KEA95005.J
IN THE SUPREME COURT
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWIN

No. 270 of 1994

					BETWEEN:
					EQUUS FINANCIAL SERVICES LIMITED
							Plaintiff

					AND:
					PETER JOHN JARVIS
							First Defendant

					AND:
					JANETTE MARIE JARVIS
							Second Defendant

CORAM:  KEARNEY J

	REASONS FOR DECISION
	(Delivered 16 January 1995)

The application

By summons of 29 December 1994 and pursuant to s191(VII) of the Real Property Act (herein "the Act"), the Plaintiff seeks to have extended indefinitely, until further order, Memorandum of Caveat No. 303316 in respect of Lot 1951 Town of Darwin.

The basis of the application

The basis of the Plaintiff's application is as follows.  It claims to have an equitable interest in Lot 1951, by virtue of certain security documents entered into by the Defendants, who are the registered proprietors of that land.  On 21 February 1994 the Plaintiff lodged a caveat no. 303316 over that land.  On 12 December 1994 the Registrar-General notified the Plaintiff that the Defendants had applied for the removal of the caveat.  The Registrar-General gave notice under s191(v) of the Act that unless the caveat was withdrawn by the Plaintiff by 2 January 1995 he would remove it.  By order made ex parte on the Plaintiff's application on 30 December 1994 the caveat was extended to 13 January 1995; it was subsequently extended until today.

As regards the First Defendant, the Plaintiff claims its caveatable interest under a Deed of Loan made between the Plaintiff and the First Defendant on 25 August 1989.  Clause 11.1 of that Deed provides:-

	"As security for the due and punctual payment of the Secured Moneys ... the Borrower as beneficial owner hereby charges in favour of the Lender all of its right, title and interest in and to the Charged Property and all property hereafter to be held or acquired by the Mortgagor in substitution or replacement of or addition to the Charged Property." (emphasis mine)

The "Charged Property" is defined in Clause 1.1(c) as "the Trust Property and the Additional Property".

The "Additional Property" is defined in Clause 1.1(a) as comprising, inter alia:-

	"(i)	All of the property described in the Schedule under the heading "Additional Property"."

In the Schedule "Additional Property" is described as "42 Freshwater Road, Jingili, N.T."

It can be seen by reading these definitions into Clause 11.1 that the First Defendant purported to charge, by way of security, in addition to No. 42 Freshwater Road, his "right, title and interest" in property he later acquired "in substitution or replacement of or in addition to" No. 42 Freshwater Road.

The Plaintiff's submissions

(a)	As regards the First Defendant

Mr Maher of counsel for the Plaintiff, relying on the terms of Clause 11.1 understood in the light of the foregoing definitions, submitted that the First Defendant had thereby charged his "right, title and interest" in Lot 1951 on the basis that Lot 1951 was "property hereafter ... acquired [that is, acquired after 25 August 1989] by the Mortgagor [that is, the First Defendant] in substitution or replacement of or addition to the Charged Property [that is, No. 42 Freshwater Road, Jingili]".

It is common ground the Lot 1951 is in Stuart Park, and is not identical with the property No. 42 Freshwater Road, Jingili, which is Lot 3113 Nightcliff.

Mr Maher made two supporting submissions.  First, in terms of Clause 11.1, Lot 1951 is "property hereafter ... acquired by the [First Defendant] in addition to [No. 42 Freshwater Road, Jingili]".  This required no more proof than the production of a search of the Certificate of Title to Lot 1951, in which the First Defendant is shown as joint owner with the Second Defendant.

Second, Lot 1951 is "property hereafter acquired by the [First Defendant] in substitution or replacement of [No. 42 Freshwater Road, Jingili]".  To establish this Mr Maher relied on the coincidence of transactions relating to Lot 3113 Nightcliff and Lot 1951.  It is clear that the Defendants as joint owners since 27 October 1986 of Lot 3113 by a transfer registered on 16 March 1992 transferred their interests in that land.  It is also clear that on the same date, 16 March 1992, the Defendants became registered as the joint owners of Lot 1951.  Mr Maher relied on this coincidence of dates as "compelling evidence"; he submitted that it proved that, in terms of Clause 11.1, Lot 1951 was "property ... acquired by the [First Defendant] in substitution or replacement of [Lot 3113]".  He submitted that the coincidence of dates showed that what had occurred was:-

	"... a common sort of transaction where a property [Lot 1951] is purchased subject to the sale of an existing property [Lot 3113] and the settlements take place on the same day because of the flow of finance."

