Kench v Forsyth

[2002] TASSC 1

[2002] TASSC 1

CITATION:              Kench & Anor v Forsyth & Anor [2002] TASSC 1

PARTIES:  KENCH, Grant Edward

FOSTER, Michael Graeme
v
FORSYTH, Brian John
FORSYTH, Margaret Edith

TITLE OF COURT:  SUPREME COURT OF TASMANIA
JURISDICTION:  ORIGINAL
FILE NO/S:  M300/2001
DELIVERED ON:  14 January 2002
DELIVERED AT:  Hobart
HEARING DATE:  26 October, 15 November, 12 December 2001
JUDGMENT OF:  Master Holt

CATCHWORDS:

Interpretation - General rules for the construction of instruments - Where inconsistencies - Later clause contradicting earlier clause creating obligation - Earlier clause prevails.

Forbes v Git & Ors [1922] 1 AC 256, applied.
Aust Dig Interpretation [7]

REPRESENTATION:

Counsel:
           Applicants:  C M Schokman
           Respondents:  M F Daly
Solicitors:
           Applicants:  Piggott Wood & Baker
           Respondents:  Rae & Partners

Judgment  Number:  [2002] TASSC 1
Number of paragraphs:  9

Serial No 1/2002
File No M300/2001

GRANT EDWARD KENCH & MICHAEL GRAEME FOSTER
v BRIAN JOHN FORSYTH & MARGARET EDITH FORSYTH

REASONS FOR JUDGMENT  MASTER HOLT

14 January 2002

1. By their originating application, the applicant mortgagees have applied for an order that within 28 days the respondent mortgagors give possession to the mortgagees of premises at Coles Bay, known as the Coles Bay Caravan Park, pursuant to the Land Titles Act 1980, s146, unless in the meantime loans totalling $621,500 are repaid.

1. The following is common ground:

·The respondents are the registered proprietors of the Coles Bay land, being the land described in folio of the register, volume 108305, folio 1.

·The land is subject to four mortgages and the applicants are the registered proprietors of those mortgages, being:

(i)       Mortgage No B649633 by which the principal sum of $500,000 was advanced;

(ii)      Mortgage No B708117 by which the principal sum of $50,000 was advanced;

(iii)     Mortgage No B755179 by which the principal sum of $50,000 was advanced;

(iv)     Mortgage No B867956 by which the principal sum of $21,500 was advanced.

·   The principal sum of $621,500 was drawn down between 7 April 1993 and 19 September 1995.

·   The mortgages did not fix a date for repayment of the principal, but did require the respondents to make quarterly interest payments.

·   The respondents have not been in default in the payment of interest.

·   By notice issued in August 2001, the applicants demanded repayment of the principal sums within seven days.

·   The demand has not been complied with.

·   There are no collateral agreements and the whole of the terms and conditions pertaining to the loans are to be found in the written memoranda of mortgages.

·   The memoranda of mortgages each contain on the first page the words:

"How and when the principal sum is to be repaid: On demand"

The final clause in each mortgage is as follows:

"THIRDLY it is hereby agreed that during the term of this mortgage the principal monies together with any interest and any other monies secured and payable hereunder shall be payable on demand if the Mortgagor should:-

(a)Commit any act of bankruptcy, convene any meeting of the creditors of the Mortgagor, execute any assignment for the benefit of his creditors or enter into or make any scheme of arrangement or if the Mortgagor is a company be wound up or placed under official management, appoint a receiver in respect of any of its assets, file a petition for the purpose of considering its winding up or placement under official management or enter into any scheme of arrangement otherwise than for the purpose of amalgamation or reconstruction;

(b)Cause or procure or suffer or permit the Mortgagor's effects to be seised or taken in execution; or

(c)Cause or procure or suffer to [sic] permit any judgment to be entered or writ of execution to be issued against or affecting the said land or any part of it."

·   None of the events referred to in the final clause have occurred.

1. Counsel for the respondents submitted that the later clause, at least insofar as the parts of it which are not void by virtue of bankruptcy legislation are concerned, operates to qualify the mortgagors' liability to repay on demand.  As none of the specified events have occurred, the respondents contend that the mortgagees' demand was ineffective.  The demand being ineffective, the non-compliance did not give rise to a default.  There being no default, no order for possession can be made.  The later clause is not ambiguous and so it was submitted that effect must be given to the words used, notwithstanding that the result may appear capricious or unreasonable and notwithstanding that it might be suspected that the parties intended something different. Australian Broadcasting Commission v Australian Performing Right Association Ltd (1973) 129 CLR 99 at 109.

1. Counsel for the applicant submitted that the later clause cannot be read consistently with the "on demand" clause and so is to be rejected as repugnant, leaving the earlier clause to prevail.  Reliance was placed upon the words of Lord Wrenbury delivering the judgment of the Privy Council in Forbes v Git & Ors [1922] 1 AC 256 where he said at 259:

"The principle of law to be applied may be stated in few words.  If in a deed an earlier clause is followed by a later clause which destroys altogether the obligation created by the earlier clause, the later clause is to be rejected as repugnant and the earlier clause prevails.  In this case the two clauses cannot be reconciled and the earlier provision in the deed prevails over the later.  Thus if A covenants to pay 100l and the deed subsequently provides that he shall not be liable under his covenant, that later provision is to be rejected as repugnant and void, for it altogether destroys the covenant.  But if the later clause does not destroy but only qualifies the earlier, then the two are to be read together and effect is to be given to the intention of the parties as disclosed by the deed as a whole.  Thus if A covenants to pay 100l and the deed subsequently provides that he shall be liable to pay only at a future named date or in a future defined event or if at the due date of payment he holds a defined office, then the absolute covenant to pay is controlled by the words qualifying the obligation in manner described."

