Appellants v Respondents

1 Before the Court is an appeal from the judgment and orders made by an Associate Judge on 27 May 2015, dismissing an application brought by Native Bond Pty Ltd and N Sevdalis Pty Ltd by Originating Process filed 2 February 2015. His Honour delivered reasons for judgment on 13 May 2015.[1] The plaintiffs had made an application pursuant to s 418A of the Corporations Act 2001 (Cth) for orders declaring the appointment of the first and second defendants, Anthony Robert Kant and Simon Patrick Nelson respectively, as receivers and managers of the whole of the assets and undertaking of the first and second plaintiffs, to be invalid.

2 Section 418A provides:

(1) Where there is doubt, on a specific ground, about:

(a) whether a purported appointment of a person, after 23 June 1993, as receiver of property of a corporation is valid; or

(b) whether a person who has entered into possession, or assumed control, of property of a corporation after 23 June 1993 did so validly under the terms of a security interest in that property;

the person, the corporation or any of the corporation's creditors may apply to the Court for an order under subsection (2).

(2) On an application, the Court may make an order declaring whether or not:

(a) the purported appointment was valid; or

(b) the person entered into possession, or assumed control, validly under the terms of the security interest;

as the case may be, on the ground specified in the application or on some other ground.

3 The appointments were purportedly made by the third defendant, Gulf Country Investments Pty Ltd. The plaintiffs also sought a declaration that, as at 28 May 2014, and at the date of judgment, there was and is no debt owed by them to Gulf.

4 The receivers and Gulf were separately represented. The receivers adopted the submissions of Gulf as to the validity of their appointment but sought, as a backstop remedy, an order validating their appointment under s 1322(4) of the Corporations Act. The application to validate the appointments was made by interlocutory process filed on 4 September 2015, supported by the affidavit of Simon Patrick Nelson, sworn the same day. The receivers also filed a notice of contention seeking the same relief.

5 By a loan agreement dated 23 November 2011, Gulf advanced to N Sevdalis Pty Ltd, Nicholas Sevdalis and Native Bond Pty Ltd the sum of $1,221,518.10, repayable with any outstanding interest and bank charges 'on or about the 23 February, 2012 ... or earlier by mutual agreement'. The purpose of the loan was to facilitate repayment of an earlier loan from Optima Funding Pty Ltd. Under the Gulf loan agreement, the borrowers agreed to pay interest at the rate of 6 per cent per month, payable on the settlement date as directed by the lender. In the event of default, the borrower was required to repay principal and interest calculated from the date of default at 8 per cent per month, calculated daily.

1. The Lender has the right (at its discretion) to lodge Caveats over the Borrowers properties situate at the following:

(a) 110 Riversdale Road, Hawthorn more particularly described in Certificate Title Volume 06190 Folio 928 [owned by Sevdalis]

(b) 242 Station Street, Fairfield more particularly described in Certificate Title Volume 08045 Folio 855 [owned by Sevdalis]

(c) 24 Hartington Street, Northcote more particularly described in Certificate Title Volume 03842 Folio 211 [owned by Native Bond]

(d) 200 Smith Street Thornbury more particularly described in Certificate Title Volume 11065 Folio 251 [owned by Sevdalis]

(e) 2026 Donnybrook Road, Yea more particularly described in Certificate Title Volume 10353 Folio 339 [owned by Sevdalis]

(f) 895 Yan Yean Road, Doreen more particularly described in Certificate Title Volume 08580 Folio 808, Volume 11106 Folio 233 [owned by Native Bond] and Volume 10300 Folio 203 (also known as 880 Bridge Inn Road Doreen and 35 Garden Road, Doreen) [owned by Sevdalis]

(g) 331 Heidelberg Road, Northcote more particularly described in Certificate Title Volume 10090 Folio 379 [owned by N Sevdalis Pty Ltd]

(hereinafter called the 'Secured Properties').