He submitted that it should be inferred, taking a "reasonable common sense commercial approach", that funds acquired by the Defendants from the sale of Lot 3113 were used to purchase Lot 1951.

(b)	As regards the Second Defendant

Mr Maher put the Plaintiff's case against the Second Defendant in a different and more restricted way.  He submitted that the First Defendant had borrowed money from the Plaintiff, and the Second Defendant had entered into a "Deed of Guarantee and Indemnity" with the Plaintiff, also on 25 August 1989, in relation thereto.  This is not in dispute.  Clause 5 of the Second Defendant's Deed provides:-

	"As security for the due and punctual payment of the guaranteed Moneys, the Guarantor as beneficial owner hereby charges in favour of the Lender, all of its right, title and interest in the property (if any) referred to in the Schedule to this Guarantee and Indemnity under the heading "the Property" together with all property hereafter to be held or acquired by the Guarantor in substitution or replacement of the Property." 
	(emphasis mine) 

The property "referred to in the Schedule" is No. 42 Freshwater Road, Jingili.

The difference in the case which the Plaintiff brings against the Second Defendant, as compared with its case against the First Defendant, can now be seen.  In relation to the First Defendant Mr Maher was able to rely on a contention that Lot 1951 was "acquired ... in addition to" Lot 3113; he cannot rely on that contention in relation to the Second Defendant, where he is limited to submitting that Lot 1951 was acquired "in substitution or replacement of" Lot 3113.  In other words he is restricted to a submission similar to the second supporting submission he put in relation to the First Defendant.  As to that submission, he relied again on the coincidence of the dates of the transfers of Lot 3113 and Lot 1951.

As to the validity of a charge given over after-acquired property, Mr Maher relied on Tailby v The Official Receiver [1888] 13 App. Cas. 523 at 543.  That case established that a charge over after-acquired choses in action (book debts) is valid.

The Defendants' submissions

Mr Withnall of counsel for the Defendants submitted as follows.  The fundamental question in issue is whether the Defendants could validly charge after-acquired property.  A covenant to charge property constitutes an equitable charge over it but to be valid it must relate to property which is specifically identified.  Here the property said to be after-acquired in the respective covenants had not been sufficiently delineated.  Montagu v Earl of Sandwich (1886) 32 Ch. D. 525 shows that where the language of covenant rather than of grant is used, the disposition may be too uncertain for equity to enforce.

The wording of the Second Defendant's covenants is too indefinite to sustain a charge over Lot 1951, in which she acquired an interest some 3 years after executing the Deed.  The words "in substitution or replacement of" in Clause 5 are not clear in their meaning.  The evidence in any event - which is merely the identical dates on which there was a transfer of Lot 3113 and an acquisition of Lot 1951 by the Defendants - is too indefinite and vague to sustain a conclusion that the latter property is substituted for or replaces the former property as property charged.

As to the First Defendant's case and the words "in addition to" in Clause 11.1, Sweeney J in Re Roberts; Ex p. ATECC v Taylor (1982) 84 FLR 88 at p.91 cited with approval an observation by Cotton LJ in Montagu v Earl of Sandwich (supra) at p.538:-

	"I think it is an established rule, that where the covenant is to charge real estate, which can be ascertained by existing facts and circumstances, for example if there is a covenant to charge all the real estate which a man has at a particular time, that covenant will itself make a charge."

I note that Mr Withnall appeared to construe "existing facts and circumstances" as a reference to facts and circumstances which existed at the date of the covenant.  I do not think that that is the proper construction to be placed on those words.  In Re Roberts (supra), I note, the equitable charge was over a property specifically identified in the loan agreement.  In this connection Mr Withnall stressed that here the charge was sought to be enforced over a property acquired after the Deed, and not specifically identified in it.  He referred to Clause 1.1(a)(iii) of the Deed which also includes within the definition of "Additional Property":-

	"(iii)	any other land, goods, shares, units or other property whatsoever in which the Borrower has or may in the future acquire any interest during the currency of this Deed."

