Austino Wentworthville Pty Limited v Metroland Australia Limited

125; (2012) 88 ACSR 18 Santley v Wilde [1899] 2 Ch 474 Tancred v Delagoa Bay and East Africa Railway Co (1889) 23 QBD 239 Texts Cited: "Daniel's Chancery Practice", 8th ed (1914), p 187 Category: Principal judgment Parties: Austino Wentworthville Pty Limited - Appellant Metroland Australia Limited - First Respondent David Levi - Second Respondent Representation: MW Young SC - Appellant CRC Newlinds SC and DR Sulan - First Respondent EA Collins SC - Second Respondent Dixon Holmes Du Pont - Appellant DLA Piper Australia - First Respondent Addisons Commercial Lawyers - Second Respondent File Number(s): 2013/45192 Decision under appeal Citation: In the matter of Metroland Australia Limited [2013] NSWSC 98 Date of Decision: 2013-02-07 00:00:00 Before: Brereton J File Number(s): 2012/326339

Judgment 1BEAZLEY P: I agree with Barrett JA. 2MEAGHER JA: This appeal should be dismissed with costs for the reasons given by Barrett JA. Austino was not a creditor of Metroland because its chose in action had been assigned to Bank of China. That assignment was an absolute one not purporting to be by way of charge only and it was common ground that written notice of it had been given to Metroland. Accordingly, that assignment was effective at law. 3BARRETT JA: On 31 August 2012, the first respondent ("Metroland") became subject to voluntary administration under Part 5.3A of the Corporations Act 2001 (Cth). The second respondent ("Mr Levi") was appointed the administrator of Metroland. 4At a meeting of creditors of Metroland held on 5 October 2012, it was resolved by the majorities required by regulation 5.6.21(2) of the Corporations Regulations 2001 (Cth) that Metroland execute a deed of company arrangement. The deed was then executed and immediately implemented. Implementation involved the establishment of a "creditors' trust" of which more will be said presently. 5Mr Levi was the chairman of the meeting of creditors. For the purposes of voting at that meeting, he had admitted the appellant ("Austino") as a creditor of Metroland in the sum of $353,312.18. Austino was of the opinion that it should have been admitted for $2,826,496 and claimed a voting entitlement accordingly. Mr Levi did not share that opinion. 6Austino voted against the resolution for the adoption of the deed of company arrangement. It maintains that, had it been regarded, for voting purposes, as a creditor in the sum of $2,826,496 instead of $353,312.18, its negative vote would have produced a situation where the resolution was supported by a majority by number of the creditors who voted but opposed by a majority by value of the creditors who voted. Had that happened, the resolution would not have been carried by creditors' votes and the outcome would have depended on any exercise of the casting vote accruing to Mr Levi as the chairman of the meeting under regulation 5.6.21(4).

The proceedings below 7On 19 October 2012, Austino filed an originating process in the Equity Division seeking various relief against Metroland and Mr Levi. The principal claim was for an order pursuant to s 1321 of the Corporations Act that Mr Levi's decision to admit Austino's proof of debt in the sum of $353,312.18 only be modified so that Austino was recognised as a creditor in the sum of $2,826,496. The time limit imposed by regulation 5.6.26(3) for challenging the decision on the proof of debt was observed. 8That challenge was determined by Brereton J on 7 February 2013 adversely to Austino. His Honour delivered an ex tempore judgment in which he concluded that, because of a deed of assignment made in April 2011 between Austino as assignor and Bank of China Limited ("BOC") as assignee, Austino was, as at 5 October 2012, not a creditor of Metroland in the sum of $2,826,496 or at all. He ordered that the proceedings be dismissed with costs. 9The decision that Austino was not a creditor of Metroland disposed of not only Austino's challenge to the administrator's decision regarding the proof of debt (and therefore the claim under s 1321 of the Corporations Act) but also Austino's other claims brought under provisions of the Corporations Act. This was because those other claims could only be pursued by a creditor of Metroland (or, at least, a person with some sufficient interest in the company) and the decision that no sum was owing to Austino meant that it lacked standing to bring those claims.