1. To further secure the Principal Sum the said Borrower Companies N.SEVDALIS PTY LTD and the NATIVE BOND PLTY LTD hereby gives consent to the Lender to lodge a charge both fixed and floating over the assets both real and personal of the said Borrower Companies shall sign all necessary documents to enable the Charges to be registered with ASIC.
2. Further, where there is a default in the payment of the Principal sum and any interest outstanding on the settlement date the lender may exercise its rights to foreclose over the secured properties (as set out in Paragraph 4) and the property against the Borrower Companies by giving the each respective party a notice in writing giving them 14 days notice to rectify the said default as specified in the notice otherwise the Lender may exercise its rights of foreclosure without further notice to the parties.

7 By a Deed of Fixed and Floating Charge, dated 23 November 2011, Native Bond and N Sevdalis Pty Ltd, as mortgagors, granted to Gulf, as mortgagee, a fixed charge over the 'fixed charge property', which included properties listed in cl 4 of the loan agreement, and a floating charge over the 'floating charge property', defined as all other property or assets of the mortgagor from time to time which are not 'fixed charge property'. Under cl 19 of the charge, the mortgagee had a power to appoint a receiver in the event of default. It was common ground that a default had occurred. The obligation secured by the charge was repayment of 'all amounts owing to the mortgagee under the loan agreement dated 23 November 2011'.

8 Under a Management Agreement dated 15 September 2011, Kim Douglas Jennings and Gulf engaged and appointed David Arthur Graer and Hakel Investments Pty Ltd to provide certain services in relation to 'money invested by Gulf'. The services included:

(f) Management of loan repayment;

(g) Collection of loan;

(h) Managing any default and enforcement of any security;

9 By further Deed dated 21 March 2013, Gulf assigned to Downtown Visuals Pty Ltd the outstanding amount due under the loan agreement, being the sum of $396,365.06, which included accrued interest. The deed provided:

In consideration of payment of the amount Owing to Gulf by Downtown on the Settlement date, Gulf will absolutely and unconditionally assign all of its beneficial and legal interest in the loan, subject to clause 2(b), without limitation to Downtown.

The reference to cl 2(b) is ambiguous, and probably incorrect. Gulf suggested that the reference was erroneous. It submitted the clause ought to have made reference to cl 1(b), which provided for a flat rate of 3.5 per cent interest on the loan, leaving a little less than half the interest to be retained by Gulf.

10 Following the borrowers' default, a Notice of Default, dated 10 December 2013, was served on the borrowers. The notice provided:[2]

WHEREAS you the said N.SEVDALIS PTY LTD ACN:006 606 506, NATIVE BOND PTY LTD ACN:074 817 799 and NICHOLAS SEVDALIS ("the Borrowers") have entered into a Loan Agreement dated 23 November 2011 with Gulf Country Investments Pty Ltd ABN: 27 149 485 478_. By a Deed of Assignment dated the 21 March 2013 the loan was assigned to Downtown Visuals Pty Ltd_ ACN:082 850 842 ("the Lender"). Pursuant to clause 4 of the said loan Agreement you offered as security for the payment of the funds advanced to the properties situate at the following:-

(a) 110 Riversdale Road, Hawthorn more particularly described in Certificate Title Volume 06190 Folio 928

(b) 242 Station Street, Fairfield more particularly described in Certificate Title Volume 08045 Folio 855

(c) 24 Hartington Street, Northcote more particularly described in Certificate Title Volume 03842 Folio 211

(d) 200 Smith Street Thornbury more particularly described in Certificate Title Volume 11065 Folio 251

(e) 2026 Donnybrook Road, Yan more particularly described in Certificate Title Volume 10353 Folio 339

(f) 895 Yan Yean Road, Doreen more particularly described in Certificate Title Volume 08580 Folio 808, Volume 11106 Folio 233 and Volume 10300 Folio 203 (also known as 880 Bridge Inn Road Doreen and 35 Garden Road, Doreen)

(g) 331 Heidelberg Road, Northcote more particularly described in Certificate Title Volume 10090 Folio 379

AND WHEREAS you have defaulted under the terms of the loan and as follows:

You have defaulted under your loan and Mortgage because you have failed to pay the sum of $385,649.56 being the principal and interest on the due date being when it became due and payable. Penalty interest at a rate of 8% per month on the Principal Sum is now payable from the due date until the said sum is repaid calculated at $1014.31 per day.