The question was whether land which fell within the description in 1.1(a)(iii) could be described as land "which a man has at a particular time", as it was put in Montagu v Earl of Sandwich (supra).  He conceded that the Deed of 25 August 1989 was still in force, but submitted that Lot 1951 could not be described as land which the First Defendant had "at a particular time"; this was because particularity in the sense of time did not extend to property acquired at any time during which the Deed remained in force.

Further, the First Defendant was not the registered proprietor of Lot 1951, but only had a moiety in it.  A moiety was clearly a "interest", in terms of Clause 11.1, but at very best the Plaintiff only had a charge on the First Defendant's one-half interest in the land, and not in all the interests in it.  See Lyons v Lyons [1967] VR 169.  Accordingly, caveat no. 303316 which forbade all dealings in the land, could not be sustained.

The Plaintiff's submissions in reply

Mr Maher submitted as follows.  Clause 1.1(a)(iii) was irrelevant, for present purposes; the Plaintiff rested its case on Clause 11.1 and 1.1(a)(i).  Re Roberts (supra) was not concerned with after-acquired property.  The citation therein from the judgment of Cotton LJ did not assist the Defendants, since Clause 11.1 of the Deed in essence stated that property acquired by the First Defendant at any particular time in the future is secured.

Conclusions

In Montagu v Earl of Sandwich (supra) the majority held that a covenant of 1867 properly construed operated as a charge (and not merely as a covenant to create a charge) to take effect upon the covenantor's death, on all the real estate of which he should die seised.  The covenant to charge was held to be a present charge; it could clearly cover after-acquired property of the Earl, who did not die until 1884.  It is I think clear from the reference by Cotton LJ (who dissented as to whether the covenant created a charge), to "a particular time" (see p6) that his Lordship had in mind any particular time specified in the Deed; in that case, the time specified was the date of death of the covenantor.  In the present case, time is specified in Clause 11.1 only to the extent of "hereafter", which I think should be construed as any time during the currency of the Deed.  I think that is adequate particularity.  The land to be charged, as His Lordship said at p.540, is "to be ascertained by evidence".

In In Re Kelcey; Tyson v Kelcey [1899] 2 Ch 530, Kekewich J held that a general charge for value on all the existing property of the Mortgagor is not void for uncertainty if the property to which it attaches can be ascertained at the time of enforcement.  There the charge created in 1869 was of:-

	"... all my real and personal estate whatsoever and wheresoever and of what nature and kind soever the case may be or consist ...".

The charger died in 1899.  What was in issue was the proceeds of a policy of assurance which was in existence at the date of the charge.  His Lordship construed the charge as not relating to future property.  However, he cited from Bowen LJ in In Re Clarke (1887) 36 Ch. D. 355, a case which related to after-acquired property expressed in the deed in very general terms, viz:-

	"There is another kind of vagueness which arises from the property not being ascertained at the date of the contract, but if at the time when the contract is sought to be enforced the property has come in esse and is capable of being identified as that to which the contract refers, I cannot see why there is in it any such vagueness as to prevent a court of equity from enforcing the contract.  Even then there may be something in the nature of the contract which will prevent its being enforced.  I will not attempt to define what will have that effect.  It is suggested that, as distinct from vagueness, there may be such wideness in a contract that it ought not to be enforced by a court of equity".  (emphasis mine) 

Lyons v Lyons (supra) establishes that a joint tenancy of land under the Torrens system in Victoria is not severed when one co-owner mortgages his interest.  This is because a Torrens mortgage operates as a security only and not as a transfer of the interest charged.  Accordingly, the mortgagee's security in the land lapses if the mortgagor does not survive his co-owner.  In that case the mortgagees-caveators unsuccessfully claimed an equitable interest in fee simple as to a half share of the subject land, as tenant in common with the survivor of the joint tenants.

