In Bond v Hong Kong Bank of Australia Ltd (1991) 25 NSWLR 286, Gleeson J explained that the concept of reasonable time as enunciated in Bunbury Foods is directed to the mechanics of complying with the demand, not to matters such as time to obtain finance from another source or time to raise money by selling assets or any such matter. At 295, Gleeson CJ said:
"The matter was considered by Walton J in Bank of Baroda v Panessar [1987] 1 Ch 335. His Lordship pointed out that the English authorities treat the concept of a reasonable time to comply with a demand as being a rather narrow one related to giving the debtor an opportunity of implementing whatever reasonable mechanics of payment he may need to employ to discharge the debt. Where, for example, as in the present case, a very large amount of money is involved, it is evidently necessary for a debtor to pay by some form of banking transaction. The appellant, being obliged by contract to pay on demand, was entitled to such time as was reasonably necessary for implementing the mechanics of arranging the necessary bank transfers of funds: Toms v Wilson (1862) 4 B & S 442 at 443; 122 ER 524 at 525; RA Cripps & Son Ltd v Wickenden [1973] 1 WLR 944; [1973] 2 All ER 606. He was not, however, entitled to time to go out and try to borrow the money necessary to enable him to discharge his obligations.
When regard is had to what is involved in the concept of reasonableness in this context, and especially when one puts to one side any suggestion that the appellant was entitled to be given time to try to borrow the necessary funds from some third party, then the number of hours allowed by the second notice of demand was not unreasonable." (emphasis added)
In the present case, the reduction arrangements expressed with respect to FDL 1 were that there was to be repayment in full within a term not to exceed 12 months. That term, however, had ceased to apply by the time the Bank gave notice of demand on 16 December 1991.
It was put on behalf of the cross-respondents that it was a contractual term applying to the Group's overall borrowings that payment would not be called for until at least six months after the date of completion of the development and until Parras had had an opportunity to meet the market in respect of any units then remaining unsold. Clause 6 of the Mason conditions was relied upon. It was contended that, by cl 6, the Bank contracted that it would not call for payment of the indebtedness until at least six months from the date of completion of the development had expired and thereafter until Parras had had an opportunity to meet the market in respect of any units remaining unsold. It was further submitted that, in the circumstances, that would have been reasonable notice, and that anything less was not.
However, the Mason conditions which were set out in the letter of 30 August 1989 and accepted on 6 September 1989 were directed to ensuring that funds advanced would be used only for the purpose for which they were lent and that the Phontos' group would take steps to reduce the indebtedness in the various ways which were indicated. I do not read the Mason conditions as changing the basic contractual arrangements between the Bank and Parras. In particular, I do not read cl 6 of the Mason conditions as contractually extending the time before which the Bank could call for repayment of its advances. Rather, the Bank was requiring an acknowledgment that all accounts other than FDL 1 were to be treated as being "In Reduction" and that the indebtedness to the Bank would be reduced at least in the manner stated in clauses 5, 6 and 11. The letter of 30 August 1989 did not express or imply a commitment on behalf of the Bank that it would not call for payment of the sums outstanding otherwise than in accordance with the express provisions of the Mason conditions. The Bank's usual terms and conditions continued to apply.
Nor do I accept the submission put on behalf of the cross-respondents that it was an implied term of the arrangement between the parties that the cross-respondents should have a time such as six months after the date of the completion of the last unit within which to sell the units prior to the Bank's terminating its facilities and calling for payment of the amount outstanding. In the first place, I think that a concept such as reasonable time for payment is inconsistent with the general relationship of banker and customer and that the terms governing such contractual arrangements are generally to be found in the provisions expressly agreed upon. Secondly, the term as suggested by the cross-respondents is inconsistent with the position taken by the Bank which was that it was seeking payment at a much earlier stage. See, for example, the Mason conditions in the conditions of the letter of 19 October that at least four home units were to be sold by 15 December 1990, that the Cremorne units were to be put on the market on 15 December 1990 and that, if sales did not eventuate, they were to be listed for auction by mid to late February 1991. The Bank made it clear that it was seeking payment before the expiration of the period suggested by the cross-respondents.