NOW TAKE NOTICE that you are hereby required to pay the total amount of $704,142.90 being the monies owing under the Loan Agreement as defined above (including the principal sum of and interest owing as at the date of this Notice) within 14 days after service of this Notice pursuant to Clause 7 of the said Loan agreement.

AND FURTHER TAKE NOTICE that if you fail to comply with this Notice by paying the above amount within 14 days after service of this Notice, legal proceedings will be instituted against you without further notice and the Lender will proceed to obtain judgement against you personally and thereafter take possession of the properties listed above and secured by the Loan Agreement and if necessary pursuant to Clause 7 of the said Loan Agreement sell up the said properties to recover the total amount owing and costs.

DATED the 10 day of December 2013.

Graer signed the notice 'on behalf of the Lender by its Authorised Officer'. The debtors did not comply.

11 By Notice of Appointment of Receivers and Managers, dated 28 May 2014, Gulf purported to appoint the receivers pursuant to the charge. The Notice was 'signed for and on behalf of [Gulf] pursuant to SubSection 127(1) of the Corporations Act 2001 by its duly authorised officers'. It was common ground that Graer's execution of the document, as if a sole director, did not comply with the requirements of s 127(1) of the Act. There were two directors of Gulf. The other director was Jennings.

12 By their notice of appeal, dated 10 June 2015, the appellants relied on the following grounds:

(a) the notice of default dated 10 December 2013 (the Notice of Default) constituted express notice of the assignment to Downtown Visuals Pty Ltd (Downtown) of the debt owing under the loan agreement dated 23 November 2011 between the plaintiffs and their director on the one hand and Gulf on the other (the Debt); but

(b) the Notice of Default did not constitute express notice of the assignment to Downtown of the rights of Gulf under the deed of charge dated 23 November 2011 (the Deed of Charge) and the legal remedies which were incidents thereof (including the right to appoint a receiver);

(2) His Honour failed to find that the Notice of Default constituted express notice of the assignment to Downtown of the rights of Gulf under the Deed of Charge and the legal remedies which were incidents thereof;

(3) By reason of the matters stated at paragraph (1)(b) above, his Honour found that the Deed of Charge and the legal remedies which were incidents thereof had not been assigned to Downtown pursuant to section 134 of the Property [L]aw Act 1958 (Vic);

(4) His Honour found that:

(a) at 28 May 2014, David Graer (Graer) was authorised, as an individual, to appoint the Purported Receivers on behalf of Gulf;

(b) Graer's signature on the notice of appointment of the Purported Receivers dated 28 May 2014 (the Notice of Appointment) was effective as an act of Gulf; and

(c) by reason of the matters stated in paragraphs (a) and (b) above, the appointment of the Purported Receivers by Gulf was validly made;

(a) at 28 May 2014, David Graer (Graer) was not authorised, as an individual, to appoint the Purported Receivers on behalf of Gulf;

(b) Graer's signature on the Notice of Appointment was not effective as an act of Gulf; and

(c) by reason of either of the matters stated in paragraphs ... and (a) above, the appointment of the Purported Receivers was not validly made;

(6) His Honour found that the plaintiffs had abandoned the ground of challenge to the appointment of the Purported Receivers that the signing of the Notice of Appointment by Graer was done in bad faith, by reason of the fact that he had no authority from Downtown, as legal owner of the Debt, to sign the Notice of Appointment, when the plaintiffs had not abandoned that ground;

(7) His Honour should have found that the signing of the Notice of Appointment by Graer was done in bad faith, by reason of the fact that he had no authority from Downtown, as legal owner of the Debt, to sign the Notice of Appointment, and that the appointment of the Purported Receivers was invalid as a result.

