Queensland Premier Mines Pty Ltd & Ors v French

[2007] HCATrans 494

[2007] HCATrans 494

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M54 of 2007

B e t w e e n -

QUEENSLAND PREMIER MINES PTY LTD, FRANK GEORGE BECKINSALE, HELEN MARY BECKINSALE, MARMINTA PTY LTD

Appellants

and

WALTER MURDOCH FRENCH

Respondent

GLEESON CJ
GUMMOW J
KIRBY J
HAYNE J
HEYDON J
CRENNAN J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON TUESDAY, 4 SEPTEMBER 2007, AT 10.17 AM

Copyright in the High Court of Australia

MR C.L. PANNAM, QC:   If the Court pleases, I appear with my learned friend, MR M.S. GOLDBLATT, on behalf of the appellant.  (instructed by Oakley Thompson & Co)

MR B.W. WALKER, SC:  May it please the Court, I appear with my learned friend, MR P.J. BICK, QC, for the respondent.  (instructed by Norton Gledhill)

GLEESON CJ:   Yes, Dr Pannam.

MR PANNAM: Your Honours, this appeal raises a short but important point arising in relation to the effect of the registration of a transfer of a Torrens system mortgage which mortgage only secures debts and obligations having their origin in agreements that collaterally or independently exist in a mortgage. The relevant section that is in question is section 62 of the Land Title Act (Qld). The facts that give rise to the particular question could not be simpler. If they are stripped of their essentials they can be put in the following way. It starts off with two simple contract debts that came into existence in October and November 1989.

Under the terms of those simple contract debts, they were constituted by an exchange of letters and under their terms a company called Seventeenth Febtor Pty Ltd, in the one, lent Queensland Premier Mines a sum of $560,000, in the other, jointly lent Queensland Premier Mines and Mr and Mrs Beckinsale some $410,000.  What happened in relation to those simple contract arrangements was that Queensland Premier Mines, which was the owner of several properties at Yeppoon in Queensland, granted two registered mortgages over those properties.

The mortgages themselves were the typical all moneys, all accounts mortgages and contained the usual covenant to pay.  What happened was in December 1992 Seventeenth Febtor assigned those mortgages to Mr French and not only did he sign the mortgages but there was an assignment of the underlying contractual debts.  What then happened was that Mr French sold the mortgages to Marminta in December 1999/January 2000 under an exchange of correspondence that took place at that stage.  That gave rise to a dispute as to whether there was a contract or not that was ultimately resolved by the Queensland Court of Appeal which held there was a binding contract and decreed specific performance of the contract to assign the mortgages to Marminta.

GLEESON CJ:   A covenant to pay was a covenant of Queensland Premier Mines Propriety Ltd?

MR PANNAM:   Yes, it was.

GLEESON CJ:   Only, about the promise of Mr and Mrs B.

MR PANNAM:   Beckinsale? 

GLEESON CJ:   Yes.

MR PANNAM:   Yes. So you have got two agreements. One, Queensland Premier Mines, the other one a joint promise by Mr and Mrs Beckinsale and Queensland Premier Mines and you have the mortgage by Queensland Premier Mines that secures the debt. The point we make about the proceedings in Queensland for specific performance is this, that, in our submission, there was no finding made by the Queensland courts, either the trial judge Justice Dutney or the Court of Appeal of Queensland, that found that the sale contained an express provision to include the debts. Similarly, there was no finding that it had a provision that excluded the debts. The finding simply was there was a purchase and sale of the mortgages. The question was, what went across to Marminta under the provisions of section 62 of the Queensland Act?

What then happened was that Mr French commenced proceedings in the Supreme Court of Victoria in which he sued the Beckinsales and Queensland Premier Mines under the terms of the two loan agreements and the defence that was raised was that the obligations that they owed them to you, you transferred to Marminta, and that was the defence.  Your Honours, the first step in the analysis is really to look at the relevant provisions of the Queensland legislation.

GUMMOW J:   Do we have in the appeal book copies of the relevant certificates of title?

MR PANNAM:   No, not the certificates of title.  You have copies of the mortgages and copies of the various assignments, the letters constituting the purchase and sale and of the transfer to Mr French.

GUMMOW J:   Were the certificates of title ever in evidence?  You have some title searches which we are told are not reproduced.  I do not know why not.

MR PANNAM:   Your Honour, I do not think that titles were ever put into evidence in the proceedings in the Supreme Court.

GUMMOW J:   No.  Anyhow, I would like to see the relevant, the most complete title search so it can be uplifted and copied.  It is in evidence, I see.  It was not reproduced.

MR PANNAM:   Perhaps that can be done.

GUMMOW J:   It should have been.

MR PANNAM:   I am told that when the court book ‑ ‑ ‑

GUMMOW J:   It is all about the Torrens title and I like to see the certificate of title.  It is an old-fashioned view.

MR PANNAM:   Yes, I understand that, your Honour. What happened, I am told, your Honour was this. Originally they were in the list that was prepared to be submitted for settling by the appropriate authority and it was taken out. So we will have it reproduced and your Honour can have a copy. Can I take your Honours to the provisions of section 62 of the Queensland Act.

GUMMOW J:   Before we go there, so the action we are concerned with was an action ‑ ‑ ‑

MR PANNAM:   By Mr French ‑ ‑ ‑

GUMMOW J:   On what?

MR PANNAM:   On the original loan agreements constituted by the exchange of letters.

GUMMOW J:   Right.

MR PANNAM:   The pleadings are set out in the further amended statement of claim that appears from pages 1 on in the appeal book.

GUMMOW J:   Where is the relevant defence to that action?

MR PANNAM:   The relevant defence appears at page 13.

CRENNAN J:   Paragraph 13.

GUMMOW J:   Justice Crennan refers to paragraph 13.

MR PANNAM:   Yes.  That is the transfer, the transfer from ‑ ‑ ‑

GUMMOW J:   There is a plea of not indebted.

MR PANNAM:   In all events, the defence that was argued before the trial judge and in the Court of Appeal on appeal was that there was no debt upon which Mr French could sue because the benefit of the agreements upon which he was suing had been transferred to Marminta.  I think one then has to go to the counter-claim to find the declaration that was sought in that regard at page 20 of the appeal book.

HAYNE J:   It is paragraph 2 also of the counter-claim, is it not, which is set up to tender this issue about section 62, the trial judge describing it as an allegation that all the rights, including the rights to recover moneys vested in Marminta.

MR PANNAM:   Yes.

HAYNE J:   Is that the essence of it?

MR PANNAM: Yes, this is and I will come to that in a moment. There is the defence and there is the counter-claim which raises the section 62 point and sought, consequent on that plea that his Honour referred to, the declaration that appears in the prayer on page 20 of the appeal book. Can I take the Court to section 62 of the Queensland Act. The Court will there see in section 62:

Effect of a registration of transfer

(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.

Pausing at that point, can I stress this.  Registration achieves a transfer to the transferee of “all the rights, powers, privileges and liabilities of the transferor” but then there is a qualification “in relation to the lot”, so the relevant right must have a direct bearing upon the land itself. 

KIRBY J:   Can I ask, are any of the words “powers, privileges and liabilities” in your submission relevant given that subsection (4), on which so much attention is being paid, is a definition only of “rights” or can we ignore those other words?

MR PANNAM:   I do not think anything turns upon the other words, I think “rights” is really at the heart of the matter.  It may be a power, it is not a privilege and it is not a liability, it is a right or a power of the transferor.

KIRBY J:   Your problem has arisen because of the view taken under the mortgage which is in the definition of “rights” and, therefore, I am asking whether you can avoid that problem by appealing to one of the other large words of obligation that exist there in subsection (1).

MR PANNAM:   “Powers” I think is the other word we pick up.

KIRBY J:   That does not seem to have been argued though.

MR PANNAM:   No, it was not.

KIRBY J:   Everybody has just gone from “rights” down to subsection (4).

MR PANNAM:   Down to subsection (4), that is so, your Honour.

KIRBY J:   If you are arguing it, I would like to have a little help on that at some stage.

MR PANNAM:   Yes, your Honour.

KIRBY J:   Like Justice Gummow, so far as I am concerned, the issue that will concern me most is the one that was signalled on the special leave which is how this section is going to work best in the context of the Torrens system.  Remember Justice Hayne made emphasis on that in the special leave hearing and that is the matter which I think we should keep as our guiding star.

MR PANNAM:   If your Honour pleases.  Coming down to the provisions of the definition in ‑ ‑ ‑

HAYNE J:   Just before you do, can I delay you at 62(1).  Can you, in effect, personalise the application of 62(1) for me?  Can you articulate how, if at all, you say 62(1)is engaged in respect of these parties in respect of this land?

MR PANNAM:   So far as the first lender, the Febtor company is concerned, it had a right – put power to one side for a moment – to call up the moneys that were defined by the obligation to pay the all moneys covenant in the mortgage and the covenant to pay those and that vested in the transferee, the transferee then being Mr French.  When Mr French transferred those rights were transferred on to Marminta and so Marminta became entitled to the rights, that is, the right to enforce the personal covenant to pay those obligations and debts that were covered by the definition of the secured moneys.

GLEESON CJ:   Did that include the rights against Mr and Mrs Beckinsale?

MR PANNAM:   Yes.  That came about because there was a joint obligation between Queensland Premier Mines and Mr and Mrs Beckinsale in relation to the one agreement and the consequence of the transfer of the joint obligation of Queensland Premier Mines was to take across that debt obligation, in our submission.  Your Honour, if I can next come to the definition.  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. 

If we pause at that point and take the approach of the learned President in the court below to see where the difference was between him and her Honour the trial judge in relation to the word “under” in this definition “under the mortgage”.  What his Honour President Maxwell did in the Court of Appeal was to say there were two sources of the obligation to pay the loans.  One was the agreement constituted by the exchange of letters, the debt agreement, and the other was the covenant to pay in the mortgage.  So he has the two obligations.  But then his Honour reasoned that there can only be a right to recover a debt or enforce a liability under the mortgage if the mortgage itself was the source of the creation of the debt or the liability in question.

KIRBY J:   Just help me on this.  I think you said in your introduction that it would be common to have in a mortgage such a provision, but for some reason it slipped out of this particular mortgage, is that correct?

MR PANNAM:   No, I did not say that, your Honour.

KIRBY J:   I have misunderstood something you have said.

MR PANNAM:   I think what I said was common was that these all moneys, all accounts mortgages were in common form.

KIRBY J:   Yes.  At some stage, not necessarily now, would you help me to understand what, on Justice Maxwell’s view, was the correct relief that was open to you, if any, to sue, or should you have sued not on the transfer but directly on the agreement?  Is that his theory of how you would recover?

MR PANNAM:   Yes.  What he said was ‑ ‑ ‑

KIRBY J:   What is wrong with that?

MR PANNAM:    ‑ ‑ ‑ absent a transfer or an assignment of the underlying debt, then you cannot sue on the covenant to pay in a mortgage, because the only thing that goes across with the covenant to pay in a mortgage are debts and obligations that are specifically created or sourced in the mortgage itself.

KIRBY J:   I realise that this is ultimately a legal question and a question of statutory interpretation, but at some stage I would like your help on what is the flaw, if any, in the practical world of the theory that Justice Maxwell was propounding? 

MR PANNAM:   I will come to that, if I may, in due course, but can I just stay with the words of the definition in subsection (4) for a moment.  In subsection (4), the President’s analysis is a liability under the mortgage or lease.  The only thing that gets transferred is something that is created, a debt or a liability created by the terms of the mortgage itself.  It does not pick up a collaterally secured obligation.  What his Honour said was that to get to any other conclusion you would have to read the word “under” in this definition as meaning a liability secured by or which is secured by the terms of the mortgage or lease. 

His Honour found that to be the problem with her Honour’s analysis at trial level, because what President Maxwell said, and the other two members of the Court of Appeal agreed, was that you are distorting the language of the section because “under” means under the express terms of the mortgage, that is to say, the obligation or liability in question has to arise in terms of its creation under the mortgage itself.

KIRBY J:   Well, it does say “under the mortgage”.

MR PANNAM:   Yes, well, in our respectful submission, “which are secured by” add nothing to “under”.  Under the terms the mortgage might just as well be read as, which are secured by the mortgage, or to put it another way, to enforce a liability under the terms of the mortgage. There is nothing magical, in our respectful submission, in the terms of the word “under”.  There is nothing that differentiates between debts and liabilities that are the subject of creation in the mortgage itself as distinct from obligations created by the mortgage in relation to collaterally secured obligations.

GUMMOW J:   As usual, we only get bits and pieces of these statutes, but does the Queensland Title Act of 1994 contain a provision to the effect that registered dealings take effect as a deed so the action under the mortgage would be an action covenant and debt on a speciality?

MR PANNAM:   It was in the form of a deed, in any event, so that to begin with there would be a different limitation period attaching to the covenant in the mortgage.

GUMMOW J:   That is right.

MR PANNAM:   There would be a longer period than the simple debt limitation period.  So there are differences between the two.  But the point we make for present purposes is, just looking at the definition itself, the work that the learned President made the word “under” do, in our respectful submission, was not correct.  It does not say anything about the liability must be contained or created in the mortgage.  The liability under the covenant to pay was certainly provided for in the mortgage.  What his Honour said was ‑ ‑ ‑

KIRBY J:   As the President pointed out, this is a very familiar problem.  We had it in the case of Tang.

MR PANNAM:   Yes.

KIRBY J:   And you can say, well, it is under in the sense of directly and only under the mortgage or you can say, well, it is under if it is indirect and connected with and provided for in the language of the mortgage so that it then becomes a question of what is the correct way to read the statute.

MR PANNAM:   Our short submission about it is, is that the words comfortably accommodate the interpretation to enforce a liability under the terms of the mortgage.