Condition 6 of the Mason conditions required Parras to sell the Wharf Road units as soon as possible after completion and to "meet the market" in respect of any units remaining unsold after six months from the date of completion. The term "meet the market" is probably not a technical term but it conveys that the vendor must be prepared to accept whatever is the market price of the units at that time. One way of complying with the condition would have been for Parras to have put up the unsold units for auction without reserve and to have accepted whatever were the highest bids. If it is relevant, I agree with the submission put by counsel for the Bank that, if Parras had taken steps to meet the market, all units would have been sold prior to 5 November 1992, the date of the filing of the cross-claim.
Counsel for the Bank submitted that the Bank was not required to give notice of demand and that the arrangements between the parties incorporated an implied term that the total indebtedness of Parras was repayable within a reasonable time from the expiration of 19 October 1990, the date on which the Bank, in the letter I have set out above, extended the facility by a further $300,000. In my opinion, such a term is inconsistent with the ordinary relationship of banker and customer and would be so imprecise in its application that it ought not to be implied. The Bank was, in my opinion, required to give notice if it terminated the facilities.
In December 1991, the Bank had an entitlement to terminate FDL 1 at its pleasure and to call for payment of the sums due. By 16 December 1991, the Bank had done all that which it had agreed to do by way of advancing funds to enable the Wharf Road project to be completed. There was no express or implied contractual term between the parties which precluded the Bank from exercising at that point of time its right to cancel the facilities at its pleasure. The purpose for which the funds had been lent had been achieved. Nor can I see any matter of fact which would have given rise to an equitable estoppel precluding the Bank from so acting. By 16 December 1991, more than three years had passed since the facilities had been granted and drawings had been made upon FDL 1 and FDL 2. During that time members of the Phontos' group had shown an unwillingness to cooperate with the Bank by reducing the indebtedness to the best of their ability. One example was the failure of Fulanga to sell the two Cremorne townhouses, the sale of which had been a specific condition of the 1988 terms sheet, of the 1989 Mason conditions and of the 1990 letter. Another was that moneys which could have been applied to the reduction of the facilities had been used for other purposes. I am of the view that the Bank was, in December 1991, entitled to call up FDL 1 on adequate notice.
The reduction arrangements with respect to FDL 2 did not express a date for repayment but required progressive reduction and ultimate clearance from the sale of townhouses at Cremorne, from the profits which PEP then expected from contracts it had with the Housing Commission and from the profits expected from the Wharf Road development. Fulanga did not sell the townhouses at Cremorne. There were no profits from the Housing Commission contracts for they were cancelled. A sum of $3.95m was received by PEP from the Housing Commission in settlement of a claim which it made against the Housing Commission and $3m was applied to the reduction of various of the Phontos' group accounts including FDL 1 and FDL 2. There were no profits from the Wharf Road development; but the proceeds from the unit sales were applied in reduction of the debt. In December 1991 the Bank was entitled to call up FDL 2.
In my opinion, the moneys due to the Bank became due and payable on the expiration of fourteen days from 16 December 1991. The notices of 16 December 1991 were adequate to terminate the relationship of banker and customer and to render the outstanding advances due and payable. In any event, by 5 November 1992, the date when the Bank filed its cross-claim, all possible periods of reasonable time had long since expired and the Bank had made it clear both by the notices served on 16 December 1991 and by the later notices served under s 57(2)(b) of the Real Property Act that it was seeking recovery of the funds. The submission put on behalf of the cross-respondents that, at the time of the filing of the cross-claim the time for the payment of the facilities had not yet arrived, seems to me to be without foundation.
The cross-respondents allege that each of the demands and notices served in December 1991 and in January and June 1992 was waived by the Bank when, on 28 May 1992, the Bank paid $3800 from PEP's overdraft in respect of an invoice respecting work on the Wharf Road development and when, on 17 August 1992, it advanced to Parras a further sum of $4,858 for payment to Auction Centre Pty Limited for carpet which had been installed in one of the units. However, these payments were made in accordance with earlier arrangements. I do not regard them as waiving the Bank's entitlements. They constituted a tidying up of outgoings which the Bank had agreed to meet. Their payment did not indicate in any way that the Bank was not requiring payment of the sums due.