13 The parties approached the appeal, and the grounds set out in the notice, as if raising two substantive questions - the scope of the assignment, and the validity of the notice of appointment. The appellants abandoned grounds (6) and (7).

14 While the existence of the debt was challenged in another proceeding, the appellants sought a declaration in this proceeding that 'as at 28 May 2014, and the date of judgment, there was and is no debt owing by the plaintiffs to Gulf'. The appellants contended that, as a consequence of the assignment of the debt to Downtown, the appellants were no longer indebted to Gulf. Thus, a question before the Associate Judge was whether Gulf's rights under the Deed of Charge had been completely assigned to Downtown at law, as well as in equity.

15 Also before the court on the appeal was the interlocutory process, filed on behalf of the receivers, by which they applied under ss 418A and 1322(4) of the Corporations Act for an order declaring their appointments valid. Under s 1322(4) of the Corporations Act, the court may, on application by an interested person, declare an act by a person is not invalid by reason of any contravention of a provision of the Act or the constitution of the corporation.

16 The appellants contended that the Notice of Default gave them express notice of the assignment of the debt, and of rights under the loan agreement and charge; alternatively, by operation of s 134 of the Property Law Act 1958 (Vic) all remedies which were incidents of the debt, including the right to appoint a receiver. They contended that the power to appoint a receiver could only be exercised by the assignee. Accordingly, at the time it purported to make the appointments, Gulf no longer had the right to do so.

17 Section 134 provides:

Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to claim such debt or thing in action, shall be and shall be deemed to have been effectual in law (subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice -

(a) the legal right to such debt or thing in action;

(b) all legal and other remedies for the same; and

(c) the power to give a good discharge for the same without the concurrence of the assignor:

Provided that, if the debtor, trustee or other person liable in respect of such debt or thing in action has notice -

(a) that the assignment is disputed by the assignor or any person claiming under him; or

(b) of any other opposing or conflicting claims to such debt or thing in action -

he may, if he thinks fit, either call upon the persons making claim thereto to interplead concerning the same, or pay the debt or other thing in action into court under the provisions of the Trustee Act 1958.

18 The respondents had argued before the Associate Judge that while the assignment of the debt may have been complete in equity, it was not complete at law. They argued that the charge had not been assigned. Thus, Gulf retained the power to appoint a receiver. The Associate Judge accepted the respondents' submission, holding that there had been no assignment of the charge, and consequently, no express notice of such an assignment. His Honour said:[3]

A Deed of Charge and a loan agreement are two different documents with separate terms and obligations. For there to be express notice of the Deed of Charge, there must be an express intention to assign the charge, rather than an inference that the charge has been assigned. True, the Loan Agreement refers to the charge, but there has not been express notice that the charge has been assigned. The Notice of Default is not sufficient to pass with it the legal remedies which are incidents of the deed of charge, including the right to appoint a receiver. The plaintiffs therefore fail on this ground.

19 The appellants contended that the loan agreement and charge should be viewed as a suite of documents, because the terms of the loan agreement required the appellants to execute the charge. Thus, the charge became incorporated into the loan agreement and, as a consequence, all rights under the charge passed with the assignment, express notice of which was given by the Notice of Default.

20 The appellants contended in the alternative that the power to appoint a receiver fell within the scope of 'all legal and other remedies' in paragraph (b) of s 134 of the Property Law Act. Thus, they argued, the Associate Judge erred in finding that the Notice of Default was 'not sufficient to pass with it the legal remedies which are incidents of the Deed of Charge, including the right to appoint a receiver'. The appellants contended that the right to appoint a receiver was an incident of the debt, because a receiver was appointed to sell property in satisfaction of the debt, and the appointment of a receiver was dependent upon the existence of a debt.

