Wongala Holdings Pty Ltd v Mulinglebar Pty Ltd

[1995] HCATrans 27

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney           No S137 of 1994

B e t w e e n -

WONGALA HOLDINGS PTY LIMITED

Applicant

and

MULINGLEBAR PTY LIMITED

Respondent

Application for special leave
to appeal

MASON CJ
BRENNAN J
TOOHEY J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 17 FEBRUARY 1995, AT 12.32 PM

Copyright in the High Court of Australia

MR S.D. RARES, SC:  If the Court pleases, in this matter I appear with my learned friend, MR D.J. HIGGS, for the applicant.  (instructed by Walsh James)

MR J.A. McCARTHY, QC:  May it please your Honours, I appear with my learned friend, MR J.F. KILDEA, for the respondent.  (instructed by Hargraves)

MR RARES:   Your Honours, there are two substantial questions of public importance for the grant of special leave. The first is whether a misstatement of the default required to be remedied under section 57(3)(b) of the Real Property Act of New South Wales invalidates a notice required to be issued pursuant to section 57(2)(b) of that Act as not complying with mandatory requirements as the condition precedent before the statutory power of sale may be exercised.

The second issue which, in a sense, only arises tangentially because Justice Clarke said that he only put forward a tentative view on the estoppel question and that is whether a mortgagee can exercise a statutory power of sale under section 58 of the Act by establishing that even though the power had not in fact been actuated because the statute had not been complied with, the mortgagor was estopped from denying that fact, notwithstanding that by section 58A the parties cannot by agreement waive or short circuit the statutory requirements to give notice where there has been monetary default.

Your Honours, the undisputed facts which Justice Clarke found in the court below were that the expression of the default in the notice which was given in March 1991 was not consonant with the default that had occurred.  The problem was that the parties had entered into the mortgage which was registered that had dates for the payment of interest being half years ending on the blank day of March and the blank day of September.  So that the registered instrument - and if your Honours go to page 61, I think, your Honours will see the notice requires, in line about 12:

YOU ARE REQUIRED to pay.....
(a) Interest due on 31st January 1991 - $67,200.00 ‑

The mortgage did not require, as registered, the payment of any money on 31 January. The mortgage, your Honours would need to go back one page, required, at line 5, payment of principal “on blank day of March, 1992” and then at line 9 or so, “on the blank days of the months of September and March in each and every year”, so that the registered instrument which it was later agreed should be rectified did not record the agreement. But the notice that is required under section 57 is a notice that relates, and Justice Clarke accepts this and there was not really any dispute about this, has to relate to the registered mortgage.

At page 63 his Honour said:

I would accept immediately that where there is a registered mortgage a default occurs, for the purposes of s57 of the Real Property Act 1900, only if there has been some failure to observe a term of that registered mortgage.

BRENNAN J:   What is the special leave point?

MR RARES:   The special leave point is the construction of section 57, because what one has is the regime of owning property and triggering these statutory notices which the Court has held in Carr v Finance Corporation of Australia 150 CLR 139 and also in Bevham Investments v Belgot 149 CLR 494 that this is a scheme that is required to be complied with. Now, the real point of general importance in New South Wales is if you issue a notice and it is inaccurate, as this one admittedly was, the Court of Appeal says, well, that does not matter, that can be cured. Now, the substantial inaccuracy in this case was one which required an order for rectification to cure so as to bring the notice which required the mortgagor to pay the money to be brought into turn with the mortgage, you had to rectify the mortgage.

TOOHEY J:   Is it right to speak of curing the defect?  If the mortgage is the subject of rectification, may not the notice operate upon the instrument as rectified?

MR RARES:   No, because - can I take your Honours to the statutory scheme. What it requires is you issue a notice that says what the default you rely on is. So the mortgagee can pick his default. If it is a monetary default under section 58A you cannot waive, even by agreement in the mortgage, the one month that the mortgagor has to cure the default. Now, if you nominated a fault and the mortgagor cures it by paying, section 57(4) of the Act provides:

Where a notice is served under subsection (2)(b) and the requirements of the notice are complied with within the time applicable to the notice under subsection (3)(d), the default to which the notice relates shall be deemed not to have occurred.

So if you take the facts of this case and assume, as an example, that the mortgagee transferred the mortgage to a third party in the middle of the statutory period that was given under the 57(2)(b) notice, the third party says, well, you may have paid $67,000 in respect of January but the mortgage I bought says “the blank day of March and the blank day of September” is the day for due payment; pay me.

TOOHEY J:   Yes, but that is not the situation.  We are not dealing with a third party.  This is a special leave application and you use the expression “cured”, and it was in that context that I asked you whether rectification really did not involve curing the defect, as having the effect that there was no defect in the notice.

MR RARES:   Justice Clarke took that view, I think, at about line 20 on page 64.  He said:

In these circumstances the effect of that order ‑

the rectification -

was to destroy any attack on the notice based upon an asserted misdescription of the default.