It was submitted that the demands of 16 December 1991 were not validly given for they, like the subsequent s 57(2)(b) notices, were delivered to Phontos & Associates Solicitors. It was submitted that Phontos & Associates were the solicitors acting for the cross-respondents and were not shown to have had authority to receive demands on behalf of the cross-respondents. There is no suggestion, however, that the documents delivered to Phontos & Associates did not come to the notice of the cross-respondents or that Phontos & Associates indicated that they did not have authority to receive them. In fact, Phontos & Associates acted generally for the cross-respondents. Letters were written to Michael Phontos as representative for the cross-respondents and he wrote to the Bank on behalf of the cross-respondents. The documents which required execution were passed through Phontos & Associates. I conclude that Phontos & Associates had authority to receive the demands of 16 December 1991 on behalf of the cross-respondents and that, even if the contrary were the case, the demands came to the notice of the relevant cross-respondents.
MICHAEL PHONTOS AND SPOTEK PTY LTD
Michael Phontos and Spotek Pty Ltd ("Spotek"), which was Michael Phontos' company, had overdrafts with the Bank. On the establishment of each of these overdrafts, the standard form of application, the S22 form, was executed. The terms of that form, including the condition that the Bank may from time to time at its pleasure cancel or vary the limit of the accommodation granted, were part of the terms of the arrangement.
Michael Phontos and Spotek received letters of advice approving of the overdrafts each of which provided for "annual review of the overdraft". It was the submission of counsel for the cross-respondents that this term precluded the Bank from acting at its pleasure to cancel or vary the limit of the overdraft and that a change could be made only at an annual review. I do not read the contractual documents in that way. The provision as to annual review did no more than to indicate that, at least annually, the overdraft would be formally reviewed by the Bank. It was an additional provision, not a limitation to other provisions. It did not preclude the Bank from acting at other times to terminate or reduce the overdraft as it saw fit.
A fourteen day notice calling for the payment of sums due was served on Michael Phontos on 31 October 1991. I am satisfied that the notice was adequate and made the overdrafts due and payable on the expiration of the fourteen day period. The demand of 31 October 1991 was expressed to be a demand under a security, a registered mortgage which Michael Phontos had given to the Bank, but it was a sufficient demand for payment of the moneys outstanding under the overdrafts: Turnbull v National Mutual World Bank Ltd (1992) 26 NSWLR 361.
A notice of demand was given to Spotek on 16 January 1992. I am satisfied that this notice was adequate and that the overdraft became due and payable on the expiration of the fourteen days.
On 27 June 1990, Michael Phontos had been granted a Bills Discount Facility of $50,000. In due course, a bill matured and was not met. The Bank at first transferred the indebtedness to an overdraft account and later, when the Bill Facility was not reinstated, to a Bills Matured account. In my reasons for judgment of 24 October 1997, I rejected a challenge to this course of action. The sum due ultimately formed part of the moneys claimed by the Bank in the 14 day notice given to Michael Phontos on 31 October 1991.
It has been submitted on behalf of Michael Phontos that the original terms of the Bills Disount Facility continued to apply notwithstanding that a bill matured on 28 September 1990 and was not rolled over or thereafter reinstated. It was submitted that the amount outstanding became an excess to the ordinary overdraft of Michael Phontos but was payable as to interest only for the first twelve months and as to principal in the amount of $5,000 for every six months on and from December 1991. I reject this submission. In my opinion, the Bills Discount Facility was a facility of a different character from that of the overdraft facility which had been granted to Michael Phontos. Once the bill matured on 28 September 1990 and was not rolled over or reinstated, the sums payable under the bill were due and payable by Michael Phontos and were properly so treated by being debited to a Bills Matured account.
It was submitted that the notice of 31 October 1991 was ineffective because it was merely faxed to Phontos & Associates Solicitors, which was the firm established by Michael Phontos and of which he was the principal. It was not, however, suggested that Michael Phontos did not receive the notice. Argument proceeded on the footing that the document was faxed. However, the copy of the notice of 31 October 1991 which is in evidence at Vol 7 p 348 of the agreed bundle has on it the signature of Mr BJ Gardiner, the Manager of the Commonwealth Bank at Gladesville and a date received stamp of 1 November 1991, which suggests that the notice was actually received by Phontos & Associates on that date. In my opinion, there is nothing in the point. Michael Phontos received the notice. In fact, many of the communications which passed between the Bank and the Phontos group during 1991 were faxed to and from the office of Phontos & Associates.