21 The appellants formulated their submission in two ways. The first depended on the 'suite of documents' argument to contend that the assignment, notice of which was given in the Notice of Default, included the powers under the charge. In the alternative, they contended that the 'express notice in writing' of the assignment of debt transferred the right to appoint receivers, whether or not the charge was taken to have been assigned.

22 The appellants argued that the phrase 'legal and other remedies' had a plain meaning, and included such remedies as the appointment of a receiver over secured property. They relied on the judgment of Lord Esher MR in Reid v Brown.[4]

23 The respondents contended that the Deed of Assignment did not purport to, and did not effect, an assignment of the mortgagee's rights under the charge. They drew a distinction between the situation in which an assignment of a mortgage will, by implication, assign the debt.[5] They relied on the proposition expressed by the learned author of Commercial Law,[6] that where a debt is transferred without mention of the mortgage, the transferor holds the mortgage as trustee for the transferee, who thus becomes entitled to it in equity.

24 The question as to whether the security was assigned under the Deed of Assignment is a matter of construction of the deed. Clause 2(b) confined the assignment to the loan, which was defined in the recitals as the 'Loan Agreement in writing dated the 23 November 2011'. What was assigned was the right to receive the benefit of the loan agreement, or so much of it as was assigned. Under cl 5 of the loan agreement the lender was entitled to lodge a charge over the assets, both real and personal, of the 'Borrower Companies', each of whom agreed to facilitate registration of the charge. As further security, under cl 7 the lender was entitled to 'exercise its rights to foreclose over the secured properties (as set out in Paragraph 4) and property against the Borrower Companies ...'.

25 In my opinion, these clauses do not assist the appellants' case. Insofar as the loan agreement incorporated security rights, they authorise certain action by the 'Lender', who is defined as Gulf. Assuming such rights to have been assigned to Downtown, in addition to the debt, cl 7 appears confined to security rights granted under paragraph 4. The charge granted by the corporate borrowers was confined to different property - the property of the 'Borrower Companies'. This distinction is material, because most of the properties listed in paragraph 4 were not owned by the 'Borrower Companies'. There was a material distinction between the scope of the charge to be granted under cl 5 and the 'rights to foreclosure' under cl 7.

26 The existence of a separate charge, granted under cl 5, which covered different property than that listed in paragraph 4, points to an intention of the parties, objectively ascertained, to differentiate between the security granted under cl 7 the loan agreement and the security granted by the charge, given pursuant to cl 5. The absence of any reference in the Deed of Assignment to the charge must be taken to have been deliberate. In my opinion, the parties to the assignment did not intend to assign the charge and the particular rights granted thereunder.

27 Moreover, the true scope of the assignment, and the rights and remedies passed thereunder, cannot be augmented by the operation of paragraph 134(b) of the Property Law Act. If, upon its proper construction, the assignment did not transfer to the assignee the assignor's benefit under the charge, the assignor's rights under the charge do not pass, and are not transferred, from the date of any notice of the assignment of the debt under s 134 of the Property Law Act. If, as I have found, the assignment did not include the charge, notification under the Notice of Default of the assignment did no more than inform the debtor that the assignee was entitled to collect the debt.

28 The decision in Reid v Brown does not assist the appellants. The phrase, 'legal and other remedies', was considered by the Court of Appeal in England in the context of s 25(6) of the Judicature Act 1873, which concerned the same subject matter as s 134 of the Property Law Act. But the question before the court was quite different. Lord Esher MR drew a distinction between the phrase 'legal right' to the debt, which corresponds with the words in s 134(a), and the phrase 'legal and other remedies for it', which corresponds with the words of s 134(b). His Lordship was dealing with a submission to the effect that the phrase 'legal right' was equivalent to the phrase 'legal and other remedies'. As his Lordship pointed out, if that were so, there would exist a 'mere tautology'. His Lordship distinguished between the debt as property and the right to sue for the debt.

