Tempany v Hynes

• Jurisdiction: Ireland
• Judge: KENNY J.,HENCHY J.
• Judgment Date: 01 June 1976
• Neutral Citation: 1976 WJSC-SC 1351
• Court: Supreme Court
• Docket Number: No. 3937P/1974,[1974 No. 3937 P]
• Date: 01 June 1976

TEMPANY v. HYNES

MAURICE TEMPANY

Plaintiff

and

DESMOND HYNES

Defendant

1976 WJSC-SC 1351

O'HIGGINS C.J.

HENCHY J.

KENNY J.

No. 3937P/1974

(147-1975)

REVERSING HIGH-10.7.75

THE SUPREME COURT

KENNY J.

1 Judgment delivered 1st June 1976by O'Higgins agreeing.

2 Tractasales (Longford) Limited ("the company"), which carried on a garage business, were registered as owners under the Registration of Title Act of the lands in folios 9792, 12146 and 12386 in the county of Longford. By a first mortgage debenture made between the company and United Dominions Trust (Ireland) Limited ("the debenture holders") which recited that the company had requested the debenture holders to lend them £25,000 and that the debentures holders had agreed to make this advance with interest provided that the repayment was secured by a debenture, the company "hereby charges its undertakings and all its property assets and goodwill whatsoever and wheresoever both real and personal present and future including therein the uncalled capital of the company for the time being with the repayment to the debenture holder of all the principal and interest and other monies payable under this debenture so that the charge herebycreatedshall be a first charge on the property charged herein and so that it shall be a floating security only not hindering any sale or other dealings by the company in the ordinary course of its business with its property and assets comprised in the charge but that the company shall not be at liberty to create any mortgage or charge on any of its property or assets ranking in priority to or pari passu with this debenture without the previous consent in writing of the debenture holder provided always that the said charge above referred to so far as it relates to the property comprised in the schedule hereto shall be a specific charge thereon and not a floating charge as on the borrowers other property". The property described in the schedule was folio 9792. The completion of the debenture had been carried out rapidly because the company were in severe financial difficulties and the solicitor who prepared it had not been told that the company were registered as owners of the lands in folios 12386 and 12146.

3 The sum advanced under the debenture of the 11th of September 1969 was not sufficient to solve the company's difficulties and they sought further help from the debenture holders who agreed to give it. By a second debenture made on the 1st of June 1971 and registered on folio 9792 only, the company charged its assets and undertaking with all further sums advanced so that the charge was to be a floating charge on all its assetsbut a specific charge on the property in folio 9792.

4 On the 26th of July 1971 the debenture holders appointed the plaintiff to be receiver of all the property charged by the two debentures. The plaintiff decided to sell all the property in one lot but his solicitors and he thought that the company were registered as owners of the lands in folios 9792 and 12146 Co. Longford and were not aware that part of the property was in folio 12386. Between the date of the appointment of the plaintiff as receiver and the public auction, two judgment mortgages had been registered against the lands included in folios 9792, 12146 and 12386. The conditions of sale described the property as being that in folios 9792 and 12146. The special conditions provided that the plaintiff was selling the property as receiver in exercise of his power of sale conferred by the mortgage debentures of the 11th of September 1969 and the 1st of June 1971. They also provided: "The vendor shall discharge all charges registered against the said folio on or before closing and shall pay all Land Registry fees for the cancellation of such charges". The closing date was 28th of May 1974 and, in the event of the sale not being closed on that date, interest at the rate of 18% was to be paid by the purchaser on the balance of the purchase money until completion. The defendant attended the auction on the 26thof February 1974 and purchased the property for £30,500. He paid£7625 which was paid "as a deposit and in part payment of the purchase money" and signed the contract attached to the conditions of sale.

5 On the 23rd of November 1971 Peter F. Doggett registered a judgment mortgage against the lands in folio 9792 and on the 26th of March 1973 Henry Smith registered a judgment mortgage against the lands comprised in the three folios. These two judgment mortgages were registered after the appointment of the receiver but before the contract for sale had been signed. On the 22nd of May 1974 the Longford Arms Motor Works Limited registered a judgment mortgage on the three folios and on the 1st of July 1974 Foster Finance Limited registered a judgment mortgage on folios 12386 and 12146. The last two mortgages were registered after the contract had been signed.