It was said on behalf of Michael Phontos that his guarantee was not enforceable as the Bank had failed to comply with clause 3 of the Mason conditions. I rejected this allegation in my reasons of 24 October 1997 and I need not discuss the matter again.
It was also submitted that there was a waiver of the amounts due under the overdrafts and the Bills Matured account because, during 1991, Michael Phontos from time to time either paid or offered to pay off part of the outstanding sums and some amounts were received and accepted by the Bank. It was also submitted that the demand of 31 October 1991 was waived by a payment by Michael Phontos of $5,000 on 27 December 1991. I see nothing in the acceptance by the Bank of moneys in partial discharge of the outstanding indebtedness which amounted either to a waiver of the Bank's contractual rights or to a waiver of the demand for payment it made on 31 October 1991. Nor do I see any matter by way of waiver arising out of a payment made to LJ Hooker on 3 December 1991 and an offsetting credit made on 19 December 1991. The fact that there is an agreed dealing on an overdraft after it has been called up does not of itself demonstrate a waiver of an earlier demand for payment. The demand for payment having terminated the overdraft facility, there could be no further transaction thereon without consent.
PEP
PEP had an overdraft with the Bank. By reason of the signing of the S22 form, it was a condition of the overdraft that the Bank may, from time to time at its pleasure, cancel or vary the limit of the accommodation granted. In my opinion, the notice given to PEP on 16 December 1991 was adequate notice which made the overdraft due and payable on the expiration of the 14 day period. For the reasons I have already mentioned, I am of the view that the Bank was not restricted in its contractual arrangements to reviewing, cancelling or varying the limit of the accommodation granted only at the time of a formal annual review of the overdraft.
On 5 December 1991, the Bank advanced a further $25,000 to enable the first mortgagee on the home owned by Peter and Elli Phontos to be repaid. This sum was debited to PEP 2 which was the overdraft which was then operated by PEP. It was submitted on behalf of the cross-respondents that this sum of $25,000 should have been debited to FDL 2. A purpose of FDL 2 specified in the terms sheet was to "refinance existing facilities with ... a private mortgage." However, the total amount of FDL 2 had been used to pay out the ANZ. PEP was the building company which had been established to take over the business which had been conducted by Peter and Elli Phontos. They were the shareholders and Peter Phontos was the principal director of the company. I assume that the $25,000 had been borrowed to assist PEP in its business activities and had been used for that purpose. I assume that Peter Phontos drew a cheque or obtained a bank cheque on PEP's overdraft and that this was paid. I conclude that the $25,000 was debited to PEP's overdraft with its authorisation.
The principal point made in relation to this was, as I understand it, that the $25,000 was not payable before FDL 2 became payable. In view of my other findings, this point is irrelevant. However, I should specifically say that, in my opinion, if the $25,000 was debited to PEP's overdraft with the authority of PEP, as I conclude that it was, then payment of the sum was due when the overdraft was called up.
DOVIZO PTY LIMITED
Dovizo Pty Limited ("Dovizo") granted a mortgage on 2 May 1990 which supported advances and accommodation granted or to be granted to Parras, PEP, Phontos Investments, Ilanz and Fulanga. Dovizo was not asked to and did not execute a guarantee but I see no significance in this as the mortgage incorporated memorandum T340042 and this memorandum contained the conditions as to payment which I have already set out. It was alleged that Dovizo was under no liability to the Bank and that its mortgage was ineffective because of the lack of a guarantee. I see no substance in this point.
It was also submitted that the notice given to Dovizo on 16 December 1991 was ineffective both because the name of Dovizo was spelled "Doviso Pty Limited" and because the notice was in a form similar to that served on many of the other cross-respondents and referred to a guarantee dated 15 September 1988. That guarantee did not exist. In my opinion, the error in the name was of no significance and the reference to the guarantee, although it was an error, would not have mislead Dovizo as to what payment was called for. The notice made it clear that the sum was demanded under the mortgage of which particulars were given.