KIRBY J:   It may not be a test though comfortably accommodated.  That is for you to win the case.  We have to decide what the statute is intended to mean, what its purpose is.

MR PANNAM:   In our respectful submission, if one, for example, goes – if I can take the Court next to the definition of “mortgage” – or rather before that, if I can take your Honours over to section 73 of the Act.  Section 73 of the Act provides that:

(1)An instrument of mortgage must –

must do what?

(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 –

So the requirement is that it must include a description of the debt or liability secured by the mortgage.  In our respectful submission, the covenant to pay a collateral contractual obligation is certainly comprehended by those words, and section 74:

A registered mortgage of a lot or an interest in a lot operates only as a charge on the lot or interest –

for what?

for the debt or liability secured by the mortgage.

So the words are wide is the point we make about these provisions, section 73(1) and section 74.  They do not draw, they do not attempt to draw any distinction between obligations and liabilities that are created by the mortgage as distinct from those obligations that are caught by the covenant to pay external or collateral obligations.  Then if one goes to the definition of “mortgage” itself, which I do not know what print your Honour is looking at because between 1994 and the current print the definitions were moved from section 4 to Schedule 2.

KIRBY J:   We have reprint number 8.  At least that is the one I have.

MR PANNAM:   If I can take the Court then to the dictionary in Schedule 2.

KIRBY J:   Is this the correct reprint?  It says “Reprinted as in force on 6 February 2006”, which seems a trifle late.

MR PANNAM:   I have one that says “Reprinted as in force on 1 July 2007” but I also have a copy of the Land Title Act 1994 which, as I said, has the relevant definition in section 4 and not in the schedule, but perhaps nothing turns on this because ‑ ‑ ‑

KIRBY J:   It may not turn but, as the Chief Justice always points out, we have to get this right.  We have to know what is the relevant date and what is the reprint as at the relevant date.

MR PANNAM:   I think the relevant reprint is the Act of 1994 itself which, if the Court does not have copies, I have supplied.  Can I just make this point for the moment.  With one alteration – and I take your Honour’s point of criticism – the definition of “mortgage” remains relevantly constant.  I take the Court to that definition of “mortgage”.  It says:

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

There appeared in the definition of “mortgage” in the 1994 Act “but does not include a charge on personal property or a charge on a lot in personal property”.  So that has gone, but that does not matter for present purposes because the point ‑ ‑ ‑

KIRBY J:   Again, you say it does not matter.  It does not matter to you, but we have to state the law as at the right date and you have to provide us with the Act as at the right date.

MR PANNAM:   Yes, I understand that, your Honour, and we will.  I apologise for it not being there.

KIRBY J:   Just your statement “does not matter” ‑ ‑ ‑

MR PANNAM:   I said that only because the change in the definition really just takes out the last part and leaves standing what is still there and it is the width of that that we refer to and rely upon.  It:

includes a charge on a lot or an interest in a lot –

For what? 

for securing money or money’s worth.

So the words are wider is the short point we make.

KIRBY J:   But against you can be made the point that the essence of it is the charge.  That is the essence of what a mortgage is and the fact that it goes on to “for securing” is simply an adjectival phrase describing what the purpose of the charge is.

MR PANNAM:   That identifies the purpose of the charge but, in our respectful submission, when the mortgage, as in these two cases, contains an independent covenant to pay the money secured in wide terms that is the relevant provision of the mortgage that one should go to for the purposes of section 62. What his Honour does is, in our respectful submission, draw an impermissible distinction between debts and obligations that are created by the mortgage itself, have their existence in the terms of the mortgage, as distinct from what he would have as being the personal covenant to pay debts and obligations that arise independently of the mortgage but, nevertheless, to take your Honour’s point, are secured by its terms.

CRENNAN J:   What do you say, Dr Pannam, about his Honour’s reliance on the “no merger” clause in paragraph 19, which is at appeal book 429?  It seems to have been important to his Honour to distinguish these facts from perhaps the more common situation where you have a transfer of the mortgage where the debt is transferred as well.

MR PANNAM:   The “no merger” provision, in our respectful submission, really does not have any bearing on the present argument for this reason, it does not assist in the analysis because all that does is to ensure that the simple contract debt remains on foot as well as the covenant to pay. As his Honour said, there are two. There is the covenant to pay in the mortgage and the simple contract debt. If there was not a “no merger” clause, the simple contract debt would go across to the mortgage and find its sole repository there. But, in our respectful submission, to have the two independently operating obligations does not affect the question as to whether section 62 operates in relation to the contract debt. We would have it that the merger issue is really irrelevant for present purposes. It does not have any direct bearing upon the point at all.

Your Honours, with that background of the short statement of facts and going to the statute, can I take your Honours briefly to the reasoning of her Honour and the reasoning of the President in a little more detail.  For that purpose, can I first take your Honours to the passage in her Honour’s judgment at paragraph 150 on page 388 of the appeal book.  I will come to the cases that have been previously and were subsequently discussed by her Honour, including some important decisions in this Court, but to identify the nub of her Honour’s reasoning, can I take the Court to page 388 to paragraph 150 where what her Honour says is:

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.

Putting to one side for a moment the source in authority in decisions of this Court of that statement, what her Honour was saying was you look to whether or not the relevant covenant, in here the covenant to pay contained in the mortgage:

affected, touched and concerned, defined or was intimately connected with, the estate or interest in land constituted by the mortgage.

Of course it was and so she found, because the mortgage secured the performance of those liabilities or obligations.

KIRBY J:   The trouble is that the statutory phrase is not “connected with the mortgage”, it is “under the mortgage”.  Anyway, you press on and tell us what her Honour said and then we have to then measure that against the statute.

MR PANNAM:   That is what her Honour’s approach was.  The rest of the judgment was an analysis of the cases and dealing with other points that I will come to in due course, but that is the heart of her Honour’s reasoning.  If:

the relevant covenant affected, touched and concerned, defined or was intimately connected with, the estate or interest in land constituted by the mortgage.

then it goes across. The covenant to pay was such a covenant because it was secured by the proprietary interest created by the mortgage over the land and, hence, the transfer under section 62 carried that interest. Can we contrast that with what his Honour the President said in order just to get the two positions.

GUMMOW J:   Just before we do that, should we not look at paragraph 157 of the primary judge?

MR PANNAM:   Yes.  Her Honour there was making the point that there is a distinction between the first and second limb of the definition.  The argument that was put to her and she accepted was this, that if one goes back to subsection (4):

rights, in relation to a mortgage or lease –

and this was described as the first limb –

includes the right to sue on the terms of the mortgage or lease –

So it was said that that would deal with a situation where the obligation was created by the terms of the mortgage or lease.  The second limb was said:

and to recover a debt or enforce a liability under the mortgage or lease.

The argument was, and her Honour accepted, that that went far wider and that covered collaterally secured obligations.  That is the point that her Honour was making in the last part of that paragraph.

GUMMOW J:   What is the distinction in section 62(4) between, on the one hand, a right to sue and the right to recover? Mr Walker says that there is.

MR PANNAM:   One is the reflex of the other.  In our respectful submission – it is infelicitous drafting – the right to sue on it would apply to catch the result of the suit and in the second limb the recovery assumes that a suit has taken place and there is a recovery under it.  Perhaps that is all casuistry in one sense because our main point that we put to the Court at the moment is, merge the two limbs of subsection (4) and do not treat them as being distinct, nevertheless, the word “under” does not do the work that the President makes it do.

GLEESON CJ:   Dr Pannam, does the word “under” qualify the noun “debt” or the verb “to recover”?

MR PANNAM:   It relates directly to neither but, rather, to liability, “liability under the mortgage”.  So you look at the “debt or enforce a” ‑ ‑ ‑

GLEESON CJ:   It is the same question.

MR PANNAM:   The same thing, a debt or a liability under the mortgage.

GLEESON CJ:   You just use the expression “recover under the mortgage”.

MR PANNAM:   Yes.

GLEESON CJ:   I am just wondering whether the word “under” qualifies the nouns “debt” and “liability” or the verbs “recover” or “enforce”.

MR PANNAM:   In our respectful submission, it does not matter because you come to the same conclusion. 

HAYNE J: It may reflect a question about where you are starting. What we see in (4) is inclusive, it is not exclusive. The “rights in relation to a mortgage” includes certain things. Section 62(1) is the hinge about which the whole provision turns, is it not?

MR PANNAM:   Yes, it is.  It is, on the face of it, wider than subsection (4) and that comes back to the point that heretofore one has gone straight from rights to the subsection, subsection (4), and treated that as the sole repository, but your Honour is perfectly correct that it includes those things, but it does not delimit the rights that are dealt with in (1).  So there are perhaps two routes to the conclusion for which we contend, one, that “rights” as a general word in subsection (1), that covers all rights in relation to the lot and, to make it perfectly clear, subsection (4) deals with the subject it deals with and if that does not comprehend the conclusion for which we contend, then we can fall back on (1), the general meaning of the word “rights”.

HAYNE J:   But it comes back again to the Torrens notion of 62(1) which, relevantly, is concerned with a transfer of an interest in a lot, is it not?

MR PANNAM:   Yes, it is.

HAYNE J:   The register is relevantly constituted by the lot, the certificate of title to the freehold, if you like, the interest in the lot, relevantly the mortgage, and the transfer of the mortgage, which is the transfer of the interests of the lot, and when you want to identify what are the rights, powers, privileges and liabilities in the subject of engagement of 62(1), where do you go?  You go to the interest in the lot, relevantly, the mortgage.

MR PANNAM:   And in the mortgage you find ‑ ‑ ‑

HAYNE J:   You find whatever be the rights, powers, privileges and liabilities, which are the subject of the transfer that engages 62(1), do you not?  Now, that is explicated, at least to an extent, by 62(4) but, is it defined by 62(4) or confined by 62(4)?

MR PANNAM:   In our respectful submission, it cannot be confined for the reason your Honour refers to, it uses the word “includes”, but it all depends on what is in the mortgage itself and whether you can draw a distinction between those parts of the covenant to pay which relate to debts that are created and liabilities created by the mortgage as distinct from collateral obligations that are secured by the mortgage.  Our central contention is that the language that is used both in (1) in relation to “rights” and “powers”, and in (4), do not on the face of them confine the operation of the transfer in the way that the learned President held because, in our respectful submission, there is no warrant to construe in (4) the word “under” in the way that he does. 

The words are perfectly general, capable of meaning that which his Honour said that they cannot mean, that is to say, which are secured by or it means under, under what?  Under the terms of the mortgage.  If that is the proper construction of (4), you look at all of the terms of the mortgage and you do not just look at the terms of the mortgage that relate to independently created obligations that are found in the mortgage itself.  So what his Honour does is to confine the operation by reference to the word “under” which puts completely out of contention for transfer purposes obligations that are only collaterally secured rather than created by the mortgage.

HAYNE J:   Leave aside the fact that these instruments were all moneys, all accounts type instruments.  The relevant operation of the instruments with which we are concerned, that is, the mortgage instruments, was to secure particular sums under particular facilities, was it not?

MR PANNAM:   Yes, it was.

HAYNE J:   And are we concerned in this litigation with anything except sums allegedly owing under those particular facility arrangements?

MR PANNAM:   No.  The whole subject matter of the litigation was the enforceability by Mr French of those two agreements. 

HAYNE J:   I understand you say there are consequences for all moneys, mortgages, I understand that argument and you will come to it in due time, but for the moment, the particular operation that we are concerned with immediately in the litigation is recovery of a sum said to be due under the facility arrangement specifically referred to in the mortgage instrument.  Is that right or am I wrong?

MR PANNAM:   That is the President’s analysis because he would have it so confined.  Our submission is that when you look at the general covenant to pay, the obligations that are defined in the definition of the secured moneys, there is no warrant for so confining the extent of the transfer by reference to these words.  The words just simply will not do that work of confinement, in our respectful submission.

GUMMOW J:   How does your analysis of 62 where what is transferred is the mortgage, as it is said, how does it square and how does it apply to 63 where what is transferred is the lot and 63(1)(b) is an indemnity in favour of the “transferor against liability under the mortgage”, the same words as in 62(4)?

MR PANNAM:   It does not advance the analysis, in our respectful submission.

GUMMOW J:   Would it apply?

MR PANNAM:   Yes, it would apply.

GUMMOW J:   What we are postulating really, in old fashioned language,  is the transfer of the equity of redemption, are we not?

MR PANNAM:   Yes, a transfer of the legal title to the lot subject to the mortgage.  At all events, can I take your Honours to what the President said, lest I have misrepresented his analysis, so that the lines of battle can be appropriately and clearly drawn.  Can I take your Honours first to page 429 of the appeal book to paragraph 20 where what the learned President said was this:

The loan agreement contains a free-standing covenant to repay (“the agreement covenant”), enforceable in accordance with its terms.  The covenant to pay contained in the mortgage (“the mortgage covenant”) is a separate contractual obligation, also enforceable in accordance with its terms.  By the mortgage covenant, the mortgagor agreed to pay the amounts due under the loan agreement, on the dates fixed for payment under that agreement.

So that his Honour first recognises that there are two obligations to pay. Then his Honour on the next pages, 430 to 431, down at the bottom of the page, after looking at the provisions of section 62(4) that the Court has just been looking at, at paragraph 25 says:

The critical question is whether registration also had the effect of vesting in Marminta the right to sue on the agreement covenant.  It is again common ground that the first limb has no application.  The agreement covenant is not a term of the mortgage.  It is a term of a quite separate contract.

In my view, the second limb is also inapplicable.  The right to sue on the agreement covenant is not a right “to recover a debt or enforce a liability under the mortgage”.  It is a right to recover a debt under the loan agreement.  The fact that the mortgage covenant imposes an obligation to pay amounts due under the loan agreements is nothing to the point.  As I have said, they are separate covenants, which confer distinct contractual rights, albeit in respect of the same loan amounts.