But that is not so because firstly, the rectification order occurred a year or two years after the default.  What the Court of Appeal is saying in this case - and one has to put oneself in the ordinary course of flow of conveyancing transactions in New South Wales.  If you issue a notice the mortgagor has to know that when he pays it is going to cure the default.  Here, as one has in many cases, there was not any opposition at the trial to the rectification order but, in many cases, your Honours, there is a genuine dispute between parties as to whether rectification should be granted.

TOOHEY J:   I understand that, but what you are saying seems to make this a not particularly appropriate case to deal with the question of principle.

MR RARES:   But the question of principle is really whether the requirements of section 57 are mandatory and whether any misdescription, or at least any substantial misdescription, of the default ‑ ‑ ‑

MASON CJ:   What is your submission on that?  Any misdescription or substantial misdescription?

MR RARES:   Your Honour, I can put it either way, but obviously the question of importance for the Court is going to be a substantial misdescription.  If there is a typographical error, we do not suggest that that would vitiate it, but this was not a typographical error.

MASON CJ:   But once you contend for a substantial misdescription and concede that there may be misdescriptions that do not have an invalidating effect, that takes you into the area of fact and degree.

MR RARES:   Your Honour, we would primarily put it “any misdescription with respect to the default relied upon”.

BRENNAN J:   That is inconsistent with the concession you made in Part 3, paragraph 1(c) of your outline.

MR RARES:   I accept that.  If I am not allowed to withdraw that concession, to take the point that your Honour the Chief Justice puts, in this case you have a misdescription which requires rectification in order that the notice could be made valid, because that is what Justice Clarke says.  Now, if you have got such a misdescription, it obviously raises the question of principle, it is an important point - it is like a bankruptcy notice or some other provision that triggers somebody’s right to sell another person’s property ‑ ‑ ‑

BRENNAN J:   But there is no doubt about the statutory conditions which are expressed as conditions enlivening, when satisfied, the right to sell.  The question is simply whether or not this notice satisfies those statutory conditions.

MR RARES:   But the question really is whether misdescriptions can affect the validity of the notice.

BRENNAN J:   Of course, and it is undoubted that some can and some do not.

MR RARES:   But the real problem is, if the principle here is right, it means that even in a case where you need rectification, the misdescription does not vitiate the notice.  Now, how do mortgagors know whether to comply or whether not to comply, and whether if they do comply, they will get the benefit of 57(4) which is their important right to say the default then is deemed not to have occurred.  Because that is the critical thing, the critical benefit the mortgagor gets from complying with the notice, like complying with a bankruptcy notice, which are also strictly construed but have, in the Bankruptcy Act in section 306 where you get the power of the court to waive irregularities.  There is no such similar provision in the Real Property Act with respect to this.

BRENNAN J:   Now, in this case, if the payment had been made pursuant to the notice and the mortgagee had sought to enforce the power of sale despite the payment, what would the position of the mortgagor have been?

MR RARES:   Well, the mortgagor would have had an equity or an equitable right to stop it.

BRENNAN J:   That is right.

MR RARES:   But that does not determine the principle for which the Court of Appeal’s judgment will stand as a precedent in ‑ ‑ ‑

BRENNAN J:   Just that it seems to me that the most you can raise this case to is a question of whether or not a present notice in the circumstances of the case is

one of a non-complying disparity between the notice and the registered instrument.

MR RARES:   Yes, but that is something that comes up in practice frequently, and this is a major discrepancy which, as I say, requires rectification.

BRENNAN J:   What is the question of principle?

MR RARES:   The question of principle is what do people do in the ordinary course of dealing with these kinds of notices.  I mean, banks - frequently parties send out ‑ ‑ ‑

BRENNAN J:   What is the question of principle of law for which you contend?

MR RARES:   That the notice of default in a section 57 notice must stipulate a term of the mortgage or stipulate precisely the default relied on and that no substantial misdescription of that default should be permitted. Unless that happens, people will not be able to have the certainty which the statute and the statutory scheme was intended to give them.

Your Honours, those I think really - there are questions in the judgment under appeal which would come up, but they all depend, for example there was a question of this new agreement that was supposed to have been made. If we are right that there was no valid section 57(2)(b) notice, then no agreement can be made and no estoppels can arise, in our submission.

MASON CJ:   Thank you, Mr Rares.

MR RARES:   I wonder if I might trespass.....There is one other point.  Another way of putting it is that it is a precondition of the right to exercise a power of sale that you have a default in the mortgages registered and that when the misdescription as we had in this case was of something that was not registered and could not be implied in the mortgage, because it was obviously discordant with it, it could not enliven the power of sale.

MASON CJ:   Thank you, Mr Rares.  The Court need not trouble you, Mr McCarthy.

The applicant seeks to challenge the primary conclusion of the Court of Appeal that the expression of default in the notice given by the respondent under section 57 of the Real Property Act (NSW) 1900, though it involved misdescription, complied with the section.  Whether the notice complied with the section, that is whether the misdescription resulted in invalidity, in our view raises no question of general principle requiring the grant of special leave.  The application is therefore refused.

MR McCARTHY:   I ask for costs, your Honour.

MASON CJ:   You do not oppose costs, Mr Rares?  The application is refused with costs.  The Court will now adjourn until 2.15 pm.

AT 12.50 PM THE MATTER WAS CONCLUDED