By Vuu-Cindy Dang, University of Technology Sydney

This case note was originally published in the Animal Law Case Book, ed Sophie Riley (1st ed, 2015) and has been republished with minor edits by Voiceless with permission from the editor.   

Citation: Saltoon v Lake [1978] 1 NSWLR 52

Court – Supreme Court of New South Wales

FACTS OF THE CASE

Saltoon, the plaintiff and respondent, lent $20 000 to Scali, which was secured by a mortgage over four horses, one being Mighty Khan. The security agreement was contained in a deed dated the 5th August 1975. In this, Scali assigned Mighty Khan to Saltoon subject to the condition that he or she would be reassigned to Scali upon the repayment of the principle sum and interest, as well as the fulfilment of all covenants, conditions and agreements provided for by the deed. The deed stipulated that the mortgagor, being Scali, would assume responsibility for the care of the horse.

At the time of the mortgage agreement, Mighty Khan was being trained by Lake, a defendant and appellant. While a letter was supposed to be sent to Lake to notify him of the mortgage over the horse, this was never received. The judge at first instance accepted that before proceedings commenced, the defendants were unaware of the mortgage.

After several transactions which took place between the conclusion of the mortgage agreement and the proceedings being initiated, the first, second and third defendants had acquired Scali’s interest in Mighty Khan. The fourth defendant, being Lake, had possession of the horse.

Scali then went bankrupt.

THE ISSUES

• Whether the failure to register the deed as a stock mortgage rendered it void by virtue of s 13 of the Liens on Crops and Wool and Stock Mortgages Act 1898 (NSW).
• Whether the deed of mortgage was invalid as an unregistered bill of sale under s 5(1) of the Bills of Sale Act 1898 (NSW).
• Whether Saltoon’s conduct was such that the defendants’ interests should take priority over his.
• Whether s 26(1) of the Sale of Goods Act 1923 (NSW) applied.

THE DECISION

The Court dismissed the appeal.

Failure to register the deed as a stock mortgage

The first submission was that as the deed was not registered as a stock mortgage, it was void in accordance with s 13 of the Liens on Crops and Wool and Stock Mortgages Act 1898 (NSW). The Court determined that the purpose of the Act was to facilitate the mortgage of stock, and also eliminating invalidity caused by mortgagor bankruptcy and fraud. Based on the interpretation of the legislation, the Court rejected the submission that a failure to register the stock mortgage wholly invalidated it.

Effect of the mortgage

The second submission was that s 5(1) of the Bills of Sale Act 1898 (NSW) rendered the plaintiff’s mortgage void upon Scali’s bankruptcy. It was accepted that the unregistered stock mortgage was a bill of sale. However, the Court held that s 5(1) operated to invalidate an unregistered bill of sale where necessary to facilitate the Official Receiver’s recovery of property in the event of bankruptcy. It did not result in the comprehensive invalidity of the bill of sale. As such, the second submission failed.

Whether others should take priority

The third submission was that the conduct of Saltoon was such that the Court should give priority to the interests of the first, second, and third defendants over him. It was claimed that Saltoon had participated in a fraud; however, the Court held that this had not been established with evidence. It was also found that Saltoon’s failure to take possession of the certificate of registration with the Australian Jockey Club upon acquiring the mortgage did not disentitle him of the benefit of his security.

Application of the Sale of Goods Act 1923 (NSW)

The Court held that equitable rules relating to mortgage priorities operate independently of s 26(1) of the Sale of Goods Act 1923 (NSW). While the defendants could have made a claim based on this section in an attempt to establish their title to the horse, they did not argue this.

COMMENTARY

This case affirms the property status of animals under Australian law. It demonstrates how the law’s characterisation of animals in this way allows them to be used for an array of purposes, including as security for a mortgage agreement.