French v Queensland Premier Mines Pty Ltd & Beckinsale

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 4139 of 2002

WALTER MURDOCH FRENCH	Plaintiff
v
QUEENSLAND PREMIER MINES PTY LTD (A.C.N. 010 614 552) and Ors	Defendants

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JUDGE:	DODDS-STREETON J.
WHERE HELD:	MELBOURNE
DATE OF HEARING:	2 and 3 August 2004
DATE OF JUDGMENT:	18 August 2004
CASE MAY BE CITED AS:	French v Queensland Premier Mines and Beckinsale
MEDIUM NEUTRAL CITATION:	[2004] VSC 294	Revised 30 September 2004 Revised 11 April 2005

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REAL PROPERTY - MORTGAGE – Transfer of mortgages – Whether registered transfer of “all moneys” mortgages effective to vest in transferee the right to recover under two loan agreements secured by the mortgages, pursuant to s.62 of the Land Title Act (Qld) – Whether s.62 vests rights to recover all debts secured by the mortgage or only debts primarily created by and set out in terms of the mortgage – Section 62 effective to vest rights to recover debts the subject of covenants to pay in, and secured by, the mortgage.

Julong Pty Ltd v Fenn [2002] QCA 529 (6 December 2002) followed; Consolidated Trust Co Ltd v Naylor (1936) 55 CLR 423; English, Scottish and Australian Bank v Phillips [1936-1937] 57 CLR 302; Measures v McFayden (1910) 11 CLR 723; Gilmour v Pyramid Building Society (in liq) (1995) NSW ConvR 55-747, 8; PT Ltd v Maradona Pty Ltd [1991] 25 NSWLR 643; Hutchens v Deauville Investments Pty Ltd (1986) 68 ALR 367; JodawayPty Ltd v Langton [2003] QSC 79; Mercantile Credits Ltd v Shell [1975-1976] 136 CLR 326 considered.

Whether parties may raise claims which could have been raised in previous litigation, in circumstances where Queensland Court of Appeal considered and rejected applications to raise them – Port of Melbourne Authority v Anshun (1981) 147 CLR 589; Gibbs v Kinna (1999) 2 VR 19; G v G (1986) 64 ALR 273; State and Territory Laws and Records Recognition Act 1901 (Cth) s.18; Constitution Act (Cth) s.118.

Whether transferor of mortgage may claim reimbursement of rates and land tax paid on mortgagor’s behalf prior to transfer of mortgages; Gemmell v Brienesse (1933) SR (NSW) 473; Macanash v Mackey (1934) 51 WN (NSW) 156; Land Tax Act 1915 (Qld) s.24.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr P.J. Bick Q.C. with Mr M. Hoyne	Norton Gledhill
For the Defendants	Dr C.L. Pannam Q.C. with Mr M.S. Goldblatt	Oakley Thompson & Co.

TABLE OF CONTENTS

INTRODUCTION.............................................................................................................................. 2

THE PLEADINGS.............................................................................................................................. 3

Amended Statement of Claim.......................................................................................................... 3

Defence................................................................................................................................................. 5

Counterclaim....................................................................................................................................... 5

FACTS AND EVIDENCE................................................................................................................. 6

EFFECT OF LAND TITLE ACT 1994 (QLD) S.62........................................................................ 16

The Legislation................................................................................................................................. 16

The Parties’ Contentions................................................................................................................. 17

The Plaintiff’s Argument............................................................................................................ 17
The Defendants’ Argument....................................................................................................... 21

Relevant Authority........................................................................................................................... 22

Application........................................................................................................................................ 35

THE ANSHUN ISSUE...................................................................................................................... 43

PLAINTIFF’S CLAIM FOR RATES AND LAND TAX............................................................ 53

CONCLUSION................................................................................................................................. 57

HER HONOUR:

INTRODUCTION

In this proceeding the plaintiff, Walter Murdoch French (“French”) seeks to recover moneys allegedly due to him from the first, second and third defendants pursuant to two loan agreements.

The liabilities of the first defendant, Queensland Premier Mines Pty Ltd (“QPM”), the second defendant (Mr Beckinsale) and the third defendant (Mrs Beckinsale) as joint debtors under the first loan agreement, and the liabilities of QPM as sole debtor under the second loan agreement, were secured by two “all moneys” mortgages successively executed by QPM as mortgagor over different parcels of land.

French was not the original lender and mortgagee. He took an assignment of the loans, and the mortgages securing them, from the original lender and mortgagee in 1992. Pursuant to an agreement made in January 2000, French assigned the mortgages to the fourth defendant (“Marminta”), a company associated with the other defendants. The transfer of the mortgages to Marminta was registered in January 2004.

The defendants, in reliance on s.62 of the Land Title Act 1994 (Qld), contend that although not expressly assigned, the right to recover the underlying debts vested in Marminta as the registered transferee of the mortgages which secured them, pursuant to the operation of the section. Accordingly, they argue that French has no remaining interest in the loan agreements and no standing to sue on them. The plaintiff contends that the debts are not created by, or set out in, the terms of the instruments of mortgage, and s.62 therefore does not apply.

French also makes a claim of unjust enrichment against Marminta on the basis that he, while mortgagee, paid council rates and land tax in relation to the land subject to the mortgages, upon QPM’s failure to do so. Marminta, by counterclaim, seeks to recover interest which it paid to French on the purchase moneys for the transfer of the mortgages, on the ground of his alleged delay in settling the transfer. Marminta, while making the counterclaim in response to the plaintiff’s unjust enrichment claim, contends that there is an estoppel in relation to both claims, because they should have been raised in litigation conducted between French and Marminta in the Supreme Court of Queensland, and the parties’ subsequent applications to raise them were rejected by the Queensland Court of Appeal.

Alternatively, French claims that QPM is liable to repay the council rates and land tax he paid as mortgagee pursuant to provisions of the mortgages, the doctrine of “practical compulsion” and s.24 of the Land Tax Act 1965 (Qld).

THE PLEADINGS
Amended Statement of Claim

By amended statement of claim dated 30 June 2004 the plaintiff seeks payment of $5,091,348.50 plus interest and indemnity costs from QPM pursuant to the first and second loan agreements, and payment of $2,157,071.50 plus interest and indemnity costs from the Beckinsales pursuant to the first loan agreement. The plaintiff also seeks declarations that he did not assign his right, title or interest under either loan agreement to Marminta, and that QPM and the Beckinsales remain indebted to him under the loan agreements.

The plaintiff alleges a first loan agreement dated 30 October 1989 by which Seventeenth Febtor Pty Ltd (“Febtor”) loaned the sum of $410,000 to QPM, Frank Beckinsale and Helen Beckinsale, and a second loan agreement dated 24 November 1984, by which Febtor loaned QPM the sum of $560,000.

It is alleged that QPM granted Febtor mortgages over certain lands it owned in Queensland, by way of bills of mortgage dated 24 November 1989 and 3 September 1990 respectively, which secured both the loan agreements.

It is alleged that Febtor assigned its rights to the loan agreements to the plaintiff by deed of assignment dated 18 December 1992. The Beckinsales and QPM were notified of the assignment and the transfer of mortgages.

The plaintiff alleges that QPM and the Beckinsales breached the first loan agreement and QPM breached the second loan agreement by failing to repay the principal sum and interest due under them.

It is alleged that, as at 27 January 2004, QPM and the Beckinsales owe $1,747,071.50 in interest on the first principal sum, QPM owes $2,374,277.10 interest on the second principal sum, and that interest continues to accrue.

The plaintiff also alleges that QPM is indebted to him in the amount of $123,786.13, due to its failure to pay land tax pursuant to the Land Tax Act 1915 (Qld) during the period between 1990 and 1999. Further, it is pleaded that upon demand in writing by the Commissioner for Land Tax, Queensland, the plaintiff, as mortgagee of the properties, paid $123,786.13 in the land tax on QPM’s behalf on 1 August 2003. Alternatively, the plaintiff claims that Marminta has been unjustly enriched by the plaintiff’s payment of the land tax, and is obliged to repay the plaintiff.

The plaintiff further alleges that between 1990 and 1 August 2003, QPM failed to pay municipal rates, which the plaintiff paid on QPM’s behalf in order to prevent sale of the properties by the Shire of Livingstone. The plaintiff claims that QPM is obliged to indemnify the plaintiff for an amount equal to the outstanding rates or alternatively, that Marminta has been unjustly enriched by the plaintiff’s payment of the unpaid rates in the amount of $46,47.91.

It is pleaded that by agreement dated 5 January 2000, the plaintiff agreed to sell its interest in the mortgages to Marminta. On 14 January 2004, pursuant to an order made by the Court of Appeal of the Supreme Court of Queensland, the plaintiff transferred his interest in the mortgages to Marminta, and the transfers and releases of the mortgages were registered.

The plaintiff claims that the transfer of the mortgages did not affect the liability of QPM and the Beckinsales under the first loan agreement, or of QPM under the second loan agreement. It is also pleaded that at the time of the transfer of the mortgages to Marminta, there was no debt under the mortgages, but only under the respective loan agreements, to which the mortgages were collateral securities.

Defence

By defence dated 1 March 2004 the defendants admit the execution of the relevant loan agreements, mortgages and deeds of assignment. They deny that they breached the loan agreements or that they are indebted to the plaintiff under them.

QPM admits that it failed to pay the land tax or municipal rates, but denies that it is indebted to the plaintiff for payment of the land tax or that it is obliged to indemnify the plaintiff for the amount of outstanding rates.

Marminta admits that it purchased the mortgages but denies it has been unjustly enriched by the plaintiff’s payment of the land tax or the municipal rates. Marminta denies that the transfer of the mortgages did not affect the liability of QPM and the Beckinsales to pay the plaintiff under the respective loan agreements. It also denies the plaintiff’s claim that there were no debts under the mortgages at the time of transfer to Marminta.

Counterclaim

By counterclaim dated 31 May 2004 Marminta alleges that pursuant to s.62 of the Land Title Act 1994 (Qld) all rights pursuant to the mortgages and to the secured monies vested in it upon registration of the transfer of mortgages. Marminta also pleads that the plaintiff wrongfully refused to transfer the mortgages pursuant to the agreement dated 5 January 2000 until 14 January 2004. It claims that the plaintiff was not entitled to receive interest on the purchase price from 7 October 2002 (when Marminta was ‘ready, willing and able’ to settle the agreement) to the date of settlement of 14 January 2004. It claims that the plaintiff is liable to compensate Marminta for the loss of use of the monies it would have received.

The counterclaim further alleges that pursuant to s.62 of the Land Titles Act 1994 (Qld), all the rights of the mortgagee, including the right to recover monies pursuant to the loan agreements, vested in Marminta.

FACTS AND EVIDENCE

The first defendant, QPM, and the fourth defendant, Marminta, are companies of which the second defendant, Mr Frank Beckinsale, and his wife, the third defendant, Mrs Helen Beckinsale, are the sole shareholders and directors.

Various entities associated with the Beckinsales, including QPM, were registered proprietors of parcels of contiguous land (“the development site”) situated at Yeppoon in Queensland, which collectively had potential for development as a shopping centre.

The land relevant to the present proceeding was part of the development site. It was acquired by QPM as registered proprietor in 1989.

QMP and the Beckinsales borrowed the funds used to acquire the land from Febtor, a company associated with Mr Stephen Wharton.

By an agreement made 30 October 1989 (“the first loan agreement”) Febtor loaned QPM and the Beckinsales $410,000. By an agreement made 24 November 1989 (“the second loan agreement”) Febtor loaned QPM the sum of $560,000.

The terms of the first and second loan agreements were not identical.

Under the first loan agreement, QPM, Frank Beckinsale and Helen Beckinsale were described as “the Borrower”. It is not disputed that they were joint borrowers. The principal amount of the loan was stated to be $410,000.

Clause 3 of the first loan agreement provided that:

“The Agreement is to be jointly and collaterally secured by mortgage over Certificates of Title Volume 237 Folio 127[1] and Volume 9551 Folio 440, (‘the secured properties’).”

[1]It is not disputed that the land subject to the mortgage was described in Certificate of Title Volume 237 Folio 125.

Clause 6 of the first loan agreement provided that the agreement was to be read in conjunction with the lender’s letter of offer and that where the agreement and the letter of offer conflicted, the agreement would prevail. Where the agreement and letter of offer conflicted with “the memorandum of common provisions”, the agreement and letter of offer would prevail. The term “common provisions” is not defined in, or explained by, the first loan agreement.