To construe the second limb in this way is simply to give the statutory words their ordinary meaning and natural meaning.  There can only be a right to “recover a debt or enforce a liability under the mortgage” if the mortgage is the source of the debt –

And then his Honour cites a number of ‑ ‑ ‑

HAYNE J:   Just before you depart from those pages, at paragraph 24 of his Honour’s reasons, line 43 or 45 on 430, he reaches the conclusion, does he, that:

Upon registration of the mortgage transfer, therefore, the right to sue on the mortgage covenant vested in Marminta.

MR PANNAM:   Yes.

HAYNE J:   Do I understand his Honour correctly then to say that right vests and subsequently his Honour says that right is empty or barren?

MR PANNAM:   Is empty.  I was coming to that next, and that is at page 443, is the next part of the analysis that takes up your Honour’s question.  At 443 what his Honour said is this, after referring to Hutchens v Deauville Investments in this Court which dealt with the question of the departure of the security obligations from the original debt obligations and it was held you could not have that division because you cannot turn one debt into two – and his Honour dealt with that point at the top of the page at paragraph 59:

It can be seen immediately that there is no analogy between that case and the present.  Here there is no “divorcing” of a surety’s liability from the liability of the principal debtor.  Nor does the separation of the mortgage and the debt, which occurred here upon the assignment of the mortgage, have the effect of converting one debt into two.  There is but one debt, owing under the loan agreement.

It might have been thought that the separate existence of the mortgage covenant would, following the assignment of the mortgage, result in there being two debts.  After all, the effect of the mortgage covenant when originally entered into was that QPM made a separate promise (as mortgagor) to pay to the mortgagee the amounts payable (by the debtors, including itself) under the loan agreement.

As transferee of the mortgage, Marminta has the contractual right under the mortgage covenant to require QPM, as mortgagor, to pay any “Moneys Secured” which are unpaid.  On examination, however, no amount is payable by QPM (as mortgagor) to Marminta (as mortgagee by transfer) pursuant to that covenant.

QPM is obliged to pay to Marminta “each amount included in the Secured Moneys”.  The relevant part of the definition of “Secured Moneys” in cl. 2.1 of the mortgage is:

“(b)                all moneys now or hereafter payable to the Mortgagee pursuant to any Facility Agreement;” (emphasis added)

When French was the mortgagee, this clause applied to the moneys payable by QPM (but not the Beckinsales) to French pursuant to the loan agreement . . . Now that Marminta is mortgagee, however, this clause has no application.  Put simply, there are no moneys payable to “the mortgagee” pursuant to any facility agreement and, hence, no “Secured Moneys” ‑ ‑ ‑

GUMMOW J:   But the mortgage has been released, has it not?  Was it not released on 14 January?

MR PANNAM:   It was.

GUMMOW J:   What are we talking about?  That is why I wanted to see this certificate of title.  It is off the title, as appears from page 306.  Your chronology says that on 14 January 2004 Marminta registered the transfer of the mortgages.  That is only half the story.  It then released it.

MR PANNAM:   Yes, it then discharged the mortgages.

GUMMOW J:   Yes.  It is against that background that Justice Maxwell is saying what he is saying.

MR PANNAM:   Even taking that into account, your Honour, in our respectful submission, he refers to the mortgagee as being Mr French when he was the mortgagee.  The question really is whether those obligations went across or not.  That is the question.  It is not the answer.

GUMMOW J:   The question is whether they survived the discharge.  What were you suing on?  That is what I do not understand at the moment.

MR PANNAM:   We were not suing on anything.  We were defending and seeking a declaration that we took the benefit when the assignment took place that the transfer was registered.

GUMMOW J:   What are you suing on in your counter‑claim is what I am trying to find out?

MR PANNAM:   It is a timing issue.  We say that when we got those rights – what we did with them thereafter is nothing to the point.  The question is whether the right came across to us.  If it did, French did not have it.  The mere fact that we may have disposed of it in the way that we did is nothing to the point, in our submission.

GLEESON CJ:   Both Marminta and QPM were companies controlled by the Beckinsales, is that right?

MR PANNAM:   Yes, that is so.

GLEESON CJ:   Has the evidence disclosed why it was done by way of transfer of the mortgage to Marminta rather than a simple discharge of the mortgage given to QPM?

MR PANNAM:   No, it does not. In all events, the analysis of the President there appearing is really consistent with what I was putting to the Court before about the Court of Appeal’s position and it all depends upon this word “under” in subsection (4) of the definition in section 62. We have already submitted that, in our respectful submission, the statutory provisions themselves do not draw the distinction that his Honour sought to draw and that the word “under” really is another way of saying “which is secured by” or if that is not right “under” must be under something “under the terms of the mortgage”. What his Honour would read in “under liabilities that arise under and are contained in the mortgage”. You have to add those words, in our respectful submission, and there is no warrant for adding words like that.

Your Honours, the learned trial judge in her reasoning drew support from certain decisions of this Court that I want to go to next because, although there is no decision that bears directly upon the point, there are critical passages, statements of principle, in both Naylor’s Case and Phillip’s Case that, in our respectful submission, support her Honour’s approach.  Could I take the Court first to the decision of this Court in Consolidated Trust v Naylor (1936) 55 CLR 423. In this case, there was contained in the mortgage itself an independent personal guarantee by Mr Naylor of the company’s debt. So it was a personal guarantee that was included in the framework of the mortgage document itself.

It will be seen the court held that upon transfer under the comparable provisions of the New South Wales legislation, that did not go across. It did not go across for a particular reason that was identified and it is that reason that is being treated as being critical in subsequent cases. Can we first take the Court to the joint judgment of Sir Owen Dixon and Justice Evatt on page 434 a little over halfway down the page. What their Honours said, if your Honours can pick up the words, “Such language is not incapable”, so the wide language of the section, sections 51 and 52 of the Real Property Act (NSW), which was the equivalent of the statutory provisions in Queensland:

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 . . . 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 –

Now, it is true that in Naylor’s Case the mortgage itself contained the relevant obligations and the distinction that is being drawn is between the mortgage transaction as it affects the land, that is, the security interest, as distinct from something that was quite accidentally contained in the mortgage document, namely, this independently operating guarantee.  The point that we refer to and draw comfort from for the present argument, as other judges as we will show have, is the phrase:

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.

Your Honours, it was that passage ‑ ‑ ‑

GUMMOW J:   It is intimately connected because it gives you the measure of the equity of redemption.

MR PANNAM:   It does indeed.  We would say that that is exactly the same as in the present case where the covenant to pay all of the debts and liabilities that are provided for in the mortgage itself constitute the obligation.  That is the personal obligation that arises under the mortgage.  It is of the mortgagor to pay those collaterally secured debts.  If I can take the Court next and briefly to the decision of the Supreme Court of Queensland in Julong v Fenn in 2002 and take the Court to the facts because it is not contended that the passage in the judgment of Justice Atkinson that I am about to read at page 9 of the judgment was really in issue in the case or was the subject of contention, but it is important to see the way in which a sister Court of Appeal in Australia treated the operation of section 62(1) of the Act.

Can I take the Court to paragraph [40] on page 9 and perhaps with this preface, that there was in evidence in the court below and there is contained in the appeal book a copy of the mortgage that was at the heart of this litigation and it was, just as the present, an all moneys mortgage.  There was no independently created obligation in the mortgage itself.  In paragraph [40] what was aid was this:

On 31 August 1994, the transfer of mortgage from Keradale to Julong was registered and on 2 September 1994, Mr and Mrs Fenn were given written notice of the transfer of the mortgage and advised to make future payments to Julong. Keradale was entitled to so transfer the security with or without the concurrence of the Fenns. Pursuant to s 62(1) of the Land Title Act 1994, all the rights, powers, privileges and liabilities of Keradale in relation to their mortgage over the Fenns’ 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, Keradale. The transfer effected a transfer of the debt owed by Mr and Mrs Fenn to Keradale as well as a transfer of mortgage security for that debt.

Then the footnote reference 5 is to Naylor, the passage that I read at 434. So that was a view expressed by the Queensland Court of Appeal. The next year after ‑ ‑ ‑

GLEESON CJ:   Before you pass from that, the actual transfer of mortgage in Naylor, as appears from 425, included an assignment of “all moneys secured” by the mortgage.  That seems to appear from the bottom of 425, does it not?

MR PANNAM:   “I hereby assign . . . all moneys secured by the within written mortgage”, yes, your Honour is correct.  Of course, all statements of principle have to be read subject to the particular factual setting in which the point arises but the general point that was the subject of their Honours’ observations at page 434 was obviously regarded as important to them because the next year they reaffirmed the statement in Phillips’ Case.  If I can go next to that, briefly, The English, Scottish and Australian Bank Ltd v Phillips.  The facts are of little present interest because they involve a curious situation where the mortgagee took the benefit of an assignment of the mortgage and, hence, for an instant in time, he was both the obligor and the obligee and the question was whether that prevented the operation of the relevant section, but putting that to one side and looking at the statement of principle, page 322, this time their Honours, Justice McTiernan sharing the judgment, at the top of the page, three lines from the top:

But, nevertheless, 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.

Then their Honours repeat that passage from Naylor at page 434. So far as those two statements of principle are concerned, it is our respectful submission that they provide support for the view ‑ ‑ ‑

HAYNE J:   Just before you pass from ES & A, am I right in understanding what their Honours say there as, in effect, identifying the interest in the land and defining it by reference to the obligations?

MR PANNAM:   “Normally incident thereto”, yes.

HAYNE J:   Just so, that is, that a mortgage, relevantly, is identified by reference to that which it secures in part though there are other identifying features of a mortgage but, in part, an important identification of a mortgage is that which it secures.

MR PANNAM:   And that provides the direct and immediate relationship to the interest in the land and the obligation to pay because if it is not met, it can be called up by a sale of the land or other enforcement rights that a mortgagee has. 

HAYNE J:   The consequence of the view formed by the President that the obligation to pay under the mortgage was empty or barren was, in effect, the mortgage secured nothing, is that right?

MR PANNAM:   It secured nothing.  In our respectful submission, that ignored the obligation contained in the covenant to pay.

GUMMOW J:   Of what time are we speaking when you talk about the mortgage secured nothing?

MR PANNAM:   The President was referring to the time at which it came to Marminta.  The point was that Marminta was owed nothing by Queensland Premier Mines or by the Beckinsales and because the company was not personally owed anything, there was nothing upon which the covenant to pay in the mortgage could operate.  That was his Honour’s reasoning.  In our respectful submission, that was incorrect for the reasons that I have previously given, namely, it reads out of the mortgage and of these provisions the obligation to pay in accordance with the covenant to pay in the mortgage.  It simply says that unless the covenant to pay in the mortgage is a covenant to pay a debt created by the mortgage itself, then it is empty, it has no content.

KIEFEL J:   Is the effect of the President’s reasoning that what was sold was the right to discharge the loan?

MR PANNAM:   Yes, that is exactly the consequence of it, that all that happened here was the $950,000 was paid to get the proprietary aspect of the mortgage across which then enabled the mortgage to be discharged as it was, as has been pointed out, so that the land could then be sold and developed.

KIEFEL J:   Should the focus then be upon the terms of the mortgage itself?

MR PANNAM:   I am sorry, your Honour.

KIEFEL J:   Should the focus then be upon the terms of both the sale of the mortgage to which the Court of Appeal referred and the mortgage itself which was sold?

MR PANNAM:   So far as the sale of the mortgage is concerned, that was a fairly straightforward transaction achieved by an exchange of correspondence. It gave rise to problems in Queensland about whether or not there was a concluded contract and whether it had been abandoned and matters of that kind that were disposed of by Justice Dutney in the Queensland Court of Appeal. They said there was a binding contract. There was a binding contract to purchase the mortgage. As I put to the Court earlier on, in our respectful submission, there was no finding by Justice Dutney or by the Court of Appeal in Queensland that there was an express agreement that the benefit of the loan agreements went across with the mortgage and, similarly, that there was no express agreement that they did not. Under the terms of the contract there was a purchase and sale of the mortgage and the question then was, what operation does section 62 have?

That was highlighted in the Queensland Court when an application was made to have the terms of the order varied by adding “and the benefit of the loan agreements” after the judgment in the Court of Appeal and the Court of Appeal rejected that application. It was on that occasion that again it was repeated in the Queensland Court of Appeal that, you probably do not need it because of section 62 but as the matter was being litigated in Victoria, we say no more than that there is a problem about section 62 and it may give you the relief that you seek here that we are not going to give you.

Can we then go to Measures v McFadyen 11 CLR 723 which is relied upon by our learned friends. I want to make some submissions about that. What happened in Measures v McFadyen is relevant for present purposes.  There was a covenant in a lease which required the lessee to carry out certain improvements on the leased land within a particular time, which was described by reference to the word “forthwith” and there was an action brought to sue for damages for breach of the covenant, the lease having been determined by the lessor, or the assignee of the lessor, on the basis of a failure to pay rent.

So after the lease had been determined on that basis the question was whether the right that was the subject of the transfer of the lease, the rights that were comprehended by the transfer of the registered lease, included a right to sue for that breach of the covenant which had taken place some time before and what the court held was, was that it did not carry.  The court held that the rebuilding works or the renovations had not taken place and at page 731 the question was whether the plaintiff, who was the transferee of the registered mortgage, could sue upon that covenant in the lease.  At page 731 his Honour the Chief Justice in the second full paragraph on the page said this:

The plaintiff, however, contends that the words “the right to sue upon any . . . instrument and to recover any . . . damages thereunder” in sec. 52(1) –

New South Wales equivalent –

are sufficient to transfer the right.  The state of the law before the Act is shown by the case of Coward v Gregory, and in my judgment these words are not sufficient to alter it.