In Avco Financial Services Ltd v White [1977] VR 561 there was an equitable charge in a contract of loan over "all freehold and leasehold interests in the land which I may now have or during the currency of the loan may acquire".  The lender lodged a caveat.  The lender's equitable charge over certain property existing at the time of the loan was held to have priority over an equitable interest under a later unregistered mortgage; the lodging of the mortgage for registration was restrained.  Gillard J observed at p.565:-

	"It will be noted that the charge was granted generally over all freehold and leasehold interests in the land, which the grantee may have at the time of the agreement or during the currency of the loan.  It might well be thought that this was too vague and so wide as not to be enforced in or by a court of equity.  But this view was rejected by Kekewich, J., who, having been faced with a similar provision said "This created an estate in equity which might take precedence over a purchaser".  (See In Re Kelcey; Tyson v Kelcey, [1899] 2 Ch. 530, at p. 534.  See also London County Bank v Tomkins, [1918] 1 K.B. 515; Re Lesser; National Trustees v Lesser, [1944] V.L.R. 210.  Compare Re Rothermere, [1943] 1 All E.R. 307.)  Having regard to these authorities I have come to the conclusion that the plaintiff did have an equitable charge over any interest in any real property owned by Mr. and Mrs. White, for their several interests."

Clark v Raymore (Brisbane) Pty Limited [No. 2] (1982) Qd. R. 790 involved a question of priority as between a purchaser and a prior equitable chargee.  The charge was over all the charger's property, both real and personal.  At pp.794-795, Thomas J said:-

	"It is to be noted that the charge was given only by the male owner.  The title shows that he and his wife are joint tenants.  Although a joint tenant holds the whole jointly, he holds nothing separately, and has no power to dispose of the joint interest.

	(Co. Litt 186a; Farrelly v Hircock [1971] Qd. R. 341, 352).

	Prima facie the purported charge in the guarantee would be effective as to the male owner's moiety only (Co. Litt 186a supra), in which case a severance of the joint tenancy would be effected. This position seems to have been recognised by the chargee, as it commenced an action against the male owner only, claiming that the guarantee created a charge in respect of his interest "as tenant in common" in the subject land.  This is consistent with the subject caveat which claims "an estate or interest as equitable chargee of an estate in fee simple ... in the interest of the said Theodorus Franciscus Sanders ..." in the subject land.  The argument before us proceeded on the footing that a valid equitable charge had been granted, but no argument was addressed as to the precise nature of the chargee's interest.  In a case such as the present where there is a competition between equitable interests, I think it is important to identify as clearly as possible the intrinsic nature of each interest.

	The words used in the guarantee are extraordinarily wide, and one might suspect that the courts of equity may have refrained from giving them full effect.  However this was not the case, and Kekewich J. in Re Kelcey, Tyson v. Kelcey [1899] 2 Ch. 530, at pp. 532-534, considered that such words create a charge in equity capable of taking precedence over the interests of a purchaser.  (Compare London County Bank v Tomkins [1918] 1 K.B. 515, and Avco Financial Services v White [1977] V.R. 561, at p. 565).

	I would therefore describe the interest which the chargee obtained as an equitable general charge securing a contingent debt under a guarantee, and capable of attaching to the male owner's moiety in the subject land."

See also Corin v Patton [1989-90] 169 CLR 540 where it was held that an unregistered transfer by a joint tenant of Torrens land to a trustee, to be held in trust for herself, did not sever the joint tenancy.

I consider that the language of Clause 11.1 of the First Defendant's Deed, and of Clause 5 of the Second Defendant's Deed, is apt to create a present charge of certain after-acquired property of each of those defendants.  The question is, is that after-acquired property identified with sufficient certainty in the Deeds (pp2 and 4)?  I consider that it is.  I consider that the description in the Deeds is not so vague that the Court cannot ascertain whether Lot 1951 falls within the description.  When the Defendants acquired Lot 1951 they became bound by the charge created by the Deeds of 25 August 1989.  As regards the First Defendant, I uphold the second supporting submission of the Plaintiff (pp3-4); I also uphold his submission in relation to the Second Defendant (p5).  Since Lot 1951 comes within the scope of the charge in the Deeds, it is bound thereby.

Accordingly, I grant the relief sought in paras 1 and 2 of the Plaintiff's summons of 29 December 1994.

Order accordingly.