Clause 12 of the first loan agreement provided that the agreement was conditional upon the receipt of information satisfactory to the lender in its absolute discretion, including, (iv): sales agreement for Certificate of Title Volume 237 Folio 125 secured properties, and (v): satisfactory valuation of the properties securing the facility.

The second loan agreement stated the borrower to be QPM. The principal sum of the loan was stated to be $560,000.

The second loan agreement provided that “In this Agreement unless the context otherwise requires:

1.‘FACILITY’ means the agreement and any collateral or related security documentation required by the Lender to secure payment of the moneys secured”.
2.‘LOAN’ means the amount of money from time to time comprising the moneys secured.
3.‘MONEYS SECURED’ means the principal sum and any outstanding interest thereon … together with any further funds which may be advanced to the Borrower from time to time; any actual contingent or future liability now existing or which may hereafter arise incurred by the Lender …
…
8.‘DEBT’ means the sum from time to time of all advances outstanding … ”

Clause 3 of the second loan agreement provided that “The Agreement is to be jointly and collaterally secured by mortgage over Certificates of Title Volume C411 Folio 88, Volume C284 Folio 236, Volume 312 Folio 146, Volume 410 Folio 162, Volume C424 Folio 70, Volume C411 Folio 213, and Volume C325 Folio 197 (‘the secured properties’)”

Clause 4(1) of the second loan agreement provided that the “principal sum (and each and every part thereof) and interest thereon shall immediately become payable at the option of the Lender” upon the happening of certain specified events which relevantly included –

“(a) if default is made by the Borrower in the due and punctual payment of any part of the principal sum or interest thereon or of any instalment of principal and interest at any time due and payable by the Borrower to the Lender;
(b) if default is made by the Borrower in the observance or performance of any other obligation on the part of the Borrower contained in this Agreement or in any other account or transaction between the Lender and the Borrower;”

Clause 7 provided that the agreement is to be read in conjunction with the lender’s letter of offer.

Clause 15(j)(b) provided that Febtor could assign its rights under the second loan agreement.

By a bill of mortgage dated 3 September 1990 (“the first mortgage”) QPM mortgaged a part of the land to Febtor.

By a bill of mortgage dated 24 November 1989 (“the second mortgage”) QPM mortgaged a further part of the land to Febtor.

The mortgages were both “all monies” mortgages. Both mortgages stated the mortgagor to be QPM and the mortgagee to be Febtor. The relevant terms of the mortgages, which were substantially identical, are set out below.

Clause 1.1 relevantly provides:

“In this Mortgage unless the context otherwise requires the following terms shall have the meanings designated:
(f)“Facility Agreement” means any agreement whether written or oral now existing or subsequently entered into in relation to the Secured Moneys including (but without restricting the generality of the foregoing)-
(i)any agreement pursuant to which the Mortgagee agrees to provide any credit and/or financial and/or other facilities and/or accommodation to the Mortgagor and/or to any other person at the request of the Mortgagor;
(ii)any agreement pursuant to which moneys are lent by the Mortgagee to the Mortgagor and/or to any other person at the request of the Mortgagor;
…
…

(i) ‘Secured Moneys’ has the meaning given to it in Part 2.0
(l)‘Mortgagee’ means SEVENTEENTH FEBTOR PTY. LTD. a company incorporated in the State of VICTORIA and having its registered office in that State at 8^th Floor 445 Toorak Road, Toorak and includes its successors and assigns.
(m)‘Mortgagor’ means and includes the executors administrators successors and permitted assigns of the Mortgagor and when two or more persons are so identified-
(i)‘Mortgagor’ is a reference to each of them severally as well as to any two or more of them jointly;
(ii)the obligations contained or implied in this Mortgage shall bind them jointly and each of them severally; and
(iii)this Mortgage binds every person who executes it as Mortgagor notwithstanding that any other person named as Mortgagor never executes it or the execution of any person so named is void or voidable”.

Clause 2 provides:

“2.1 The moneys intended to be secured by this Mortgage and herein referred to as the Secured Moneys comprise all moneys now owing or payable or hereafter to become owing or payable to the Mortgagee by the Mortgagor on any account including (but without restricting the generality of the foregoing):
(a)all moneys which on any account or in any manner whatsoever –
(i)are at any time and from time to time presently owing and payable to the Mortgagee by the Mortgagor.
(ii)are at any time and from time to time owing but not then presently payable to the Mortgagee by the Mortgagor.

(iii)are at any time and from time to time owing upon a contingency to the Mortgagee by the Mortgagor.
(iv)at any time and from time to time may become owing or for which the Mortgagee may become liable by reason wholly or partly of past events or by reason of anything done or omitted by the Mortgagor or the Mortgagee, and
(v)at any time and from time to time may reasonably foreseeably become owing whether by operation of law or equity or otherwise by reason of anything done by the Mortgagor with the consent or at the request of the Mortgagee or by the Mortgagee with the consent or at the request of the Mortgagor

whether as principal debtor or surety or otherwise and whether alone or jointly with any other person and either by direct advance or by reason of the Mortgagee accepting or enforcing or paying or discounting any order draft cheque promissory note bill of exchange or other engagement or by entering into any bond indemnity or guarantee or otherwise incurring liabilities for or on behalf of the Mortgagor or by granting to the Mortgagor a lease of any real or personal property;
(b)all moneys now or hereafter payable to the Mortgagee pursuant to any Facility Agreement;
…

(m)all moneys payable by the Mortgagor to the Mortgagee pursuant to any indemnity given by the Mortgagor to the Mortgagee hereunder or under any Facility Agreement or Collateral Security;
(n)all moneys paid or which shall at any time become payable by the Mortgagee on account of the Mortgagor or whether directly or indirectly in respect of the Mortgaged Property pursuant to any provision of this Mortgage;
(o)all moneys which the Mortgagor either alone or jointly with any person whether directly or indirectly or contingently or otherwise or whether by way of damages or otherwise presently is or hereafter may become liable to pay to the Mortgagee hereunder or under or on any document or negotiable or other instrument or by reason of any other matter or thing whatsoever or as a result of or pursuant to any transaction or event; and
(p)amounts referred to in other parts of this Mortgage as being added to or forming part of the Secured Moneys

and shall where the context so admits mean and include any part of the foregoing all of which moneys are intended to be secured by this Mortgage and the Mortgagor covenants to pay all such moneys aforesaid to the Mortgagee.”
(Emphasis added).

Clause 4.1 provides:

“The Mortgagor shall pay each amount included in the Secured Moneys to the Mortgagee:
(a)on the date fixed for payment of that amount under any Facility Agreement; or
(b)if no date for payment is so fixed on demand in writing by the Mortgagee”.

Clause 4.2 provides:

“In addition to and without prejudice to any other rights of the Mortgagee under this Mortgage or any Facility Agreement the Mortgagee shall be entitled to demand payment from the Mortgagor of the Secured Moneys including the face value of any bill of exchange drawn by the Mortgagor and accepted by the Mortgagee whether under any Facility Agreement or otherwise and notwithstanding that any such bill of exchange has not matured and which face value shall be included in the Secured Moneys for all the purposes hereof if there occurs any Event of Default”.

Clause 33.1 relevantly provides:

“In any of the following events that is to say:
(a)if default shall be made in payment of the Secured Moneys at the times and in the manner appointed for the payment thereof whether under this Mortgage or under any Facility Agreement.
(b)If default shall be made … in the observance of any of the covenants herein contained or in the observance of any of the covenants contained in any Facility or Agreement;
…
then and in any such case and immediately thereupon all Secured Moneys … shall at the option of the Mortgagee … become and be payable to and recoverable by the Mortgagee … “

Febtor, the original mortgagee, was indebted to Mr French pursuant to certain loan agreements, under which it defaulted in 1992. French instituted proceedings against Febtor in the Supreme Court of Victoria in 1992 in relation to the defaults. The proceedings were settled. Pursuant to the settlement, Febtor, by deed made 18 December 1992, expressly assigned to French its right, title and interest in and to both the loan agreements and mortgages, for a consideration of approximately $450,000.

By letter dated 5 March 1993, Corrs, French’s then solicitors, notified the solicitors for QPM and the Beckinsales of the assignment to French of the loans and mortgages.

It is not disputed that between 1989 and 2000, QPM and the Beckinsales failed to make any payments on the loans. Further, they did not pay rates or land tax due on the land. As a consequence of the failure to pay rates and land tax, the Livingstone Shire Council and the Commissioner for Land Tax both took action to recover outstanding rates and land tax, which resulted in Mr French, as mortgagee paying rates and land tax. He makes further claims in this proceeding on the basis of those payments, which are discussed below.

During the 1990s QPM made unsuccessful attempts to sell the land. In 1999 French, as mortgagee in possession, also made an unsuccessful attempt to auction the land.

By letter dated 21 December 1999, French informed Mr Beckinsale that he had received two offers of $950,000 for the land. He offered the Beckinsales the opportunity to match the offer. The letter stated:

“Frank,
Further to our phone conversation today I would like to give you the opportunity to match the latest offer to sell the above mentioned property.
I have had two offers of $950,000.00 subject to councils condition being acceptable to erect a shopping center. I have had an offer for similar money from a Rockhampton Car Dealer who is very keen on the site again subject to council approval.
You indicated in your fax dated 7^th November, 1999, that you and Helen would like to buy back the land. If this is still the case, could you please advise me by return fax as to what your proposal would be, I would like to conclude a transaction with somebody prior to the end of January 2000.
I will be around over the Christmas break, should you wish to discuss anything further.
Wishing you and Helen all the best for Christmas and a prosperous 2000.
Regards,
Rusty French”

By facsimile transmission dated 30 December 1999 Mr Beckinsale offered, on behalf of Marminta, to buy back the mortgages for $900,000 on various terms. The facsimile stated:

“Dear Rusty,
Ref: Your Mortgage (Yeppoon Property)
Subject to my lawyers advice and receipt of copy of your letters of offer from Jeff Murphy and Silly Sollys with their terms and conditions as discussed with you, I make the following offer for above land.
Buy back the mortgage for all titles held by you -     $900,000
Deposit on or before 10^th January, 2000  $50,000
(Subject to contract preparation by your lawyer)
2^nd payment - 30th April, 2000  $400,000
Balance - 30^th July, 2000  $450,000
Mortgage assignment to be in the name of
MARMINTA PTY. LTD. - ACN 060 701 626
26 Coolwaters Esplanade,
KINKA BEACH. Q. 4703

Rusty, on the assumption you would have to pay comission [sic] on the sale, would you discount the contract by that amount? I also note from your letter of 7^th November, 1999 that your letters of offer are conditional to Council conditions.
Please consider $900,000 for full contract price as my offer will be unconditional. Thank you for the opportunity for Helen and myself.
Have a great New Years eve and a wonderful 2000.
Regards,”

By facsimile transmission dated 4 January 2000, French replied to Beckinsale as follows:

“Dear Frank,
RE: Mortgage Yeppoon Property
Thank you for your fax dated 30/12/99
As the above property owes me in excess of $2 Million, I am not prepared to transfer the mortgages to Marminta Pty Ltd for any less than what we agreed on the phone last week.
That was $950,000
Non refundable deposit of $50,000.000. Paid upon completion of transfer documents.
2^nd Payment due on 30^th March, 2000, of $450,000.00
Balance prior to 30^th June, 2000, of $450,000.00
Frank I am flying to Brisbane tomorrow – 5^th January, 2000 – to meet with another Estate Agent who has a Gold Coast Developer interested in the site at $1,200,000.00 which will be an unconditional contract.
Find copy of Silly Solly’s contract which I have not yet accepted.
If you want to secure the above property Mortgage Transfers @ $950,000.00, I suggest that we meet in Brisbane this week to put something formally in place.
Please advise me of your intentions as soon as possible.
Regards,
Rusty French”

Beckinsale responded to the above unconditional offer of $950,000 on behalf of Marminta by facsimile dated 4 January 2000 which stated:

“Dear Rusty,
Please find below unconditional offer for assignment of Mortgage held by you on land in our Company name Queensland Premier Mines Pty . Ltd..
Buy back the Mortgage for all titled as per Item B.
Full purchaser price $950,000
Non refundable deposit within 14 days $50,000
2^nd Payment 30^th April, 2000 $450,000
Balance on or before 30^th June, 2000 $450,000
Both parties are to work together to draw contract of sale.
Mortgage assignment to be in the name of
MARMINTA PTY. LTD. AC N 060 701 626
26 Coolwaters Esplanade,
KINKA BEACH. Q. 4703
Please confirm your acceptance of our letter of offer as we must arrange transfer of funds from offshore.
Yours faithfully,
MARMINTA PTY. LTD
…
F.G. BECKINSALE
Director “

French accepted the offer made on behalf of Marminta by facsimile transmission dated 5 January 2000 which stated:

“Dear Frank,
RE: Mortgage Yeppoon Property
In reference to your fax dated 4/1/2000, regarding your offer on the assignment of the Mortgages on the Yeppoon Properties.
I hereby accept your offer as set out in the above mentioned fax, on the provision that your non-refundable deposit of $50,000.00 is received in my office within 14 days of this letter. Should the deposit not be received in the agreed period, this acceptance of your offer will no longer be valid.
Regards,
Rusty French”

As at January 2000, the outstanding principal and interest due under the loan agreements totalled $4 million in round terms.