Coward v Gregory had held that even at common law the benefit of such a covenant would not go with a transfer of the lease.  His Honour said:

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.

So what his Honour was doing was limiting the operation of the section and it is submitted he was doing that for the very reason that he characterised the subject matter of the cause of action as being a mere chose in action.  In other words, it was not directly related to the leaseholder State at all.  It was simply something that had happened in the past, it was a mere chose in action and upon transfer of the lease that right did not carry.  Justice O’Connor took the same view and Justice Isaacs at page 737:

Then it was urged by Mr Knox, that even so, sec. 52 of the Real Property Act passed the right to the damages for the breach to the plaintiff.  But the object of the section is only to perfect the transaction effected by the statutory transfer.  With respect to personal obligations –

we stress that, personal obligations as distinct from obligations that are linked the tenancy itself –

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.

But whether a right to damages has been transferred depends not on that section, but on the terms of the transfer and other sections of the Act.  The real key to the section is contained in the words “notwithstanding the same may be deemed or held to constitute a chose in action.”  The general non-assignability of choses in action at common law was well known.  So too was the vagueness of the meaning of the term, making it very uncertain in many cases whether the given claim fell within that designation.  And to transfer a debt at common law required, as a rule, the assent of the debtor – really a novation.

Sec. 52 was intended to put an end to all this, and to perfect, even in regard to legal procedure, the simplicity and directness which otherwise characterise the Statute.

It was not intended to extend, and its language is not sufficient to extend to so radical and unexpected a change, and probably so unfair a change, as bodily transferring all accrued rights to damages, limited only by the Statutes of Limitation and existing independently of the continuance of the obligation under which they arose, and of the land upon which they were originally secured.

What the Court is doing is drawing a distinction between those matters which did not directly affect the leaseholder’s stake, they had taken place in the past, the breach was complete – it was not continuing – and the lease had been determined for a different reason, namely the non‑payment of rent, and it was said that the transfer did not carry those sorts of obligations.

In our respectful submission, that reasoning has very little, if any, application to mortgages for this reason.  The whole object of a mortgage is to secure the payment of the debt to which it relates which is embraced or covered by it, and, in the present case, we would have it that the personal covenant to pay the collaterally secured debts constituted by the loan agreements were the subject matter of that covenant.  If they were, they were directly and immediately linked to the land because the mortgage secured the repayment so that it is a very different case to Measures v McFadyen.

That case, in our respectful submission, provides no support for the view that by any sort of an analogy it can apply to the present circumstances. It is sought in the notice of contention to say that even if the argument that they put about section 62 is incorrect, that is to say the Court of Appeal was wrong and her Honour was right, nevertheless, the judgment below can be supported on the basis of this doctrine that would have it that all of these breaches of the loan agreements had taken place in the past, they were not continuing and, therefore, applying Measures v McFadyen, they did not go with the transfer.

Now, in our respectful submission, that completely misunderstands, if I may say so with respect, the link between the security provided by the mortgage for the repayment or the payment of those obligations.  They just do not stand as mere choses in action, as the Chief Justice described the obligations in Measures v McFadyen. They are obligations that are secured, if our argument is correct, by the mortgage itself so that there would be no room, in our respectful submission, at all for the operation of that doctrine in the context of the present case if we are otherwise successful in persuading the Court to our view of section 62 and its operation.

There is only one other case that I want to refer to and that is the judgment of Justice Giles in PT Ltd v Maradona Pty Ltd in 1992.  The facts in this case are somewhat complicated but can I reduce them to the following.  A company, EMF, lent $500,000 to a company called Maradona.  The security for that loan included guarantees given by persons associated with the company including an elderly Mrs Gwen Thompson who gave a guarantee and, quite separately, she gave a mortgage over real property that she owned to secure that guarantee. 

His Honour held, for reasons set out at length that I will not go to, that the guarantee was ineffective.  It failed on the basis of non est factum, she had no understanding of what she was doing.  So the liability under the guarantee was extinguished or did not come into existence, but secondly he turned to the argument that said, well, on registration of the mortgage, could you enforce the covenant to pay in the mortgage that was made good by registration irrespective of the lack on enforceability of the guarantee against Mrs Thompson.  His Honour held that you could.  In those circumstances registration defected the title to the mortgage.

If I can take the Court to page 679 of the reasons.  So after finding the guarantee was not binding, but the registration of the mortgage was effective, notwithstanding that she did not understand what she was doing when she executed it, his Honour turned to deal with the situation at letter B:

The general position thus indicated is, I think, as follows.  That which is attained by registration is, in the words of s 42, an estate or interest in the land.  Registration does not validate all the terms and conditions of the instrument which is registered.  It validates those which delimit or qualify the estate or interest or are otherwise necessary to assure that estate or interest to the registered proprietor.

The more specific provision in relation to a mortgage, and in particular the transfer of a mortgage, requires a reference to s 52(1) of the Real Property Act 1900. Referring back to “any transfer” in s 51, it provides -

and the section is set out.

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 (1936) 55 CLR 423, which also demonstrates a limitation upon the rights secured. It was there held that a transfer of mortgage does not operate to give the transferee the right to sue a guarantor on a guarantee contained in the mortgage instrument. Stark J said (at 432) that s 52 transferred the mortgage security and the rights, powers and privileges relating to the debt secured by the mortgage, but did not extend to the collateral obligations such as guarantees given by strangers to the mortgage transaction.

Then is set out that same passage that I have already read at page 434.  His Honour decided the case by holding that notwithstanding the fact that there was a liability under the mortgage, the liability did not attach because of the way in which the obligation was expressed.  His Honour, for reasons that are not presently relevant, concluded that the statement of the obligation that was secured did not attract the claim that was being made in the case.

So again we have a judge holding, basing himself on that critical passage that is in the joint judgment in Naylor’s Case, the drawing of this distinction between, on the one hand, matters that do not affect directly the nature of the estate or interest in the land created by a mortgage or by a lease, and, on the other hand, incidental provisions that are contained in such instruments that will not be transferred under the relevant transfer provisions of the Torrens legislation.

Putting all that together and coming back to the argument based on section 62, in our respectful submission, when one goes in the light of that back to section 62(1) and looks at the content of that provision, it relates to the:

rights, powers, privileges and liabilities of the transferor in relation to the lot -

Now, “in relation to the lot”, as the passage in Naylor shows, are those obligations which are directly related to the proprietary interest created by the lease or by the mortgage.  In our respectful submission, there is no warrant for confining the operation of the concept of rights in (1) or the definition of rights in (4) to obligations that find their source or origin in the mortgage itself.  Can I deal with your Honour Justice Kirby’s invitation?

KIRBY J:   Yes, it is enlivened by those words at the end of Justice Isaacs’ reasons in McFadyen because he comes back to look at how unfair the proposition that was being put to him was.

MR PANNAM:   Yes.  The choice in the present case – just putting to one side for a moment the terms of the legislation – on the one hand it would be said that if you want to transfer anything more than the rights and obligations that have their source or their origin in the mortgage, you have to do that by a separate instrument, by an assignment of those debts and liabilities.  If you do not do it then all the section does is to transfer that which the president would have them transferring, namely, liabilities and obligations that are sourced in the mortgage itself. 

On the other hand, approaching it from a different way, there goes over all of the rights that are conferred by the mortgage subject to the ability of the parties to regulate the operation of section 62. For example, our learned friends, both at trial level and in the Court of Appeal and in their outline of argument, draw attention to several anomalies that might be said to follow upon the construction for which we contend.

If, to use one of their examples, one of only the two mortgages was assigned, it is said that would leave open the second because there would go across on this argument all of the obligations of Queensland Premier Mines and the Beckinsales under the one mortgage and you would leave the other mortgage on foot but empty, and other variations on the theme are given. 

One lender, a large number of lots or pieces of land, were the subject of different mortgages, and there is a transfer of only one, say, of six mortgages. It said, “Well, would not an unfair result or an unjust result” – to use Justice Isaacs’ expression – “be created by adding as a consequence to that the lack of security provided by any of the other mortgages, because you might for a smaller sum agree to assign one mortgage and then find yourself having section 62 or its equivalent working havoc because you would render all of the other mortgages empty because it would give priority the moment it was registered”.

KIRBY J:   You have me trembling with anxiety now.  How do you get out of that?

MR PANNAM:   The answer to that question is the parties can control it.  Now, the learned President said they cannot, and he dealt with that in his reasons at 455, if I can take the Court to that passage, at paragraph 66.  What his Honour said there was:

On the view I have taken of the proper construction s.62, no question arises about “contracting out”.

It is really a question of contracting in or contracting out, but he says there is:

no question arises about “contracting out”. Suffice it to say that, before there could be an effectual contracting out of the statute at law, it would be necessary to read into the unqualified terms of s.62 suitable words of qualification –“Unless otherwise agreed between the transferee and the transferor…”

He gives an example, provisions of the Partnership Act:

Prima facie that would, once again, involve an impermissible rewriting of the statute.

In our submission, it would not involve a rewriting of the statute at all.  It is a machinery provision that does not carry with it any concepts of an overriding public policy that would say that must happen, and if it does not happen then dire social evils would be created.  It is a provision that says that if there is not otherwise an agreement, this is what will happen.

But there is no reason for construing section 62 as not being able to be modified by agreement between the parties, so that the choice really is between do you contract into section 62 by obtaining a separate – perhaps it is – I withdraw that. Do you deal with section 62’s limitation by requiring if you want anything more than what the President would have, a contractual assignment of the debts or liabilities, obligations, or do you start from saying, well, if the parties do not say anything this is what will happen normally, but if you do not want that to happen you can control it.

So really they are equally balanced, in our respectful submission, in terms of the working out from a just or an unjust point of view. What the purpose of section 62 is, if you do not do anything about it this is what will happen. There is no more reason in policy to accept the rival argument of the Court of Appeal than the contention that we put forward as the proper construction, they are equally balanced.

It is really where do you have the initiative? Is the initiative to ensure that they do go across, or is it to see that if section 62 has the operation for which we contend they do not go across. So that, your Honours, is that part of the argument. I do not think I can usefully add anything to that part of the argument. The next part of the argument perhaps is much shorter ‑ ‑ ‑

KIRBY J:   Is there any discussion of this in the texts?  Our attention was drawn to the opinion of Professor Butt that rather favours the decision of the Court of Appeal in Victoria.

MR PANNAM:   There are discussions that were collected, and indeed put before the Court of Appeal, but we thought that as there was a canvassing in her Honour’s judgment of the view for which we contend, and a detailed canvassing of the rival view in the Court of Appeal, there was not much that we were able to find that added to the argument either way except for a preference for one or the other, and that is for this Court to determine.  Now, your Honours, the only other question that arises on the appeal is in relation to rates and taxes, and it comes up in the following way.

HEYDON J:   I thought that on the special leave application you said that whoever won on the first question would win on this question as well.

MR PANNAM:   Yes, I think that is correct, your Honour, and hence perhaps I will be quite short.  It is said against us that that, as I said on the special leave application, and it is also said that in other places there was a concession that that was so.  The only thing I would say about the concession is, if we take the Court just briefly to the judgment of the trial judge at page 373 at the bottom of the page, line 94:

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.

Then her Honour, at the end of her reasons, recorded a concession that appears at page 408 in paragraph 244:

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.

What happened between the argument that was noted and the concession that was said to be made, I do not recall.  It certainly was a concession that was made in the Court of Appeal but, in our respectful submission, it was a concession in relation to a matter that depends not upon any facts, it is simply a reflex of the success by the other side of their argument, if they do persuade the Court that their argument is correct and the decision of the Court of Appeal is correct, because these were obligations that were provided for expressly in the mortgage itself.  Can I take the Court to the relevant provisions.  They are set out ‑ ‑ ‑

KIRBY J:   Are you seeking to withdraw the concession?

MR PANNAM:   Yes, your Honour, we seek that leave.  The relevant provisions of the mortgages are set out in the judgment of the primary judge at 407.  The subject matter are rates and taxes that were paid on the land by Mr French when there was a failure to pay them by Queensland Premier Mines and under threats from the authorities to sell up the land.  Mr French made the payments and he sought to recover them.

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(l) of the mortgages provides that “money 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 -

The short argument is that the obligation to pay these moneys arises in relation to these clauses under the mortgage.  They are part of the moneys secured.  They are independently created obligations by the mortgage, and, if our learned friend’s argument is correct, then it should follow, subject to one thing I will mention in a moment, that the right to those moneys was transferred to Marminta.  The complication is added by the way in which the Court of Appeal dealt with this matter.  If I can take the Court to line 87 on page 450:

The further amended notice of appeal shows that the appellant’s claim for rates and land tax is made primarily against the first respondent [that is Queensland Premier Mines] and only in the alternative, on the basis of unjust enrichment, against the fourth respondent [that is Marminta].  Unlike the debt, the first respondent’s liability for rates and land tax is prima facie “a liability under the mortgage” within the meaning of s.62(4). The difficulty is that it is not the kind of liability intended to be transferred, the breach of the relevant clause of the mortgage having been committed before the transfer. That breach gave rise to a cause of action in contract that enured to, and was not lost by, the appellant.

The comparison in the footnote is to Measures v McFadyen.  In our respectful submission, the reference to Measures v McFadyen there is inappropriate because these moneys became subject to the security of the mortgage itself.  In Measures v McFadyen, they had nothing to do with the lease, it was a mere chose in action, as the Chief Justice said, so that brief analysis is not correct and if it is not correct then it should follow that this was a liability under the mortgage that went to Marminta.

MR PANNAM:   So the argument is a short one and concessions were made. They were made in terms of failing on the section 62 argument.

