Wu v Minister for Immigration and Ethnic Affairs

[1994] FCA 926

CHRISTOPHER ROBIN FISHER AND FAY ANNETTE FISHER v WESTPAC BANKING CORPORATION
LTD, GREGORY MUNRO AND RURAL ADJUSTMENT AND FINANCE CORPORATION OF WESTERN
AUSTRALIA
RURAL ADJUSTMENT AND FINANCE CORPORATION OF WESTERN AUSTRALIA v CHRISTOPHER
ROBIN FISHER AND FAY ANNETTE FISHER
No. WAG75 of 1983
FED No. 926/94
Number of pages - 12
Property

COURT

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
FRENCH J

CATCHWORDS

Property - loans - mortgages - repayment of loans - letter of priority - arrangement as between mortgagees not affecting mortgagors' obligations to mortgagees - alleged failures in attestation and material alterations to mortgages.

HEARING

PERTH, 13, 20 and 23 June 1994
#DATE 30:11:1994

Counsel for the Cross-Claimant: Mr K.M. Pettit

Solicitors for the Cross-Claimant: State Crown Solicitor

Mr M. Adams appeared by leave for the Cross-Respondents

ORDER

THE COURT ORDERS THAT:
1. The cross-claimant have possession of the cross-respondents
land being:

(a) Portion of Oldfield Location 628 and being the whole of the land comprised in Certificate of Title Volume 1848 Folio 968;

(b) Portion of Oldfield Location 638 and being the balance of the land comprised in Certificate of Title Volume 1848 Folio 552.

1. There be judgment for the cross-claimant against the

cross-respondents in the amount of $104,606 inclusive of

pre-judgment interest.

1. The cross-respondents pay the cross-claimant's costs of the

cross-claim.

1. There be liberty to apply within seven days to vary the form of

the orders to correct any error of calculation.

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

JUDGE1

Introduction
FRENCH J Christopher Robin Fisher and Fay Annette Fisher are farmers who borrowed $40,000 in 1981 and 1982 from what is now known as the Rural Adjustment and Finance Corporation (Rafcorp). They also had on foot borrowings from Westpac Banking Corporation. Only a small portion of the loan from Rafcorp has been repaid and Rafcorp now claims the outstanding principal and interest and possession of the properties covered by mortgages which secure the advance. Rafcorp's claim is brought as a cross-claim in answer to proceedings instituted by the Fishers against Westpac and Rafcorp. The cross-claim was ordered to be tried separately. The Fishers maintain that the money is not owed because Rafcorp, in effect, had the opportunity to satisfy its debt out of the proceeds of the sale of land owned by the Fishers which was covered by its securities. They also contend that there were deficiencies in the attestation of the mortgages relied upon by Rafcorp and that those mortgages were the subject of material alterations which effectively invalidated them.

Rafcorp's Cross-Claim
2. By its cross-claim in the present proceedings, Rafcorp alleges that in March 1981 and March 1982, the Fishers applied to it for drought relief loans. On 9 June 1981 it advanced $20,000 to the Fishers and a further $20,000 on 29 June 1982. These loans were both secured by mortgages over land at Oldfield Locations 631, 638, 640, 641 and 968. This much is not in dispute. Up to December 1987, Rafcorp had first and second registered mortgages over Locations 638 and 640. Westpac had a third registered mortgage. Locations 638 and 640 were on the same Certificate of Title, which was Volume 1699 Folio 288. Westpac had a letter of priority dated 20 May 1983 from Rafcorp in respect of Locations 638 and 640 to the extent of $185,000. In December 1987, the Fishers sold Location 640 to a company called Hazdot Pty Ltd and Rafcorp discharged its mortgage in respect of that land without any consideration. The proceeds of that sale went to Westpac under the letter of priority. Rafcorp inadvertently discharged its mortgage over Location 638. Westpac discharged its third registered mortgage. The Fishers admit that the Westpac mortgage was discharged. They deny that the discharge of the Rafcorp mortgage over Location 640 was without consideration and further deny that the discharge of the mortgage over Location 638 was inadvertent.

