R.J.Wood Pty Ltd v Sherlock, A.G.

[1988] FCA 183

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IN THE FEDERAL COURT	OF	AUSTRALIA	1
NEW SOUTH WALES DISTRICT REGISTRY	1	No. G344	of 1988
GENERAL DIVISION	1

BETWEEN:  R.J. WOOD PTY. LIMITED

First Applicant

KNIGHTWOOD CASH 'NI CARRY

WHOLESALERS PTY. LIMITED

Second Applicant

A.S. KNIGHT h CO. PTY.

LIMITED

Third Applicant

BEALE h JACOBS PTY.

LIMITED

Fourth Applicant

RODGER h LLOYD PTY. LTD.

Fifth Applicant

- AND : ANTHONY GARDINER SHERLOCK
and ERNEST GEORGE HARRIS

First Respondents

ERNEST GEORGE HARRIS and

WILLIAM JOSEPH WILDE

Second Respondents

CORN! :	Davios J.
-	DATE :	18 ?larch 1988
PLACE:	Sydney

AUSTRALIAN GUARANTEE

CORPORATION LIMITED

Third Respondent

AGC (ADVANCES) LIMITED

Fourth Respondent

DESMOND STIRLING

L .

MINUTES OF ORDER

THE COURT ANSWERS the questions set aside for separate

determination pursuant to Order	29 Rule 2 of the Federal Court
Rules as follows:-
Question 1:	Whether the purported appointments on 1 March 1988 of the first and second respondents as receivers
and managers of the first to fourth applicants i
invalid by reason of the said appointments purporting to be joint and several.
Answer :	Yes.
Question 2.	whether on a true construction of the mortgage debenture dated 18 September 1986, compliance with the provisions of Section 111 of the Conveyancing
Act (NBW) 1919 have been dispensed with for
non-monetary default.
Answer:	No.

THE COURT ORDERS TBAT:-

The respondent should pay the costs of and incidental to the above two separate questions.

- NOTE :

Settlement and entry of orders is dealt with in

Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTE WALE6 DISTRICT REGISTRY	NO. G344 Of 1988
GENERAL DIVISIOFJ

BETWEEN:  . WOOD PTY. LIMITED

First Applicant

KNIGHTWOOD CASH 'N' CARRY

WROLESALERS PTY. LIMITED

Second Applicant

A.S. KNIGHT & CO. PTY.

LIMITED

Third Applicant

BEALE C JACOBS PTY.

LIMITED

Fourth Applicant
RODGER & LLOYD PTY. LTD.

Fifth Applicant

-	AND :	ANTHONY GARDINER SHERLOCK
and ERNEST GEORGE HARRIS

First Respondents

ERNEST GEORGE HARRIS and

WILLIAM JOSEPH WILDE
Second Respondents

AUSTRALIAN GUARANTEE

~ORPORATION LIMITED

Third Respondent

AGC (ADVANCES) LIMITED

Fourth Respondent

DESMOND STIRLING

Fifth Respondent

corn	:	Davies J.
-	DATE :	18 March 1988
PLACE:	Sydney

REASONS ?OR JUDGMENT

EX TEMPORE

I turn to the questions of law. The proceedings are

brought under the Trade Practices Act 1974 (Cth)	and raise
associatod issuos undor State law.	The following two

questions, which in thornselves contain no Federal element,

have, for reasons of urgency, been set aside for determination

separately from the other questions in the proceedings. See

Order 29 Rulo 2 of the rodera1 Court Rules.

The quostionr are:

(1) whothor tho purported appointment6 on 1 March

1988 of the first and second respondents as
receivers and managers of the first to fourth

applicants is invalid by reason of the said

appointments purporting to be joint and several;

and

(2) whethor on a true construction of the mortgage

dobonture, dated 18 September 1986, compliance

with the provisions of 6.111 of the Conveyancing

-	Act N.S.W. 1919 have been dispensed with	f o r
non-monetary default.