That concession of failing on the section 62 argument, I suppose, was primarily our argument, but we succeeded in part, we would say, on this aspect of the section 62 argument and the concession ought not to be held against us.

GLEESON CJ:   Was the making of the concession a reason why the unjust enrichment argument was not dealt with?

MR PANNAM:   Probably so.  Yes.  I do not think I can say anything to the contrary about that.  They are our submissions.

GLEESON CJ:   Thank you, Dr Pannam.  Yes, Mr Walker.

MR WALKER:   Your Honours, ultimately I will be putting an argument that ES and A v Phillips is not an authority that your Honours will consider as governing the particular case.  However, I start with it because, in our submission, there is a passage in the joint reasons at 57 CLR 321 which transcends the facts of that case, transcends the facts of this case but states a critical principle for what, in our submission, ought to be the starting point of the argument.  At about halfway down the page their Honours simply say this:

The question which calls for decision arises out of the operation of the statutory provisions‑

and I emphasise, of course, the word “statutory” -

and although the legal result ensuing from the situation created by those provisions must be determined by the principles of the general law where the expression of legislative intention stops short, it is necessary, before resorting to them‑

and the antecedent of them of course is the principles of the general law -

to obtain a complete understanding of the statute and exhaust the implications it contains.

That is the end of the quotation. In our submission, your Honours, when the facts which my learned friend, with respect, correctly described as being relatively simple in this case are stated, with or without the degree of analogy which they may bear to the facts of the authorities which have been discussed, it remains unavoidable that it is the provisions in their immediate statutory context of section 62 which govern the outcome. The outcome in question, we cannot over‑emphasise, is one which at first sight is startling. This is the Land Title Act.  It is one of the famous Australian innovations for title by registration.

In relation to real estate it is not a statute to do with personal covenants to pay arising from instruments that create no estate or interest in land and have no place in any conveyance of an interest in it – the loan agreements in this case – and, in particular, neither in section 62 itself nor in any of the accompanying provisions, which have been referred to in the reasons in both courts below and in the written arguments by the parties and in my learned friend’s address, nowhere does one find any word about an intended legislative effect upon the personal obligations created by the loan agreements – that is by instruments or transactions which themselves do not do anything to create or affect any estate or interest in land.

GUMMOW J:   Is not the starting point page 6 as to what your client was sued on?

MR WALKER:   Yes, it is, your Honour, and that is, with great respect ‑ ‑ ‑

GUMMOW J:   Paragraphs 16 and 17.

MR WALKER:   Exactly so.

GUMMOW J:   And would seem to be suing on two agreements.

MR WALKER:   We sue on loan agreements.  While on those paragraphs, may I simply note it is not, I hope, ultimately of any moment.  There is an error in the later references to those paragraphs on pages 10 and 11.  At 10, line 45, and this was corrected apparently in later forensic dealings, that should read paragraph 17 not 16 at prayer A against the first defendant.  On page 11 at about line 19 prayer G against the second and third defendants should read 16 not 17.

But, yes, returning to the matter that Justice Gummow has raised with me, this is an action, this was an action, on loan agreements which themselves neither purport to nor of their nature could possibly affect in any way any or a state or interest in any land and it was met by the pleas that your Honours have already had drawn to your attention which ultimately came down, so far as issues still subsisting in this Court are concerned, to the statutory effect said to be accomplished by section 62. So the first sight shock of the claim by the appellants is that they say that section 62 found in the Land Title Act provides an answer to an action on loan agreements which themselves have nothing to do with land title.

GUMMOW J:   Where it said the burden, not the benefit, has been assigned by some statutory mechanism.

MR WALKER:   Yes, and assigned, one need hardly emphasise, if you will forgive me for descending to the vulgarity of the particular facts of the particular case, assigned for the purpose of evaporating them as rapidly as possible.

GUMMOW J:   Then you get to transfer the Marminta and then a release on discharge.

MR WALKER:   A simple discharge of the mortgage, which we accept, of course, discharges all covenants extant and enforceable under the mortgage.

GUMMOW J:   What you were doing at page 10 was to head off this argument, I think, in paragraph (c) at the top of the page.

MR WALKER:   Yes.

GUMMOW J:   For that purpose you set out paragraph 34.

MR WALKER:   Yes.

GUMMOW J:   Then in the cross-claim that is picked up and turned against you.

MR WALKER:   That is right.  So we claimed – I do not know whether it should be called precautionary or defensive – a declaration about the very live controversy between the parties, which is recorded in paragraphs 34 and 35, the so-called contentions against us by Marminta, and that was in fact treated in the action as being carried by the cross-claim against us. 

HAYNE J:   But the paragraph 34(c) at page 10 of the appeal book has two elements to the contention against you.  Marminta became, but it is the next one that is the bite “the Plaintiff ceased to be”.

MR WALKER: Yes. Your Honours have seen our written submissions and have seen by reflection in the reasons, particularly in the Court of Appeal, the way the matter has been put on our behalf beforehand. I hope we will not be departing from that except in relation to the contention matter to which I will come last. May I venture this as a summary of the way in which we have always put it and continue to put it, that neither in the statutory provisions nor in the instrument of transfer does one find any words which are capable in law of having the effect captured in the second part of contention (c) of paragraph 34 of our pleading, to which Justice Hayne has just drawn attention, of depriving us of the right which we had hitherto under the loan agreements. There are no words that say that. It comes from an effect said to be achieved by section 62.

HAYNE J:   I think that the argument against you might be captured as, transfer the security to another security holder and you transfer the debt that is secured.

MR WALKER:   Indeed, that is the argument, there is no question about that.

HAYNE J:    As distinct from terminate the security and you may, you may not, give up the debt, it may go from secured to unsecured.

MR WALKER:   Quite so. 

HAYNE J:   But, that is the essence against you, is it not?

MR WALKER:   It is indeed and, in our submission, it requires analysis starting with the statute and in fact ending with the statute, but on the way also looking at the general law attributes of the loan agreements in particular and asking, what does it mean to say, to use some of the expressions of my friend this morning, that the debt was carried over? In our submission, properly understood, that is either referring to an assignment or transfer, an assignment would be the correct word at general law. Clearly that is not the position of the appellants. There had been a flirting with that below, it is no longer a contention, which leads only this idea that section 62 itself accomplishes what an assignment could have accomplished.

Another way of putting this case, verging towards the merits end of the argument, is that this stance by the appellants ought to be seen as the proper, unexceptionable outcome of transactions that did not include the assignment of the debts due or the obligations due under the loan agreements, as simple as that.  If you do not assign the benefit of the agreement, then there it is.  If your Honours will permit me one further reference to the particular circumstances of this case to which reference has already been made in argument and to which reference was made in the Court of Appeal in passages we have noted in our written submissions.

There is nothing puzzling about the idea that the mortgage was transferred but the loan agreements were not assigned.  This was not, as it were, a refinancing or the sale of the benefit of a financing transaction with security which would ordinarily, of course, require, that paying for a conveyancing solicitor of the most egregious negligence for not advising on, assignment of the loan agreement and indeed all accounts upon which moneys secured might as well as a transfer of the mortgage.  This was by entrepreneurs long interested in the development, no doubt, for handsome profit of land which had been both security for and the object of the original borrowings, this was an attempt by them to enable them, rather than the mortgagee, to control and thus ultimately to maximise the benefit of rekindled interest by the market in the land.  To do that they required to be free of the embarrassment of the encumbrance both for the offering and the settlement, offering to the market and the settlement of any transaction that might follow.

HAYNE J:   Why not just discharge the mortgage?  Why go the circuitous path?

MR WALKER:   The facts, so far as I have been able to understand them by study of the record, your Honour, does not permit me to answer that.  It is obviously something to do with the relationship between the parties which does not appear to be entirely straightforward from what one can infer from the record – I do not want to speculate – suffice it to say that, as held below, there is no doubt that the intention of what I will call the transferee side was that this was a mortgage to be obtained not for the value it may yield but in order to discharge it thereby bestowing very considerable commercial benefit of a kind to which I have already referred.

HAYNE J:   To put the Beckinsales side of the transaction into the position where they could control discharge.

MR WALKER:   Yes, free of the dominion over the sale of the land which would otherwise be the mortgagees either directly exercising a power of sale or indirectly by refusing to discharge except for full payment.

HAYNE J:   But the proposition you advance is that although they have taken the circuitous path, all that has been achieved is discharge of the mortgage, leaving the debt to you.

MR WALKER:   Quite so.  One can see other circuitous circumstances.  ES & A v Phillips is a very good example of circuitous circumstances, not entirely successful for those who devised it in that case. The point we wish to make by reference to these facts, which obviously cannot and will not affect your Honour’s reading and application of section 62, is simply this. One starts, so far as the spare facts of this case is concerned, with the proposition that though it was clearly possible in another kind of transaction for another kind of commercial motivation for the loan agreements to be assigned, they were not.

GUMMOW J:   The substance of the case against you is that your client was a mug for taking security because it ended up worse off than it would be than if it just had bare covenants under the loan agreement.

MR WALKER: That is right. In our submission, there is nothing in the record to support that either psychologically or ultimately as a matter of analysis from a legal position. Your Honours, may I next turn to section 62 itself. This is not a section which is innocent of authority in this Court, though the present point, we accept, is not determined by any decision of this Court in terms. By the “point” I mean, does the transfer of the mortgage which contains a covenant by the mortgagor – I stress “by the mortgagor” – to pay kinds of moneys which are defined in more or less complicated ways, does that transfer or assign the benefit of the obligation owed by all the other transactions preceding, simultaneous with or postdating the grant of the mortgage, which themselves create liabilities, falling within the compendious description of money secured? That has never been decided in this Court and that is what this case will be authority for one way or the other.

Now, I will come to the authorities after going to the statutory text.  In our submission, ultimately they were all one way, and that is in our favour, concerning the limits of how one reads statutory provisions which, as their Honours said in Phillips, for example, undoubtedly present choices to be made by the Court.  In our submission, the choices that were made in Measures v McFadyen and in Naylor and, for that matter, in Phillips as well, are all choices which support the arguments for which we contend.

Subsection (1), if your Honours will forgive me for putting it this way, is the first part of section 62. That contains the word which is defined in subsection (4). The tail will not wag the dog, although obviously the tail tells you what it looks like.

What is transferred upon registration, and I stress this is a Land Title Act stipulating the way in which interests may be dealt with, creating the notion of registration and regulating both the way in which it may be made and the consequences which it will have contrary or at least different from preceding general law.  The effect of registration is that a bundle of attributes which include both sides of the ledger, presumably all sides of the ledger if there is more than two, are transferred, that is, they vest in the transferee.  They are “rights”, the defined term, “powers, privileges”, which may or may not be a quaint word in the context of a mortgage, “and liabilities” and liabilities I will return to when I come to subsection (2).  But they are not simply rights, powers, privileges and liabilities, they are rights, powers, privileges and liabilities of the transferor and then follow five critical words “in relation to the lot”.  In our submission, that is the text which ‑ ‑ ‑

GUMMOW J:   “Lot” is a defined term, is it not?

MR WALKER:   Yes, it is and it includes the interest, which in this case is the hypothecation interest which is a Torrens mortgage.  Now “in relation to the lot” means in relation to that which is an interest in the land and, in our submission, that is the text which, though it may not have been so clearly or explicitly said so in the earlier authorities, justifies the choice which was made in those earlier authorities to draw the line so as, in this case, to exclude the consequence for which the appellants contend.

GLEESON CJ:   Somewhere in the course of its history the provision shed the reference to “notwithstanding that these may be deemed or held to constitute a chose in action”.

MR WALKER:   Yes.  It shed it at different times in different places, as you will see from the various State provisions which are quoted in the authorities to which your attention has been drawn.

GLEESON CJ:   Those words were said by Justice Isaacs to be the key to an understanding of the statutory purpose.  Do they remain such a key even though they have been dropped?

MR WALKER:   The answer is, no, those words do not remain a key, but the same effect is achieved in argument by this means.  It could not sensibly be suggested and has not been suggested that upon the various statute law revision which produced the current form different from the larger number of words in 1861, any substantive change was understood to be effected to the scope of these provisions by those amendments.  Further, those words are in the nature of an fairly direct historical marker of one of at least the mischiefs to which the 1861 enactment was directed.  Historically, as a matter of statute law revision, it makes sense that historical marker had ceased to be necessary as statutory text. 

The statute law revision in question obviously takes into account the way in which the precursor provisions had been construed and by those multiple steps we reach the same place as would be reached if I had been able to give a simple yes to the Chief Justice’s question.  The words do not continue.  They do not have an afterlife as statutory text and we do not submit that they somehow ought to be contained in the text which this Court construes.

Clearly enough, the words protest or mark a perceived mischief which was being addressed by the original enactment in a way which is still captured by the current wording without the reference to the possibility of those obligations, or the rights relative to those obligations being choses in action and that is because, obviously, choses in action are possible to be encompassed within the general description “all the rights, powers, privileges and liabilities of the transferor in relation to the lot”.  But it is to be recalled – and we will come back to this a little later – that, insofar as choses in action are concerned – that is, the very subject matter of the words which historically were said to be the key and which continue to have the effect for which I have just argued – it is to be recalled that they were the very matters that this Court considered in Measures v McFadyen with the very plain holding that completed choses in action upon which action might, without anything further occurring, be brought were not to be regarded as having been transferred or vesting in the transferee pursuant to subsection (1). 