The appeal 10Mr M W Young SC appeared for Austino on the appeal to this Court. He challenged the primary judge's conclusion regarding the effect of the deed of assignment and the decision that the deed deprived Austino of the status of creditor, whether in the sum of $2,826,496 or in any other sum. 11Mr C R C Newlinds SC (with whom Mr D R Sulan appeared) submitted on behalf of Metroland that the primary judge's decision concerning the deed of assignment was correct, as did Ms Elizabeth Collins SC who appeared for Mr Levi. 12It was (and remains) common ground that, if the deed of assignment produced a legal assignment by Austino to BOC of a chose in action owed by Metroland to Austino, the appeal must be dismissed. 13Metroland and Mr Levi say, however, that if there was in truth no legal assignment by Austino to BOC of the chose in action owed by Metroland to Austino so that Austino should have been recognised as a creditor, matters raised in a notice of contention filed by Metroland (and supported by Mr Levi) should still cause the appeal to be dismissed. I shall return to those matters.

The subject matter of the deed of assignment 14I have deliberately referred to the subject matter of the April 2011 deed of assignment between Austino and BOC as a chose in action because it is arguably not (or not confined to) a debt in the narrow sense. I shall explain what I mean. 15On 29 September 2010, Austino contracted to purchase a shopping mall at Wentworthville from Global Real Estate Assets Corporation Pty Ltd ("Global"). Austino later purported to rescind the contract. By a deed dated 19 November 2010 made by Austino, Global and Metroland, it was agreed by Austino and Global that the original contract for sale should be reinstated and that the sale and purchase should proceed but on varied terms. 16The deed of 19 November 2010 contained a clause 64 headed "Net Income Guarantee" which ran to some seven pages. By that clause 64, Global and Metroland covenanted with Austino that, during each of several periods after transfer of the shopping mall to Austino, Austino would receive rent of at least a specified sum and, if the rent actually received was less than that sum, Global and Metroland would pay to Austino a sum equal to the shortfall. This aspect of the deed is referred to by the parties as "the Rental Guarantee". 17In conjunction with the deed of 19 November 2010, an agreement was made between Global and Austino under which Global agreed to manage the shopping mall. This agreement was referred to as "the Management Contract". 18It was the benefit accruing to Austino under the Rental Guarantee and the Management Contract that later became the subject of the deed of assignment of April 2011. It is to that deed of assignment that I now turn.