The first question concerns the applicants, R.J. wood

Pty Limited, Knightwood Cash 'nr Carry Wholesalers Pty
Limited, A . S . Knight L CO Pty Limited and Beale and Jacobs Pty
Limited. On 1 March 1988, purportedly acting under a mortgage
debenture dated 18 September 1986, the third and fourth-named

respondents, Australian Guarantee Corporation Limited and

A.G.C. Advances Limited, by a number of separate deeds

of appointment, appointed the first-named respondents, Anthony

Gardiner Sherlock and Ernest George Harris, joint and several

receivers and unagors of the mortgaged premises described	in
the mortgage debenture. The question is whether such
appointment8 were within the power conferred	by the mortgage
debenture.	?or the purpose of this question it is accepted

that each of the applicants was in default and that the

appointment of a receiver and manager was authorised.

Clause l8 of the mortgage debenture provides that the circur8tances there set out the mortgagees, Australian in

Guarantee Corporation Limited and A.G.C. Advances Limited may

"appoint a receiver and/or manager" of the mortgaged premises
Clause 63 of the mortgage debenture provides, inter alia,

that:-

'Except to the extent that such interpretation shall

be excluded by or be repugnant to the context
whenever the same is used herein the words 'the
Mortgagor' rhall include the party described in
Schedule 1 and ita ruccerrors and permitted assigns
and in every care jointly and severally and the word
'Mortgagee' rhall include the party described in
Schedule 2 and ita ruccesrors arsigns and transferees
and any perron authorired by the Mortgagee to become
the re irtered holder hereof., the word 'person'

rhall ! nclude a corporation or company or

partnerrhip; wordr importing the ringular number or

plural number rhall include the plural number and
ringular number rerpectively, wordr importing any
gender rhall include all genderr, the expressions
'bookr of account' and 'documents' shall include
bound or loore leaf paper writing, microfiche or
microfilm, magnetic card or tape, punched card or

tape, magnetic dirk or an other type of recording

and/or retrieval ryrtem W ether electronic mechanical X

or otherwire rhatroever; any reference to rtatutes

rhall include all rtatuter or consolidating or in

rubrtitution for the rtatuter referred to. The words 'Mortgagor' and 'Mortgagee' rhall also include where applicable any company rerpectively related to the

Mortgagor or the Mortgagee ar the case may be within

the meaning of the Corpanier (Queenrland) Code."

Mr P. McClellan QC, renior counsel for the

applicant., rubmitted that the law to be applied was stated in

Liqhtman L Mora, The L&w of Receivers of Companies	at
paragraph 4-06, that:-

"It ir a qu	lrtion of conrtruction of the debenture
whether th	I appointor can appoint more than one

perron to	ar z oint receiverr.	In the absence of
r o m indic	Ition o	a contrary intention, the singular

in the deb lnture rhould be conrtrued as including the

plural [L. '.A. 1925,r.6l(c)l and accordingly the

power to a	,point a receiver rhould be construed as a
power to a	,point joint receiverr. Exprers provision
in the deb	lnture ir required to authorise joint
receiverr	:o act reverally as well as jointly."

Mr McClellan alro relied upon Picarda, The Law Relating to

Receiverr and Managerr, in which it ir rtated at page 35:-

"... debentures often provide expressly that unless	the context otherwise requires the singular includes
the plural. In both instances the relevant provision would empower the debenture holder to appoint joint receivers and managers even though the instrument talks only of a receiver and manager".
nr McClellan conceded, and I believe correctly so,

that the subject mortgage debenture authorised the appointment

of more than one receiver and manager, particularly having

regard to the provisions	of Clause 63 which state that a
singlular term should be	read as including the plural term.

Re HcClellan Submitted, however, that the mortgage debenture did not authorise the appointment of two persons to

act as receivers and managers jointly and aeverally. He submitted that any doubt was removed by Clause 63 of the debenture which specifically referred to the mortgagors	in
their joint and aoveral capacities	but made no such provision

in respect of receivers and managers.

nr T.F. Bathurst QC, senior counsel for the

respondents, submitted that if receivers and managers could be

appointed to act jointly, they could	be appointed to act
severally and that there was no legal	or commercial reason to

limit the construction of the mortgage debenture to an
appointment of receivers and managers jointly. But the
appointment of two persons to hold such an office is
ordinarily construed as requiring them to act jointly. Thus,

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in Re Gudgeon and Another; ex parte Pegler and Ana Ither ( 1969)

13 F.L.R. 350 at p.352, Gibbs J. said:-

"The general rule of law is that trustees have duty

to act jointly, and, in the absence of statutory
provision to the contrary, if two persons were

appointed to the office of trustee of a bankrupt

estate, their authority would be joint and not

separate and they would be obliged to act jointly in

carrying out the duties of their office".

