Golden Dew Pl v Toweran Holdings Pl

[1995] QSC 72

IN THE SUPREME COURT

OF QUEENSLAND

No. 638 of 1995

Brisbane

Before the Hon. Justice G N Williams

[Golden Dew Pl v. Toweran Holdings Pl & Anor]

BETWEEN:

GOLDEN DEW PTY LTD (RECEIVER APPOINTED)
  ACN 059 526 831

Plaintiff

AND:

TOWERAN HOLDINGS PTY LTD
  ACN 010 013 555

First Defendant

AND:

TREVOR JOHN SCHMIERER
  Second Defendant

JUDGMENT - G N WILLIAMS J

Judgment delivered 28/04/1995

CATCHWORDS      MORTGAGES - construction - when loan repayable - whether "on or after" clause - various provisions to be read together - held payable by specified date without demand - Re Tewkesbury (1911) 2 Ch.279 considered.

Counsel:Dunning for applicant

T Matthews for respondents

Solicitors:Michell Sillar Nicholsons for the applicant

Hemming and Hart T/a for Griffiths McColm and Parry for respondents

Hearing date:    24 April 1995

IN THE SUPREME COURT

OF QUEENSLAND

No. 638 of 1995

BETWEEN:

GOLDEN DEW PTY LTD (RECEIVER APPOINTED)
  ACN 059 526 831

Plaintiff

AND:

TOWERAN HOLDINGS PTY LTD
  ACN 010 013 555

First Defendant

AND:

TREVOR JOHN SCHMIERER
  Second Defendant

JUDGMENT - G N WILLIAMS J

Judgment delivered  28/04/1995

This is an application for a declaration that the appointment of a receiver was invalid, and for consequential relief.  The applicant, Golden Dew Pty Ltd, has been involved in land development activities in the Gladstone region.  The first respondent, Toweran Pty Ltd, is one of its shareholders. 
           Toweran advanced $600,000 to the applicant in or about September 1993, and the applicant gave a mortgage over certain lands it owned to secure that advance.  Because of alleged default by the applicant in repaying that advance, Toweran, relying on the provisions of the mortgage and the Property Law Act, appointed the second respondent, Trevor John Schmierer, as receiver, on 24 January 1995. 
           In these proceedings the applicant challenges the validity of that appointment primarily on the ground that it was not in default under the mortgage at the material time.
           The issue raised by the applicant can be simply stated, but the answer is more difficulty to formulate.  The Bill of Mortgage is in the current standard form which is made up of a series of numbered panels into which details are inserted.  Panel 8 contains the following:-

"Consideration: $600,000

Rate of interest:          12%

Terms of payment:      12 calendar months ending 20 September 1994"

Then Panel 9 as amended reads:

"The mortgagor for the above consideration hereby covenants with the mortgagee in terms of the schedule hereto and charges the estate or interest herein specified in the land above described with the repayment/payment of all sums of money referred to in Item 8 above in the manner therein expressed."

That Bill of Mortgage was executed 21 September 1993.
           The other important provision is cl.2 of the Schedule; it provides:-

"The Mortgagor will pay to the Mortgagee the moneys secured on 28 February, 1994 or when the same is demanded in writing by the Mortgagee which will not make demand earlier than 28 February, 1994."

Clause 3 makes provision for the payment of interest by the mortgagor, but it is not necessary to set out its terms in detail.  By cl.11.1 the mortgage provides that if the mortgagor

"defaults in making any of the payments referred to in clauses.2 and 3 hereof or in the payment of any other monies payable hereunder or defaults in the performance or observance of any agreement or covenant on his part contained or implied herein or if the Mortgagor defaults in the observance or performance of any obligation on the part of the Mortgagor contained in ... any agreement in writing made between the Mortgagor and the Mortgagee ... then in all or any such case the Mortgagor shall be deemed to have made default hereunder."

