Bank of New South Wales v Permanent Trustee Company of New South Wales Limited

The High Court of Australia heard an appeal from the Supreme Court of New South Wales concerning an action brought by the Bank of New South Wales against Permanent Trustee Company of New South Wales Ltd., as executor of the estate of Dr. Percy Moore Wood. The dispute centred on the Bank's claim for recovery of a principal sum of £2,745 17s. 2d. and interest, based on personal covenants contained within a memorandum of mortgage executed by Dr. Wood in favour of the Bank. This mortgage was given to secure Dr. Wood's liability under a guarantee he had provided in 1928 for an unsecured debt of a company.

The legal issues before the court were whether the Bank was precluded by the provisions of the Moratorium Act 1930-1931 (N.S.W.) or the Moratorium Act 1932-1936 (N.S.W.) from enforcing the personal covenants for payment of principal and interest contained in the mortgage. Specifically, the court had to determine if the Moratorium Act 1932, through its amending provisions, revived the personal liability on the mortgage covenant, which had been rendered void by earlier moratorium legislation.

The majority of the High Court, comprising Latham C.J., Rich and McTiernan JJ., held that the liability on the personal covenant in the mortgage was not revived by the Moratorium Act 1932-1936. Their Honours reasoned that while Dr. Wood was a mortgagor in fact, and his personal covenant was rendered void by section 25(7) of the Moratorium Act 1930-1931, the subsequent legislation did not operate to reinstate this liability. They found that the definition of "mortgagor" in the earlier Act did not extend to a person who gave a mortgage to secure their own guarantee, and that the provisions of the 1932 Act, particularly sections 35 and 41, were intended to restore remedies against guarantors of mortgage debts where such liability had been abolished, but did not revive a personal covenant in a mortgage given by a guarantor to secure their own debt. Starke J. dissented.

The appeal was allowed, and the decision of the Supreme Court of New South Wales was set aside. The High Court ordered that judgment be entered for the plaintiff bank for the sum of £4,096 5s. 1d., together with interest on £2,762 18s. of that sum at the rate of four and one-half per cent per annum from the date of the writ until judgment, and for costs of suit, to be levied out of the assets of Dr. Wood deceased.