29 In the present case, the source of the right to appoint a receiver is found in the charge. There is a material difference, in my view, between a right to sue, conferred by assignment in writing 'of which express notice in writing has been given to the debtor', and a right to appoint a receiver over property charged to secure the debt.

30 In Morley v Morley,[7] Sir John Romilly MR emphasised the difference between debt and security, in a case where the assignment of a debt expressly excluded the security from the assignment. In the present case, the security was not expressly excluded, but nor was it expressly mentioned. The significance of the judgment in Morley's case is to recognise the independence, rather than interdependence, of the rights under the loan and the security. A proposition to the same effect, as that advanced by the learned author of Commercial Law, is found in Fisher & Lightwood's Law of Mortgage.[8]

31 By the Notice of Default, the debtors were advised that 'the loan was assigned'. That is the extent of the express notice in writing of the assignment. The 'legal and other remedies' relate to the 'debt or thing in action' in paragraph 134(a). Relevantly, the remedy included the right to recover the debt. It did not include rights under the charge, which was not assigned.

32 The appellants have not established any error by the Associate Judge concerning the scope of the assignment and the right of the mortgagee to appoint a receiver under the charge.

33 The appellants challenged the validity of the notices of appointment. They submitted that if, contrary to their contention, Gulf was authorised to exercise the security rights, and empowered to appoint receivers under the charge, Graer's execution of the notice was invalid. The appellants advanced two grounds for invalidity. First, Graer's purported execution of the documents pursuant to s 127(1) of the Corporations Act was ineffective, because he was only one of two directors of Gulf. That much was common ground. Second, Graer was not authorised under the Management Agreement.

34 The respondents relied on Graer's express authorisation under the Management Agreement. The Associate Judge found:[9]

In my view, the agreement between Mr Graer, Hakel Investments Pty Ltd and Mr Douglas with Gulf Investments authorises Mr Graer to sign a Deed of Charge. Mr Graer did sign the appointment pursuant to s 127 of the Act, which he could not do. I accept the submission that it should make no difference, because Mr Graer had the authority to sign a Deed of Appointment of a receiver and such appointments relate to the enforcement of a security.

35 The appellants argued that because Graer purported to execute the notices under s 127(1) of the Corporations Act, he must be taken to have intended to exercise that power and not some other power or exercise or some other authority. In other words, he was not purporting to exercise the power conferred under the Management Agreement. They also argued that the Management Agreement did not go so far as to authorise Graer to appoint receivers on behalf of Gulf. This was because any right Gulf had to appoint the receivers was as trustee for Downtown, the assignee of the debt. As a consequence of the assignment, there was no 'money invested by Gulf' and any power conferred on Graer could only be exercised for that purpose.

36 Alternatively, the appellants contended that the powers conferred under the Management Agreement should not be construed as extending to the execution of notices appointing receivers on behalf of Gulf, because there was no mention in the list of authorised actions, to the execution of documents on behalf of Gulf.

37 If, as I have found, Gulf was entitled to exercise the power to appoint receivers under the charge, the range of management services contracted by Gulf were apt to include that function. Services included the 'enforcement of any security'. Gulf had invested money. While its rights to the debt had been assigned, it retained a residual right to collect the debt by the exercise of the security rights, but only as trustee. Any amount recovered by Gulf under the charge would be held on behalf of Downtown, subject to any entitlement Gulf may have to some part of the interest.

38 The erroneous execution clause, referring to s 127(1) of the Corporations Act, did not invalidate the notice. Gulf did not contend that Graer was not authorised to execute the notice. The question of authority is one to be determined by reference to the objective facts, not the intention that might be inferred from the terminology.

39 The appellants have not established any error on the part of the Associate Judge in reaching his conclusion that Graer had authority to sign the Deed of Appointment.