Where the mortgagor has made default the mortgagee is given the powers set out in cl.12.1, which include the power pursuant to the Property Law Act to "appoint in writing such person as he thinks fit to be a receiver who shall be deemed to be the agent of the Mortgagor ... and may sell the land on such terms and conditions as the Mortgagee shall think fit."  Finally it should be noted that cl.20 provides that any notice or demand to be made by the mortgagee to the mortgagor "may be given or made in writing under the hand of the Mortgagee" and may be served in accordance with the provisions of the Property Law Act.
           Central to the issue now raised is the contention by Toweran that the applicant was in default under the mortgage because all of the principal had not been repaid as at 20 September 1994.  There is a dispute as to what precise amount was then outstanding, but there is no dispute between the parties that at least a significant part of the principal was still outstanding as at that date.
           There was agreement between the parties that no notice of demand pursuant to cl.2 of the Schedule was given between 28 February 1994 and 22 December 1994 when Notice of Exercise of Power of Sale was given relying on the failure to pay all of the principal by 20 September 1994 as constituting the material default.  For purposes of the argument it was conceded by the respondents that if the failure to pay all the principal by 20 September 1994 did not constitute a default then there was no basis on which the power of appointment of the receiver could have been validly exercised. 
           Counsel for the applicant submitted that the pro forma Bill of Mortgage as completed and the Schedule constituted the one written agreement for mortgage, and all the provisions thereof should be read together.  He submitted that it was not appropriate to regard any one part of those documents constituting the mortgage as carrying more weight than any other.  In the main counsel for the defendants accepted those propositions.  In other words there was agreement that Panel 8 and cl.2 of the Schedule had to be read together.
           Counsel for the applicant relied heavily on the use of the word "payment" in Panel 8 as distinct from the word "repayment".  In both the marginal note to Panel 8 and in Panel 9 the expression "repayment/payment" is used and relying on that he submitted that "payment" was something different from "repayment".  It may well be that the term "repayment" is more appropriate when one is concerned with repayments of a loan, and that "payment" is the more appropriate term to use when the mortgage is securing the payment of, for example, an annuity.  But, in my view, there is no difference in meaning between the two terms when used in the context of a loan.  In this case there can be, in my view, no difference in meaning whether the word "payment" or the word "repayment" is used in Panel 8; that is particularly so given the use of the word "pay" rather than "repay" in cl.2 of the Schedule. 
           Once that position is reached the argument of counsel for the applicant that the contents of Panel 8 should be disregarded in favour of cl.2 loses most its foundation.
           The main argument by counsel for the applicant was that cl.2 should be regarded as the definitive clause when it came to the question of the loan repayment.  In his submission it should be categorised as an "on or after" payment clause.  He referred in particular to the decision of Parker J in Re Tewkesbury Gas Company; Tysoe v. The Company (1911) 2 Ch.279 (affirmed on appeal (1912) 1 Ch.1). In his reasons at 284 Parker J said:-

"What is the effect of a covenant to pay on or after a specified date?  A covenant to pay, without specifying a time for payment, creates either a present liability to pay or, at the least, a liability to pay on demand.  A covenant to pay on or before a certain day creates a liability to pay on the day named with an option of earlier payment.   In the case of a covenant to pay on or after a certain day, it seems to me there is similarly an option to pay on the day named, but no liability till after the day is passed, and possibly not even then, till demand be made.  It is true that any subsequent day forever would be after the day named, but it would appear that an obligation to pay solvendum nunquam or solvendum at Doomsday is an obligation to pay in praesenti, or at any rate on demand, the solvendum only being rejected:  see Sheppard's Touchstone, p. 369."