1. Rafcorp says that on 17 April 1989 it advised the Fishers of the inadvertent discharge of the mortgage and asked them to execute a replacement mortgage over Location 638 and an application for the issue of a balance of title for Location 638. It repeated that request by a letter dated 11 May 1989. The Fishers admit the letters of 17 April 1989 and 11 May 1989. Rafcorp says that the Fishers failed to comply with either of its requests for a replacement mortgage and as a consequence it lodged a caveat on the title to Location 638 on 28 June 1989. The Fishers admit the lodgment of the caveat but deny that followed from any failure on their part to comply with Rafcorp's request and deny "both any requests or any failure to comply with the same".

2. By a letter of 29 June 1989, Mark Regan Settlements on behalf of the Fishers, requested that Rafcorp discharge its mortgage over separate land, being Location 641. Rafcorp says it wrote back to Mark Regan Settlements and the Fishers on 5 July 1989. Mark Regan Settlements was told that the mortgage would not be discharged over Location 641 unless alternative security was arranged. Rafcorp's letter to the Fishers enclosed two proposed mortgages, one for Location 638 and one for Location 628 and an application for balance of title for Location 638. It advised the Fishers that Rafcorp would not discharge the mortgage over Location 641 until the previous documents which it had sent to them were executed or the loans were repaid in full. The Fishers say they do not know and do not admit the existence of a letter written by Mark Regan Settlements on 29 June 1989 and deny the authority of that firm to act on their behalf in making any request. They admit that Rafcorp wrote to them on 5 July 1989 but do not admit that it wrote to Mark Regan Settlements or that that firm was authorised to accept correspondence on their behalf.

3. Rafcorp alleges that on 11 July 1989, Mr Fisher agreed by telephone to execute and return the documents and Rafcorp agreed that it would then discharge the mortgage over Location 641 upon settlement. On 20 July 1989, according to Rafcorp and in the sight of Greg Munro, Westpac's Branch Manager at Ravensthorpe, the Fishers executed the documents and handed them to Munro. Munro is said to have signed and dated the documents including mortgages in favour of Rafcorp over Locations 638 and 628. Rafcorp says that on or about 2 August 1989, Westpac and Rafcorp verbally agreed that the mortgage over Location 638 in favour of Westpac would take priority over the Rafcorp mortgage on the same Location in order to restore the previous priority that had existed. On or about 4 August 1989, Westpac delivered to Rafcorp the Location 638 and 628 mortgages in favour of Rafcorp. At the time both mortgages had been signed by the Fishers, witnessed by Munro and bore the date 20 July 1989. Rafcorp says it subsequently altered the encumbrance box on the Location 638 mortgage to reflect its agreement with Westpac by striking out the word "NIL" and writing in lieu thereof the words "Mortgage Number dated 20/7/89 in favour of Westpac Banking Corporation stamped to secure $352,800". All these matters are put in issue by the reply filed by the Fishers. Rafcorp and Westpac attended the Office of Titles on 22 August 1989 and lodged the following documents:
   

(a) An application for balance of title for Location 638

(b) The Westpac Location 638 Mortgage; and

(c) The Rafcorp Location 638 Mortgage.

These documents were duly registered on the Register of the Office of Titles. The Rafcorp Location 638 mortgage was numbered E175559. The Location 628 mortgage is also said to have been lodged for registration at that time although that was not expressly pleaded. The Fishers admit the attendance at the Titles Office and lodgment of the specified documents and their registration at the Office of Titles, but otherwise deny the facts alleged. Rafcorp pleads the covenants contained in the mortgages over Locations 628 and 638 that the Fishers would pay, upon demand, the amount of the principal sum of the loans of $40,000 for the time being owing together with interest and to pay to Rafcorp interest on the loans half yearly on 31 March and 30 September each year. It pleads that the Fishers have failed to duly and punctually pay the half yearly interest on the loans and that only the following payments have been made to Rafcorp by the Fishers:

1. On 8 February 1983 the sum of $1,252.70

2. On 1 July 1985 the sum of $4,973.00

3. On 30 March 1992 the sum of $2,000

Rafcorp says that on 9 December 1992 it sent the Fishers, by registered post, notices of demand in respect of the mortgages for payment of the whole of the balance of the principal sum of the loans then owing, being $39,142.38, interest to that date being $53,638.25 and continuing interest at the rate of $18.93 per day until payment. The demand, it is said, has not been met. The Fishers are said to be in possession of Locations 638 and 628 and to have refused and continue to refuse to deliver up possession of that land to Rafcorp. Rafcorp claims possession of the land being Locations 638 and 628, the sum of $39,162.38 together with interest to the date of demand of $53,638.25 and interest accruing thereafter at the rate of $18.93 per day until judgment.

