mortgagee
(i) in relation to the instrument of mortgage or amendment of mortgage, failed to comply with section 11A(2); or
(ii) in relation to a transfer of the instrument of mortgage, failed to comply with section 11B(2); and
(b) the instrument of mortgage or amendment of mortgage was executed other than by the person who was, or who was about to become, the registered proprietor of the lot or the interest in a lot for which the instrument was registered.  

McMurdo J decided because the Bank failed to take reasonable steps to ensure that it was the defendant who executed the mortgages in question, in breach of section 11A of the Land Titles Act 1994, it did not gain indefeasibility for its mortgages. The bank had attempted to avoid the consequences of this provision by saying that the court should only remove its mortgages from the titles in question upon payment of the debts owed to it. That attempt failed.

Section 11A of the Land Titles Act (Qld) provides:
(1) This section applies to
(a) the mortgaging of a lot or an interest in a lot; and
(b) an amendment of a mortgage mentioned in paragraph (a).
(2) Before the instrument of mortgage or amendment of mortgage is lodged for registration, the mortgagee under the instrument (the original mortgagee) must take reasonable steps to ensure the person who executed the instrument as mortgagor is identical with the person who is, or who is about to become, the registered proprietor of the lot or the interest in a lot.
(3) Without limiting subsection (2), the original mortgagee takes reasonable steps under the subsection if the original mortgagee complies with practices included in the manual of land title practice under section 9A(2)(c) for the verification of identification of mortgagors.
(4) The original mortgagee must, for 7 years after the instrument is registered, and whether or not there is registered a transfer of the interest constituted by the mortgage
(a) keep, in the approved form, a written record of the steps taken under subsection (2); or
(b) keep originals or copies of the documents and other evidence provided to or otherwise obtained by the original mortgagee in complying with subsection (2).
Maximum penalty 20 penalty units.

There is no equivalent provision in Victoria to sections 11A and 185(1A). 

Indeed, if the same circumstances arose here, the Bank would not concede that it would not be entitled to rely upon indefeasibility from the registration of its mortgages.

W G Stark
Hayden Starke Chambers

Thursday, 23 August 2012

Are there any recent decisions clarifying unconscionable conduct by a mortgagee?

Before the Global Financial Crisis (GFC) in 2008, we may have seen a return to some of the more dubious 1980's lending practices.
It seems that subsequent to the GFC there may be a return to 1980's banking and finance litigation (possibly due to harsh economic times).

In Choice Constructions Pty Ltd v Janceski [No 3] [2011] WASC 358, the Supreme Court of Western Australia was called on to look into an allegation of unconscionable conduct by a mortgagee, along the lines of the Garcia and Amadio decisions.  

The defendants, Mr and Mrs Janceski moved from their native Macedonia to Perth, Australia in the 1970’s. Therefore, they were of a non-English speaking background. Neither husband nor wife had received any formal education in English, and Mrs Janceski had only received formal education to grade 4 level. However, both defendants could read, write and speak a little English. 

They had been involved in a series of property transactions prior to entering into the mortgage with Choice Constructions Pty Ltd. The mortgage in question came about due to their purchase, with their son, of a 3 storey town house developed by the mortgagee as builder/developer. They could not pay the full purchase price, and the vendor agreed to finance their purchase.

In this proceeding, the defendants (representing themselves) claimed that the mortgagee had acted unconscionably, based the principles set out in the High Court decisions of Commercial Bank of Australia v Amadio (1983) 151 CLR 447 and National Australia Bank Limited v Garcia (1998) 194 CLR 395. As a result, they sought a declaration that the mortgage was unenforceable.

Unconscionable conduct
Readers will recall that in Amadio, the High Court held that a contract (the mortgage) will be unenforceable where one party to it is at a special disadvantage and because of that special disadvantage it would be unconscionable for the other party (the bank) to take a benefit from the transaction. 

Garcia took the argument one step further, deciding that it is unconscionable to enforce a guarantee against a married woman (a professional in that case) in circumstances of undue influence. The particular guarantee in that case was to repay her husband’s debts in circumstances where:
  1. the wife did not understand the effect of the transaction, and was not receiving a benefit from it;
  2. the lender was aware that the wife did not understand the transaction; and
  3. the lender did not take steps to ensure that the wife had the transaction explained to her. 
These decisions led to a change in lending practices that resulted in guarantors being required to prove that they had received independent legal advice before entering into the proposed guarantee (by providing an independent solicitor's certificate). 

It seems that before the GFC, some lenders had again taken to lending in dubious (high risk) circumstances, on the basis that it was a rising property market, and the value of the security property being offered would protect the lender against all possible risks. The GFC confirmed how foolhardy that attitude was! 

The decision
Simmonds J ultimately found in favour of the mortgagee/developer, on the basis that the defendants were not at a special disadvantage and that the mortgagee had taken adequate steps to ensure they received appropriate and translated advice.

