Mortgages

At the conclusion of a work referring to the New Zealand laws, it may not be out of place, by way of postscript, to add a few words in order to draw attention to the unsatisfactory state of the law regarding mortgages and trusts under "The Land Transfer Act, 1870" (a transcript of the Adelaide Real Property Act of 1861.)

Under "The Conveyancing Ordinance, 1842," a man who borrows money on mortgage of land, say for five years, is guaranteed quiet and undisturbed enjoyment of his land, until the principal moneys secured by the mortgage become due; for, until default is made in their payment, it is not lawful for a mortgagee to enter into possession of the mortgaged property. At the end of the five years, if the borrower fail to pay the money borrowed and is three months in arrear in making such payment, he receives a formal notice to pay, else that his land will be sold; after which, if he is still in arrear another three months his land is sold at public auction on behalf of the mortgagee. To prevent a sacrifice of the property, however, if the land is sold through the Registrar of the Supreme Court, the mortgagee can bid and buy at such auction, and as it is to the interest of the mortgagee to see that the property is not sold for less than the amount of money he has lent upon it, a greater hance is thereby secured of obtaining a fair value for the property.

This has always been the law in New Zealand. Framed in the first instance for the purpose of facilitating the borrowing of money for industrial purposes and to secure borrowers from oppression, this law has been found to work satisfactorily; eminently so since 1860, when power was given to mortgagees to bid at sales by Registrars.

Under "The Land Transfer Act, 1870," on the other hand, a similar borrower on mortgage of land has no guarantee whatever for quiet enjoyment until the principal moneys secured by the mortgage become due, inasmuch as if such borrower is in arrear one month in payment of interest, he receives a formal notice as above mentioned, and if then in default one other month, he may be sold up at once. In this case, by a special enactment, no sale can be made through the Registrar, the mortgagee cannot bid, and there is nothing to prevent the sacrifice of the property More than this; instead of selling the land, the mortgagee can bring an action of ejectment in the Supreme Court to turn the owner out of possession; and having thus acquired possession for himself, can by other proceedings bar the owner from ever reclaiming the land, although able and willing to pay the money lent, with interest.

What possible reason can there be for such a difference in the law on opposite sides of the same street in the same town ? None whatever.

In Adelaide, the system of foreclosure has always been in full operation, and therefore when the operation of mortgage deeds was changed there, it became necessary to create new powers for mortgagees, in order to preserve to them the same remedies under the new mortgages as they had under the old mortgages. When, therefore, page 50 the Adelaide Real Property Act declared that bills of mortgage thereunder should operate as security for payment of money and not as transfer of land, power was given to mortgagees by ejectment to get possession of the land in the first instance, in order that they might acquire the position of being able, by suit or other proceedings in equity, to foreclose the equity of redemption. This power was specifically given to mortgagees in the Adelaide Real Property Act of 1858, and the power having thus been created, the mode of exercising it was afterwards changed, and the Adelaide Real Property Act of 1861, (which has been copied here,) merely provides a mode of procedure by which an already existing power in Adelaide shall be exercised.

How is this power of foreclosure to be exercised in New Zealand in the face of a positive enactment in these terms : "A mortgagee shall not in any case be entitled to foreclose the equity of redemption"? (Conveyancing Ordinance, 1842, sec. 41.) There is nothing in the New Zealand Land Transfer Act which specifically creates a power to foreclose; and although a mode of procedure in such cases is provided therein, yet certainly an enactment so specific, and stated in such direct and unmistakeable terms, as the one quoted above in italics, can not be repealed merely by implication, by the words of an incidental section in an adopted Act.

The question of the repugnancy of an Act is determined by 28 and 20 Vict., c. 63, s. 2, as follows :

"Any Colonial law which is repugnant to the provisions of any Act of Parliament extending to the colony, shall be read subject to such Act, and shall, to the extent of such repugnancy, be and remain absolutely void and inoperative."

Apply this test to our own laws; read the 62nd section of "The Land Transfer Act, 1870," subject to the 41st section of "The Conveyancing Ordinance, 1842"—they are contradictory. Does not the 62nd section become void for repugnancy? It cannot be contended for one moment that the 41st section of the Conveyancing Ordinance has been repealed by the enactment in the Land Transfer Act; and if not, then the latter enactment must go to the wall as being antagonistic and contrary to the expressed letter of the first.

The Land Transfer Act is not a creation of the New Zealand Assembly : it is an importation, and those parts of the Act, which though suitable to the circumstances in Adelaide are not suitable to the case in New Zealand, ought not to have been adopted; and as they were so adopted by a mistake, they should be cut away. All sections of the Act that refer to remedies of mortgagees aud encumbrancees, namely, SS. 59 to 64, and 122 to 128 of the Act of 1870, also section 4 of the Land Transfer Act of 1876 should be repealed; and in lieu of section 50 of the Act of 1870, it should be enacted that mortgage and encumbrance should have effect as security, but not operate as transfer of the land thereby charged; in case of default, mortgagees and encumbrancees under the Land Transfer should be placed upon exactly the same footing as mortgagees under the Conveyancing Ordinance, and should be left to seek their remedies under that Ordinance and its amending Acts.

The Conveyancing Ordinance is a special creation of New Zealand for, among other matters, the amendment of the law relating to mortgages. The policy which directed the framing of this law aimed at the total abolition of the operation of mortgage deeds in respect of the conveyance of the fee; but not seeing their way to accomplish so much, the framers of the New Zealand Ordinance had to content themselves with enacting an entire modification of the practice under the old law, by postponing the strict operation of mortgage deeds, and declaring that it should not be lawful for a mortgagee to enter into possession of mortgaged land until after default made in payment of the principal money secured by the mortgage. This measure, which in no way affected the security of the mortgagee, was of great relief to the mortgagor. In Adelaide, on the contrary, they entirely modified the operation of mortgage deeds, but perpetuated the inconvenient practice under the old law, only for the reason that that practice was already existing in Adelaide. This reason does not exist in New Zealand, where the practice under the old law has never existed, but where a good practice specially enacted for the circumstances of the colony was the only rule relating to mortgages previous to the passing of the Land Transfer Act 1870, aud ought to be the only rule now, notwithstanding that last-named Act.

page 51

The theory of mortgage under the Land Transfer is the correct one, and should be adopted universally in New Zealand, as it enables an owner to hypothecate his land without losing possession and all control over the same : the practice in relation to remedies of mortgagees is best under the Conveyancing Ordinance, and should be the only practice. Instead of dragging an unfortunate mortgagor backwards and forwards between law and equity, let him have ample notice of sale by the Registrar of the Supreme Court, and thereby the beat price for the property is secured ami needless quarrels and ill will are avoided. At any rate, uniformity in the law will have been attained.