Although a number of draft deeds of assignment were prepared by the solicitors for Marminta, and Marminta’s and French’s respective solicitors attempted to negotiate terms, no deed of assignment was executed. A dispute subsequently arose between Marminta and French. Marminta asserted, and French denied, that there was a specifically enforceable agreement for the assignment of the mortgages.

In January 2002, French issued this proceeding against QPM and the Beckinsales to recover the outstanding balances due under the loan agreements.

In 2002, QPM agreed to sell the development site, including the land subject to the mortgages, to Unison Properties Pty Ltd (“Unison”) for $2.44 million, with settlement due to take place on 30 September 2003.

Marminta unsuccessfully sought specific performance of the agreement to assign the mortgages in the Supreme Court of Queensland before Dutney J. His Honour held, by judgment handed down on 13 December 2002, that an agreement existed pursuant to the first limb in Masters v Cameron,[2] but that it had been abandoned.
[2](154) 91 CLR 353.

Marminta appealed to the Queensland Court of Appeal. By judgment delivered on 5 December 2003, the Court of Appeal allowed the appeal and ordered specific performance of the agreement.

On 19 December 2003, in a hearing before the Queensland Court of Appeal, French sought to raise the unjust enrichment claim in respect of rates and land tax now the subject of paragraphs 26 and 27 of the further amended statement of claim. Marminta sought to raise the claim in relation to interest on the purchase price of the mortgages now contained in paragraph 3 of Marminta’s counterclaim. On 24 December 2003 the Queensland Court of Appeal made orders dismissing the applications for variations of the orders it had made on 5 December 2003.

The transfer of the mortgages to Marminta was registered on 14 January 2004.

Due to French’s argument that the assignment of the mortgages to Marminta did not carry with it an assignment of the debts, Marminta and QPM applied to the Queensland Court of Appeal for a variation of the orders that that court had made on 5 December 2003.[3]
[3]Appellant’s application to the Court of Appeal of the Supreme Court of Queensland at 1.

The Queensland Court of Appeal heard the application on 5 February 2004. It raised with counsel the effect of s.62 of the Queensland Land Title Act 1994 (Qld).[4] Although it declined to adjudicate on the issue or to interfere with litigation in this court, the Queensland Court of Appeal stated:

“Once registered s.62 of the Land Title Act 1994, which supplants ss.65 and 66 of the 1861 Real Property Act and which is mirrored in legislation in other States, would have effect. Consequent upon s.62 there is an assignment of the right to sue to recover the debt.”

[4]Marminta Pty Ltd v Queensland Premier Mines & Ors, Court of Appeal, Queensland, 5 February 2004, Transcript of Proceeding.

In January 2004, Marminta was added as fourth defendant in this proceeding.

EFFECT OF LAND TITLE ACT 1994 (QLD) S.62
The Legislation

Section 4 of the Act provides:

“A dictionary in Schedule 2 defines particular words used in this Act.”

Schedule 2 relevantly provides:

“‘mortgage’ includes a charge on a lot or an interest in a lot for securing money or money’s worth.”

Section 62 of the Act provides:

“(1)On registration of an instrument of transfer for a lot or an interest in a lot, all the rights, powers, privileges and liabilities of the transferor in relation to the lot vest in the transferee.
(2)Without limiting subsection (1), the registered transferee of a registered mortgage is bound by and liable under the mortgage to the same extent as the original mortgagee.
(3)Without limiting subsection (1), the registered transferee of a registered lease is bound by and liable under the lease to the same extent as the original lessee.
(4)In this section--

‘rights’, in relation to a mortgage or lease, includes the right to sue on the terms of the mortgage or lease and to recover a debt or enforce a liability under the mortgage or lease”.

Section 73(1) provides:

“(1) An instrument of mortgage must--
(a) be validly executed; and
(b) include a description sufficient to identify the lot to be mortgaged; and
(c) include a description of the debt or liability secured by the mortgage; and
(d) include a description sufficient to identify the interest to be mortgaged.”

Section 74 provides:

“A registered mortgage of a lot or an interest in a lot operates only as a charge on the lot or interest for the debt or liability secured by the mortgage”.

The Parties’ Contentions
The Plaintiff’s Argument

The plaintiff contended that although the Court of Appeal Queensland found that French transferred the mortgages to Marminta, there was no assignment or transfer of the underlying loan agreements, which consequently remain vested in him and under which he seeks to recover in the present proceeding.

The defendants argued that Marminta took an assignment of both the mortgages and the underlying debts, and as the proceeds of the sale of the land were less than the secured debt, it was entitled to the entirety.

The parties’ positions depend on fundamentally different constructions of s.62 of the Act.

Mr Bick, senior counsel for the plaintiff, argued that s.62 did not apply to vest debts secured by a collateral or “third party” mortgage. The plaintiff contended that s.62 of the Act operates to vest in the transferee of a mortgage only rights to recover debts or obligations which are created by, and can be directly sued for under, the terms of instrument of mortgage, without reliance on an external agreement or transaction.

On the plaintiff’s construction, s.62 applies only where the terms of the dealing giving rise to the liability secured by the mortgage are set out in the mortgage. It does not vest the right to recover a debt for which a third party only was liable, although that debt was secured by the mortgage. On this view, the section would generally apply only to vest debts owed by the mortgagor.

Section 62(4) relevantly defines the rights which will vest in the transferee of the mortgage to include both “the right to sue on the terms of the mortgage … “ (“the first limb”) and “[the right] to recover a debt or enforce a liability under the mortgage or lease” (“the second limb”).

The plaintiff argued that, properly construed, the second limb of s.62 refers to a debt or liability directly created by, and actionable under, the mortgage, rather than a debt or liability merely secured under the mortgage. The plaintiff’s interpretation of the second limb would appear to render it otiose, as such limited rights of recovery and enforcement would necessarily be encompassed by the right “to sue on the terms of the mortgage” pursuant to the first limb.

Mr Bick, however, contended that the second limb was merely a gloss on, or illustrative of, the first limb, and did not expand its ambit. He argued that s.62(4) should be construed as a reference to the right to sue on the terms of the mortgage to recover a debt. Therefore, unless a suit on the terms of the mortgage would result in establishment of a claim to recover a debt, s.62 would not apply. Mr Bick submitted that logic and commercial common sense dictated the narrow construction of s.62, which was necessary in order to avoid the potentially absurd outcomes which a wider construction would produce. In this context, he referred to several hypothetical examples. First, in the present case, if French had transferred only one of the two mortgages, it would vest the entire debt in the assignee; the remaining mortgage would not secure any liability and hence would be vulnerable to discharge at the instance of the mortgagor. Secondly, Mr Bick pointed out that a commercial lender holding multiple mortgages over different land to secure one large loan could transfer only one mortgage, yet the entire debt would vest in the transferee, possibly for a payment of substantially less than the amount of the debt. Thirdly, where a lender with loans secured by multiple mortgages transferred more than one of the mortgages, the first transferee to register would obtain priority and the right to recover the full debt.

The plaintiff contended that in the present case, both mortgages (which were in substantially identical terms) were “all moneys “, collateral mortgages which did not themselves create a debt or any obligation to pay money and could not be directly sued upon. The mortgages were merely security for an obligation to pay created by the first and second loan agreements.

Mr Bick contended that it was “impossible to determine from a reading of the mortgages whether any and if so what sum is or might be secured by the mortgages. It was necessary to refer to the first and second loan agreements in order to determine what sums were secured under the mortgages”. He argued that the sums owing under the loan agreements were recoverable only under the loan agreements, and not under the mortgages standing alone. The covenants to pay contained in the mortgages were, in the plaintiff’s submission, no more than a restatement of the covenants to pay under the loan agreements. They did not give rise to an effective right to recover the debt. Any attempt to enforce the covenants to pay in the mortgages would simply be making a claim to enforce an obligation created by another agreement, the breach of which would have to be proved. As such, the mortgages did not create a primary liability to pay.

Mr Bick conceded that where the terms of a mortgage imposed on the mortgagor a personal liability to pay the debt, the debt would vest in the transferee on registration of the transfer of the mortgage. In the present case, he argued that by reason of the above matters, the mortgages did not create a cause of action to recover the debts under the loan agreements and (on the assumption that the plaintiff’s construction of s.62 is correct) the rights to recover the debts had not vested in Marminta on registration of the transfer of the mortgages.

Mr Bick argued that the crucial issue was whether the right to sue on the terms of the mortgage would allow a debt to be recovered under the mortgage.

The plaintiff submitted that, although the mortgages in the present case were of a type commonly encountered in modern commercial transactions, no decided case had held that debts merely secured (rather than created) by a mortgage would vest in the transferee upon registration of its transfer.

Further, Mr Bick contended that the High Court in Consolidated Trust Company v Naylor[5] stood for the proposition that the registration of a mortgage would not carry with it the obligations owed by the mortgagor under a separate and distinct agreement, unless the parties agreed to that in the mortgage instrument.
[5](1936) 55 CLR 423.

He also relied on Measures v McFadyen[6] and Jodaway Pty Ltd v Langton[7], cases involving leases, in which it was held that personal rights of action in relation to a completed non-continuing breach of a covenant in a lease did not vest in, and were not enforceable against, the registered transferee of either the lease or the reversion.
[6](1910) 11 CLR 723.
[7][2003] QSC 79.

Mr Bick contended that the loan agreements in the present case created merely personal rights and obligations and did not run with the land, as they were not created as part of the mortgage interest.

He also emphasised that the language of the letters constituting the agreement between French and Marminta referred only to the transfer of the mortgages, and did not make reference to the debts they secured. He submitted that an agreement to transfer the mortgages alone for $950,000, leaving the full amount of the loans still outstanding, had the commercial purpose of freeing the land from the security, thus permitting the development site to be sold.

The Defendants’ Argument

The defendants contended that s.62 operates to vest in the registered transferee of a mortgage the benefit of all the debts and obligations it secured, whether or not they were created by, or directly actionable under, the terms of the mortgage.

Dr Pannam, senior counsel for the defendants, submitted that the plaintiff’s narrow construction of the section was without foundation in the terms of the legislation. On the contrary, “mortgage” was widely defined in the Act and the terms of s.62(4) required some independent meaning to be attributed to the second limb, that is, “the right to recover a debt … or enforce a liability under the mortgage”.

He contended that the plaintiff’s construction not only rendered the second limb of s.62 otiose, but also required detailed restrictions to be added to the plain words of the section.

Dr Pannam argued that several authoritative decisions of the High Court made clear, as a matter of principle, that a transfer of a mortgage carried with it rights in relation to all the fiscal obligations secured by the mortgage. Such rights were necessarily intimately connected with the interest in land constituted by the mortgage. Further, he submitted that the Queensland Court of Appeal in Julong Pty Ltd v Fenn[8] held that debts secured by a “third party” mortgage, although created under an external loan agreement, were within the ambit of s.62.
[8][2002] QCA 529 (6 December 2002).

He submitted that leases stood in a different position from mortgages, and the principles concerning non-continuing, completed breaches of a lease were not applicable to the circumstances of this case.

Although s.62 does not expressly so provide, it was not disputed that the parties to a transfer may “contract out” of its operation. Dr Pannam argued, however, that in the present case, there was nothing in the agreement of the parties (constituted by the correspondence between them) to indicate that Marminta agreed to pay $950,000 merely to remove the fetter on the title to its land, while leaving the related debtors still liable to French for the full amount of the loans.