1. By way of answer to the cross-claim, the Fishers say, inter alia, that they admit the making of the payments alleged and admit that they are in possession of Location 638 and refuse to deliver up possession of the land. They deny they are under any obligation to do so. They contend that should it be found at the trial of the action that they are indebted to Rafcorp on its cross-claim they will seek to set off so much of their claim made in the principal proceedings as is sufficient to extinguish the cross-claim. Otherwise there is a general traverse of the cross-claim.

Factual History
7. In 1971 the Rural Reconstruction Authority was established under the Rural Reconstruction and Rural Adjustment Scheme Act 1971. It was redesignated in 1977 as the Rural Adjustment Authority, and in 1985 became known as the Rural Adjustment and Finance Corporation of WA (Rafcorp) pursuant to the Rural Reconstruction and Rural Adjustment Schemes Amendment Act 1985. The principal Act was thereafter known as the Rural Adjustment and Finance Corporation Act 1971. That Act was repealed by s.48 of the Rural Adjustment and Finance Corporation Act 1993. However, Rafcorp was preserved and continued under that name by s.4 of the 1993 Act. The functions of Rafcorp prior to 1993 included the operation of schemes of assistance placed under its control and administration. By s.15A of the 1971 Act Rafcorp was empowered, for the purposes of operation of a scheme, to take such security as the Corporation thought fit in respect of moneys advanced under the scheme by way of a loan. Under the 1971 Act, Rafcorp is capable of suing and being sued. Its corporate identity, rights and obligations were not affected by the repeal of the 1971 Act and its capacity to take and defend proceedings in its corporate name is continued.

1. Christopher Robin Fisher and Fay Annette Fisher were both the children of farmers and have been farmers all their lives. In 1977 they took up an option to purchase a property at Hopetoun, comprising Oldfield Locations 631, 638, 640, 641 and 968 subject to the sale of certain properties they held at Lake Grace. They were able to pay a deposit of $100,000 in relation to their purchase and to carry the balance on vendor's terms. Settlement of the purchase was in March 1978. In that year they transferred their bank accounts to the Ravensthorpe branch of the Bank of New South Wales, as Westpac was then known. On 26 May 1978, they became the registered proprietors of the various parcels. Securities over the land were a first mortgage in favour of Henry and Margaret Prebble and a second mortgage registered in favour of the Bank of New South Wales in February 1979. On 26 March 1981, the Fishers applied to Rafcorp for a drought relief loan and $20,000 was advanced to them on 9 June 1981. A further application was made on 16 March 1982 and a further $20,000 advanced on 29 June 1982. The 1981 advance was secured by a mortgage registered over the land. That mortgage provided for repayment of the principal and interest on 28 February 1982. The second advance, in June 1982, was secured by a further mortgage over the same land.

2. On 20 May 1983, Rafcorp, then the Rural Adjustment Authority, signed a letter of priority in favour of Westpac. In consideration of Westpac continuing to make advances to the Fishers from time to time, the Rafcorp mortgage of June 1982 was postponed to the Westpac mortgage not only with respect to money then secured by it but also with respect to subsequent advances. The total priority was not to exceed $185,000. In the course of evidence at the hearing of the cross-claim, there were questions put on behalf of the Fishers about the operation of the letter of priority. Submissions based upon opinions expressed by witnesses, however, were of little use as the document must be construed according to its terms. It was submitted for the Fishers that the receipt of moneys by Westpac from time to time when land subject to its mortgages was sold, would reduce the extent of the priority in favour of Westpac under the letter. As a matter of construction, however, this is not correct. The letter contemplates advances being made by Westpac from time to time. The limit of $185,000 is described in the letter as "the total amount to be secured as aforesaid in priority to the said mortgage...". It specifies a continuing ceiling to the priority which allows for the possibility of a fluctuating level of indebtedness affected by both repayments and further advances.