The same principle applies with respect to receivers

and managers. If two persons are appointed to act as

receivers and managers, they must act jointly unless the

instrument of their appointment rpecifically or impliedly

authorises them to act severally. Likewise a power to appoint

two or more persons to act as receivers and managers will	be
read as a power to appoint them to act	jointly. A power to

appoint two or moro persons to act severally must be conferred

expressly or by nocoasary implication.

In my opinion, the appointment of Messrs Sherlock and

Harris to act sevorally as receivers and managers was

not

authorised by the mortgage debenture.

Mr Bathurstsubmitted that even if the appointment of

the receivers and managers to act severally was invalid,
nevertheless the authority conferred upon them to act jointly

was valid and was not affected

by the unauthorised grant.

However, as is stated in Farwell on Powers (Third

Ed.) at

-.

7.

p.147,	the limitations attached to the exercise of power (in
this case the power to appoint a receiver	and/or manager) must

be strictly obrervod. In Harold Heggitt Limited v. Discount S

Financo Limited (1938) 56 W.N. (N.6.W.)	23, at p.24, Owen J.
said:-

"A power to appoint a 'receiver and manager' seems to

me to b . a very different thing to a power to appoint

a 'Receiver:' R0 Urdigate Colliery Ltd. [[l9121 1

Ch.468.Ir m0 mncbostor and nilford Railway Co. [l4

Ch.D.645.1. The only power of appointment conferred

by thir doed war a power to appoint a receiver and

manager. "

In the present case the appointment of Messrs

Sherlock and Barrir to act jointly and severally was different in substance and effect from an appointment of them to act

jointly. In my opinion, the limitations of the power to

appoint a receiver and manager were not complied with and the

exercime of the power vas not	valid.	I would therefore answer
the first question: yes .

Tho second question concerns the applicant, R.J. Wood

Pty Limitod, and arises from the fact that on 11 March 1988

the appointments of Hessrs Bherlock and Harris were revoked
and new appointments were directed to	Mr Harris alone to act

as roceiver and manager of the applicant companies. It is

agreed that the applicant R.J. Wood Pty Limited is the lessee

under a registered lease of	real estate in New South Wales.
Such property is apparently the whole	or a part of the

mortgaged premises. Sections 111 and 115A of the Conveyancing

Act	- 1919 (NSW) are therefore of relevance. Their general
effect waa outlined in Isherwood L Another v. Butler Pollnow
(1986) 6 N.S.W.L.R. 363. No doubt because the Conveyancing
- is a st8tute of New South Wales, Act I wa not in the present
case asked to reconrider any aspect of the views expressed by
the majority therein.

The crucial provision appears in s.lll(a)(b)(ii)

which speaks of the circumstance where "notice or lapses	of
tine pursuant to this section has not been dispensed with	by
the agreement expressed in the mortgage".	The notice and
lapse of time referred to are those specified	in sub--6.

111(3), in brief a notice is required specifying the default

and requiring it to be remedied within a period to	be
specified being not lesr than one month.

The argument before me was not directed to default

under the terms of the mortgage debenture or to the provisions

of rub-r. 109(2). Cor the purposes of the question, it is

assumed that R.J. Wood Pty Limited is in default under the

morgage debenture in respect of a non-monetary obligation.	It
ia agreed that no notice was given under	6.111 of the
Conveyancing Act.	The issue raised by the question as

elaborated in argument is whether the mortgage debentures

dispenaed with notice and lapse of time otherwise required	by
8.111.