While contending that, properly construed, s.62 applied to vest any debt or liability secured by the mortgage, Dr Pannam argued that, even on the plaintiff’s construction of s.62, in the present case, it would vest the underlying debts in Marminta because, contrary to the plaintiff’s submission, a cause of action for breach of the loan agreements arose directly pursuant to the terms of the mortgages. Although the existence and quantum of that liability was not ascertainable from the mortgage instruments, and would depend on evidence of the underlying breach, that did not mean that a liability did not arise under the terms of mortgages. In the defendants’ submission, the plaintiffs, in relying on the necessity to prove breach under the facility agreements, conflated the cause of action under the mortgages with the evidence necessary to make it out. The existence of the former did not depend on the latter.

Dr Pannam also argued that, as the mortgages in this case could not be understood independently of the loan agreements, they were necessarily incorporated into it.

Relevant Authority

The parties relied on a number of decisions of the High Court and superior State courts in support of their competing constructions of s.62.

They relied on Hutchens v Deauville Investments Pty Ltd[9] to support the proposition that, in the absence of a provision to the contrary, it is necessary to include in an assignment all the rights which are to be assigned or transferred. Hutchens v Deauville Investments Pty Ltd also illustrates another principle relevant to the present case – namely, that if, on analysis, there are no extant obligations falling within the definition of the “obligations secured” under a mortgage, there will be no basis on which to enforce it.
[9](1986) 68 ALR 367.

In Hutchens v Deauville Investments Pty Ltd the appellant executed a deed of guarantee and a mortgage of his land in order to secure advances made to a company of which he was a director. The company executed a first mortgage debenture. The mortgage provided that the appellant mortgaged the land to secure the payment to the mortgagee of

“each and all sums of money in which [the appellant] may now or hereafter be indebted or liable or contingently indebted or liable to the Mortgagee on any account whatever … including … any moneys owing under pursuant to or in connection with … the guarantee and indemnity.”[10]

[10]Ibid, at 368-9.

The debtor company subsequently executed a second ranking debenture containing a floating charge in favour of a third party (Helvetic), and became insolvent.

The original lender/mortgagee assigned the company’s debt and first mortgage debenture, and the appellant’s mortgage, to Helvetic. Helvetic transferred the mortgage to the respondent, Deauville, but it did not transfer the debt owed by the debtor company under the first mortgage debenture, nor the first mortgage debenture given to secure it.

Gibbs CJ, Mason, Wilson, Brennan and Deane JJ in their joint judgment stated:[11]

“[t]he benefit of neither the guaranteed debt nor the first mortgage debenture given to secure it was ever assigned to Deauville. … the present evidence suggests that there was neither a separate transfer of the benefit of the guarantee nor an express transfer of Hutchens’ indebtedness by Helvetic to Deauville. If that be so, questions arise about whether the transfer of the real property mortgage by Helvetic to Deauville, could, of itself, suffice to effect a transfer of Hutchens’ indebtedness as guarantor which was … the only actual liability which it secured and whether, if it could not, Deauville is entitled as mortgagee to enforce the security of the real property mortgage given to secure the payment of a debt owing to a company other than itself.”

[11]Ibid, at 370.

Their Honours assumed that the transfer of the mortgage purported to transfer “the benefit both of the security of the mortgage and of any indebtedness which it secured.”[12]
[12]Ibid.

The only debt secured by the mortgage was that owing by Hutchens in his capacity of guarantor. The debt he was bound to pay as guarantor remained a debt owed by the company as principal, and if he had paid it, he would have been subrogated to creditor’s rights under the first debenture.

The High Court held that because the benefit of Hutchens’ liability as guarantor, and the mortgage securing that liability, were transferred without the debt of the principal debtor which Hutchens had guaranteed, the principal debtor remained liable to Helvetic, rather than to the transferee of the mortgage.

Hutchens’ liability as a guarantor could not be transformed into an independent liability owed to a different creditor from the creditor to whom the principal debt was owed.[13] Their Honours observed:[14]

“Put differently, it would seem to be simply impossible as a matter of basic principle, to assign the benefit of a guarantee or the security for it (as distinct from the property secured) while retaining the benefit of the guaranteed debt and thereby to convert the one debt owing by both principal debtor and guarantor into two debts, one owing by the principal debtor to the creditor and the other owing by the guarantor to the assignee.”

[13]Ibid, at 372.

[14]Ibid, at 373.

The parties relied on Consolidated Trust Co Ltd v Naylor,[15] in which the High Court considered the operation of ss.51 and 52 of the Real Property Act 1900-1928 (NSW), which were analogous to s.62 of the Act. It held that the sections did not operate to vest in the transferee of a mortgage the right to sue a surety on a covenant of guarantee included in the mortgage, because, broadly, the guarantee was collateral, and did not affect the land.
[15](1936) 55 CLR 423.

In Consolidated Trust Co v Naylor a corporate debtor executed a mortgage of Torrens land to secure the repayment of a loan made to it by the mortgagee. The instrument of mortgage included a guarantee to repay the loan and interest, given by a person associated with the corporate debtor.

The mortgagee assigned the mortgage to a third party. The transfer of mortgage was registered. There was no evidence of the terms of the transfer.

The debtor company subsequently defaulted and the transferee of the mortgage sought to enforce the guarantee. The Full Court of the Supreme Court of New South Wales held that the transfer of the mortgage did not operate to transfer to the mortgagee the right to enforce the guarantee.

On appeal to the High Court, the guarantor argued that, on their proper construction, the relevant provisions should “restrict the rights that are transferred to such rights as belong or appertain to the estate of the mortgagee, that is, his estate or interest in the land … “[16] but not “anything which is not a necessary incident or necessarily belonging or appertaining to the interest of the mortgagee as such under the Act”.[17]
[16]Ibid, at 430.
[17]Ibid, at 429.

Dixon and Evatt JJ, in their joint judgment, stated:[18]

“Sec. 51 [of the Real Property Act] says that the estate or interest of the transferor as set forth in the instrument of transfer with all rights, powers and privileges thereto belonging shall pass to the transferee. Sec. 52 says that by virtue of the transfer the right to sue upon the memorandum of mortgage and to recover any debt or sum of money thereunder, notwithstanding that it is a chose in action, and all interest in the debt or sum of money shall be transferred so as to vest the same at law as well as in equity in the transferee. Such language is not incapable of including among the rights which pass to the transferee the benefit of the covenant by a surety who joins as a party in the instrument of mortgage for the purpose of giving the covenant. But, in our opinion, the language should not be so interpreted. The statute is concerned with dealings in land and it is because a mortgage involves such a dealing that the statute prescribes how mortgages may be transferred and with what consequences. It is concerned with the mortgage transaction in its entirety as it affects the land, and, therefore, extends to the personal liability of the mortgagor for the mortgage debt because that liability is intimately connected with the rights of property arising out of the mortgage transaction. A surety’s obligation stands in a different relation to the dealing. His liability is introduced by way of additional security. It is personal and, except as a result of subrogation, does not directly or indirectly affect the land. Rights of subrogation are not of a kind falling within the scope of the Real Property Act. A guarantee is thus collateral to the mortgage transaction, and the circumstance that the obligation is expressed in the mortgage instrument must be regarded as accidental to the mortgage transaction and not as characteristic of the dealing contemplated by the legislation. In relation to transfers of mortgage secs. 51 and 52 should be understood as dealing only with rights, powers, privileges, debts and sums of money affecting the mortgage transaction as between mortgagor and mortgagee.”

[18]Ibid, at 434-435.

Starke J stated:[19]

“The purpose of these provisions is to transfer the mortgage security and the rights, powers and privileges relating to the debt secured by the mortgage. But the provisions do not, I think, extend to collateral obligations, such as guarantees, given by strangers to the mortgage transaction. Measures v McFayden (1) supports this conclusion.”

[19]Ibid, at 432.

The reasoning in Consolidated Trust Co Ltd v Naylor appears to be one expression of a fundamental principle governing the ambit of registration in relation to covenants contained in registered instruments. That principle was applied in Mercantile Credits Ltd v Shell[20] in relation to a registered lease. The High Court there held that the option of renewal included in a registered instrument of lease was a covenant that “touched and concerned” and ran with, the land. As such it was an incident, and part, of the interest in land. It therefore, although not capable of separate registration, secured the priority obtained by registration of the lease. In contrast, an option to purchase did not directly affect or concern the leasehold estate and would be considered collateral.[21] Similarly, in Consolidated Trust Co Ltd v Naylor, the High Court excluded the guarantee in question because it only gave rise to a personal liability in the guarantor. It was not secured by, and did not create, an interest in the land.
[20][1975-1976] 136 CLR 326.
[21]Ibid, at 346.

In The English Scottish and Australian Bank Limited v Phillips,[22] the respondent, Phillips, was the registered proprietor of an estate in fee simple subject to a mortgage (“the first mortgage”). He transferred the fee simple, subject to the first mortgage, to a purchaser who executed a second mortgage. The fee simple was transferred several times, eventually to an ultimate purchaser, subject to both mortgages. The ultimate purchaser executed a third mortgage and subsequently defaulted on the first mortgage, at which point Phillips purchased it from the original first mortgagee for the amount equal to the mortgage debt. Phillips was thus concurrently both mortgagee and mortgagor under the first mortgage, which was transferred, rather than discharged. Phillips subsequently transferred the first mortgage to a purchaser, who in turn transferred it to the appellant bank. At first instance, the bank unsuccessfully claimed the principal and interest secured by the first mortgage from Phillips.
[22][1936-1937] 57 CLR 302.

On appeal to the High Court, the majority allowed the bank’s appeal. In their joint judgment, Dixon, Evatt and McTiernan JJ held that Phillips remained liable to the bank on the personal covenant contained in the first mortgage.

Their Honours considered that Phillips’ liability on the personal covenant was not extinguished by the transfer of his mortgage to himself. First, he had chosen “to treat the payment of the amount demanded by the mortgagee not as discharging the mortgage, but as consideration for its transfer to him”.[23] Secondly, they considered that the Torrens legislation was inconsistent with the application of general law doctrines under which the final extinguishment of obligations will result from the benefit of the obligation coming to reside in the obligor.[24] Therefore, the statutory vesting of the covenant to pay in Phillips, the obligee, did not extinguish the covenant.
[23]Ibid, at 320-321.
[24]Ibid, at 324.

In reaching that conclusion, their Honours noted that the legislation placed no limit on the persons who could deal in the interest created by a mortgage or a lease. Whilst the concurrent status as both mortgagee and mortgagor was possible under the Act, there was nothing in the statute to indicate that the mortgage would ipso facto merge in the estate of fee simple.[25] They observed that:

“A mortgage under the system is the creature of statute and its incidents depend upon the provisions of the statute and so much of the general law as is availed of by or under those provisions.”[26]

[25]Ibid, at 323.

[26]Ibid.

Their Honours further stated:[27]

“It appears to us that the plan of the legislation is to treat mortgages as distinct and persisting interests capable of the same ready transfer by registration as estates in fee simple and without any discrimination or concern as to the relation of the transferee or transferor thereof to any other estate or interest in land … When s.151 of the Real Property Act 1886 says that upon registration of a transfer of a mortgage, lease or encumbrance, the estate or interest of the transferor, as set forth in the instrument transferred, with all rights, powers and privileges thereto belonging, including the right to sue upon and recover in his own name any debt, sum of money, annuity or damages under such transferred instrument, shall pass to the transferee, it means, we think, that they shall pass and be enjoyed as a congeries of separate and distinct rights which in turn may be alienated by him by means of a registered transfer.”

[27]Ibid, at 324.

They also observed that, “ … the plan of the legislation is to enable the proprietor to transfer by registration not only the interest in the land, but all the accompanying personal obligations normally incident thereto”[28] and cited the passage from Consolidated Trust Co Ltd v Naylor set out above.
[28]Ibid, at 322.

In English, Scottish and Australian Bank Ltd v Phillips, the majority expressly recognised that, under the legislation, the consequences of a transfer of a lease might be different from the transfer of a mortgage, because, unlike a Torrens mortgage, “a term of years is an interest existing apart from the provisions of the statute and its qualities are defined by the general law, subject, however, to the statute.”[29]
[29]Ibid, at 323.

Further, the fact that Phillips was secondarily liable under the covenant in the mortgage did not preclude the covenant from vesting. (Phillips, as the original mortgagor, was only secondarily liable for the mortgage debt because of the statutorily implied covenant by the registered proprietor of the fee simple to pay to the mortgagee the moneys secured by the mortgage.)[30]
[30]Ibid, at 324.