3. In May 1985, the Fishers were desirous of selling part of their land and purchasing some adjoining property, evidently Oldfield Location 628. They discussed the question of reducing the debt to Rafcorp with Brian Gregory, who was then the Branch Manager of the Ravensthorpe Branch of Westpac. He recalled a meeting on 25 January 1985 in which the Fishers discussed the proposed sale and the proposition that the proceeds would go to reduce their debt to Westpac. However, Rafcorp wrote to Westpac on 10 May 1985 saying that it required the Rafcorp debt to be cleared in full from the sale proceeds. Gregory wrote back on behalf of the Fishers on 27 May 1985. He pointed out that they had expressed surprise at the request for full repayment of the debt. He stated his belief that the proposed purchase was essential to ensure the ongoing viability of the Fishers and that Rafcorp's insistence upon full clearance would seriously jeopardise their application to Westpac for finance. He said in the letter that the Fishers had indicated that following settlement, they could possibly manage a reduction of $5,000. On 4 June 1985, Rafcorp wrote back to Gregory saying that it was prepared to accept $5,000 immediately with the possibility of a full payout after harvest. Additional priority would not, however, be entertained. The sale was settled on 1 July 1985. A settlement statement sent to the Fishers on 4 July 1985, noted a payment out to the Rural Adjustment Authority (as Rafcorp then was) of $5,000. I infer from this material and Gregory's evidence generally that the Fishers knew from May 1985 that only the sum of $5,000 was to be paid to Rafcorp from the sale of land. On 29 July 1985, the Fishers acquired Oldfield Location 628 subject to a first mortgage registered in favour of Westpac.

4. On 22 January 1986, a further letter of priority was signed by Rafcorp in favour of Westpac. It referred to Rafcorp's mortgages of May 1981 and June 1982 and the prior Westpac mortgage dated 10 August 1968. The latter date was clearly typed in error for 10 August 1978. The priority letter was in the same terms as the 1983 letter and the limit was again stated at $185,000.

5. In July 1987, Mrs Fisher was found to be suffering from cancer and the Fishers decided to sell some more of the land in order to reduce their debt and their workload. At the same time they wanted to retain as much land as they could near the Hopetoun town boundary evidently with a view to subdivision and development. In November 1987, they sold Lot 1 of Location 631 to Herekino Pty Ltd. They instructed Mark Regan, a solicitor operating a settlement agency known as Mark Regan Settlements, to act on their behalf. He acted for the Fishers on four occasions in the sale of various parts of their Hopetoun properties.

6. On 30 September 1987, Regan wrote to Rafcorp about the sale of Lot 1, advising that settlement was due for 15 November. He asked Rafcorp to advise of the amount needed to clear the debt. Frank Borrello, who was employed by Rafcorp as a securities officer, wrote to Regan on 19 October 1987 enclosing a partial discharge of mortgage document and advising that Rafcorp would not be recovering any proceeds from the sale of Lot 1 as all were to be claimed by Westpac. Rafcorp would rely on its remaining securities. Westpac wrote to Regan on 24 October advising that it would collect the total amount due at settlement because of the priority it had over Rafcorp. On 17 November 1987, Regan wrote to the Fishers enclosing a settlement statement in relation to the sale to Herekino Pty Ltd. The settlement statement itself did not show the disposition of proceeds to Westpac at settlement. Settlement was effected on 19 November 1987 and Regan attended personally. On the same day, he wrote to the Fishers confirming settlement had been effected and advising that an amount of $120,469.20 was received by Westpac on behalf of the Fishers. He went on to say:
   

"At settlement Westpac and RAFCO discharged their mortgages from the lands sold, and we attended to the registration of these together with the Transfer to the purchaser."

By a letter sent to Rafcorp, which was undated but received there on 30 November 1987, Regan advised that Westpac had collected $120,469.20 on behalf of the vendors in reduction of their debt.