The deed of assignment 19The deed of assignment contains two recitals: "A. The Assignor owns all the right, title, benefit and interest in and arising out of the Rental Guarantee and the Management Contract. B. The Assignee has agreed to lend the Assignor the amount of AUD10,980,000.00 ('Loan') pursuant to the Facility Agreement and secured by the Securities given by the Assignee to the Assignor and the Assignor has agreed to provide as part of the Securities an assignment of any and all of its rights in and to the Rental Guarantee and the Management Contract on the terms and conditions hereinafter appearing." 20The "Assignor" is Austino. The "Assignee" is BOC. They are the only parties to the deed of assignment. 21The definitions of "Rental Guarantee", "Management Contract" and "Securities" are as follows (clause 1): "'Rental Guarantee' means the rental guarantee provided by Global Real Estate Assets Corporation Pty Ltd ACN 118 983 403 and Metroland Australia Limited ACN 009 138 149 in favour of the Assignor, a copy of which is annexed hereto and marked 'C'." "'Management Contract' means the management contract between Global Real Estate Assets Corporation Pty Ltd ACN 118 983 403 and the Assignor, a copy of which is annexed hereto and marked 'B'." "'Securities' means: (a) a first ranking registered legal Mortgage over the land and improvements at 42-44 Dunmore Street, Wentworthville NSW 2145, folio identifier 11/746514; (b) Fixed and Floating Charge over the present and future assets of the Assignor; (c) Deed of Covenant and Indemnity entered into by the Assignor and the beneficiaries of the Wentworthville Unit Trust; (d) joint and several Guarantees by Heming Quan, Suhua Yan and Min Lu; (e) this Deed of Assignment of the Rental Guarantee and the Management Contract." 22The main operative provision, clause 3, is in these terms: "3. ASSIGNMENT In further pursuance of the consideration provided to the Assignor by the Assignee, the Assignor, as beneficial owner, assigns to the Assignee all its right, title, benefit and interest in and to all monies now payable or to become payable and the full benefit of all the provisions of the Rental Guarantee and the Management Contract such that the Assignee is forthwith subrogated to all rights of the Assignor under or pursuant to the Rental Guarantee and the Management Contract." 23The "consideration provided to the Assignor by the Assignee", as referred to at the start of clause 3, is not explicitly identified. The reference is, clearly enough, to the agreement referred to in Recital B, that is, BOC's agreement to lend money to Austino. 24Clause 5 of the deed of assignment provides: "5. FURTHER ASSURANCES AND DOCUMENTS The Assignor shall upon request by the Assignee execute such formal assignments, deeds or other documents and do all such other acts, matters and things as the Assignee may reasonably require for perfecting the assignment constituted by this Deed." 25Reference must also be made to clause 6(a): "6. FURTHER WARRANTIES AND REPRESENTATIONS The Assignor further represents and warrants to the Assignee that: (a) the Assignor shall if so required by the Assignee give or lend its name to any act, deed, document, instrument, action or proceedings (including any legal action or proceedings) or other matter or thing for the purpose of the exercise by the Assignee of any of its rights, powers and remedies pursuant to the Facility Agreement or the Debt or the Securities or the Rental Guarantee or the Management Contract and will attend at any proceedings for the purpose of giving evidence when so requested by the Assignee." 26Clause 7 provides: "7. NOTICE TO DEBTORS In pursuance of this Deed the parties hereto shall execute the Notice to Debtors in the form annexed hereto and marked 'A'." 27The form of notice in annexure "A" is: "NOTICE TO DEBTORS TO Global Real Estate Assets Corporation Pty Ltd ACN 118 983 403 and Metroland Australia Limited ACN 009 138 149 ('Debtors') BANK OF CHINA LIMITED ABN 29 002 979 955 of 39-41 York Street, Sydney NSW 2000 ('Assignee') and AUSTINO WENTWORTHVILLE PTY LTD ACN 146 623 421 as trustee for the WENTWORTHVILLE UNIT TRUST of Suite 145, 416-418 Pitt Street, Sydney NSW 2000 ("Assignor") HEREBY GIVES YOU NOTICE THAT, by Deed of Assignment dated . . April 2011 between the Assignor and the Assignee, the Assignor assigned absolutely all its right title, benefit and interest in and to including any all claims, chose in actions or rights and remedies whatsoever whether at law or in equity or pursuant to any statute in relation to or arising out of the Rental Guarantee and the Management Contract and the Debt as hereunder defined. 'Debt' means the total of the indebtedness of the Debtors to the Assignor pursuant to the Rental Guarantee and the Management Contract together with any and all other amounts of whatsoever nature (including but not limited to principal, interest, charges, fees further advances) arising out of or relating to the Management Contract and/or Rental Guarantee). 'Management Contract' means the management contract between Global Real Estate Assets Corporation Pty Ltd ACN 118 983 403 and the Assignor, a copy of which is annexed hereto and marked 'A'. 'Rental Guarantee' means the rental guarantee provided by Global Real Estate Assets Corporation Pty Ltd ACN 118 983 403 and Metroland Australia Limited ACN 009 138 149 in favour of the Assignor, a copy of which is annexed hereto and marked 'B'. Date April 2011." 28There is then provision for signing of the notice on behalf of both Austino and BOC. 29It was accepted in this Court that the matter had proceeded before the primary judge on the footing that the deed of assignment between Austino and BOC had been executed and delivered so as to take effect as a deed and that written notice of the assignment (in the form of the annexure "A") had been given to Global and Metroland. The appeal must be approached on the same basis.