The majority in the English, Scottish and Australian Bank Ltd v Phillips did not consider that “difficulties in ascertaining the amount which should be regarded as unpaid on the mortgage”[31] precluded the conclusion that the debt would pass to the registered transferee.
[31]Ibid.

Their Honours recognised that a mortgage was a separate interest in land which involved, or usually involved, personal obligations. They acknowledged that the fulfilment or performance of the personal obligations could not be ascertained by a search of the register “and the question what rights they continue to confer may depend upon such matters”.[32] Therefore, a person dealing with land subject to a mortgage “may be unable to depend on anything but inquiries from the parties to ascertain how much of the principal sum secured remains unpaid”.[33]
[32]Ibid, at 321.
[33]Ibid, at 322.

The plaintiff relied on Measures v McFadyen[34] in which the High Court held that the rights to recover damages for breach of a covenant contained in a registered lease did not vest in the registered transferee of the fee simple. The relevant covenant provided that the lessee must forthwith complete certain additions and improvements to the demised premises. The lessee had breached the covenant. The breach was committed and complete prior to the registered transfer of the fee simple to the plaintiff. The plaintiff, in reliance on ss.51 and 52 of the Real Property Act 1900 (NSW), sued for damages for breach of the covenant.
[34](1910) 11 CLR 723.

Griffith CJ rejected the appellant’s argument that s.52 transferred the right to sue for the completed breach of covenant.

His Honour stated that “the term ‘transfer’ in s.51 means the transference of estate resulting from registration and the word ‘thereto’ refers to the estate or interest transferred. The estate or interest transferred is one thing, and the personal right of action in respect of an antecedent completed breach of contract is another. In my opinion, the words of the section are not sufficient to transfer the right to bring an action in respect of such a past breach … “.[35]
[35]Ibid, at 731.

His Honour further stated:[36]

“The purpose of the Act was to transfer the estate or interest of the transferor in the land with all the rights incidental to present and future possession, but I do not think that it was intended to transfer also mere choses in action in respect of past and completed breaches of covenant”.

[36]Ibid.

Isaacs J stated:[37]

“But the object of the section is only to perfect the transaction effected by the statutory transfer. With respect to personal obligations the Act primarily concerns itself with their security upon land for their fulfilment, and having provided a statutory transfer of the benefits of the obligation as between the transferor and the transferee, proceeds in this section to completely effectuate the transfer by affecting the third person, the obligor also. To this end it transfers the right to sue and recover whatever debt, sum of money, annuity or damages (that is, right to damages) has been thereunder transferred”.

[37]Ibid, at 737.

His Honour considered that the section was not intended to transfer “all accrued rights to damages … independently of the continuance of the obligation under which they arose, and of the land upon which they were originally secured.”[38]
[38]Ibid, at 738.

In Jodaway Pty Ltd v Langton,[39] Mullins J held that s.62 of the Land Titles Act did not operate to vest in the heirs of certain deceased lessees a right to insist that the registered transferee from the landlord repay a loan which the landlord had owed the lessees pursuant to the lease. The debt under the lease was owed by the transferee’s predecessor in title, whose obligation to pay pursuant to lease had accrued prior to the transfer.
[39][2003] QSC 79.

Mullins J stated:[40]

“Section 62 of the LTA is a provision which has a long history in that it can trace its genesis to ss.43, 65 and 66 of the Real Property Act 1861. It cannot be construed in isolation from this history. Provisions in similar terms to ss.65 and 66 of the Real Property Act 1861 were considered by the High Court in Measures v McFadyen (1910) 11 CLR 723 which held that on the transfer of the reversion those provisions did not enable the transferee to sue in respect of a breach of a clause in the lease that was completed prior to the assignment of the reversion. There appears to be no authority to support a construction of s.62(1) of the LTA that the expression ‘the rights, powers, privileges and liabilities of the transferor in relation to the lot’ covers rights, powers, privileges and liabilities which do not run with the land. Section 62(1) of the LTA does not have the effect which the respondents seek to give it in respect of imposing on the applicant as the assignee of the reversion the obligation to make the repayment of the relevant part of the loan under cl 3.5 of the lease.
To the extent that the respondents seek to rely on s.62(1) of the LTA as conferring on them the rights which [the deceased lessees] had under the lease to obtain repayment of the loan, those rights are personal, do not run with the land and registration therefore does not assist the respondents in seeking to enforce those rights. As the lease has been terminated, the respondents have no entitlement to remain on the register as a means of improving their bargaining position in respect of the repayment of the loan.”

[40]Ibid, at [19].

The defendants relied on Julong Pty Ltd v Fenn,[41] a decision of the Queensland Court of Appeal, as direct authority for their construction of s.62. In that case two company directors executed a mortgage over their residential property in order to secure the repayment of $335,000 pursuant to a finance facility agreement executed by the mortgagors and the company they controlled.
[41][2002] QCA 529 (6 December 2002).

The original mortgagee transferred the mortgage to Julong. The transfer was registered and notice was given to the mortgagors. The Queensland Court of Appeal held that the transferee of the mortgage was entitled to enforce the mortgage. Atkinson J (with whom McMurdo P and Williams JA agreed) stated:[42]

“[The original mortgagee] was entitled to so transfer the security without the concurrence of [the mortgagors] pursuant to s.62(1) of the Land Title Act 1994. All the rights, powers, privileges and liabilities of [the original mortgagee] in relation to their mortgage over [the mortgagors’] home then vested in Julong. A transferee of a mortgage such as Julong, steps into the shoes of the transferor, and therefore is in no better or worse position than the transferor … The transfer effected a transfer of the debt owed by [the mortgagors] to [the original mortgagee] as well as a transfer of mortgage security for that debt. Julong is therefore entitled to claim the full amount of the debt owed by [the mortgagors] to [the original mortgagee] but is bound by such equities and accounts as would bind the transferor …. “.

[42]Ibid¸ at [40].

There was some dispute as to the facts of Julong Pty Ltd v Fenn, which was the subject of short memoranda sent by counsel following the conclusion of the hearing. The reasons for judgment do not state the facts exhaustively. They indicate, however, that the corporate debtor and its controllers (the mortgagors) were parties to the finance facility agreement under which the winding up of the corporate debtor would constitute default, and render the balance of the loan payable.[43] It appears that the corporate debtor was the principal borrower, but at another point it is referred to as a joint borrower with the mortgagors.[44] The mortgage was an “all moneys” mortgage[45] which provided that the financial consideration included “[the mortgagee] at the request of [the mortgagors] giving to the [corporate debtor] the financial accommodation referred to in an agreement dated the 12^th October 1993 [the date of the finance facility agreement]”.[46] It also provided for default upon, inter alia, the failure to perform or observe any collateral agreement.
[43]Ibid, at [23], [24].
[44]Ibid, at [47].
[45]Ibid, at [27], [48].
[46]Ibid, at [27].

The defendants also relied upon Gilmour v Pyramid Building Society (in liq)[47] in which Meagher JA (with whom Priestley and Clarke JJA agreed) held that the registered transfer of a mortgage operated as an assignment to the transferee of not only “the personal covenant [presumably the covenant to pay] but also of the guarantee contained in that document, which was an integral part of the mortgage.”
[47](1995) NSW ConvR 55,748 at 55,762.

Meagher JA referred to Consolidated Trust Co v Naylor, in which the guarantee was not considered an integral part of the mortgage. He did not explain the basis for distinguishing the case before him. The reported facts appear incomplete, but indicate that the director’s guarantee was included in the mortgage given by the corporate debtor. A further mortgage was given by the director and his wife over their residential property. Both mortgages were transferred and the transfers were eventually registered. Prior to their registration, the mortgages were varied to include additional amounts and the directors gave a new guarantee. The original mortgagee at no stage expressly assigned the guarantee.

The mortgage executed by the directors was a “third party” mortgage under which the “borrower” was their company. The directors’ mortgage was declared to be collateral to the company’s mortgage and to secure the identical principal sum secured thereby, which the mortgagors covenanted to pay to the mortgagee.

Meagher JA stated:[48]

“If as I think, the personal covenants in the [directors’] mortgage are the foundation of the plaintiff’s rights against the present appellants, all difficulties dissolve”.

[48]Ibid, at 55,764.

It appears, therefore, that the liability under the guarantee was, by reason of the definition of “secured moneys” in the directors’ mortgage, a secured liability which affected the mortgagee’s interest in the land.

In PT Ltd v Maradona Pty Ltd,[49] a case which was not the subject of submissions, Giles J considered the effect of ss.51 and 52 of the Real Property Act 1900 (NSW). The facts of PT Ltd v Maradona Pty Ltd are complex. Relevantly, an individual mortgaged her residential property in order to secure the liabilities of a corporate debtor under a loan, which she also guaranteed. The company’s debt and the mortgage were assigned several times and the ultimate transferee sought to enforce the mortgage.
[49][1991] 25 NSWLR 643.

Giles J found that the mortgagor had lacked mental capacity when she executed the mortgage and guarantee. The defence of non est factum therefore applied and her guarantee was not enforceable. However, he held that the mortgage had become indefeasible upon the registration of its transfer to the plaintiff mortgagee. Giles J considered, in reliance on ss.51 and 52, that the registered transfer of the mortgage included the right to enforce the personal covenant in it. His Honour observed:[50]

“Clearly enough this provision would catch the debt due from a mortgagor who was also the principal debtor, and the mortgagee’s cause of action to recover the debt would be included in the rights rendered secure by registration. That would be necessary to assure to the mortgagee his estate or interest in the land, since without the debt the security for which s.57 provides would be nugatory and thus s.52(1) is in conformity with the general position above mentioned. Its scope is confirmed by Consolidated Trust Co Ltd v Naylor[51] which also demonstrates a limitation upon the rights secured in that it did not extend to collateral obligations such as guarantees given by strangers to the mortgage transaction.”

[50]Ibid¸ at 697.

[51](1936) 55 CLR 423.

The mortgagor’s covenant to pay “the moneys hereby secured” under the mortgage included all moneys owing to the mortgagee by the mortgagor and “other persons jointly or severally liable with the mortgagor to pay the whole or any part of the moneys hereby secured on any account whatever whether as principal debtor or surety.”[52]
[52][1992] 25 NSWLR 643 at 697.

Giles J stated that:[53]

“ … it is clear that whatever obligation fell within [the mortgagor’s] personal covenant was intended to be secured by the mortgage.
… the transaction included conferring on the mortgagee an estate or interest in the [security] property as security for the [mortgagor’s] own obligation. In my view her personal covenant was so connected with the estate or interest with respect to which PT attained indefeasibility that it also achieved indefeasibility … “.

[53]Ibid, at 681.

However, due to the invalidity of her guarantee, the mortgagor was not liable, either by herself, or jointly or severally with any other indebted person. She was therefore not liable to pay any “moneys hereby secured” under the mortgage.

Application

As Dr Pannam contended, the Act is not underpinned by a restricted definition of a mortgage. It defines “mortgage” as “a charge on a lot or an interest in a lot for securing money or money’s worth” which is required only to describe, rather than set out or create, the debt or liability secured. The definition enshrines the usual broad concept of a Torrens mortgage. That concept is not limited to instruments which, by their own terms, create direct rights of action or primary liability for the debts secured, which can be established and proved independently of other agreements; nor is it restricted to instruments securing only the liability of the mortgagor.

Rather the definition of “mortgage” in the legislation accords with the meaning of an interest in land, in the nature of a charge, which secures to the mortgagee the satisfaction of fiscal obligations, irrespective of their source or means of creation, or the identity of the obligor. The existence and extent of the interest in land constituted by a Torrens mortgage depends on, and is defined by, the obligation it secures. If the liabilities have been satisfied and no outstanding obligation is secured, the mortgagor can seek a discharge of the mortgage.

As acknowledged in academic commentaries,[54] the terms of s.62 of the Act, and like provisions in Torrens legislation in other States, are poorly drawn and lack precision. Whilst the equivalent provisions are differently drafted in the various Torrens statutes, their similarity is such that a decision on any such provision is instructive when construing s.62.
[54]See: Woodham & Nettle, The Torrens System in NSW (2^nd ed), Law Book Company, 2003, Looseleaf, 12100-12104 at 12101; Fisher and Lightwood’s Law of Mortgages (11^th ed), 2002; Frances, EA., and Thomas KJ., Fox’s Annotated Transfer of Land Act (2^nd ed), JJ Hockley, Law Book Company Ltd, 1989; Robinson’s Transfer of Land In Victoria, Law Book Company Ltd, 1979.