1. At about the same time the Fishers also agreed to sell Locations 627, 628 and 640 to Hazdot Pty Ltd for $261,000. Location 640 was contained in Certificate of Title Volume 1699 Folio 288, along with Location 638. In a letter which was undated but received by Rafcorp on 30 November 1987, Regan referred to the sale of Location 640 and noted that the balance of the land comprised in the Certificate of Title Volume 1699 Folio 288 was to be retained by the Fishers. He requested Rafcorp to prepare a partial discharge of their mortgages for Oldfield Location 640 and to advise whether it would require any of the settlement proceeds to be paid to Rafcorp, taking into account the Westpac mortgage. In a subsequent telephone conversation with an officer of Rafcorp, Regan was advised that the proceeds were to go to Westpac. The sale had originally included Location 628, but a proposed subdivision was not approved and it was deleted from the contract. The purchase price for Locations 640 and 627 was agreed at $244,929.00. After deduction of fees and commissions the amount of $228,173.08 was available to the Fishers and their mortgagees. Settlement was effected on 4 December 1987. Regan attended. At settlement, two cheques were presented by the purchaser's representatives. One for $224,337.30 was paid to Westpac as mortgagee of the property on behalf of the Fishers, the other, a cheque for $6,000 was received by Regan to be held to cover fencing repairs. A further payment of $3,835.78 was made by Regan to Westpac as mortgagee of the property, being the balance of the deposit received from the selling agent. Regan wrote to the Fishers on 4 December 1987 enclosing a settlement statement dated 30 November 1987. Again, that settlement statement did not show the distribution of proceeds to the mortgagees. The bottom line simply set out an amount of $228,173.08 as "Due to you on settlement". The covering letter informed the Fishers that settlement was effected on 4 December and that Westpac collected the funds indicated on the settlement statement on their behalf. The letter made no reference to the application of the funds in reduction of the Westpac debt. Nevertheless, Regan contended from his conversations and correspondence with the Fishers that they were aware, prior to both settlements being effected, that Westpac was to collect all available settlement proceeds as mortgagee.

1. In connection with the sale to Hazdot, Edwin Biggs, an officer of Rafcorp, authorised the partial discharge of its mortgages over Location 640. The mortgages were discharged on 7 December 1987. Rafcorp received no proceeds from the sale of Location 640. By inadvertence, the discharges prepared for Rafcorp related to all the land on the title with Location 640. It therefore extended to Portion of Location 638, although that Location was not included in the sale. On 11 December 1987, Roger O'Dwyer a Senior Rural Consultant with Rafcorp, wrote to the Fishers seeking their confirmation that remaining land sales were proceeding and that the debt to the Corporation would be paid out in the near future. The letter said:
   

"We note one sale at $125000 with all proceeds going to Westpac, Ravensthorpe. As I understand it you have a sale of land to the Water Authority and a Contract of Sale also to be undertaken."

In a note on a copy of that letter sent to Westpac, O'Dwyer referred to the priority being reduced by "$125,000 to $60,000". Whatever that meant, it could not affect the actual operation of the letter of priority. Westpac, like Rafcorp, discharged its mortgage over all the land covered by Certificate of Title Volume 1699 Folio 288.

1. As Biggs pointed out in his affidavit evidence, the Fishers did not deny their ongoing indebtedness to Rafcorp thereafter. On 7 June 1988, Rafcorp wrote to them advising that it had not received repayment of interest totalling $6,478.57 which had been due on 1 April 1988. They were asked to remit the payment to Rafcorp within 28 days from the date of that letter. On 12 June 1988, they wrote back to Rafcorp enclosing a copy of their budget for the next 12 months and said it would be "a little longer" before they were in a position to repay. The Fishers say in their reply to the amended defence and cross-claim filed on 13 May 1994, that Rafcorp was paid in full on 23 November 1987 out of the proceeds of sale of Location 631 and that it was for that reason that it discharged its mortgage over the Locations and subsequently over the land comprised in Certificate of Title Volume 1699 Folio 288. This contention is patently incorrect as is the answer given by the Fishers to interrogatories where they said that amounts of $35,000 and $9,000 were paid to Rafcorp on 15 November 1987. Then it was said in the answers to interrogatories that the payments were made "by receipt of proceeds of settlement". The mode of payment was said to be "to Mark Regan Settlements for the use of the third respondent on the 28 November 1987 at settlement of sale of Oldfield Location Lot 1 of Location 631". This is in essence an argumentative answer which depends upon the Fishers' contentions set out in their closing submissions. These were, in summary, as follows:
   

1. Regan went to settlement with instructions to pay the mortgagees.

2. Regan paid Westpac on Rafcorp's say so not on the Fishers.

3. The Fishers had no input into the legal relations between Westpac and Rafcorp and could not be held responsible for their machinations.