It was also alleged that the notice which was served on Dovizo under s 57(2)(b) of the Real Property Act on 30 January 1992 was ineffective because the name of the company was misspelt as "Doviso Pty Limited". However, as the mortgage and the secured property were specified, the notice was not ambiguous.
Dovizo, like the other mortgagors, had earlier been served with the notices of 16 December 1991. In any event, the notices of 16 December 1991 and of 30 January 1992 were a sufficient demand under the mortgage to validate the s 57(2) notice which was served on Dovizo on 18 June 1992.
INTEREST
The cross-respondents contend that the amounts charged for interest were not repayable until all the principal had been repaid. However, that was not the agreement between the parties. Under FDL 1, interest was to be capitalised, that is added to the capital and repayable with it. The terms sheet provided that there was to be "Capitalisation of interest during construction and marketing stages (say nine months), subject to the ceiling limit of $2,600,000 not being exceeded." When the Bank, by the notices of December 1991, called for the payment of moneys outstanding, it claimed and was entitled to claim payment of the total indebtedness.
The Mason conditions of 30 August 1989 contained requirement 8 that "interest to be met as charged each quarter commencing September 1989." This was an unrealistic condition at the time it was imposed. It was not met and it was not enforced by the Bank, although Mr Mason regarded the default as an example of the cross-respondents' failure to comply with the conditions. If the matter were significant, I would regard the Bank's later conduct as amounting to a waiver of or an abandonment of this condition. The Bank continued to advance moneys under FDL 1 and, subsequently, twice increased the amount of the facility without requiring payment of interest in accordance with the provision.
Under FDL 2, no provision for the payment as distinct from the charging of interest was expressed. In my reasons for judgment of 24 October 1997, I indicated that I considered that, in the absence of a demand, payment of interest when charged was not required. No such demand was made.
The cross-respondents have claimed that interest was incorrectly calculated. From 20 September 1988 to 1 July 1993, interest was charged quarterly. However, as from 1 July 1993, interest was charged monthly. The rate of interest charged from 1 November 1994 to date was the standard margin/small business loans per annum rate which was charged at monthly intervals. This rate itself took account of monthly charging. The cross-respondents allege that, in the absence of evidence from the Bank to show that the change from quarterly to monthly charging was appropriate, the Court should make an adjustment for the charging of interest at quarterly intervals. However, the interest charged was the standard rate for loans of the type made to Parras. As the Bank was entitled to vary its interest rates from time to time, I see no error in the change made.
It is alleged that interest was wrongly debited to the overdrafts of Michael Phontos and Spotek at "Troublesome Rates" over the whole loan and that this was done without notification. I see no reason why the Bank should not, in its discretion, have applied its Troublesome Rates to these overdrafts. The maintenance of the overdrafts involved the Bank in constant supervision. The Troublesome Rate was a rate of interest 2.75% in excess of the standard rate and was applied to the overdrafts of Michael Phontos and Spotek from 19 November 1991 to date.
Counsel for the cross-respondents relied upon the fact that the Bank's policy with respect to Troublesome Rates included the following:
"The Bank's policy at C/1 25/7 (d) [see Schedule of Attachments at p 88] states:
"Risky and Troublesome Advances
Failure on the part of a borrower to observe the terms and conditions under which accommodation has been granted separates the account from normal lending arrangements.
Managers may at their discretion apply the troublesome rate to the full balance of such accounts under their control, under written notice to the customer without indicating the reasons for the Bank's action."
(emphasis added)
It was said that the rate was imposed without any notice to Michael Phontos or to Spotek.
There does not appear to be have been any letter setting out the decision to apply the Troublesome Rates and the evidence does not disclose whether there was any oral communication with Michael Phontos about the matter. However, the bank statement with respect to Michael Phontos showed that as at 11 November 1991 the rate was 15% to $30,000 and 17.75% on the excess over that limit. The following bank statement showed, on 19 November 1991, that the rate of interest imposed was now 17.75%. Subsequent bank statements show changes in that rate. For example, the February 1992 statement showed that, as at 3 February 1992, the rate was now 16.75%. A later statement showed that, as at 30 June 1993, the rate was now 14.4%. I consider that the facts were that Michael Phontos and Spotek were kept advised of the rates of interest charged and that Michael Phontos, who was the principal director of Spotek, was aware that the rate charged was 2.75% above normal overdraft rates.
