Secretary, Department of Social Security v Clayton, E.L.

[1991] FCA 370

LIHITED DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA	1 1
NEW SOUTH WaES DISTRICT REGISTRY	1 No. NG 87 of 1991
1
GENERAL DIVISION	)

BETWEEN:  SECRETARY TO THE DEPARTMENT OF SOCIAL SECURITY

Applicant

AND :  EDWARD LAURENCE CLAYTON
Respondent

Coram: Davies J.
Date: 17 May 1991

Place: Sydney

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. The appeal be dismissed.

AR(l#mIwu.

1. The applicant pay the respondent's costs of the appeal.

NOTE:	Settlement and entry of orders is dealt with in Order
36 of the Federal Court Rules.

RECEIVED

02 JUL1991

of the property was relatively high. I take that to be the reason why Mr Clayton was a beneficiary under the Social Securitv Act, and yet the property was valued at $300,000 gross.

Moneys were borrowed on the security of the property and most went to the son and daughter and were used in the course of carrying on the business of primary production on the property. The Tribunal, without holding that the moneys were borrowed for the benefit of the son and daughter, found that the moneys were borrowed chiefly for the direct benefit of the son and daughter.

We are not concerned with that aspect of the problem, but with the question whether the mortgages on the property were excluded mortgages by reason that the son and the daughter were parties to them. Section 4(1) of the Social Securitv Act 1947 (Cth) provides that the value of the property of a person is to be calculated as set out in that

encumbrance, not being an excluded security, exists on	subsection and paragraph (b) provides that "where a charge or
particular property of a person, ... the value of that property shall be reduced by the value of that charge or encumbrance." Subsection (10) of section 4 deals with the question of excluded securities and it provides in paragraph (b) that "a charge or encumbrance is an excluded security to the extent that the charge or encumbrance was given for the benefit of a person who is not a party, or the spouse of a
On the face of the mortgages, the son and the daughter, Colin and Yvonne, were parties to the agreements constituted by the mortgage documents. As I say, the content of the agreements cannot be determined, but they were undoubtedly parties to them. This is not a case where a signatory appears on a document and there is some doubt as to whether the signatory was truly a party to the agreement. On the face of these documents, the persons described as the debtors, Colin and Yvonne, were parties to the mortgage agreements. This is also a case where it is not surprising that they were, because they were persons connected with the land. They were in occupation of the land. They were carrying on business on the land, they were upkeeping the fences and the pastures, and they were in occupation. There was, at the very least, good reason why the Commonwealth Bank might have wanted them to be parties to the mortgages and to be bound by the terms of the mortgages so as to ensure that, in the event of default, they would not come in and make claims that they were tenants, or that they owned this or that
improvement on the property.
I cannot say any more about it than that. This is a case where a bank very sensibly, having lent moneys to persons who were carrying on business on the property and for the purpose of that business, would have wanted the persons carrying on that business to be tied by agreement to the terms of the mortgage, so that in the event of default the bank could ensure that it could exercise its security and that the narrow a description of the word "party". In my view, a person may be a party to a mortgage or encumbrance notwithstanding that he is not the owner of the land or the registered proprietor of the land which is the subject of the mortgage.
I should add that even had Mr Robb been correct in that submission, the submission might not cover the present case as it seems that the son and the daughter did have an interest in the land and that that interest became subject to the mortgages. The right of occupancy was involved. The signatures of Colin and Yvonne to the mortgages ensured that whatever could be done in relation to the father's interest could also be done in relation to their interests, so that the bank could obtain vacant possession of the whole of the property if it saw fit to do so.
The view I have expressed accords in substance with that adopted by the Administrative Appeals Tribunal. The
Tribunal held that the respondent and his two children were legally parties to the mortgage deeds, and that they had
signed the deeds. The Tribunal went on to say that all the evidence pointed to the intention to create legal relations, that Colin and Yvonne each gave consideration. I think the Tribunal was correct in that view.
At any rate, insofar as there was an element of fact involved, I cannot deal with that. It seems to me that the