4. In the broader picture, all farmers are subservient to their bankers first. The banker deals with the farmer.

5. When things become difficult for Rafcorp in its relationship with the banker (as in the case of the Fishers), Rafcorp cannot turn on the farmer.

1. Those contentions reflect a significant part of the argument that the Fishers have with Rafcorp. In substance they amount to the proposition that it was for Rafcorp to look to its own interests first and that if it chose to let Westpac take the proceeds of settlement in satisfaction of debts owed to Westpac, it cannot subsequently be heard to say that the debts owed to Rafcorp had not been paid out. It was put this way by Mr Adams representing the Fishers by leave:
   

"And Mr and Mrs Fisher after that settlement, notwithstanding that their instructions, notwithstanding that RAFCOR are first and second mortgagees find themselves now still in debt. The excuse that RAFCOR come [sic! to this Court with is that the letter of priority that they hold dictates the terms and dictates the arrangement between as to who should be paid. Well Mr and Mrs Fisher say: right, that's fine but don't come and blame us, if you want to make an arrangement between the two of you and you ought to take the money but you're not going to, you're going to give it to Westpac, that's your problem."

There is, of course, no substance in this argument. The position between Westpac and Rafcorp was governed by the letter of priority and, in any event, the Fishers own agent, Regan, was present and plainly acting within his actual or ostensible authority in agreeing to payment of the settlement proceeds to Westpac. Any suggestion that Regan acted otherwise than in accordance with his instructions is a matter between him and the Fishers and does not affect their liability to Rafcorp. In so saying, I would not wish it to be taken that there is any basis for a contention that Regan acted otherwise than in accordance with his instructions and his duty as settlement agent.

1. On 17 April 1989, Mr T.R. Streeton for Rafcorp, wrote to the Fishers advising them that the December 1987 discharge of the mortgages over the whole of the title including Portion of Location 638 had been in error. He noted that no new Certificate of Title had issued for that location and that the original Title remained in a partly cancelled state at the Land Titles Office. He enclosed an Application for the Issue of a Balance Title and replacement mortgages which he asked the Fishers to execute. On 11 May 1989 he wrote again and asked that they return the documents previously forwarded. The Fishers, in their affidavit evidence, agreed that they had received the correspondence from Rafcorp. Mr Fisher, however, said that he had telephoned Crossman of Rafcorp and told him that he would not be allowing Location 638 to be mortgaged to anyone until he could borrow funds for the development of a proposed subdivision over remaining land holdings. Whether or not the telephone conversation took place is, I think, immaterial. In the end, Rafcorp lodged a caveat over Certificate of Title Volume 1699 Folio 288 in respect of Oldfield Location 638. The caveat was lodged on 28 June 1989. The following day, Regan wrote to Rafcorp advising that he was acting on behalf of the Fishers in regard to the sale of land comprised in Certificate of Title Volume 1445 Folio 689 over which the Rafcorp mortgages remained registered. These lands were also subject to securities in favour of Westpac and AGC. Regan asked Rafcorp to prepare the discharge of their mortgage in readiness for settlement and to advise of the amount required as at settlement. Biggs responded by letter dated 5 July 1989 in which he told Regan that Rafcorp could not accede to his request for discharge of the mortgages. Those mortgages represented all of Rafcorp's securities. Since Westpac was registered ahead of Rafcorp it was assumed that all proceeds would go to the Bank at settlement. Before Rafcorp would consider the request, alternative securities would have to be arranged. Biggs also wrote to the Fishers on the same day advising them of the lodgment of the caveat and referring to the request from Regan to prepare discharges for Oldfield Location 641 in readiness for the sale of that Location to Hazdot Pty Ltd. He said that before Rafcorp would agree to discharge its mortgages over Location 641, the Fishers would have to execute mortgages which were enclosed with his letter. A fresh application for a new title was also prepared. He went on to say:
   

"If you do not wish to sign the enclosed documents, then the only possible way you can provide Hazdot Pty Ltd with clear title is to pay all the corporation's loans in full."