THE NOTICES UNDER S 57 OF THE REAL PROPERTY ACT
Section 57 of the Real Property Act 1900 (NSW) provides, inter alia:
"(2) A registered mortgagee, chargee or covenant chargee may, subject to this Act, exercise the powers conferred by section 58 if:-
(a) in the case of a mortgage or charge, default has been made in the observance of any covenant, agreement or condition expressed or implied in the mortgage or charge or in the payment, in accordance with the terms of the mortgage or charge, of the principal, interest, annuity, rent-charge or other money the payment of which is secured by the mortgage or charge or of any part of that principal, interest, annuity, rent-charge or other money;
...
(b) where
(i) the default relates to that payment; or
(ii) in the case of a mortgage, the default does not relate to that payment and notice or lapse of time has not been dispensed with under section 58A,
a written notice that complies with subsection (3) has been served on the mortgagor, charger or covenant charger in the manner authorised by section 170 of the Conveyancing Act, 1919;
...
(3) a notice referred to in subsection (2) complies with this subsection if:
...
(d) it notifies the mortgagor, charger or covenant charger that, unless the requirements of the notice are complied with within one month after service of the notice (or, where some other period exceeding one month is limited by the mortgagor, charge or judgment for remedying the default referred to in the notice, within that other period after service of the notice), it is proposed to exercise a power of sale in respect of the land mortgaged or charged.
....
(5) Without prejudice to any other manner in which it may be deprived of the force or effect, a covenant, agreement or condition whereby upon a default referred to in subsection (2)(a):
(a) the whole of the principal or other money of which the payment is secured by a mortgage or charge becomes payable; or
(b) a part of that principal or other money (not being a part to which that default relates) becomes payable,
has no force or effect until the powers conferred by section 58 become exercisable by reason of that default."
The power conferred by s 58, referred to in s 57(2), is a power to sell the mortgaged property.
In Websdale v S & JD Investments Pty Limited (1991) 24 NSWLR 573 at 578, Clarke JA, with whom Samuels & Priestley JJA agreed, said:
"The section (s 57) requires the mortgagee to bring to the attention of the mortgagor the particular default and to require him to make it good. It does not in terms require the mortgagee, in a case in which it is claimed that the mortgagor is in default in the payment of interest or principal, to specify the particular amount outstanding. What it requires is that the mortgagee identify the particular default or defaults."
The cross-respondents claim that the s 57 notices did not disclose the nature of the amount claimed to be due and owing, in the sense of distinguishing between principal, interest, other charges and debits or describe the covenant, agreement or condition in respect of which it was alleged that Parras was in default or identify the particular default or defaults.
However, it is not in dispute that the notices specified the indebtedness existing at the time of their service as it appeared to the Bank. As interest had been capitalised, it was not necessary that the Bank should go back through its books and calculate that which had originally been money advanced and that which had been interest charged or, indeed, to identify every item which had been added for service charges and the like. Nor do I think it was necessary for the Bank to identify the precise clause of the terms sheet under which the advances had been made. The mortgages were "all moneys" mortgages and relevantly, for the purposes of s 57 of the Real Property Act, it was the provision of the mortgage which applied.
I do not see any flaws in the terms of the s 57 notices. They appear to me to be in a standard and appropriate form. In the case of the moneys advanced to Parras, there were no such circumstances as might other cases have raised an ambiguity which would require clarification. Such a circumstance did arise in those cases where the mortgages covered moneys lent to more than one person. Thus, some notices served in June 1992 specified the moneys due by each principal debtor and the total claimed.