I will come back to that and to what we submit is the continuing authority unaffected by the first instance reasoning in this case of that decision which involved leases rather than mortgages.  Can I then come together to subsections (2) and (3).  What they do, obviously, is indicate, although there could not have been any doubt about this that the lots generically referred to in subsection (1) include the interests of a mortgagee as well as the interests of a lessee.  That would have followed in any event.  Interestingly, though, under subsection (3) it is obvious to see why it would be important that the transferee of a registered lease, that is the assignee and the lessee, why he, she or it would be “bound by and liable under the lease to the same extent as the original lessee”.  The linguistic parallel that one finds in subsection (2), that is, the mortgagee being “bound by and liable under the mortgage to the same extent as the original mortgagee”, the transferee/assignee, does not seem to serve the same kind of commercial purpose, but there it is.  And there are liabilities of some kind of a mortgagee, obviously, and, in particular, the ultimate, that is, literally the last action required to be taken.

GLEESON CJ:   Discharge of the mortgage.

MR WALKER:   Yes, which is of great moment, obviously.  Your Honours, it is only then that you come to subsection (4) which is the definition section.  It has already been remarked, but it bears repetition, that this is not an exhaustive definition.  So the word “rights” continues to have its general law meaning which we are bold enough to submit is utterly unaffected by it being used in a statutory enactment or in this context.  It is a word of very general reach, as my learned friend, with respect, has correctly put, and it has its general law meaning.  In subsection (4) one has, quite specifically, as an enactment a description of another right or a particular form of right.  Your Honours have already seen the way in which we put this in our written submission.  May I try to collect it as briefly as I may as follows.

First, the expression includes “the right”, et cetera, not “the rights”.  Second, the syntax of the sentence involves quite plainly the description of this right as being one which is to sue, et cetera, and to recover, et cetera.  Next, there is obviously a difference, as a matter of ordinary English and also as a matter of legal English, between “suing” and “recovering”, though it is necessary to point out that they describe different aspects of, or perhaps place a different focus on, what is ordinarily seen as a discrete and continuous process which starts with suing and ends up with recovering.  It is for those reasons that, in our submission, a mistake is made in the understanding of the relevant text by the rigid division into two so‑called limbs which, as a matter of language, is perfectly appropriate, with respect, of this right to sue, et cetera, and to recover, et cetera. 

The mistake was made in this way; by calling them with the common metaphor “two limbs” there is a separateness assumed.  Furthermore, a separateness that involves, in a continuation of that common legal metaphor, the notion of separate, if related, functions.  Then the law, contrary to all experience of documents that come before a court abhorring redundancy or tautology, proceeds by way of an argument to say, well, if they had separate though related functions, these two limbs, then one thing we ought to discard in understanding the text is that they are doing both of them the same thing.

HEYDON J:   This part of your argument involves divorce from the Court of Appeal’s approach.  The President and Justice Callaway both spoke of two limbs and analysed each limb separately and rejected recovery under either.

MR WALKER:   It is certainly true that they adopt the language, as the President puts it quite explicitly, of the trial judge that he was talking about two limbs, and so does Justice Callaway, but we think, or we hope, there is no real departure, in our submission, from the way their Honours dealt with it.  In particular, Justice Callaway assimilates the so‑called two limbs as aspects of the one composite right.  That is what we rely upon to place our argument as being in accordance with the way in which their Honours proceeded in the Court of Appeal rather than different from.  It is certainly true, I am bound to acknowledge, that the strictures that I have just uttered about the use of the limbs metaphor is not one that is reflected in the way in which their Honours in the Court of Appeal adopt the language for convenience, we would submit, as the President’s reasons show, that had been devised by the trial judge. 

Your Honours, while completing what I want to say about section 62, may I emphasise that nothing in the text of subsection (4), nothing in the general law as to mortgages or as to contracts which might inform an understanding of those words, nothing in our learned friend’s argument and certainly nothing in the first instance judgment explains what, if any, difference is supposed to be seen between a right which involves suing on the terms of the mortgage and a right which involves recovering a debt or enforcing a liability under the mortgage.

No one has explained how the preposition “under the mortgage” could proceed in any other way than by an examination of and application of the meaning in law of the terms of the mortgage.  To put it another way, it is the terms of the mortgage on their proper understanding and application to the facts which will permit an answer to the question whether a claim is truly one which is under the mortgage, that is, a claim to recover a debt or to enforce a liability, and that there is a perfect congruence between what is available under a mortgage and what the terms of the mortgage permit.  They are exactly the same.  Rather, the assertion is put, which we submit amounts in effect to assuming the conclusion of the argument, that there is a difference between that part of the inclusive definition which refers to the terms of the mortgage and that part which refers to “under the mortgage”. 

If one assumes a difference, then one is driven to positing what it might be but, in our submission, the first question is, is there any difference?  As a matter of general law and as a matter of language, there is not and no explanation has been given for how or why one would perceive a difference between the terms of the mortgage and what is available under the mortgage.  Both of them require an understanding as to the provisions, to use a neutral expression, of the mortgage in their proper understanding and in their application to the facts at hand.

GUMMOW J:   Mr Walker, there is an allegation in paragraph 13 of the statement of claim on page 5 that the assignment was under section 134 of the Property Law Act (Vic). Do we have the actual instrument, the assignment?

MR WALKER:   Yes, we do.

GUMMOW J:   What is the relevance of the Victorian Act?  Is that some choice of law provision or what?

MR WALKER:   It starts at 106, the text at 107.  The deed of 18 December 1992 between my client and Seventeenth Febtor Pty Ltd ‑ ‑ ‑

GUMMOW J:   Yes, that is what we are after.

MR WALKER:   It recites the transfer of the mortgages, it recites the status as borrowers from Seventeenth Febtor of three persons, Queensland Premier Mines and Mr and Mrs Beckinsale, under loan agreements which are specified and it recites the complete assignment of the benefit of the mortgages and the loan agreements, that is all of them, to the transferee by the agreement of December 1990.  I do not think there is anything else I need to add about that.

GUMMOW J:   How does the Property Law Act (Vic) get into the equation?

MR WALKER:   I do not know that it does, your Honour.

GUMMOW J:   The parties were two Victorians, I suppose.

HAYNE J:   The agreement is headed with a court heading.  I do not know what that is about – 109, the annexed agreement.

MR WALKER:   I think the answer may be, as the matters apparent from pages 115 and 116 would suggest, that this was a transaction conceived and made in Melbourne. 

HAYNE J:   As between counsel.

GUMMOW J:   Anyhow, the defence did not challenge that part of the paragraph which asserted that it was the Victorian section.

MR WALKER:   There was no issue concerning my client’s title, if I may put it that way, under the loan agreements.

GUMMOW J:   Under the law of Victoria.

MR WALKER:   Under the law of Victoria.

GUMMOW J:   Yes.

HAYNE J:   Just pursuing the factual issue just a little further, do I understand, particularly from pages 363 and following, that the factual circumstances that surrounded the subsequent transaction between Mr French and Marminta is that Mr French had gone into possession as mortgagee in possession, see paragraph 49 of 363?

MR WALKER:   Yes, your Honour.

HAYNE J:   He received as mortgagee in possession offers to buy the land at about $950,000.

MR WALKER:   Yes, your Honour.

HAYNE J:   And there was matching done by the registered proprietors.

MR WALKER:   Yes.  It continues over the following pages, as your Honours appreciate.

HAYNE J:   They agreed to pay the mortgagee in possession the amount that the mortgagee in possession would have raised by sale of the land according to the then stated offers.

MR WALKER:   Gets control of the commercialising of the land and gets the mortgagee out of their hair.

HAYNE J:   Which brings us back to the sting in the statement of claim description of the allegation picked up in the defence that not only did Marminta become a creditor but French ceased to be a creditor.

MR WALKER:   Yes, that is it and, as one can see in the first instance judgment at appeal book 367 in paragraph 58, the commercial endeavour proceeded with what would appear from the figures to be some measure of success, the sale by QPM for $2.44 million.

HAYNE J:   And, as the litigation has hitherto gone, what aspect of 62 or what words in 62 do you understand to be put against you as working the effect of French ceasing to be a creditor?

MR WALKER:   Your Honour appreciates my heart is not in this, answering that question.

HAYNE J:   Mr Walker, you could have fooled me.

MR WALKER:   May I have a go as follows. The expression “rights” in section 62(1) vesting in the transferee and then in section 62(4) including “the right . . . to recover a debt or enforce a liability” – I do not think there has been a distinction between those two – “under the mortgage”, with all the emphasis being on the assumed extension beyond what is available from the terms of the mortgage being available by reason of the preposition “under” in the phrase “under the mortgage”. I have already addressed my argument on that, that there is nothing as a matter of general law or ordinary English or context to accomplish that extension beyond the terms of the mortgage of what may be available under the mortgage but, as we understand it, in answer to Justice Hayne, it has only ever been those words which have been wielded against us so as to deprive my client of rights at law by dint of his status as assignee of Febtor Pty Ltd of the loan agreements.

That is why I started as we did, in our submission, not only at first sight but the longer one considers the propositions upon which the appellant depends, explicitly and implicitly, the more odd it appears that, by reason of the particular terms of the mortgage because not all mortgages contain covenants of this kind, that obligations owed by somebody who is not a mortgagor, the Beckinsales, for example, have just evaporated.  By a discharge of the mortgagor upon Marminta becoming the mortgagee, the effect which is contended for is that it is not merely QPM as mortgagor who is released from liability, it is also Mr and Mrs Beckinsale. 

In our submission, it is bewildering to contemplate how it is that the apparently simple terms of section 62 – and we are told in at least one case that they ought to be understood to achieve a simple outcome – have had that effect upon non-land obligations in defiance of the usual requirements of general law in relation to privity and agreement.

Your Honours, could I then come to some of the ways in which it is explained in the courts below.  We embrace in particular the relationship between the debt, the loan agreements and the mortgage which is finally summarised by Justice Callaway at appeal book 450, paragraph 83.  I stress, this is the final summary because his Honour’s reasoning precedes this and his Honour also, as your Honours know, adopts the approach of the learned President.

KIRBY J:   Justice Callaway suggests at the beginning that he varied from the reasoning of the President.  Is the matter you are now going to deal with the point of variance?  He said, it is a little bit obscure, “In case my view is different I will put it in my own words”.

MR WALKER:   Yes.  One of the reasons I have gone to paragraph 83 is that one does not find articulation quite like that in the learned President’s reasons, and I wish to identify paragraph 83 as, in our submission and with great respect, a straightforward description of the relationship between the loan agreement and the mortgage which produces the outcome in our favour.  Could I contrast that with a passage which, as it happens, was one of those latterly drawn to your attention in the first instance judgment at appeal book 373 and 374. 

In paragraph 94 of her Honour’s reasons the following appears.  My learned friend has read I think most of this already.  There is a reference to an argument by my learned friend that:

even on the plaintiff’s construction of s.62, in the present case, it would vest –

what is called –

the underlying debts –

and I simply flag that that may not be a useful metaphor –

in Marminta because, contrary to the plaintiff’s submission, a cause of action for breach of the loan agreements arose directly pursuant to –

and I would wish to emphasise those three words, directly pursuant to –

the terms of the mortgages.

Now, it appears that that is an argument which is upheld by her Honour, but whether or not one can spell that out from the outcome, which we submit you can, nonetheless it is an argument which we think is still the argument of the appellants and, in our submission, respectfully, it involves serious fallacy.  The use of the adverb “directly” is, with respect, surely the purest of assertions.  The notion that a cause of action for breach of the loan agreements – so they are documents to which I will take you in a moment, they are documents, self-contained – it arose directly pursuant to the terms of the mortgage. 

With respect, it does not matter how many times your Honour says it, it does not convey its own demonstration and it appears to be contrary to the nature of the breach of a loan agreement which of course arises, if you need to use the word “directly”, directly from the fact that the loan agreements provide for such and such and the facts have fallen out in such a way that the stipulation has been breached.  Then one comes to the next phrase, they arise “pursuant to the terms of the mortgages”.  If the mortgage did not exist ever, then no one could suggest that the loan agreements would have been in the slightest degree deficient as being instruments which imposed obligations and gave correlative rights which, upon certain events occurring or not occurring such as repayment, would bring about the completion of a chose in action, that is, the cause of action which could be sued on.

Now, as it happens, we are going to submit that even in the case where the mortgage did exist but then came to be discharged, the same truism applies in relation to the loan agreements. They are in existence not affected in terms by section 62 or any other provision of the Land Title Act – not surprising because they do not relate to land title – and the events in question upon which we sued, including omission to pay, are events which have meaning by reason of the terms of the loan agreements with ‑ ‑ ‑

GUMMOW J:   That is how it is pleaded.  The question is can you plead it properly without doing it?  The answer is you can, I suppose.

MR WALKER: Yes, your Honour. In our submission, it is of great moment to the nature of the contention against us to appreciate that they are saying that a land title provision about a mortgage concerning rights, et cetera, in relation to the mortgage, to adapt the language of the definitions of section 62(1), has affected loan agreements notwithstanding the entire absence of any legislative indication to that effect. It is at that point that, in our submission, there is analogical support to be gained, none of the analogies being perfect, from the authorities to which my learned friend has already taken you. I regret to say I need to go back to them briefly.

Now, Measures v McFadyen obviously needs to be understood as a case concerning a lease, not a mortgage, but it has not been proposed in any of the argument against us that that difference could make any difference to the outcome.  After all, subsection (1) applies inter alia to mortgages and leases and subsections (2) and (3) make that crystal clear.  The effect of the general provisions of subsection (1) together with the defined term supplied by subsection (4) is an effect which will be indifferent, according to their separate natures of course, in relation to leases and mortgages.

My learned friend has said, we think – I hope I am not misunderstanding his argument this morning – that in Measures v McFadyen the chose in action, that is, the cause of action for breach of the covenant to build, had nothing to do with the lease.  I do hope I am not misquoting. 

HEYDON J:   He said it did not touch and concern the land, in effect.