His Honour made several comments in his decision on the factors relevant to a finding of special disadvantage:
  1. whilst age in itself is not a special disadvantage, when combined with other factors it may give rise to a special disadvantage;
  2. emotional dependence (here the defendants alleged they were dependent on their son) is often an indicator of special disadvantage but will not amount to special disadvantage without the presence of other factors;
  3. a lack of literacy, education or comprehension of the English language are significant factors indicating special disadvantage; and
  4. a lack of business knowledge may also be a contributing factor.
His Honour specifically declined to decide whether the Garcia principle extended to the relationship between aged parents and children.

The case ran for over 20 days, and the defendants represented themselves. Those facts alone show the significant cost of this case to the mortgagee. Therefore, the Janceski decision is a reminder to lenders about the importance of ensuring that potential borrowers and especially third party guarantors obtain independent legal advice, and an independent solicitor's certificate about that advice. 

W G Stark
Hayden Starke Chambers

Wednesday, 22 August 2012

Are there any recent cases on 'Severance of joint tenancies' in August 2012?

On 3 October 2011 and 15 February 2012 I posted blogs about 2 cases where one party sought to sever a joint tenancy and the other party resisted the application. 

On 27 July 2012, Croft J handed down a further decision about the severance of joint tenancies in Mischel v Mischel Holdings Pty Ltd [2012] VSC 292. 

The circumstances in that case were that the joint tenants agreed to sever the joint tenancy, and exchanged contracts to that effect; however, before the agreement could be brought into effect, one of the joint tenants died. 

Croft J was called on to determine whether the death of the joint tenant resulted in the agreement being of no effect, due to section 42 of the Transfer of Land Act, 1958 (indefeasibility of title). 

The decision
His Honour noted (at paragraph 38): 
It is well established that the conveyance of property to parties  jointly does not of itself rebut the equitable presumption of a tenancy in common as a conveyance in this form does not identify the beneficial ownership of the conveyees— and the same applies to a transfer of land under the Transfer of Land Act 1958 (Vic).

and at paragraph 39:  
The [joint tenants] enjoyed indefeasible title as joint registered proprietors in fee simple under the provisions of the Transfer of Land Act 1958 (Vic). This position in terms of legal title does not, however, prevent parties agreeing a contrary position ... An agreement of this kind, if recognised in equity as relevant to the state of the title, would eliminate one of the “four unities” — possession.

His Honour then referred (in paragraph 40) to the:
"many authorities of long standing which reaffirm the dislike of joint tenancies in equity because of the arbitrary manner in which the right of survivorship operated. The position in this respect was discussed and reaffirmed by Gibbs CJ in Delehunt v Carmody in the context of a purchase of property where both purchasers contributed equally in the payment of the deposit and the instalments of purchase price:

... Equity had a dislike for joint tenancies, because their effect was to make the ultimate ownership of the property depend on the chance of survivorship, and, in the words of Snell’s Principles of Equity 28th ed (1982), at 37: “There is here no equality except, perhaps, an equality of chance.”
His Honour concluded that an agreement between the deceased before her death and the joint title holder:
"made in circumstances where [the deceased] provided full consideration for the purchase of her half interest in the premises would, in my view, provide a sufficient circumstance to indicate that it was intended that there should not be a joint tenancy because the result of such an agreement would be to eliminate one of the “four unities”, namely, possession.

In dealing with the death of the joint tenant before the contract was completed, His Honour noted (at paragraph 62):

Finally, mention should be made of the fact that [M] died prior to the settlement of the sale of the premises. Whilst the defendant sought to attach some significance to this fact, it does not, in my opinion affect the position argued for by the plaintiff. When an enforceable contract for the sale of land is entered into, the consequence, in equity, is that the purchaser acquires at that time the fee simple estate in equity, the vendor’s interest at the same time being converted into a lien over the land sold for the balance of the purchase price. Consequently, from the perspective of equity, [M]’s death occurred after the beneficial sale of the premises and, consequently, at a time when the agreement to apportion the sale proceeds had come into effect. This position is not affected by the passing of the legal estate in the premises by survivorship on her death because the holder of that estate, the defendant, does so subject to her beneficial interest in the proceeds of sale — now, of course, part of her deceased estate.

Severance of a joint tenancy On the question of severance of a joint tenancy, His Honour noted as follows (at paragraphs 63 and following): 

It is clear that a joint tenancy may be severed by agreement or by conduct. Although severance by conduct has been characterised merely as evidence of an agreement to sever, the “weight of authority supports [the latter] as having an independent existence”.

[64] I turn now, particularly, to severance by agreement. It is clear from the authorities that a joint tenancy may be severed in equity by agreement between all the joint tenants henceforth to hold as tenants in common. This includes a situation where the joint tenants agree that:
  • (a) 
    they each hold an equal, one-half share in the property (a moiety); and
  • (b) 
    the property is to be sold and the proceeds of sale divided accordingly.
It is the agreement between the parties to “split” their property that is determinative of an intention to sever, as emphasised by the Queensland Court of Appeal in Sprott v Harper.