Application by receivers under s 1322(4) of the Corporations Act

40 On the basis of the foregoing, there is no occasion to validate the appointment of the receivers. But if, contrary to my conclusion, the appointments are found to be invalid, it would be necessary to consider whether s 1322(4) is applicable, and if so, what if any order should be made.

41 The Associate Judge considered the application of s 1322 of the Corporations Act. The issue between the parties on that occasion was whether, if such relief was required, the notice of appointment was a 'proceeding under this Act'. The Associate Judge rejected that argument, drawing a distinction between an appointment under a deed of charge and something done or regulated under the Act. In any event, his Honour concluded that an application under s 1322(4) required an application by the receivers. They have now made such an application.

42 As the Associate Judge observed, the scope for the application of s 13322(4) is not confined to the existence of a proceeding. Paragraph s 1322(4)(a) is to be construed broadly and applied pragmatically, principally by reference to considerations of substance rather than those of form.[10]

43 The appellants objected to the application made by interlocutory process, at the hearing of the appeal, claiming prejudice on the grounds that they would need time to call some evidence. The interlocutory process and supporting affidavit were filed on 4 September 2015. This hearing took place on 15 March 2016. The appellants have had adequate time to file responding material.

44 The appellants contended that there was no relevant contravention to be excused. They conceded that s 127 of the Act was designed to support assumptions that might be made by persons dealing with a company, concerning the due execution of documents by the company. Section 127(4) acknowledges that the section does not limit the ways in which a company may execute a document. That being so, a failure to comply with s 127(1) may inform the extent to which a person dealing with a company may be entitled to make an assumption about due execution, but a company may be bound by the act of execution on some other basis.

45 I am of the opinion that the execution of the notice of appointment by Graer did not involve a contravention in the relevant sense. There was, of course, a question of authority. This case does not concern a question of whether an assumption of authority may be made. The parties to the appointment were Gulf and the receivers. Gulf is a party to the proceeding and does not challenge the authority of Graer to have executed the notice of appointment. The receivers support their appointment. I have also found that Graer was expressly authorised to make the appointment under the Management Agreement. In the circumstances, there is no occasion for an order under s 1322(4).

46 If it were necessary to do so, and Graer's execution of the notice of appointment was found to be in contravention of s 127(2) of the Act, I would declare the act of execution on behalf of Gulf not to have been invalid by reason of such contravention. If Graer is to be taken to have executed a notice of appointment pursuant to s 127(2) in contravention of the requirements, it was a contravention of a procedural nature. He had express authority from Gulf to take such a step. It was not suggested that Graer failed to act honestly. Presumably, further notices could be prepared and issued, if required, to correct the defect. Because I have found that Gulf was entitled to exercise the security rights under the charge, it would be just and equitable that such an order be made.

47 The appellants persisted in their application for a declaration that there was no debt owing by the appellants to Gulf as at 28 May 2014. I take that application to be predicated on the success by the appellants on their contentions in relation to the scope of the assignment, to include the charge, or that the 'express notice in writing', given by the Notice of Default, eliminated any residual right in Gulf to recover the balance of the debt through the exercise of security rights. While the debt was assigned the charge was not. Gulf retained the right to recover the debt and to exercise the security rights, including the appointment of receivers. Payment of the outstanding balance by the appellants to Downtown would, of course, have discharged the appellants' liability.

[1] [2015] VSC 203.

[3] [2015] VSC 203 [22].

[4] (1882) 22 QBD 128.

[5] Queensland Premier Mines Pty Ltd v French (2007) 235 CLR 81; [2007] HCA 53, at [57].

[6] Roy Goode, LexisNexis, Third Edition, p646.

[7] [1858] EngR 428; (1858) 25 Beav 253.

[8] E L G Tyler, P W Young and C E Croft, LexisNexis, Third Edition, at 413.

[9] [2015] VSC 203 [38].

[10] Weinstock v Beck [2013] HCA 14; (2015) 251 CLR 396 at [39].