The literal terms of s.62 are broad enough to encompass all rights to sue on the terms of the mortgage and to recover or enforce debts and liabilities included in it, whether owed by the mortgagor or other parties and whether secured by the mortgage or not.

None of the relevant High Court authorities or superior court decisions referred to above contained an exhaustive analysis of the ambit of the provisions. No case required determination of the question as to whether all liabilities and debts secured by a mortgage vest upon the registration of its transfer. No case concerned a mortgage which secured only the liability of a third party, and contained no covenant to pay by the mortgagor. Further, no case specifically addressed the question as to whether the limitations advocated by the plaintiff in the present case apply. Nevertheless, the statements of general principle contained in the High Court cases provide guidance on the proper construction of s.62. In both Consolidated Trust Co v Naylor[55] and Measures v McFadyen[56] the High Court placed a limit on the literal breadth of the provisions. The limitation was not, however, that for which the plaintiff contends. Rather, it excluded from the operation of the provisions those rights which, although clearly within the compass of their language, were not intimately connected to the proprietary interest in the land arising from the mortgage transaction.
[55](1936) 55 CLR 423.
[56](1910) 11 CLR 723.

The High Court’s approach to the provisions was not governed by a distinction between rights which were originally or primarily created by the terms of the mortgage, and rights which were independently created by external transactions. The consistent decisive factor was whether the relevant covenant affected, touched and concerned, defined or was intimately connected with, the estate or interest in land constituted by the mortgage.

In Consolidated Trust Company Ltd v Naylor, Dixon and Evatt JJ[57] stated that the statute was “concerned with the mortgage transaction in its entirety as it affects the land, and therefore, extends to the personal liability of the mortgagor for the mortgage debt because that liability is intimately connected with the rights of property arising out of the mortgage transaction”. The crucial circumstance was thus “the personal liability of the mortgagor for the mortgage debt”. There was no suggestion that the section would not apply if that personal liability arose as a surety or pursuant to a transaction external to the mortgage. Their Honours further observed that the provisions, properly understood, dealt only “with rights, powers, privileges, debts and sums of money affecting the mortgage transaction as between the mortgagor and mortgagee”.[58] That reference appears to underscore that the decisive factor is whether the covenant is one which affects the charge as an interest in land. Clearly, all covenants to pay which are secured are “intimately connected with the rights of property arising out of the mortgage transaction”.[59]
[57](1936) 55 CLR 423 at 434.
[58]Ibid, at 435.
[59]Ibid, at 434.

Starke J’s statement that the provisions’ purpose is to transfer “the mortgage security and the rights, powers and privileges relating to the debt secured by the mortgage”[60] clearly supports the defendants’ construction of s.62.
[60]Ibid, at 432.

Similarly, Isaacs J’s statement of principle in Measures v McFayden[61] (set out above) indicates that his Honour contemplated that under the relevant sections, the transfer of the mortgage not only transferred the mortgage as a charge on land, but also those personal obligations to pay which “completed” or “perfected” the interest in land. In that context, he considered that the sections operated to transfer the obligations of “the third person, the obligor”. His Honour appeared to contemplate that “the obligor” could be any party who owed a debt secured by the mortgage.
[61](1910) 11 CLR at 737.

The lease cases, on which the plaintiff particularly relies, are not, in my opinion, inconsistent with the view that the registered transfer of a mortgage may operate to vest third party debts or covenants to pay created outside its terms but secured under it. Such covenants “touch and concern” or “affect” the land, and are integral to the mortgagee’s proprietary interest in it. In contrast, the rights to sue for past breaches of covenant the subject of Measures v McFadyen and Jodaway Pty Ltd v Langton[62] did not, by their nature, touch or concern the leasehold or reversion or define or affect the proprietary estate. The exclusion of such rights from the operation of s.62 is consistent with the principles enunciated in Consolidated Trust Co Ltd v Naylor and English, Scottish and Australian Bank Ltd v Phillips.
[62][2003] QSC 79.

In English, Scottish and Australian Bank Ltd v Phillips[63] the High Court majority considered that the section was effective to vest the right to recover the mortgage debt in a person who was at once obligor and obligee, and to preserve it in his hands from extinguishment, despite the general law rules of merger. That was clearly a different issue from that in the present case. However, the majority acknowledged that the object of the legislation was to treat mortgages as distinct interests capable of “ready transfer”, like estates in fee simple, without discrimination as to the relationship of transferor and transferee. The majority expressly recognised the absence of any legislative restriction on the persons who could deal in the interest created by a mortgage. They endorsed an approach to the construction of the provisions which would facilitate the “ready transfer” of such interests. They emphasised that, as the Torrens mortgage was a creature of statute, general law impediments applied only in so far as admitted by the legislation.
[63][1936-1937] 57 CLR 302.

The context of the case suggests that their Honours’ remarks on “ready transfer” were not confined to the mortgage as an interest in land, divorced from the personal covenants which defined it. That conclusion is fortified by their express observation that “the plan of the legislation is to enable the proprietor to transfer by registration not only the interest in the land, but all the accompanying personal obligations normally incident thereto”.[64] (Emphasis added). English, Scottish and Australian Bank Ltd v Phillips indicates that the court should not be astute to read into the terms of s.62 restrictions which cut down their plain meaning and ambit.
[64]Ibid, at 322.

In my opinion, the terms of s.62, according to their plain or ordinary meaning, do not indicate that only rights to recover debts or liabilities primarily created by the terms of the instrument of mortgage will vest in the transferee. The terms of s.62(4) indicate that the second limb includes subject‑matter which is additional to the subject‑matter of the first limb, rather than constituting a mere illustration or sub‑category of it. Section 62(4) indicates that a transferee will acquire the right to recover a debt or to enforce a liability under the mortgage or lease, irrespective of whether the debt could be recovered, or the liability could be enforced, by suing on the terms of the mortgage.

If the reference to “under the mortgage” in the second limb of s.62(4) were held to mean, “originally or primarily created by terms included in the mortgage”, the second limb would, as Dr Pannam contended, have no effective independent operation. The principles of statutory construction, coupled with the consistent reasoning expressed in the relevant High Court decisions, indicate that the second limb of s.62(4) refers to rights to recover debts and liabilities which are secured under the mortgage.

The plaintiff’s construction of s.62 depends on a distinction between debts which are primarily created by, and the terms of which are set out in, the mortgage, and those which are not. However, even in the case of the former, it would still be necessary to refer to matters external to the mortgage instrument in order to ascertain whether there were any, and if so what, extant obligations secured by it. The majority in English, Scottish and Australian Bank v Phillips did not, in any event, consider that circumstance decisive to the operation of the provisions.

If a mortgage contains a covenant by the mortgagor to pay “moneys secured”, and those “moneys secured” include, on analysis, moneys which a third party is primarily liable to pay, or which the mortgagor (whether by itself or with others) is independently liable to pay, pursuant to an agreement or transaction external to the mortgage, in my view, the covenant to pay in the mortgage will nevertheless give rise to a direct right of action to sue for the relevant debt, albeit proof of the claim will depend on matters outside the mortgage instrument.

Although the plaintiff contended that absurdities would result from the defendants’ construction of s.62, its narrower analysis would not preclude a debt created by one mortgage being secured by multiple mortgages. The transfer of the first mortgage would operate to vest the underlying debt in the transferee, leaving the remaining mortgages subject to discharge. Similarly, while a debt secured by multiple mortgages would vest in the first transferee of mortgage to register, that result is consistent with the paramountcy accorded to registered interests under Torrens legislation. If (as senior counsel for both the plaintiff and the defendants contend) the operation of the section can be excluded by agreement, the avoidance of anomalies may be within the parties’ control.

A number of decisions of superior courts, most notably Julong Pty Ltd v Fenn, have held the transfer of mortgage provisions effective to vest the right to recover debts which are comprehended by the “moneys secured” the subject of the mortgagor’s covenant to pay.

In Julong, the Queensland Court of Appeal held that s.62 would apply to vest in the transferee of a mortgage the debts of the individual mortgagors, who were, it appears, jointly liable with a corporate debtor pursuant to a “come and go” facility secured by an “all moneys” mortgage over their property. Although it is not possible to ascertain the precise terms of the relevant facility agreements and mortgage from the reported facts of Julong, I am satisfied that Atkinson J (with whom McMurdo P and Williams JA agreed) did not apply the restrictive analysis of s.62 advocated by the plaintiff. Rather, her Honour’s statement that “a transferee of a mortgage … steps into the shoes of the transferor, and therefore is in no better or worse position than the transferor”[65] accorded with the fundamental principles expressed in the authorities discussed above.
[65][2002] QCA 529 (6 December 2002) at [40].

Similarly, in PT Ltd v Maradona Pty Ltd,[66] Giles J considered that the right to enforce the personal covenants in the mortgage vested in the registered transferee pursuant to the transfer of mortgage provisions. In that context, he considered that the mortgagor’s covenant in the mortgage to pay “the moneys secured”, within the definition of that term in the mortgage, was a sufficient basis for the operation of the sections. Although he ultimately considered that there were, on analysis, no moneys secured by the mortgage, he did not adopt the analysis advocated by the plaintiff. In Gilmour v Pyramid Building Society (in liq)[67] Meagher JA appeared to adopt an approach consistent with that in Julong Pty Ltd v Fenn and PT Ltd v Maradona Pty Ltd .
[66](1992) 25 NSWLR 643.
[67](1995) NSW ConvR 55, 761 at 55,763.

The construction advocated by the defendants accords with the terms of the section and is supported by the reasoning consistently expressed by the High Court. It follows, in my opinion, that upon registration of the transfer of a mortgage, s.62 of the Act will ordinarily apply (subject, perhaps, to the contrary agreement of the parties) to vest in the transferee the underlying debts and liabilities secured under it. It is not necessary that the debts or obligations thus secured, or the causes of action in relation to them, are primarily created by the terms of the mortgage instrument. Debts and liabilities owed to the mortgagee by third parties are covered. It is necessary only that the debt or obligation is secured by the mortgage, and thus affects the mortgagee’s estate or interest in land. It is not necessary that the existence of the obligation, or a breach thereof, can be established without reference to matters external to the mortgage.

On this construction of s.62, the registered transfer of a mortgage which contained no covenant to pay by the mortgagor, but only secured the liability to pay of a third party, would be effective to vest the right to recover the debt from the third party in the transferee. In the present case it is unnecessary to address that issue, as the mortgages contain covenants by the mortgagor to pay the monies secured by the mortgages.

In this context, I do not accept the plaintiff’s contention that the terms “mortgagee” and “mortgagor” (when used in the covenants to pay in the mortgages) apply only to those persons holding that status at the time of particular transactions giving rise to debts, or obligations, and exclude their successors in title. The mortgages expressly provide that the terms “mortgagee” and “mortgagor” refer not only the original mortgagee and mortgagor, but include their successors and assigns.

In the present case, clauses 2 and 4 of the first and second mortgages contain an express covenant by the mortgagor to pay to the mortgagee all “secured moneys”. “Secured moneys” are widely defined in clause 2.1 to include, broadly, all moneys at any time presently or in the future payable by the mortgagor to the mortgagee, whether as principal debtor, or surety, or whether alone or jointly with any other person. A large number of specific bases of liability are set out in clause 2, including “all moneys payable to the mortgagee pursuant to any Facility Agreement”, which term is widely defined in Clause 1.1 to cover loan agreements, or agreements pursuant to which the mortgagee lends, or provides credit to, the mortgagor and/or to any other person.

Under the first loan agreement, the Borrower was QPM and Mr and Mrs Beckinsale. It was undisputed that “the Borrower” was those three persons jointly, and that the Beckinsales and QPM were jointly liable for the first loan. Under the second loan agreement, the borrower was QPM alone.

In my opinion, the liabilities under both loan agreements were “moneys secured” under each of the mortgages, for which QPM was liable pursuant to its personal covenants to pay in the mortgages. The rights to recover the debts the subject of those covenants were intimately connected with, and defined, the interest in land constituted by the mortgages. I am satisfied that there is nothing in the correspondence constituting the agreement to transfer the mortgages, or in the terms of the mortgages, to establish an agreement or intention to exclude the transfer of the rights to recover the debts under the loan agreements. They therefore vested in Marminta as registered transferee of the mortgages pursuant to the operation of s.62 of the Act.