CRENNAN J:   Not directly related to the interest in the land is what I recollect him saying.

MR WALKER:   Thank you, your Honour.  I think “yes” and “yes” should be my answers.  We certainly understand the argument about what I will call sufficient connection but, obviously enough, the cause of action for breach of a covenant in the lease to build has everything to do with the lease, its entire existence depends upon the lease and nothing else apart from the facts to which the terms of the lease are then applied.  We certainly challenge the proposition that in relation to what I have called the sufficient connection that the position in Measures v McFadyen showed an insufficient one.  This is a covenant to build, to improve the reversion in such a way as, in our submission, to be quite fundamental to the nature of the relationship involving two kinds of estate, the fee simple in reversion and the leasehold estate, between the parties, not only the original parties but parties by transfer thereafter. 

There is nothing in the reasoning of the High Court that suggests there is some separation.  Rather, the relevant part of the reasoning in Measures v McFadyen, at least in the Chief Justice’s reasons and in the reasons of Mr Justice Isaacs, concentrate upon the fact that there is a species of property, a chose in action, which is perfected in the sense that it is already available as a cause of action already accrued and, notwithstanding the reference to the mischief, if that be the correct term, by the words enacted in 1861 and latterly omitted, as the Chief Justice has noted, notwithstanding that, this Court made a choice, namely, that the general terms of section 62 could not produce what they evidently thought was the surprising or startling outcome that the species of property in existence, being the accrued cause of action for breach of that covenant once and for all, as they held – your Honours will recall the inquiry as to how many months one has before you will be held to be in breach of an obligation to do something forthwith in that case – and they simply held that these words are not apt in relation to the transfer of rights in relation to the lease in that case to include what in particular Mr Justice Isaacs described as being:

rights to damages . . . existing independently of the continuance of the obligation under which they arose, and of the land upon which they were originally secured.

In other words, the lease could be surrendered – I do not quite know what his Honour means by “the land not continuing” but leave that aside – the lease could be surrendered but the cause of action would remain a good cause of action and a species of property which could be turned to account. I was quoting then from 11 CLR 738.

Now, your Honours, that, in our submission, is a good answer to the whole of the case because as we have put in that which is conveyed by our notice of contention, it is not only the rates and land tax which were an accrued cause of action but it is also, for the reasons we have put in our written submission, the obligation of a right to have the principal and interest repaid.

KIRBY J:   There is a bit of a problem there as a matter of law, is there not, that the grounds of the notice of contention are really complaining about a failure to apply a holding of the court and it is not right on the point, therefore, you have to reason by analogy from McFadyen that it is not exactly the same.  I thought it was common ground that there is no authority that this Court has laid down that decides this case.

MR WALKER:    No, your Honour. I have tried to make clear that there is no authority in relation to the effect of section 62 in cognate provisions to achieve the transfer or assignment of transactions separate from the mortgage in this case. There is no authority about that. That is what this case will stand for. But there is authority about that part of our argument which happens to be what we succeeded on in the Court of Appeal in relation to rates and land tax and what we put in our notice of contention as to the moneys outstanding, namely, that where there is an accrued cause of action, the words of section 62, notwithstanding a transfer of the mortgage, will not transfer that chose in action.

Now, that has been held. That is not an analogical matter. That has been held. True it is, held in a case about a lease. That is why we are at pains to point out that no one has argued and, in principle, it does not appear how one would distinguish between a mortgage and a lease both caught indifferently by section 62(1) in that regard.

GLEESON CJ:   Is that a convenient time, Mr Walker?

MR WALKER:    May it please your Honour.

GLEESON CJ:   We will adjourn until 2.15 pm.

AT 12.47 PM LUNCHEON ADJOURNMENT
UPON RESUMING AT 2.17 PM:

GLEESON CJ:   Yes, Mr Walker.

MR WALKER:   Your Honours, could I briefly say what we want to add to our written submission concerning Naylor’s Case. It is, in the main, to recapitulate the matter already mentioned by the Chief Justice. One finds at the foot of 55 CLR 425 the recitation of the allegations in the declaration concerning the terms of the assignment and one sees that what was assigned included:

all moneys secured by the within written mortgage and all my rights powers and remedies thereunder –

Therefore, in the passage at page 434 in the joint reasons of Justices Dixon and Evatt to which attention has been already drawn, in our submission, there is nothing which touches upon the present issue which falls out from those reasons.  They are reasons clearly expressed with respect to the nature of the transfer, although that aspect of the transfer is not, we think, expressed in their Honours reasons in that long paragraph starting at the top of page 434 and going to the top of page 435.  What Naylor’s Case stands for, of course, is that, in our submission, on a proper understanding of it, that the rights of the kind now captured in section 62(1) in the Queensland Act do not include rights of a kind had under the mortgage against somebody who was not the mortgagor.

Now, your Honours, briefly ES & A v Phillips. Could we say this. The passage that our learned friends rely upon at the top of 57 CLR 322 contains, of course, a description which requires to be filled in any particular case, namely, “all the accompanying personal obligations normally incident thereto”.

GUMMOW J:   Whereabouts, Mr Walker?

MR WALKER:   The very top of page 322, lines 5 and following.

GUMMOW J:   Thank you.  Yes, I have it.  Yes.

MR WALKER: “Normally incident thereto” is a phrase which refers back to an expression “the interest in the land” in the line beforehand, perhaps redolent in relation to “the lot” which one finds in section 62(1). However, that, of course, does not touch upon anything relevant for present purposes and there is nothing else in the reasons which casts light upon the effect on a loan agreement which binds not only the mortgagor but also others as well, in this case, the Beckinsales.

The last piece of case law where I wish to supplement what I have said in writing is PT v Maradona 25 NSWLR 643, the decision by Justice Giles in the Supreme Court of New South Wales. Your Honours have already been taken to the passage at page 679. Your Honours will appreciate that his Honour then applied the approach he had expounded in that passage in the following three pages, 680 to 682 and, as it happens in that case, by applying to the facts the description of the moneys hereby secured under that mortgage, he found, to use the expression of the Court of Appeal in this case, that it was an empty covenant in that case because, amongst other things, the guarantee which otherwise would have imposed obligations on Mrs Thompson to be secured by the mortgage was a guarantee which failed to impose any obligations on her at all.

GUMMOW J:   It might be of some help to recall what Justice Kitto said in Latec 113 CLR 265 at 275 as to what the interest of the mortgagor is in this Torrens structure.

MR WALKER:   It is a hypothecation.

GUMMOW J:   He said:

The right which the mortgagor had immediately before the sale was a right to have the mortgagee ordered (notwithstanding that the contractual date for payment has passed) to receive what should be found on a taking of accounts to be owing under the mortgage and thereupon to execute a discharge of the mortgage.

MR WALKER:   Yes.

GUMMOW J:   It is that which is the statutory equivalent of the equity of redemption.

MR WALKER:   Quite so.  In short, the mortgage is held only so long as there is content to the financial obligation for which the interest is available as an hypothecation for the land to be sold and the proceeds to be applied in satisfaction of that obligation.

GLEESON CJ:   Apart from anything else, the mortgagee has got the certificate of title.

MR WALKER:   Yes.  Your Honours, there is nothing much to add in relation to the Queensland Court of Appeal decision in Julong except this comment.  It is by no means clear from the materials supplied by their Honours’ reasons for judgment plus what happens to be the Julong mortgage in evidence in our case, appeal book page 45.  It is by no means clear as to whether the Fenns were obliged only under the mortgage, that is relevantly a third party mortgage like a guarantee, or whether they were also obliged under a different instrument.  We offer that tentatively in partial answer to a comment by my learned friend this morning. 

In any event, Naylor, for example, to which reference has been made, does not supply any justification for the approach taken in Julong, not least because there is no sign of the similar assignment in Julong as there was in Naylor of the moneys.  As my learned friend has fairly put it this morning, the matter which has been argued at Bar in this case was not an issue in Julong.

My learned friend has put about section 62 that it does not have, my words not his, some overarching or important public policy informing it of a kind which ought to be taken into account in understanding the extent of its effect in cases such as the present. We respectfully submit that section 62 precisely, as Justices Dixon and Evatt noted in ES & A v Phillips, is part of a suite of provisions under the Torrens system that does have this as an important public policy, namely, the sufficiency, subject to one point, of the register to inform those concerned to find out about the nature and extent of outstanding interests in relation to land.  The one point of qualification is, as noted by Justices Dixon and Evatt, that with mortgages, classically with an all moneys mortgage in particular, other inquiry will need to be made of the parties in order to find out from time to time what the state of indebtedness secured by the mortgage may be.  The register will not suffice to show that. 

Otherwise, in our submission, section 62 is part of the important public policy in stark contrast to what preceded, namely, that there will be register open to the public which will record, with the prescriptive detail that, for example, sections 73 and 74 of the Act require in this case, the nature of the outstanding interest in this case, the mortgage. In our submission, that is an aspect of section 62 which supports the approach for which we have argued, namely, that one would resist anything interstitial or implied from the description of the rights, et cetera, in subsection (1) in light of the definition in subsection (4) which would carry with it the loan agreements in this case. It does not appear from the statute, it would not appear from the register and, in our submission, it has nothing to do with land title.

I have neglected to give a reference in answering Justice Heydon’s question to me concerning a disparity between the way I put the two limbs matter and the way in which it was dealt with in the Court of Appeal.  In particular, it is that passage in Justice Callaway’s reasons at paragraph 84, page 450 of the appeal book to which I intended to make reference in that answer. 

Your Honour Justice Gummow drew attention to paragraph 157 of the trial judge’s reasons at page 390 of the book.  That and paragraph 158, in our submission, are significant as a proper characterisation of the extent, in our submission, the fallacious extent of the argument against us.  At the beginning of paragraph 157 in terms employs that step in the reasoning about which I spoke before the adjournment, namely, the assumption that there is a difference between the so-called first and second limbs, or to put it another way, that the second limb must be doing some work that the first limb had not already accomplished.  I do not wish to add to what I have said about that.  That leads to this conclusion starting on the third last line of page 390, and I quote:

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 –

so far, with great respect, so good.  Then continuing the quote:

irrespective of whether the debt could be recovered, or the liability could be enforced, by suing on the terms of the mortgage.

So that the severance has been accomplished impossibly, as I put before the adjournment, of this notion of there being a recovery of debt or enforcement of liability under a mortgage, notwithstanding – one of the possibilities her Honour is contemplating is notwithstanding it cannot be justified by the terms of a mortgage and, in our submission, that contains the serious error which was corrected in the Court of Appeal.  In paragraph 158 the different way in which my learned friend’s argument succeeded at first instance was expressed to the same end as paragraph 157 conveys is seen in the expression about line 15 on that page:

The principles of statutory construction . . . indicate that the second limb of s.62(4) refers to rights to recover debts and liabilities which are secured under the mortgage.

So there is that further step which is taken, again, away from the text.  Now, that leads in the consideration of consequences ‑ ‑ ‑

GUMMOW J:   In this case you have to read it as “which were secured”.

MR WALKER:   Yes, that is right, your Honour.

GUMMOW J:   Because at the date of suit there was no mortgage.

MR WALKER:   To test this argument it is appropriate to consider some consequences. It is not just this case which is in question in this Court when considering the meaning of such an important provision, section 62. Some of the cases already considered involve what are called third party mortgages, by which I mean a mortgage where the mortgagor is not the debtor under the, what I will call, principal obligation. So the parent who mortgages the parent’s house in order to support the son’s – it always seems to be son’s – business obligations and very often there will be a covenant to pay. The covenant to pay, which is parasitical or which is given its content from time to time by reference to res inter alios acta, that is, the dealings from time to time, no doubt on overdraft and running account, between the son and the bank.

In such a case, applying the appellant’s arguments and using a hypothetical example as close to the facts of this case as one can get with only one change, something like the following falls out. What if this mortgage had been a third party mortgage, which would have been the case if QPM had not been a debtor under the loan agreements? Now, it was in fact, but test the argument about section 62 by asking that question because section 62 is obviously not expressed in terms which permits any discrimination between third party mortgages and other mortgages.

If QPM was not the debtor under the loan agreement but did have a mortgage covenant expressed in terms of an obligation to pay what the Beckinsales owed Mr French, before there was any transfer of a mortgage the position would be clear.  An obligation which is in the commercial nature of a guarantee would be imposed upon QPM by the mortgage covenant and there would be between the Beckinsales and Mr French a relationship under which they owed him money.  They are not parties to the mortgage either in actual fact or in the hypothetical bar the one alteration I have made in the example.  Mr French could not sue the Beckinsales under the mortgage.  That deserves repetition.  Under that example, before the transfer, Mr French could not sue the Beckinsales under the mortgage. 

On our learned friend’s argument, upon the transfer being registered – and this has nothing to do with the discharge thereafter, their argument is about registration of a transfer, it is a section 62 argument – the following would fall out. The right to sue the Beckinsales under the loan agreement, because it is an obligation secured under the mortgage, that is, the money owing by the Beckinsales to French under the loan agreements would be money that the mortgage secures, that would be transferred to Marminta, the transferee of the mortgage. That, in our submission, is to ask a reading of section 62 to cover territory which is just impossible in any number of bounds. Section 62 does no such radical, unfair or startling thing at all.

GLEESON CJ:   The Beckinsales were not a party to the personal covenant in the mortgage, were they?

MR WALKER:   No, that is right.

GLEESON CJ:   Did the primary judge explain by what process in the law the liability of the Beckinsales to Mr French went?

MR WALKER:   Not in our submission, except by the encompassing method of saying, as one sees in paragraphs 157 and 158 to which I have drawn attention, that the obligation secured under the mortgage is an obligation the correlative right being to enforce it and because that obligation is secured under the mortgage, that correlative right is transferred simply because the obligation is secured under the mortgage.

