Kimberley Securities Ltd v Esber

Kimberley Securities Ltd appealed a decision concerning the interpretation of mortgages. The respondents, Mr. and Mrs. Esber, were mortgagors under these mortgages. The central dispute revolved around whether the mortgages secured the mortgagors' liability as guarantors or the principal indebtedness of a third party. The case was heard in the Court of Appeal of New South Wales.

The court was required to determine the proper construction of the mortgages, specifically the clause governing the monies to be secured. This involved considering the extent to which extrinsic circumstances could be taken into account in construing the mortgages, and whether any ambiguity should be resolved in favour of the mortgagors, who were acting as sureties. The parties agreed that the relevant clause could not be applied as written, acknowledging a mistake, but neither party sought rectification.

The court approached the matter as one of construction, focusing on the meaning of the words used in the mortgages rather than speculating on the parties' unexpressed intentions. It found that attempts to rely on the sequence of drafting prior to the execution of the mortgages were of little assistance and that the available inferences from extrinsic evidence were equivocal. Applying principles of contractual interpretation, particularly in cases of inconsistency, the court referred to the approach of Dixon CJ and Fullagar J in *Fitzgerald v Masters*, which allows for the correction of words where necessary to avoid absurdity or inconsistency. The court concluded that the mortgages secured the respondents' liabilities as guarantors, and that the fees in question were excluded from the "Guaranteed Moneys."

The appeal was dismissed, and the respondents were awarded their costs.