THE ANSHUN ISSUE

On 28 July 2004 I ordered that the hearing of: (a) the plaintiff’s unjust enrichment claim in respect of his payment of rates and taxes on the land, set out in paragraphs 24 to 27 of the plaintiff’s amended statement of claim and (b) Marminta’s claim for an interest adjustment, set out in paragraph 3 of its counterclaim; should be deferred for hearing (if that became necessary) until I had first decided whether those claims were shut out pursuant to the principle recognised in Port of Melbourne Authority v Anshun Pty Ltd.[68] On appeal, the defendants argued that it was unnecessary to determine the application of the Anshun principle as, on a proper analysis, the Queensland Court of Appeal had itself determined that the claims could not be raised on that basis, and this court should not disturb its decision.
[68](1981) 147 CLR 589.

French did not raise the claim of unjust enrichment by reason of his payment of the council rates and land tax either at the trial before Dutney J or on the hearing of the appeal. Similarly, the defendants did not raise their claim for a reduction of the interest on the purchase price of the mortgages payable to French on the basis of French’s alleged delay in settling.

Rather, each party sought to raise the claims for the first time in an application before the Queensland Court of Appeal on 19 December 2003, in the context of liberty to apply as to the form of the orders made by the Court on 5 December 2003.

On 19 December 2003 the Court of Appeal heard applications by French for an order that the purchase price for the mortgages be increased to cover the land tax and rates he had paid. Marminta also applied for leave to make further submissions in relation to the amount of interest to be paid on the purchase price of the transfer of mortgages for the period since 7 October 2002, claiming that it had been ready and willing to settle on that date, although settlement did not take place until 14 January 2004. Marminta sought a reduction in interest paid, interest on moneys which would have been available to it had settlement occurred on 7 October 2002 and recovery of certain rates and taxes adjusted against it at settlement.

The factual history of the plaintiff’s payment of rates and land tax in respect of the mortgaged land is set out below.

In 1994 the Livingstone Shire Council served a writ on QPM for non‑payment of rates. On 16 January 1995 French, as mortgagee, was required to pay land tax of approximately $23,000.

11 March 1999 was the final date for payment of council rates due on the land. They were not paid. On 16 April 1999 the Shire of Livingstone wrote to French advising that it proposed to auction the land in order to recover the arrears of rates.

On 6 May 1999 the Livingstone Shire Council served a notice of intention to sell. On 28 September 1999 the Livingstone Shire Council advised an auction date of 27 October 1999.

On 4 October 1999 the Commissioner of Land Tax wrote to QPM threatening legal action unless land tax of $83,000 was paid.

On 12 October 1999 French paid $127,000 to the Livingstone Shire Council in respect of rates due by QPM.

On 23 December 1999 the Queensland Land Tax Commissioner registered a statutory charge in respect of the unpaid land tax pursuant to s.37 of the Land Tax Act 1915 on the land mortgaged to Mr French.

In January 2000 the correspondence between French and Beckinsale occurred which Dutney J, by judgment delivered 13 December 2002, found to amount to an agreement to sell the mortgages to Marminta, although he found that the agreement was mutually abandoned.

On 22 June 2001 French paid $21,734.52 to the Shire of Livingstone.

On 8 January 2002 the Commissioner of Land Tax required French to pay land tax of $108,894.20.

On 19 March 2002 the Commissioner of Land Tax advised that the total of land tax owed for the years 1990 to 2001 was $110,417.90 and that judgment had been obtained for $108,764.14 plus costs.

On 24 September 2002 the Commissioner of Land Tax advised French that the outstanding land tax for the 1990 to 2002 years was $120,128.91.

On 29 October 2002 the Commissioner of Land Tax again advised French that the outstanding land tax for the 1990 to 2002 years was $120,128.91.

On 29 October 2002 French paid $24,313.39 to the Shire of Livingstone in respect of rates and charges.

On 1 August 2003 French paid the Queensland Land Tax Commissioner $123,786.19 in respect of land tax due by QPM after judgment.

On 5 December 2003 the Queensland Court of Appeal found that the January 2000 agreement to assign the mortgages to Marminta found by Dutney J had not been abandoned and that Marminta was consequently entitled to specific performance.

In Port of Melbourne Authority v Anshun Pty Ltd[69] the High Court dismissed an appeal from the decision of the Full Court of Victoria which had, in turn, dismissed an appeal from McGarvie J’s order forever staying the Port of Melbourne’s proceeding against Anshun for indemnity in relation to personal injury under an agreement for crane hire. An injured person had previously brought a proceeding against both Anshun and the Port of Melbourne. McGarvie J held that the claim for indemnity against Anshun could, and should, have been brought in the earlier proceeding.
[69](1981) 147 CLR 589.

The High Court also considered that the appellant was estopped from bringing the claim on the ground that the claim in question could, and should, have been litigated in the earlier proceeding. In those circumstances, the parties could not be permitted to re‑open the same matter of litigation[70].
[70]Ibid, at 605.

In Gibbs v Kinna[71] the Court of Appeal held that an employee was not precluded by the principles of Anshun from bringing an action against his former employer in the Magistrates’ Court for breach of contract of employment and contravention of s.52 of the Trade Practices Act 1974 (Cth), although the employee had previously applied before a Registrar for compensation for wrongful termination under the Industrial Relations Act 1998 (Cth).
[71](1999) 2 VR 19.

Ormiston JA stated that although the factual substratum in the later proceeding would be much the same as in the earlier one, it was not unreasonable not to bring the claims in the earlier proceeding.[72]
[72](1999) 2 VR 19 at 21.

In this regard, the question was not whether it were technically possible, but whether it was unreasonable, in all the circumstances, not to set up the claim in the first proceeding. His Honour stated : “The answer depends not so much on legalities as practicalities”.[73] He considered that it was not unreasonable not to do so. The two causes of action were different causes of action, requiring proof of different elements, albeit that the factual substratum would be largely the same.[74]
[73]Ibid, at 20.
[74]Ibid, at 21.

Kenny JA acknowledged that the precise ambit of the extended principle of res judicata expressed by the High Court in Anshun was not entirely clear. However, the majority had enunciated a test of whether it was unreasonable not to raise the cause of action in the earlier litigation.[75]
[75]Ibid, at 26.

In Kenny JA’s view, that required, as a minimum, the establishment of two factors. First, that the cause of action be one which could have been raised in the previous proceeding. Secondly, that the same, or substantially the same, facts will arise for consideration in the second as in the first proceeding.[76]
[76]Ibid, at 27.

Kenny JA considered those to be necessary, rather than sufficient conditions. Her Honour stated that the determination of whether it was unreasonable would depend “almost entirely on the particular circumstances”.[77] However, she noted that if any judgment which might be made in the second proceeding would conflict with the judgment or order made in the earlier proceeding, it would ordinarily be unreasonable to refrain from raising it in the second proceeding.[78]
[77]Ibid, at 27.
[78]Ibid, at 27.

Kenny JA further stated:[79]

“In cases where there is no risk of inconsistent judgments, to decide whether or not it was unreasonable for a plaintiff not to litigate closely related issues in the one proceeding requires consideration of all the relevant facts, including the character of the previous proceeding, the scope of any pleadings, the length and complexity of any trial, any real or reasonably perceived difficulties in raising the relevant claim earlier, and any other explanation for the failure to make the claim previously.”

[79]Ibid, at 28.

Kenny JA found that in the case before her, there was no risk of conflict between the orders. Further, in the earlier proceeding the employee was limited to a statutory claim, whereas the new claims could only have been introduced by amendment, probably occasioning an adjournment and a referral to a judge. The straightforward and speedy adjudication of the primary claim before the Registrar (which entitled the employee to a reverse onus) would thus have been delayed and complicated, and the employee was not entitled to costs.[80]
[80]Ibid, at 28.

Mr Bick, senior counsel for the plaintiff, argued that in the present case it was not unreasonable for the plaintiff not to raise its claim to rates and land tax before Dutney J or the Court of Appeal on appeal for a number of reasons set out in detail in the plaintiff’s written outline of argument.

In contrast, he contended that Marminta’s counterclaim was in a different position because it posed the potential for direct conflict with the Queensland Court of Appeal’s orders. In his submission, the question whether Marminta was ready and willing to settle was a very relevant issue to the questions determined by Dutney J, and it was unreasonable not to have raised it.

The plaintiff also contended that although the rates and land tax claim had been raised in the application on 19 December 2003 before the Court of Appeal, the Court of Appeal had not rejected the claim on the merits, but simply declined to hear the matter.

Dr Pannam, in contrast, contended that the Court of Appeal had entertained both applications and made final orders dismissing them, which this court ought not to disturb. Even were the Court of Appeal not competent, (which he denied), this court should not question the competence of a sister court. He relied, in this context, on Harris v Harris,[81] G v G,[82] s.118 of the Constitution Act and s.18 of the State and Territorial Laws and Records Recognition Act 1901.
[81][1947] VLR 44.
[82](1986) 64 ALR 273.

Section 118 of the Constitution Act provides:

“Full faith and credit shall be given, throughout the Commonwealth to the laws, the public Acts and records, and the judicial proceedings of every State.

Section 18 of the State and Territory Laws and Records Recognition Act 1901 provides:

“All public acts, records and judicial proceedings of any State or Territory, if proved or authenticated as required in the Act, shall have such faith and credit given to them in every Court and public office as they have by law or usage in the Courts and public offices of the State or Territory from whence they are taken.”

In G v G[83] McLelland J determined the effect of a child custody order made by the Supreme Court of Queensland upon the jurisdiction of the Supreme Court of New South Wales in relation to custody of the child. His Honour referred to the above constitutional and state provisions and stated that they “require the court to treat the Queensland order … as having the same degree of finality and conclusiveness (but no more) as that order would have in Queensland”.[84]
[83](1986) 64 ALR 273.
[84]Ibid, at 276.

The transcript of the hearing of the applications on 19 December 2003 reveals that Mr Curran, counsel for the defendants, announced his instructions to raise Marminta’s claim for a reduction in interest.

Williams JA observed, “I suppose there’s a – the shadow of Anshun perhaps hangs over it.”[85]
[85]Marminta Pty Ltd v Rusty French, Court of Appeal, Queensland, 19 December 2003, Transcript of Proceeding, at 3.

Williams JA asked counsel what he was seeking. On being informed by Mr Curran that the defendants wished in some way to preserve its rights to litigate in the future, His Honour stated that “the Court can’t do anything about that today”.[86]
[86]Ibid, at 4.

Mr Morris QC, counsel for Mr French, then raised the plaintiff’s claim for rates and taxes and made submissions in relation to unjust enrichment.[87]
[87]Ibid, at 5.

The following exchange occurred:

“JERRARD JA:

Mr Morris, let me ask, was that pleaded in any way by the respondent?

MR MORRIS:

No.

JERRARD JA:

And it wasn’t a ground of appeal by the respondent?

MR MORRIS:

No.

JERRARD JA:

And it wasn’t argued by the respondent on the appeal, I can assure you.

MR MORRIS:

Yes, I – I - - - - -

JERRARD JA:

So this is actually - this is an entirely novel claim raised on liberty to apply concerning orders for costs.

MR MORRIS:

I accept that everything your Honour says is right, but now make two points in response. One is that the land tax only arose between judgment at first instance and the hearing in this Court, so my client can hardly be criticised for failing to plead, or failing to appeal, on the basis that it’s paid 100 or he’s paid $123,000 in land tax.

JERRARD JA:

But he could have put that before the – or he could have sought leave to lead fresh evidence of that on the appeal and to argue a ground of appeal that presented a case for an order against the plaintiff, on the basis of unjust enrichment.

MR MORRIS:

Yes. I again accept - - -

JERRARD JA:

And didn’t.”

Mr Morris then made submissions on the alleged unjust enrichment of Marminta[88] on the basis of both the land tax and the rates. There were exchanges with Williams and Jerrard JJA on those issues.
[88]Ibid, at 7.

Williams JA enquired of Mr Morris what amendment would be required to the order if the Court “were with” him on those issues.[89]
[89]Ibid, at 9.

The Court then heard Mr Curran’s submission on interest adjustment on behalf of Marminta. Mr Curran explained the basis of the claim and conceded that “Anshun’s just an additional point” but that both of the claims were “totally new” issues which were alive, both at first instance and on appeal, and if French, contrary to his submissions, were now permitted to “claw back” additional moneys, “I would want an opportunity to re‑open the whole matter as well”.