GLEESON CJ:   But we know that the land, according to the evidence, was worth only about half of the amount that was owing to Mr French.

MR WALKER:   Yes.  I should also draw to attention – I am grateful to Mr Bick – that at page 394 of the book in paragraph 170 – I do not think this takes it much further – that, in relation to this matter her Honour says ‑ ‑ ‑

GUMMOW CJ:   The liabilities of whom?

MR WALKER:   Yes.  In the first sentence there is a reference to the liabilities under both loan agreements being “moneys secured”.  Then in the second part of that same sentence there is a reference to the mortgage covenant, so‑called.  There is a reference to, “The rights to recover the debts” being “intimately connected with, and defined, the interest in land”.  In our submission, more strictly speaking, the rights to recover the debt are rights with respect to the same financial obligations as form part of the mortgagor’s covenant to pay and ultimately could form part of the hypothecation rights of the mortgagee.  They do not, obviously, exhaustively define the interest in land.  The interest in land is ultimately the hypothecation interest for whatever sum from time to time falls within the “moneys secured” definition.

Then in the last two sentences of paragraph 170 there is a reference which, in our respectful submission, is immaterial to the correspondence and also a reference to the terms of the mortgage in relation to what her Honour is positing as:

an agreement or intention to exclude the transfer of the rights to recover the debts under the loan agreements. 

But the case was never thought as there being a contract to assign or transfer the benefit of the loan agreements.  That had been thought of in the past and has gone.  Her Honour then says:

They therefore vested in Marminta as registered transferee of the mortgages –

But it is all done by the statutory exercise “pursuant to the operation of s.62 of the Act”.

GLEESON CJ:   Presumably, if the argument against you is correct, after the discharge of the mortgage, Marminta was an unsecured creditor of QPM and Mr and Mrs Beckinsale?

MR WALKER:   Yes.  The effect of the discharge on the personal covenant is not, in fact, the subject of any conclusion or finding or holding in either first instance or Court of Appeal judgment.  The case raises the issue of the effect of the registration of the transfer, not of the discharge.

GUMMOW J:   I know, but how does the discharge system work under the Queensland Act?  Does it discharge the executory obligations on the personal covenants in the mortgage?

MR WALKER:   Your Honour, the discharge in this case appears to be in a form apt to discharge only what I will call the security aspect, that is, the charge.

GUMMOW J:   It does, yes, page 306.

MR WALKER:   Thank you, your Honour.  At about line 29, “The Mortgagee releases the mortgage as a charge on the land”.  This litigation has not included full exploration and has no conclusion as to the effect registration of that discharge had upon the personal covenant.

GLEESON CJ:   That was bound up with the unjust enrichment claim, was it not?

MR WALKER:   It may have ultimately had an effect on that, your Honour, but I cannot answer that in relation to the way in which that was proposed to be argued.

HAYNE J:   The description we see at line 29 on page 306 reflects the definition of “mortgage”, does it not?

MR WALKER:   Yes, it does.

HAYNE J:   A charge on a lot or interest on a lot for securing money and it is that which is discharged.

MR WALKER:   Exactly so, yes.  As Justice Gummow put it, we would respectfully adopt it.  It is rendering a secured obligation, an unsecured obligation.  I hasten to say – I just put that as a proposition – that was apparently not in question in these proceedings.  I am not entirely able to explain why not, but it is not, and there is no finding about that in the courts below.

Your Honours, reference has been made in written submissions, I think, in conveying all we wish to say about the importance of the non‑merger provision.  In our submission, that is of significance and it may be of significance if it could be used to distinguish the decision in Julong. As we have put in our written submissions, there have been no such non‑merger provision in that case. In relation to merger, in answer to Justice Gummow, yes, section 176 of the Land Title Act referred to in paragraph 26 of our written submissions does contain the familiar Torrens provision that upon registration a dealing is deemed to be a deed.

GUMMOW J: Section 176?

MR WALKER: Section 176. The general law about merger of the simple contract obligation by a specialty does not apply because of the merger. It can be ousted by a contrary intention, all of which we have mentioned in our written submission. Your Honours, may we simply note something by way of an absence from my learned friend’s argument. There does not seem to be any element of the law of joint obligations or jointure involved in the argument. I stress that because of the possibility of the discharge

being referred to and because of an answer by my learned friend to the Chief Justice at the outset of the argument this morning which seemed to suggest that the Beckinsales were spared, or should be spared, by reason of the transfer of the mortgage because theirs was a joint obligation and it was therefore transferred when the company’s obligation was transferred. 

That does not, with respect, appear to follow from any general law concerning the effect or the nature of joint obligations or jointure generally.  I stress it is not an argument about the effect of discharging one joint obligor on the obligations of another joint obligor.  That is not what is being argued and, in our submission, it is of significance that no authority has been stated or principle developed by which there could be any success for the appellants based upon the fact that the Beckinsales’ obligation was joint with QPM’s.

Your Honours, I said before the adjournment that I would deal with the contention matter at the end. In fact, I find I have nothing to add to what has already been written in the written submissions and said before the adjournment about the contention point. It leaves me to deal with the request by my learned friend to be able to argue free of the effect of the concession recorded below and repeated in substance at the special leave application. In our submission, that ought not to be permitted, in particular for the reasons raised by the Chief Justice, namely, that by reason of the concession, matters were determined and not determined, that is, the obligation to rates and land tax was said to follow the outcome of the section 62 argument and, therefore, what I will call the restitution or unjust enrichment argument, was not determined.

That, in our submission, is akin to the principle exemplified in Suttor v Gundowda, a very weighty reason indeed not to permit our learned friends to back and fill on that question.  May it please the Court.

GLEESON CJ:   Thank you, Mr Walker.  Yes, Dr Pannam

MR PANNAM: If the Court pleases. Before I deal with a few short points I want to make in reply can I have circulated to the Court the appropriate reprint number which was No 37 of the Land Title Act 1994. The mortgage was registered on 14 January 2004 and this reprint takes you up to the closest date of that. I should say that the documents that are to be handed to the Court are extracts from that Act, there was no time to have it all copied and we will see that in due course complete copies of that reprint No 7 are made available to the Court.

The second matter is in relation to the title searches that Justice Gummow requested.  They are available and will be distributed.  They require some explanation.  These were in evidence before the Court of Appeal as indeed you will see the court book numbering.  The searches of the property the subject of the mortgages dated 8 January 2004 were designed to give a snapshot of the title before the land was sold by QPM to Unison, as it ultimately was, and in relation to that, the way in which these searches are to be read is from the bottom up in terms of time.

I make that point because in the other set of searches which was a snapshot of the title after the transaction with Unison they are to be read the other way round, from the top to the bottom.  What explains that in the office in Queensland I do not know, but they are the searches that show the dates of registration of the various instruments.

The few points we want to make in reply are these.  First of all, so far as Measures v McFadyen is concerned, in our respectful submission, whatever be the merit of my learned friend’s submission that the covenant that was there in question, being the covenant to affect changes, renovations, alterations to the building being directly connected with the leasehold interest because it went to the value of the land and matters of that kind which he referred, we just make this submission that that analysis was not the analysis that the members of this Court made.  The analysis that the members of this Court made were not that it was connected with the land at all.  Indeed, in our respectful submission, the judgments are only to be understood on the basis that there was a disconnection between that covenant and the land that was the subject of the lease.

We make that point by reference to what Chief Justice Griffith said at pages 736 to 737, and I referred to this in the course of our argument, but I repeat it again, where he described them as “mere choses in action in respect of past and completed breaches of” contract so that his Honour took the view that there was certainly a disconnection between them and the leasehold interest which had passed to the transferee and Justice Isaacs made the same point at the top of page 738 that there lacked a connection with the land.

My learned friend’s argument was an argument that was open to be accepted had it been put, but the Court took the view, different to his submission, that these were mere choses in action in respect of past and completed breaches of contract.

If that is right, then Measures v McFadyen does not have, in our respectful submission, the significance that our learned friend puts on it, because it lacked that connection.

Can we next deal with the point my learned friend made on several occasions during the course of his submissions, and that was that it would be startling if section 62 had effect in relation to contracts that were external to the mortgage. His submission was that it would be curious if those rights in effect evaporated without there being either privity of contract or specific agreement.

In connection with that argument, we say, there is nothing startling about it at all, in our submission.  If I can take the Court briefly to the form of the covenant to pay in the mortgages and can I take as an example the provision of the mortgage that appears at 122 of the appeal book.  There, at the top of the page in 2.1, it is provided that:

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) -

Then there is set out an elaborate catalogue of obligations.  Then at the end, which one finds at page 124, the end of that clause ends by saying:

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.

Then there is in 4.1 the obligation to pay on a particular date.  Then if one goes over to clauses 9 and 10, one sees there the typical powers of the mortgagee, in 9, the “Power and sale,” and in 10, “Other powers of the mortgagee.”  Now, our respectful submission is that what these clauses in the mortgage do is to take up the obligation of Queensland Premier Mines under the agreements with Mr French, one of them being a joint agreement, and makes them money secured under the mortgage and imposes an obligation to pay.

In our respectful submission, there is nothing at all curious that when a transfer of that mortgage takes place that those rights to enforce the covenant to be paid go with the transfer.  That is what, in our respectful submission, the section says happens and that is what does happen.

In our submission, there is nothing at all curious about it. It is the source of an independent right that goes across under the provisions of section 62. In that connection, there is a linked point and it is this; that we accept our learned friend’s submission that in section 62(1) the “five critical words”, as he put it, are in relation to “the lot”.

KIRBY J:   Just before you leave 10, would you identify precisely the covenants which you say go across, 9 or 10?

MR PANNAM:   In clause 2?  I am sorry?

KIRBY J:   In 10.2.

MR PANNAM:   All of those powers of the mortgagee in relation to the secured moneys would pass with a transfer of the mortgage, in our respectful submission, all of them. So if one goes then to the five critical words in section 62(1), my learned friend, in our submission, accurately identified as being in relation to “the lot”, once the obligations have to be tied to the property in question, here the mortgage, one sees the pattern of distinction in the authorities in this Court.

A guarantee, as in Naylor, was not sufficiently connected with the lot.  It was simply an independent obligation created in the same instrument to be true, but separate from it.  One then gets in Measures, the covenant that was treated as being a mere chose in action in respect to the crystallised right that happened in the past but was not continuing.  Then one goes to another case that has not been cited yet but is referred to in the outline, and that is Mercantile Credits v Shell, where it was held that an option in a lease was sufficiently connected with the land to go across when the lease was transferred.  So, in our respectful submission, the link here that provides the “in relation to the lot” link is the mortgage rights that accrue in circumstances of default where the obligations that are set out in clause 2.1 that form the basis of the covenant to pay are triggered. 

Then my learned friend put the argument that there are no two limbs to section 62(4). We will accept that for the purposes of the argument. Accepting that our submission is not correct, that these are not two separate limbs, it does not matter, for the purposes of our argument and our submission, because, if one goes back to that definition, the first part of the definition is the right to sue on the terms of the mortgage or lease. It is perfectly clear that clause 2 and clause 4 are part of the terms of the mortgage or lease.

So there is a right to sue and the question is has that gone across? In our respectful submission, the right to sue on the terms is a wide expression. It is not to be confined by “on the terms of the mortgage or lease”, mortgage relevantly, that provide for the creation of the debt or liability in question that is said to be the subject only of the operation of section 62. It was a general reference and secondly, and to be repetitive, the second part of the clause, to “enforce a liability under the mortgage,” in our respectful submission, simply means no more than to repeat under the terms of the mortgage that we have already been referred to.

So you are suing on the terms and you are enforcing a liability under those terms.  One does not read in there that the obligation has to be created under the mortgage itself rather than to be found in an independently operating obligation.

Now, the only other point we desired to make in reply was this.  It was the effect of the discharge that has been raised by Justice Gummow.  In our respectful submission, the mere fact that at the date of the suit there was no mortgage is really nothing to the point.  If the transfer had been effective in accordance with our submissions then what happened to it thereafter was quite irrelevant.  Whether it was sold by Marminta, whether it was retained by Marminta, whether it was released by Marminta, whether Marminta kept the benefit of the covenants as distinct from ‑ ‑ ‑

GUMMOW J:   Well, we know the answers to some of these, do we not?  Could you just go to page 367 of the appeal book for a minute?

MR PANNAM:   Yes.

GUMMOW J:   Just so that one gets it clear in one’s head.  At the top there, paragraph 58.

MR PANNAM:   Yes.

GUMMOW J:

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.

What happened was that that settlement query on those terms and for that price was completed on 14 January2004, simultaneously with the Marminta transactions of the transfer of the mortgage and the release.  Is that right?

MR PANNAM:   Yes, that appears to be right.

GUMMOW J:   In favour of Unison Properties Pty Ltd?

MR PANNAM:   Yes, and that is shown by the searches.

GLEESON CJ:   As section 81 of the Land Title Act (Qld) says that:

On registration of the instrument of release, the mortgage is discharged, and the lot is released from the mortgage, to the extent shown in the instrument of release.

MR PANNAM:   Well – and then if one goes to the provisions of section – there is a provision that deals with the release as being very flexible.  If I can just find it for a moment.

GUMMOW J:   That is section 81, I think.

MR PANNAM:   Yes, that is right.  So you can release the proprietary interest, you can release any part of the other obligations that you see fit, so that there is a degree of flexibility about all of that, but our short point is this.  What happened afterwards, on the same day, but logically it had to happen later, is quite irrelevant to the question, and that is the submission we have to make.  They are the submissions in reply we want to make, your Honours.

GLEESON CJ:   We will reserve our decision in this matter and we will adjourn until 10.15 tomorrow.

AT 3.00 PM THE MATTER WAS ADJOURNED