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Consolidated Trust Co Ltd v Naylor

Consolidated Trust Co Ltd v Naylor

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Case Copied 12 August 1936 29 min read

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CONSOLIDATED TRUST COMPANY LIMITED APPELLANT NAYLOR

ON APPEAL FROM THE SUPREME COURT OF Principal and Surety-Mortgage-Guarantor's covenant contained in mortgage

instrument-Transfer of mortgage-Indorsement on mortgage instrument-Right of transferee to sue guarantor-Chose in action-Assignment-Notice-" Express Real Property Act 1900-1928 (N.S.W.) (No. 25 of 1900-No. 25 of 1928), secs. 51*, 52*-Conveyancing Act 1919-1932 (N.S.W.) (No. 6 of 1919-No. 65 of 1932), secs. 12*, 91*, Schedule v. (5).

A transfer of mortgage does not operate, under either secs. 51 and 52 of the Real Property Act 1900-1928 (N.S.W.) or sec. 91 of the Conveyancing Act 1919-1932 (N.S.W.), to give the transferee the right to sue a surety on a covenant of guarantee contained in the instrument of mortgage. * The Real Property Act 1900-1928

upon any memorandum of mortgage or (N.S.W.), provides -Sec. 51: Upon

other instrument and to recover any the registration of any transfer, the

debt, sum of money, annuity, or dam- estate or interest of the transferor as

ages thereunder (notwithstanding the set forth in such instrument, with all

same may be deemed or held to consti- rights, powers and privileges thereto

tute a chose in action), and all interest in belonging or appertaining, shall pass to

any such debt, sum of money, annuity, the transferee, and such transferee shall

or damages shall be transferred so as to thereupon become subject to and liable

vest the same at law as well as in equity for all and every the same requirements and liabilities to which he would have

* The Conveyancing Act 1919-1932 been subject and liable if named in such

(N.S.W.), provides -Sec. 12: Any instrument originally as mortgagee

absolute assignment by writing under of such land, estate, or in-

the hand of the assignor terest." Sec. 52 (1): "By virtue of

debt or other legal chose in action, of every such transfer, the right to sue

which express notice in writing has been

55 CLR 424

An indorsement, under the hand of the mortgagee, on a deed of mortgage of land under the general law stated, following form 5 in Schedule v. to the Conveyancing Act 1919-1932 (N.S.W.), that, for valuable consideration, he thereby assigned unto the appellant all moneys secured by the within written mortgage and all my rights, powers and remedies thereunder." The deed contained a covenant of guarantee by the respondent. For the purposes of the Moratorium Act 1932 (N.S.W.) the appellant had given to the respondent a notice in writing, in which the appellant was described as the transferee from the mortgagee of the mortgage, which was identified by its registration number, that it intended to exercise all or any of its rights, powers and remedies against him as guarantor after three months unless he paid in the meantime to it all moneys owing under the mortgage.

Held, by Dixon and Evatt JJ. (Starke J. dissenting), that the indorsement amounted to an assignment of the respondent's covenant sufficient to satisfy the requirements of sec. 12 of the Conveyancing Act 1919-1932…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [1936] HCA 33
Decision Date: 12 August 1936

CaseChat Overview and Summary

Consolidated Trust Co Ltd appealed to the High Court of Australia from a decision of the Supreme Court of New South Wales, which had upheld demurrers to the appellant's declaration. The appellant, as the transferee of two mortgage instruments, sought to sue the respondent, Rufus Theodore Naylor, on covenants of guarantee contained within those instruments. The dispute centred on whether the transfer of the mortgages vested the right to sue on these guarantees in the appellant.

The legal issues before the High Court were twofold: first, whether the transfer of a mortgage registered under the Real Property Act 1900 (NSW) operated to transfer to the transferee the right to sue a guarantor on a covenant contained within the mortgage instrument, pursuant to sections 51 and 52 of that Act; and second, whether an indorsement on a general law mortgage, in the form prescribed by the Conveyancing Act 1919 (NSW), operated as an assignment of the guarantor's covenant, and if so, whether a subsequent notice given under the Moratorium Act 1932 (NSW) constituted sufficient notice of the assignment for the purposes of section 12 of the Conveyancing Act.

Dixon and Evatt JJ. held that the provisions of the Real Property Act, concerning the transfer of mortgages, were intended to deal with dealings in land and the mortgage transaction as it affected the land, including the mortgagor's personal liability. They reasoned that a guarantor's obligation, being collateral and not directly affecting the land, was not transferred by a mortgage transfer under this Act. Regarding the general law mortgage, their Honours found that the indorsement, while following the prescribed form for mortgage transfers under section 91 of the Conveyancing Act, operated as an assignment of the mortgage debt and related rights, but not of collateral obligations like guarantees. However, they concluded that the specific wording of the indorsement, which assigned "all moneys secured by the within written mortgage and all my rights, powers and remedies thereunder," was broad enough to encompass the guarantor's covenant. Furthermore, they determined that the notice given under the Moratorium Act, identifying the appellant as the transferee and referring to the mortgages and the intention to exercise rights against the guarantor, constituted sufficient express notice in writing of the assignment for the purposes of section 12 of the Conveyancing Act. Starke J., dissenting, held that neither the Real Property Act nor the Conveyancing Act provisions extended to collateral obligations such as guarantees given by strangers to the mortgage transaction, and that the notice given was insufficient under section 12.

The High Court, by majority (Dixon and Evatt JJ.), allowed the appeal. They held that the indorsement on the general law mortgage constituted a sufficient assignment of the respondent's covenant to satisfy section 12 of the Conveyancing Act, and that the notice given under the Moratorium Act was sufficient to perfect the assignment. Consequently, the appellant was entitled to sue the respondent on his covenant. The appeal was therefore allowed, and the judgment of the Supreme Court was set aside.

Orders