6 The defendant had purchased the property because he thought that he could get finance to develop it. He was unable to do this and because determined that he would get out of the sale if he could. He raised questions about planning permission and when those had been dealt with, he made searches in the Land Registry and on the 23rd of January 1975 found out that part of the lands surrounding the garage were registered on folio 12386. The plaintiff hadforgotten that the Land Certificate in relation to this had been handed over to him when he was appointed receiver and he had left it in his office in Longford. It was not deposited with him as security. The defendant's solicitor then required the judgment mortgages registered after the date of the contract to be discharged and negotiations in connection with this took place. The plaintiff's solicitors had obtained releases of the two judgment mortgages registered before the contract and it was ultimately agreed between the solicitors that the sale should be closed on the 18th of March 1975 on an undertaking by the plaintiff's that they would put £4,500 on deposit in the joint names of the solicitors which was to be held for six weeks. If within that time, the plaintiff's solicitors had not succeeded in having the two post-contract judgment mortgages removed from the folios, the sum was to be paid to the defendant's solicitor. At this time the plaintiff's solicitors believed that the two judgment mortgages registered before the contract had to be discharged out of the purchase money but that those registered after the contract would be removed by the Registrar on registration of the transfer to the defendant. When the parties met at the Four Courts on the 18th of March the defendant refused to close the sale on these terms and insisted that the £4,500 should be paid to him immediately. This was ademand which the plaintiff's solicitors could not accept and they decided to go on with their action for specific performance of the contract which they had begun on the 3rd of December 1974. The action was heard by the President of the High Court (Mr. Justice Finlay) who dismissed it because he thought that the title shown by the plaintiff might involve the defendant in litigation with the post-contract judgment mortgages. The grounds for his decision were that folio 12386 was not included in the written contract for sale, that the debenture holders were not mortgagees of it by equitable deposit and had not registered either of their debentures against it and that the judgment mortgagees might succeed in a claim that their judgment mortgages were effective against it in priority to the claim of the debentureholders.

7 The first argument for the plaintiff was that when the contract for sale was signed on the 26th of February 1974, the company became a trustee for the defendant who became the owner of the entire beneficial interest in the lands and that the company did not own any estate or interest on which the two judgment mortgages of the 2nd of May 1974 and the 1st of July 1974 could operate and so they would be removed from the folio on the registration of the transfer to the defendant. A vendor who signs a contract with a purchaser for the sale of land becomes a trustee in the sense that he is bound to take reasonable care of the property until the sale is completed but he becomes a trustee ofthe beneficial interest to the extent only to which the purchase price is paid. He is not a trustee of the beneficial interest merely because he signs a contract. This is made clear by Lord Cranworth in Rose v.Watson (1864) 10 H.L. Cas. 672. "There can be no doubt, I apprehend, that when a purchaser has paid his purchase-money, though he has got no conveyance, the vendor becomes a trustee for him of the legal estate, and he is, in equity, considered as the owner of the estate. When instead of paying the whole of his purchase money, he pays a part of it, it would seem to follow, as a necessary corollary, that, to the extent to which he has paid his purchase-money, to that extent the vendor is a trustee for him; in other words, that he acquires a lien, exactly in the same way as if upon the payment of part of the purchase-money the vendor had executed a mortgage to him of the estate to that extent". Until the whole of the purchase money is paid, the vendor has in my opinion a beneficial interest in the land which may be charged by a judgment mortgage.

8 Some judges and writers of standard text books (Cheshire and Magarry and Wade) who have dealt with this matter have stated that from the date of the signature of the contract (whether the whole or any part of the purchase money has been paid or not) the purchaser is the owner of the entire beneficial interest in the land. Thus in Shaw v. Foster (1872) L.R. 5 H.L. 221 Lord Cairns said: "There cannot be the slightest doubt of the relation subsisting in the eyes of a Court of Equity between the vendor and the purchaser. The vendor was a trustee of the...