Mr Curran further stated: “If your Honours were seriously going to embark upon giving Mr Morris what he wants, which is of course tantamount to not only opening up the appeal, but opening up the trial. If you were going to do that then my client should have a similar opportunity, but … [The parties] ran their case before the Court both at first instance [and] on appeal and now it’s an attempt to raise totally new matters that could and should have been litigated below.”[90]
[90]Ibid, at 13.

Following further submissions in support of, and exchanges on, the claims (which included Mr Morris’ submission that French should not be punished because “something was not said at the time which perhaps more conveniently should have been said at the time”).[91]
[91]Ibid, at 16.

Williams JA stated that he was concerned that, “even to get to the stage of concluding that there was unjust enrichment as you contend, that one is really reopening the order and why should one, in effect, reopen part of it without reopening the whole can or [sic] worms”.[92]
[92]Ibid, at 17.

Mr Morris responded that he accepted the force of that and concurred in a proposal that the matters be referred to the judge at first instance.

Williams JA stated “That means that neither of you, if that was done, would take the Anshun point. We’d have to make that a condition … of sending it back”.[93]
[93]Ibid.

A discussion on costs followed and Williams JA stated, “All right. Well, really, what it boils down to then is the real question for this Court to now determine is in relation to the what I’ll call broadly the reopening issues and the implications”.[94] (Emphasis added).
[94]Ibid, at 20.

The Court reserved its decision and delivered judgment on 24 December 2003.

The judgment identified the two claims. It acknowledged that the land tax was paid only after the hearing and decision by the learned trial judge, and before the hearing of the appeal. It stated that senior counsel for Mr French “readily conceded that [French] had not asked on the hearing of the appeal for orders for payment of that land tax paid, whereas it could have; and that no application was made then to place evidence of that payment before this court. Nor had any claim against the appellant plaintiff in respect of the land tax so paid been sought to be raised by way of any amended ground of appeal by [French].”[95]
[95]Marminta Pty Ltd v French [2003] QCA 577 at [3].

The Court referred to Mr Morris QC’s submissions as to why both the land tax and rates claims should nevertheless still be heard. It stated, “The submission made by Mr Morris QC was well presented and rested persuasively on matters of basic principle applied to these particular facts. For the appellant plaintiff, Mr Curran submitted that the respondent’s applications were made far too late … [and] submitted that if the court allowed the respondent to raise now the issue of land tax paid and rates paid post January 2000, then the respondent would want to re‑open the orders previously agreed”.[96]
[96]Ibid, at [5].

The Court referred to Marminta’s argument on interest adjustment.[97]
[97]Ibid.

The Court stated:[98]

“[6] The court was presented draft minutes of orders to which no counsel took objection on the hearing of the appeal. Those orders provided for interest as ultimately ordered and not for the payment of the mortgage debt increased by the land tax and other payments. To that extent they disadvantaged Mr French, but the court would rarely fail to do equity by making orders which parties represented by senior counsel did not dispute.
[7] There is a further consideration. The respondent also conceded that the appellant would be entitled to re-open the terms of Order 3(b) as to interest, if the court contemplated making the orders sought by the respondent. Mr Morris QC submitted that the court could direct that the terms of Order 3(b) be amended by an order which required that only that the $900,000.00 be paid within six weeks of 5 December 2003, and that the remaining terms of the order be remitted to a trial judge for determination. Mr Morris agreed that this would be an unsatisfactory resolution; which it would, since it would prolong even further final orders in these proceedings. One facet of the administration of justice is bringing proceedings to a close by reasoned judgment as promptly as possible, and in the circumstances justice is done and equity is achieved by leaving the orders in 3(b) in the unchallenged form in which they were presented to this court on the appeal, amended slightly as explained in paragraphs [29] and [30] of the reasons for judgment. Mr French is entitled by those orders to less than he might otherwise have had, but gets it sooner; and the future value of the mortgage debt is not absolutely guaranteed.”

[98]Ibid, at [6]-[7].

A footnote stated: “This is the reasoning underlying the decision in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; if there was a full re‑opening each party would have to overcome the principle referred to in that case.”

I am satisfied that the Court of Appeal entertained the broad arguments put by the plaintiff and Marminta in relation to their claims and in particular, the justification for re‑opening those issues despite the difficulties posed by Anshun.

The Court of Appeal by order conclusively dismissed both the applications. It clearly intended its existing orders to stand, unaffected by those claims, for the reasons expressed. In my view, the plaintiff’s unjust enrichment claim should not be entertained by this Court because the Court of Appeal itself, by final order, dismissed the application. For the same reason, Marminta’s claim in paragraph 3 of its counterclaim should not be entertained.

PLAINTIFF’S CLAIM FOR RATES AND LAND TAX

The plaintiff also claims reimbursement from QPM of the council rates and land tax paid by him while mortgagee of the land.

The claim to council rates and land tax is based on various provisions of the mortgages and on the common law doctrine of “practical compulsion” which permits recoupment where a defaulting owner’s debt is paid in order to relieve the property from distress or from the exercise of a lien.

In relation to the payment of the land tax, the plaintiff relies on the additional ground of s.24 of the Land Tax Act 1915 (Qld).

The plaintiff relied upon the doctrine of “practical compulsion” applied in Gemmell v Brienesse[99] and Macanash v Mackey.[100]
[99](1933) SR(NSW) 473.
[100](1934) 51 WN (NSW) 156.

In Gemmell v Brienesee[101] the owner of a property transferred it subject to a mortgage. When the new registered proprietor failed to pay rates, the council obtained judgment and threatened to enforce it by sale of the land. The mortgagee paid the rates upon being pressed to do so by the proprietor. Harvey ACJ was satisfied that in such circumstances, the payment was not unauthorised and voluntary but “in the eyes of the law, a payment under practical compulsion”.[102] Therefore, although there was no privity between the current registered proprietor and the mortgagee (so that the mortgagee could not have sued the registered proprietor under any provision in the mortgage) the mortgagee could sue in quasi‑contract, implied from the circumstances under which payment was made, giving rise to an independent liability.[103]
[101](1933) SR(NSW) 473.
[102]Ibid, at 476.
[103]Ibid, at 477.

In Macanash v Mackey[104] Jordan CJ (with whom Halse, Rogers and Stephen JJ concurred) held that a mortgagee who had paid rates due on a property following its transfer by the original mortgagor to a new registered proprietor, in circumstances of “compulsion”, was entitled to recover the payment from the transferee, despite a provision in the Moratorium Act 1932 which prohibited action by the mortgagee for the payment of money secured by a mortgagor, unless the mortgagor had confirmed some agreement for such payment.
[104](1934) 51 WN (NSW) 156.

The Court considered that the moratorium legislation applied only to liabilities owed in the character of mortgagor, and not to a liability based on quasi-contract which arose independently of the mortgagor-mortgagee relationship.[105]
[105]Ibid, at 157.

In Re Gasbourne Pty Ltd[106] Nicholson J considered the doctrine of practical compulsion in relation to the claims of shareholders of companies involved in an asset‑stripping tax avoidance scheme. He recognised the prerequisites of practical compulsion, which would render an ultimately liable person indebted to a party who discharged the liability. He observed (in reliance on Goff v Jone)[107] that:

“It would appear that at common law the right to recoupment in respect of payment of another’s debt arose in relation to a comparatively limited number of categories .. “ [which relevantly included]
(a)Cases involving the relief of the plaintiff’s property from distress or a lien lawfully exercised thereon … “[108]

[106][1984] VR 801.

[107]Law of Restitution, 2^nd ed., p.244.

[108][1984] VR 801 at 843.

He considered Gemmell v Brienesse and Macanash v Mackey as “providing no more than examples of cases falling within the first two categories referred to in Goff v Jones … “[109]
[109]Ibid, at 845.

The plaintiff relied on sub-clause 7(1)(a) and (p) of the mortgages, pursuant to which the mortgagor is obliged to pay rates and land tax and is prohibited from actions prejudicial to the mortgagee’s interest.

Clause 2.1(h) of the mortgages provides that “moneys secured” includes:

“all moneys whatsoever which the Mortgagee shall lend pay or advance or become in any way whatsoever liable to lend pay or advance to for or on the credit of or for the accommodation or otherwise on the account of the Mortgagor on to for or on account of any other person upon the order or request or under the authority of the Mortgagor.”

Clause 2.1(1) of the mortgages provides that “moneys secured” includes:

“all moneys which the Mortgagee or any attorney appointed pursuant to this Mortgage or any Collateral Security may have paid or may pay in pursuance of or in defence of its or his rights or powers under or pursuant to this Mortgage or any Collateral Security.”

The Land Tax Act 1915 s.24 provides that where a mortgagee has been required to pay land tax on behalf of the mortgagor, and has done so, the mortgagee:

“Shall have the right to recover the amount paid from the owner and in addition such amount shall be deemed to be part of or added to the principal moneys under the mortgage and shall be recoverable as such with interest accordingly.”

Although the defendants argued that Re Gasbourne Pty Ltd imposed a more restrictive test of practical compulsion, which was not satisfied in this case, it would appear on the basis of Gemmell v Brienesee and Macanash v Mackey that prior to the transfer of the mortgage to Marminta, French would have had a right to recover from QPM the payments he had made pursuant to the doctrine of practical compulsion and the terms of the mortgage. Further, pursuant to the mortgage provisions, QPM’s liability would have been secured against the land. In the case of the land tax payments, s.24 of the Land Tax Act created an additional source of secured liability.

The defendants conceded that if they failed on the s.62 argument, the plaintiff would succeed in its claim against QFM for rates and land tax. The plaintiff, however, contended that he was entitled to succeed on the rates and land tax claim even if the defendants’ s.62 argument succeeded. In Gemmell v Brienesee and Macanash v Mackay, the mortgagees’ claims (being based in quasi‑contract) were not destroyed by the moratorium acts. The plaintiff argued that any transfer of obligation under the mortgages would exclude rights under quasi-contract. The plaintiff also argued that the failures to pay land tax was a past completed breach of the mortgage provisions, within terms of Measures v McFadyen.

As the defendants contended, the quasi-contract cases, Gemmell v Brienesee and Macanash v Mackey, concerned the survival of liability to the mortgagee on the part of a transferee of the fee simple, despite the destruction by the moratorium legislation of liabilities owed by that person in the character of “mortgagor”. The decisions do not assist in the determination of what rights will vest in the transferee of a mortgage pursuant to s.62 of the Act.

For the reasons set out in detail above, I am of the view that the right to recover all debts and liabilities of the mortgagor secured by the mortgage will vest in the registered transferee. The principle of Measures v McFadyen is inapplicable. The fact that an obligation within the definition of “moneys secured” may have a separate or independent basis would not, in my view, exclude it from the operation of s.62.

I am therefore satisfied that the mortgagor’s obligations to repay the rates and land tax paid by Mr French were comprehended in the right to sue on the terms of the mortgages, and to recover a debt or enforce a liability thereunder. As such, they vested in Marminta upon registration of its transfers pursuant to s.62 of the Act.

CONCLUSION

In my opinion, the Court should not entertain the claims set out in paragraphs 24 to 27 of the amended statement of claim and the plaintiff’s claims should otherwise be dismissed.

The fourth defendant’s entitlement to the declaratory relief sought in paragraph A of the prayer for relief in the fourth defendant’s counterclaim is established, and the claims in paragraph 3 of the counterclaim should be dismissed.

---

“JERRARD JA:	Mr Morris, let me ask, was that pleaded in any way by the respondent?
MR MORRIS:	No.
JERRARD JA:	And it wasn’t a ground of appeal by the respondent?
MR MORRIS:	No.
JERRARD JA:	And it wasn’t argued by the respondent on the appeal, I can assure you.
MR MORRIS:	Yes, I – I - - - - -
JERRARD JA:	So this is actually - this is an entirely novel claim raised on liberty to apply concerning orders for costs.
MR MORRIS:	I accept that everything your Honour says is right, but now make two points in response. One is that the land tax only arose between judgment at first instance and the hearing in this Court, so my client can hardly be criticised for failing to plead, or failing to appeal, on the basis that it’s paid 100 or he’s paid $123,000 in land tax.
JERRARD JA:	But he could have put that before the – or he could have sought leave to lead fresh evidence of that on the appeal and to argue a ground of appeal that presented a case for an order against the plaintiff, on the basis of unjust enrichment.
MR MORRIS:	Yes. I again accept - - -
JERRARD JA:	And didn’t.”

[2004] VSC 294

18 August 2004