Learned textbook writers have regarded that passage as establishing that where the covenant is to pay on or after a certain date, the mortgagee cannot sue until after a demand for payment has been made.  (See, for example, Fisher and Lightwood's Law of Mortgage (10th ed. by E.L.J. Tyler) 308 and Francis and Thomas Mortgages and Securities (3rd ed.) 24).  That proposition was not disputed by counsel for the defendants; he virtually conceded that if there was here a simple "on or after" clause that would be the result. 
           The response by counsel for the defendants was to submit that when the contents of Panel 8 and cl.2 were read together there was a fixed date beyond which, in any event, the loan could not be extended.  In his submission the two provisions could be read together.  Monthly payments could be made prior to 28 February 1994 but the principal monies secured could not be repaid by the applicant prior to that date.  The mortgagor had a right to repay as an from 28 February 1994 and, in appropriate circumstances, the mortgagee could demand full repayment by giving notice requiring such payment between 28 February 1994 and 20 September 1994. But the whole of the monies secured were repayable without any specific demand on 20 September 1994 and failure to so pay would constitute a default under the provisions of the mortgage. 
           This is not a case where the liability could be discharged on any day forever after the specified date; the liability must be discharged in full on any day between the two dates set by the agreement evidenced by the mortgage.
           In my view the submission by counsel for the defendants should be adopted.  It enables the Court to give effect to each and every provision of what is found in Panel 8 and cl.2.  Such a construction does not, in my view, offend the language used, and there is no legal principle which would necessarily suggest some other construction.
           Counsel for the defendants submitted that the phrase "in the manner therein expressed" used in Panel 9 referred specifically to the manner set out in Panel 8 and did not include a reference to the terms of the Schedule.  I am inclined to agree with counsel for the applicant that in the circumstances the phrase qualifies both the terms of the Schedule and the contents of Panel 8, but it is not necessary for present purposes to finally decide that point.
           It follows that no separate written demand was necessary before default was established by the applicant's failure to repay the principal in full by 20 September 1994.  In consequence the appointment of the receiver was valid.  The mortgagee had by then become entitled to exercise the power of sale conferred by the Property Law Act, and in consequence pursuant to s.92(1) was also entitled to appoint a receiver.
Counsel for the applicant raised further argument based on s.96 of the Property Law Act.  Subsection (1) thereof is in these terms:-

"Where the mortgagor has made default in payment of the principal sum at the expiry of the term of the mortgage, or of any period for which it has been renewed or extended, and the mortgagee has accepted interest on the sum for any period (not being less than three months) after default has been so made, then so long as the mortgagor performs and observes all the covenants expressed or implied in the mortgage, other than the covenant for payment of the principal sum, the mortgagee shall not be entitled to take proceedings to compel payment of that sum, or for foreclosure, or to enter into possession, or to exercise any power of sale, without giving to the mortgagor three months' notice of the mortgagee's intention to do so."

This argument only arises on the assumption that the applicant was in default in not repaying the principal by 20 September 1994.  The notice of exercise of power of sale was dated 22 December 1994, slightly longer than three months after the date of default.  During that three month period interest had been regularly paid by the applicant and accepted by Toweran.  In those circumstances the submission was made that the mortgagee could not exercise "any" power of sale without giving a further three months' notice of his intention to do so.  Appointment of a receiver with a power of sale was said to be an exercise of "any" power of sale.
Counsel for the defendants submitted that s.96 did not prevent the mortgagee from appointing a receiver, with or without a power of sale. In his submission all s.96(1) proscribed was the taking of one of the four specified steps which did not include the appointment of a receiver.
           I have come to the conclusion that the submission by counsel for the applicant should be rejected.  It is interesting to note that s.83(1)(a) of the Act confers a power on a mortgagee to exercise "a power to sell" on the mortgagor's default.  There is a separate power conferred to appoint a receiver (s.83(1)(c)).  Subsection 3 then provides, inter alia, that the power of sale and/or the power to appoint a receiver may be varied or extended by the instrument of mortgage.  The Act thereafter draws a number of distinctions with respect to the exercise of a power of sale.  Section 84(1) deals with the exercise of "the power of sale conferred by this Act or otherwise", while s.85(1) refers to the exercise of "a power of sale conferred by the instrument of mortgage or by this or any other Act".  Sections 86(1), 87(1), and 89 all expressly limit the provisions thereof to the exercise of a power of sale conferred by the Act.  To similar effect is s.90(1). 
The use of the expression "any power of sale" in s.96(1) would cover a power of sale conferred by the Property Law Act, any other Act, or by the instrument of mortgage. It therefore has a clear meaning without the necessity of extending it to the situation where a receiver is appointed. Where a receiver is appointed there are still steps to be taken before he can exercise the power of sale, and for that reason one can see why it may have been considered not necessary to extend s.96(1) to that situation. In the circumstances I reject the submission of counsel for the applicant based on s.96.
           It follows that the notice of motion should be dismissed with costs.