[65] Equity regards the parties as tenants in common as soon as the agreement to sever is made, even though the legal title remains in them as joint tenants, and even though the agreement contemplates the occurrence of future events. For example, an agreement to sell and divide the proceeds of sale of the property between the joint tenants normally severs the joint tenancy in the absence of the actual sale or division of the proceeds. Thus, Professor Butt observes:

It seems not to matter that the contemplated events might never in fact occur; for example, an agreement between husband and wife joint tenants that each henceforth is entitled to “a one-half” interest in the property severs the joint tenancy immediately, even though the agreement provides for sale of the property only on the remarriage of either of them or on one giving the notice at some future time that a sale is required.
If a co-owner dies before the legal title is altered to reflect the changed status, the beneficial ownership, equity will compel the survivor to hold the deceased’s undivided interest on trust for the persons entitled under the deceased’s will. Where that interest has been sold, the proceeds of sale of that interest will be held on trust for the person beneficially entitled.

The weight of authority now indicates, in my view, that an oral agreement to sever a joint tenancy will suffice.

The final decision of the court was that as at the date of her death, [M] was entitled to a half-share of the proceeds of sale of the premises either because she was, at the time she acquired an interest in the premises, a tenant in common in equity as to one-half share, or because any joint tenancy was severed by agreement or conduct prior to her death, with the result that she thereupon became beneficially entitled to the half-share of the proceeds of sale of the premises. 

W G Stark
Hayden Starke Chambers

Friday, 17 August 2012

Personal Property Securities Act further update August 2012

There are 2 developments for those with an interest in the Personal Property Securities Act, 2009 (Cth) the PPSA.

First, I gave a talk to the Law Institute last week in Mildura about the PPSA and how it is tracking. Copies of the talk are available for anyone who is interested. 

Secondly, the PPS Register has issued a fact sheet entitled: "Building and Construction: What you should know about the PPSR". See: 

Among other matters, the fact sheet points out that companies and small business owners operating in the building and construction industry will need to review their credit and risk management practices in consideration of the PPSA. 

It notes that the PPSA may affect business practices and documentation requirements concerned with secured finance.

The fact sheet warns that your business may be affected if, for example, you:
• supply goods on credit under retention of title arrangements
• use equipment leases
• provide fleet management services, and/or
• provide fleet rental services.
It highlights that by using the Personal Property Securities Register, businesses can protect their position in the event of debtor default or insolvency.

The fact sheet provides a timely reminder to all businesses that the 2 year transition period is passing quickly, and steps need to be taken to ensure compliance with the PPSA before it is too late.

W G Stark
Hayden Starke Chambers

Thursday, 2 August 2012

What are a developer vendor's obligations to use its best endeavours to obtain registration of a plan of subdivision in a timely fashion?

In Joseph Street Pty Ltd v Tan [2102] VSCA 113 (BC201203905), the Victorian Court of Appeal had to determine whether a developer was in breach of its obligations to use its best endeavours to register a plan of subdivision. 

The circumstances were that the developer /vendor entered into a contract for the sale of part of certain land in Mitcham, Victoria, that it proposed to develop. The contract included a term that it would use its best endeavours to register a plan of subdivision. The contract also provided that if the Plan of Subdivision was not registered within 15 months of the date of the contract, either party could rescind. If the developer was in breach of the 'best endeavours' term, it was then unable to rescind the contract. 

In the Supreme Court of Victoria, the appellant /purchaser unsuccessfully sought specific performance of the contract for sale. The appellant/purchaser had claimed that the respondent had failed to comply with its obligation to the purchaser to use its best endeavours to procure registration of relevant plan in a timely way. Evidence was led that if the developer had entered into a section 173 agreement with the local council, ultimately the Plan of Subdivision would have been registered much more quickly. As a result of the developer's failure to do so, the appellant/purchaser claimed the developer was not entitled to rescind the contract. 

The decision 
In Hospital Products Ltd v United States Surgical Corporation(1984) 156 CLR 41, the High Court decided, among other things, that "use best efforts" required a person just to take reasonable steps (although the Court did acknowledge that "the meaning of particular words in a contract must be determined in the light of the context provided by the contract as a whole and the circumstances in which it was made, and that decisions on the effect of the same words in different context must be viewed with caution - per Gibbs CJ). The developer argued that it had met that standard, and in fact it was unreasonable to expect it to enter into a section 173 agreement with the local council.

The Court of Appeal overturned the trial judge's findings, and held that on the evidence respondent / developer had breached its obligation to its use best endeavours to obtain registration of the plan in a timely fashion.

As a result, the developer dis-entitled itself from rescinding the contract and the trial judge erred in declining the relief of specific performance sought by appellant. The Court of Appeal ordered
specific performance of the contract of sale of land.

The Court of Appeal's decision turned on its holding that "best endeavours" required the developer to do more than just take reasonable steps to attempt to have the Plan of Subdivision registered. In the circumstances of the case, this meant that the developer should have entered into an agreement under section 173 of the Subdivision Act with the local authority, which in turn would have expedited the process of the local authority in approving the Plan of Subdivision.

W G Stark 
Hayden Starke Chambers