1. Crossman gave evidence that on 11 July, Mr Fisher rang him and told him that he did not understand why Rafcorp needed the mortgages. Crossman explained the position to Fisher who then agreed to sign and return the mortgages and the balance title application. Crossman agreed that if this were done, Rafcorp would discharge its mortgage over Location 641. In a joint affidavit sworn on 7 June 1994, the Fishers referred to the letters of 17 April 1989, 11 May 1989 and 5 July 1989 and said:
   

"As to the letters we deny that the letters had been unanswered in that Christopher Fisher had spoken to Rodger Crossman of RAFCOR expressing dismay in learning that we still owed RAFCOR monies."

They exhibited to their affidavit a note of the conversation handwritten by Crossman which recorded, inter alia, that the Fishers claimed that more land would be sold and Rafcorp paid out, their aim being to discharge all debts and have some money left over. It was also noted that the Fishers agreed to sign and return both mortgages and the title application. There was no reference to any expression of dismay in Crossman's evidence and it was the case that the Fishers were well aware from correspondence sent by Rafcorp in 1988 that it maintained the debt was still in existence. Mr Fisher's attempt to explain this in cross-examination was unconvincing. I do not accept that he was either surprised or that he expressed surprise at the continued existence of the debt to Rafcorp. In my opinion, he and Mrs Fisher were well aware that Rafcorp maintained that the debt was continuing and that they agreed, upon the basis that it did continue, to execute the mortgages and the balance of title.

1. It was the Fishers' evidence that they signed and returned the mortgages to Rafcorp unwitnessed. But according to Gregory Munro, who was then the Manager of the Ravensthorpe branch of Westpac, they signed the document in his presence on 20 July 1989, he witnessed them and sent them to Rafcorp himself. On Munro's account of it, the Fishers signed the documents at the Hopetoun supermarket. He signed them as witness to the signatures of the Fishers. One of the Fishers, he said, expressed concern that Rafcorp might act immediately under the mortgages. Mrs Fisher typed up a letter in respect of that concern. Munro said he took the documents and the letter back to his office, attached a "With Compliments" slip and sent them to Rafcorp. The letter was in the following terms:
   

"We refer to phone conversation with Rodger Crossman where by he advised that Oldfield Locations 628 and portion of Location 638 were requested to be remortgaged by us to secure the monies owed to the Corporation and that the Corporation would not bring pressures for immediate clearance of Locations on signing but were prepared to wait for proceeds from future sales for clearance. Caveat is to be lifted by the Corporation at their expense as discussed. Please note that the attached Mortgages are signed subject to these conditions."

The letter was signed by Mrs Fisher on behalf of her husband and herself. I do not accept their evidence that the mortgages had been signed by them and returned to Rafcorp prior to 20 July. That is quite inconsistent with the reference in the letter to "the attached Mortgages". Cross-examined on that point, Mrs Fisher denied that the mortgages were attached to the letter. She said "What he attached to it I don't know but I didn't attach anything to it". At one point she suggested that the reference to "attached mortgages" could have been intended as a reference to the attachment of the mortgages to the letter after it was received by Rafcorp. Asked why she and her husband would have returned the mortgages to Rafcorp unwitnessed, as she claimed, Mrs Fisher said, "Because we are in the habit of doing it, that's why". She then tried to suggest that it was a matter of pride, that they would not want to have some person outside their family know of their mortgage arrangements. Mrs Fisher did concede however, that she had signed the two mortgage documents and had intended them to reach Rafcorp and to be registered as valid mortgages. I have no hesitation in this case in accepting Munro's account of the events of 20 July 1989 as substantially correct. The Fishers gave inherently improbable evidence, contradicted by the terms of the letter itself.

1. The letter of 20 July 1989 and the two mortgages and the application for balance title, were received by Rafcorp on 4 August 1989. It is not in dispute that the Rafcorp mortgages over Locations 628 and 638 were lodged for registration at the Titles Office on 22 August 1989. By arrangement between Rafcorp and Westpac, the Westpac mortgage on Location 638 was lodged in priority to the Rafcorp mortgage. Westpac already had a first mortgage over Location 628.