1. Furnival v Coombes [1843] 5 Man & G 736 was referred to in Forbes v Git (supra) as an illustration of the application of the rule.  There, officials of a parish covenanted by deed with a builder to pay for repairs to the parish church.  Later followed a proviso that nothing in the deed should be taken to create any "personal covenant".  The covenantors were not the trustees of a fund or the agents of a corporate entity.  The original covenant must have been personal and so the proviso which destroyed it was rejected as repugnant.  A similar arrangement was considered in Williams v Hathaway [1877] 6 Ch D 544. There, when the contract was looked at as a whole, it could be seen that a fund had been established and the intention was to pay the building costs out of the fund. It was apparent that the parish officials in that case were not covenanting personally and so a proviso that the covenantors were not bound personally was held to be good. The rule has been recognised by the High Court in Australian Guarantee Corporation Ltd v Balding (1930) 43 CLR 140 at 151 and applied to contracts not under seal, as well as deeds. See Lyon v Sullivan (1891) 7 WN (NSW) 104; Producers and General Finance Corporation Ltd v Dickson (1938) 40 WALR 34 and Maile v Jennings [1956] VLR 45.

1. The rule is an arbitrary canon of construction to be applied only as a last resort where no other means of resolving an apparent inconsistency is available.  This is made clear in the judgment of Mansfield CJ in Doe d Leicester v Biggs [1809] 2 Taunt 109, where he said at 113:

"This case might be argued and considered forever without advancing it at all in law, reason, or precedent.  But as it happens, in this will, the last words are 'permit and suffer,' which give the cestui que trust a legal estate; and the general rule is, that if there be a repugnancy, the first words in a deed, and the last words in a will, shall prevail; and consequently, for want of a better reason, we are forced to say that we think this will gives the legal estate to the party beneficially interested."

Where clauses are inconsistent, that which is inconsistent with the intention of the parties as disclosed by the whole document is rejected.  If the Court cannot discover the overriding intention, then, as a last resort in the case of deeds, the earlier clause prevails.  The starting point is to endeavour to discover the real intention of the parties.  In Walker v Giles [1849] 6 CB 662, Wilde CJ said at 702:

"And, as the different parts of the deed are inconsistent with each other, the question is, to which part effect ought to be given.  There is no doubt, that, applying the approved rules of construction to this instrument, effect ought to be given to that part which is calculated to carry into effect the real intention, and that part which would defeat it should be rejected …".

In delivering the judgment of the Privy Council in Chase Securities Ltd v G S H Finance Pty Ltd [1989] 1 NZLR 481, Lord Lowry said at 485 - 486:

"Their Lordships have been reminded by counsel of a number of helpful authorities on the construction of documents, with a view to what the Court may or may not do to give effect to the intention or supposed intention of the parties.  In Gwyn v Neath Canal Co [1868] LR 3 Ex 209 Kelly CB said at p215:

'The result of all the authorities is, that when a court of law can clearly collect from the language within the four corners of a deed, or instrument in writing, the real intentions of the parties, they are bound to give effect to it by supplying anything necessarily to be inferred from the terms used, and by rejecting as superfluous whatever is repugnant to the intention so discerned'."

1. Looking at the instruments in question in this case it can be seen that they create loans, impose stipulations, and provide the land as security for the repayment.  The loans are interest only.  The earlier clause that the principal be repaid "on demand" has the effect of making the duration of the loans at the will of the mortgagees.  When the later clause is imposed as a qualification on the earlier clause (and the respondents did not contend that any other meaning might exist) the circumstances in which the mortgagees may recover payment upon demand is limited so significantly as to make the duration of the loans effectively at the will of the mortgagors whilst they hold the land.  Although the later clause preserves a scintilla of the earlier obligation, the practical effect is to destroy the earlier stipulation that the loans continue only at the will of the mortgagees.  The clauses are inconsistent. 

1. Counsel for the respondents did not contend that in the event of this finding I should prefer the later clause as being conformable with the intention of the parties as disclosed by the documents.  There was nothing to support such a contention.  The result is that the arbitrary rule of construction is to be applied so that the later clause is rejected as repugnant and void with the earlier clause prevailing.  When the instruments are construed in this way, the mortgagees' right to demand repayment is unfettered and upon demand the mortgagors' obligation was to repay in accordance with the tenor of the demand.  The demand was made and there has not been compliance.  The mortgagors have not shown good cause why possession of the premises should not be recovered, their resistance to the application being confined to the construction point. 

1. Upon proof of continuing default, there will be an order that possession of the premises described in folio of the register, volume 108305, folio 1, be given by the respondents to the applicants on or before a date which I will specify unless by that date all money due under memoranda of mortgages numbered B649633; B708117; B755179 and B867956 is paid.  Pursuant to the Land Titles Act 1980, s146(5), the date which I specify must be not less than four weeks from the day of the hearing. I will hear counsel as to the date to be specified.