Clause 41 of the mortgage debenture deals with

non-monetary dofault and provides that	in the circumstances
there specified:

I

heroundor and thereupon or at any time thereafter,	... tho Hortgagor shall be deemed to be in default
all moneys horeby secured and all costs charges and expenses as aforesaid shall at the option of the
nortgagoo but only at such option forthwith or at any
time thoroaftor without notice to the Hortgagor
becomo and be payable to and recoverable by the
Mortgagoo as i f the time hereinbefore appointed for tho payront thereof had arrived anything to the contrary notwithstanding. The Mortgagee shall subjoct to any restriction imposed on the Hortgagee
by Statute or othorwise similarly be entitled to
exorciso all or any of the rights powers and remedies
conferrod on the Hortgagee hereunder or by Statute or
othorwise notwithstanding any omission to exercise or
waiver of right to exercise any such powers on any previous occasion."
Clauso 53 of the mortgage debenture further

provides:-

"... it is a condition of this instrument that the	provisions of any Moratorium or of any Federal State
or other statute or regulations now or at any time hereaftor in force having the effect of limiting
restricting or suspending the rights powers or
rorodies by this security granted to the Hortgagee
shall b . excluded from and shall have no application
to those prosents or any collateral securities."
M r HcClellan rubritted that Clause 41, which deals

specifically with non-monetary default, recognised the

limitation placed by s.111 upon the appointment of a	receiver.
He subrittod that Clauso	53 was merely a general provision
which did not ovorride the operation of Clause	41. Hr

Bathurst submitted that Clause 41 referred only to those

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statutory provisions compliance with which may not	be waived
by the mortgage debenture, while Clause	53 waived compliance

with all those statutory provisions compliance with which may
be waived by the agreement. The issue is undoubtedly finely

balanced.

In my opinion, on balance, Clause 53 does not reach

the mark to which Hr Bathurst has aimed it.	Section 111 does
not impose a statutory obligation	in the circumstance where
the mortgage dobenture expressly dispenses with the notice	or
lapse of time described in sub-section 111(3). Clause	53 does

not expressly dispense with such matters. It merely excludes the operation of statutory requirements. One must look first to see whether the agreement has dispensed expressly with the

notice and lapse of time before one can ascertain whether or

not there is a statutory restriction upon which Clause 53 may

operate.

Section 111 specifies the only means by which the

agreement may waive compliance with its provisions as to

notice and lapse of time. If that means be not adopted the
restriction or limitation which it imposes and to which	it
gives effect may not be excluded. Once it	has been concluded
that Clause 53 does not express a dispensation	of the notice
and lapse of time requirements of	6.111, as I think it does

not, then it necessarily follows that Clause 53 has no effect

upon the operation of 6.111.	Although the provisions of 6.111
may be waived in an appropriate case	by subsequent conduct or

agreement (am to which see, eg., In Re Thompson v. - Holt

(1890) 44 C.D. 492; Pattermon v. McNaghten (1905) 2 C.L.R. 615

and Bennion On Statutory Interpretation at pp. 27-33.) They

may not be waived or otherwime dispensed with by the mortgage

debenture itmelf mave in the manner which the section

providem, namely that the partiem may contract therein so as

to extinguirh or modify the requirement of the notice and a period of time. In brief, I think Claume 53 is too general in

its termm to effect the dimpenmation of which S. 111(2)(b)(ii)

speakm. That i m not to may that Clause 53 has no effect. It

may well have effect under s.109(2) of the Conveyancing Act but it was not mubmitted by either counsel that such effect was material in thim present case.

The term which warn considered in the Isherwood &

Another v. Butler Pollnow decimion warn sufficient to dispense

with the m.lll	requirement.	As Rr Justice Kearney said at
p.371:-

"Each deed contains provisions dispensing with notice

or lapme of time under the Act	in respect of the
exercime of the mortgagee's or receiver's powers."

The Aumtralian Encyclopaedia of Forms and Precedents (2nd E .,

Vol. 9, p.195) likewire sets out forms which direct their attention to notice and periods of default. Clause 53 does not ume such t e r m and in my opinion doer not operate so as to

waive or otherwime exclude the operation of the provisions of

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12.

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s.lll.	I shall thorefore answer the second question: no.
The respondent should pay the costs of and incidental

to these tvo separate questions.

I certify that thir and the 11

preceding pa es are a true copy	of
the Reasons !	or Judgront herein of

the Honourable nr J u a c e Davies.

Associate:  &)G