2. Evidence was given at the hearing by Trevor Streeton, Securities Officer with Rafcorp, that he had corrected the land description on the mortgage in relation to Oldfield Location 628 so that it read "Portion of Oldfield Location 628". He added the words "Portion of" which reflected the true description of the land comprised in the Certificate of Title to which the mortgage applied. He also struck out the volume and folio numbers of the old Certificate of Title because new numbers would be inserted by the Titles Office after registration. He deleted the designations "whole" and "balance" and wrote the word "whole" in the column headed "Extent" on the mortgage document.

3. In relation to the mortgage in favour of Rafcorp over Location 638, he crossed out the word "Balance" and the Certificate of Title designation "Formerly 1699 288 NOW" and probably had the word "WHOLE" typed in. A blank was left for the numbers for designation of the new Certificate of Title. The word "Nil" appeared against the entry entitled "ENCUMBRANCES". He struck out the word "Nil" and inserted the words "Mortgage No. E175559 dated 20/7/89 in favour of Westpac Banking Corporation stamped to secure $352,800". Streeton explained that alterations of this kind are common on documents lodged for registration. He had been twenty years in the securities side of the banking industry.

4. I am satisfied that none of these alterations were material or had any effect upon the obligation of the Fishers to Rafcorp. In particular, there was nothing in them which affected the arrangements between Westpac and Rafcorp under which Westpac's mortgage was registered first. The entry relating to encumbrances is not a part of the mortgage document which affects the contractual relationships between the parties.

5. The terms of the mortgages required the Fishers to pay the principal sums on demand with interest and to pay the interest half yearly. They provided also, in clause 17, that one day was fixed as the period of time for which the default mentioned in s.108 of the Transfer of Land Act 1893 must continue before the power of sale could be exercised. As at 11 April 1994, the only repayments of the 1981 and 1982 advances which had been made by Rafcorp, after allowing for fee adjustments, were:
   

8 February 1983 $ 1,252.70 1 July 1985 $ 4,973.00 30 March 1992 $ 2,000.00

On 4 June 1991, 27 March 1991 and 4 March 1992, Rafcorp wrote to the Fishers requesting a payment of $2,000 as a sign of their good faith. On 17 March 1992, William Hamersley, a Senior Review Officer with Rafcorp, met with the Fishers and told them that Rafcorp must have the debt serviced. He pointed out to the Fishers that they were no longer farming and were now in effect land developers. The debts owed to Rafcorp had not been cleared by their respective maturity dates and had not been serviced. Rafcorp, he said, required at least $2,000, of which $1,000 would be attributable to each of the loans as a show of good faith. Upon that payment, Rafcorp would allow transfer of part of Oldfield Location 638 to a developer. One or other of the Fishers said that they would try to find $2,000 to pay Rafcorp to allow the transfers. At no time in this conversation did the Fishers dispute the debts or give any indication that they had been repaid or that repayment had been available. A cheque for $2,000 was sent to Rafcorp on 30 March 1992.

1. On 9 December 1992, Rafcorp issued notices of demand to the Fishers in respect of the loans. On 10 March 1993, Mr Fisher spoke to Hamersley and told him that he fully acknowledged that he owed the money. He said that he had no problems about Rafcorp's dealings with the mortgage.

CONCLUSION
27. For the reasons given above, the Fishers are indebted to Rafcorp for the outstanding balance of the principal sum and interest due under the loans. As at 9 December 1992, the amount of principal due was $39,162.38 with interest to that date of $53,638.25. Interest has continued to accrue. At the date the notice of demand issued, it had reached $53,638.25. By 19 April 1994, the total interest accrued on each of the loans was $30,931.62 for the first and $32,358.16 for the second, a total of $63,289.78. There will be judgment on the cross-claim for the principal sum and interest as at 19 April 1994. I will award additional pre-judgment interest from 19 April 1994 to today calculated at 9% on the principal sum outstanding. This yields an additional sum of $2,153.93. It is a lesser sum than if the flat rate claimed of $18.93 per day from December 1992 is applied as that does not account for falling interest rates. The total of principal and interest, including pre-judgment interest, is $104,606. There will be judgment in that amount on the cross-claim and an order for possession of Portion of Oldfield Location 628 and 638. The Fishers will have to pay the costs of the cross-claim.