I do not read s 57 as bearing upon the issue as to when the sums became due by the principal debtor, Parras, to the Bank. There must be a default under the mortgage before a s 57 notice can be given. If the default is the payment of money, a s 57 notice may not be given before the sum claimed is due and payable. As Clarke JA pointed out in Websdale in his lengthy discussion at 578-9, a s 57 notice would not bring to the mortgagor's attention the existence of a particular default and give the mortgagor the opportunity of remedying that default if there was not a pre-existing default. Therefore, before a s 57 notice can be given, there must be moneys due and owing under the mortgage and default in the payment thereof. The notices served on 16 December 1991 and in January 1992 were a sufficient demand. In Turnbull v National Mutual World Bank Ltd (1992) 26 NSWLR 361 it was held that a notice served under s 57 of the Real Property Act may be effective as a demand for other purposes. In that case, it was held that a notice which was invalid for the purposes of 57(2)(b) was, nevertheless, effective as a demand for the purpose of an acceleration clause in a document other than the relevant mortgage. The s 57(2)(b) notices which were served on 18 June 1992 were, in my opinion, effective notices.
The covenant, agreement or condition referred to in s 57(5) is not any covenant, condition or agreement but one in which, upon a default, the whole of the principal of the money or a part of that principal or money becomes payable. The subsection applies to an acceleration clause. The moneys which became payable by reason of the notices served by the Bank on 16 December 1991 did not became payable under such a provision. They became payable by reason of the notice which terminated the banker/customer relationship and required payment of the amounts which had been advanced.
THE MORTGAGES AND GUARANTEES
- Demands and Notices
It was submitted that the demands made and notices served upon the mortgagors were ineffective on the ground that they were not served in compliance with cl 35 of memorandum T340042. That clause read:
"35. Any notice to be given to or demand to be made upon the Debtor or Mortgagor hereunder by or on behalf of the Bank shall be deemed to be duly given or made if it is in writing and is signed by an authorised officer of the Bank and is left at or sent through the post in a prepaid envelope or wrapper addressed to the Debtor or Mortgagor as the case may be at the usual place of abode or business or registered office of the Debtor or Mortgagor last known as such to the person signing such notice or demand or is delivered personally to the Debtor or Mortgagor ... any such mode of service shall in all respects be valid and effectual notwithstanding the date of such service the Debtor and Mortgagor or either of them may be lunatic dead bankrupt insolvent or absent from the State of domicile or usual residence of the Debtor or Mortgagor as the case may be or may be in the course of liquidation or be wound up and notwithstanding any other matter or event and any such notice or demand if sent through the post as aforesaid shall be deemed to have been received by the Debtor or Mortgagor as the case may be at the time when the envelope or wrapper containing such notice or demand would in the ordinary course of post have been delivered."
Clause 19 of the guarantees was in comparably similar terms and the submission was put that the demands made on and the notices served on the guarantors were similarly ineffective.
However, these provisions of the mortgages and of the guarantees did not limit or purport to limit the means by which demands and notices may be communicated. They merely provided a means of service which, if followed, would establish sufficient communication of the demand or notice. In the present case, it was not submitted that the cross-respondents did not receive the demands and notices which were served upon them.
It was submitted that, as the demands of 16 December 1991 and the s 57(2)(b) notices served in 1992 were sent to Phontos & Associates, Solicitors, they were not served upon the cross-respondents. For the reasons I have earlier given, I reject that point.
The law requires a creditor to make demand upon a guarantor before enforcing a guarantee if the terms of the guarantee itself so provide. See the Modern Contract of Guarantee by O'Donovan and Phillips, pp.379-80. A provision that the guarantor pay on demand all moneys now or hereafter to become owing or payable is such a provision. See Bradford Old Bank v Sitcliffe (1918) 2 KB 833; Esso Petroleum Co Ltd v Alstonbridge Properties Ltd [1975] 1 WLR 1474. However, no particular form of notice is required. In my opinion, the notices served on 16 December 1991 were a sufficient demand for they indicated that, if the principal debtor did not pay, the guarantor should pay. In any event, the notices served under s 57 of the Real Property Act in January 1992 were a sufficient demand.
The cross-respondents allege that the Bank's demands of 16 December 1991 were not effective demands for the purpose of the mortgages and the guarantees. For example, cl A1 of memorandum No T340042 which was incorporated in each of the relevant mortgages read:
"The Mortgagor will at such time or times and in such manner as may at any time and from time to time be agreed in writing between the Mortgagor and the Bank and in the absence of any such agreement on demand pay to the Bank -