The decision of the primary judge 30The question addressed by the primary judge was whether there had been a legal assignment of the relevant choses in action, effective as such by virtue of s 12 of the Conveyancing Act 1919: "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 chose 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 receive or claim such debt or chose in action, shall be, and be deemed to have been effectual in law (subject to all equities which would have been entitled to priority over the right of the assignee if this Act had not passed) to pass and transfer the legal right to such debt or chose in action from the date of such notice . . ." 31Given the concessions referred to at [29] above, the main submission before the primary judge was that the assignment effected by the deed of assignment was not an absolute assignment or that it purported to be an assignment by way of charge only. His Honour said (at [12]): "It is clear enough that the assignment was in order to secure indebtedness of Austino to the Bank of China, and was by way of security, however, that is not to say it was not absolute but only by way of charge: a common law (old system) mortgage is an absolute assignment, not a mere charge." 32His Honour continued (at [13]): "To my mind, the fact that the assignment was one of a bundle of securities for the indebtedness in question, the others of which were in the nature of charges or hypothecations rather than legal assignments, is beside the point. It is the nature of the property over which security is given that typically dictates the nature of the security. Thus had the land which formed part of the security been old system title land the relevant security would have been an absolute legal assignment; but as it was Torrens Title land, the security was by way of Real Property Act mortgage, which is more in the nature of a hypothecation. As part of the security given included the assets and undertaking of the company, the security over that property was by way of fixed and floating charge. That is, in my view, no indication that security over a debt would be by way of charge only and not legal assignment." 33Attention was then directed to the question whether the assignment was, in any event, "absolute" as referred to in s 12. The judge said (at [14]) that the words "as beneficial owner, assigns to the Assignee all its right, title, benefit and interest in and to all moneys now payable or to become payable and that the full benefit of all the provisions of the Rental Agreement" were indicative of an absolute assignment. 34The judge then turned to the words "such that the Assignee is forthwith subrogated to all rights of the Assignor". He was of the opinion that those words did not reflect an intention that relevant rights of action were to remain vested in the assignor. He said (at [15]) that they reflected "perhaps inelegantly" an intention that it was the assignee, not the assignor, who was entitled to exercise the relevant creditor rights. 35As to clause 5 and the suggestion that it detracted from the absolute nature of the assignment, his Honour observed that the provision was a covenant for further assurance of a commonplace kind and did not indicate that the assignment was to be otherwise than absolute. 36The judge then said (at [17]): "To my mind, however, the strongest indicia that this was an absolute assignment is to be found in the notice to debtors annexed to the Deed and which, as it seems to me, being an annexure to the Deed and referred to in the Deed, may properly be resorted to for illumination of the intention of the parties to the Deed. It expressly states 'The Assignor assigns absolutely all its right, title, benefit and interest...'. Nothing could more clearly reveal that the intent of the parties to the deed was that it affect an absolute assignment."

Austino's submissions on appeal 37In view of the matters mentioned at [29] above, the issue to be addressed is whether the judge was correct in his conclusion that the assignment was, as described in s 12 of the Conveyancing Act, an "absolute assignment . . . not purporting to be by way of charge only". 38Austino submitted on appeal that: (a) the assignment was not "absolute" because: (i) it was not expressed to be absolute (and that is not changed by the statement in the form of notice in annexure "A" that Austino had, by the deed, "assigned absolutely" the relevant subject matter); (ii) there was a clear indication that Austino was to retain title to the subject matter, in that the assignee is said to be "subrogated to" the rights of the assignor and subrogation is an equitable concept or process by which one person is recognised as having an entitlement to rights vested in another; (iii) the words "as beneficial owner", used in relation to Austino as assignor, indicated that it was only a beneficial interest owned by the assignor that was assigned; (iv) the inclusion of clause 5 showed that something more had to be done to perfect what was, in the meantime, an incomplete or partial assignment; and (v) the inclusion of clause 6(a) showed that the assignment was not such as to enable the assignee to sue without the assistance of the assignor; and (b) the assignment was, in any event, one purporting to be "by way of charge only" because it did not operate as a legal mortgage and was a security for the indebtedness of Austino to BOC additional to those referred to in the definition of "Securities".

Case law 39Before the several propositions for which Austino contends are addressed, it is convenient to note aspects of the case law concerning the relevant statutory provision. 40The progenitor of s 12 of the Conveyancing Act was s 25(6) of the Judicature Act 1873 (Eng). There, as in s 12, the relevant words were "absolute assignment" and "not purporting to be by way of charge only". 41National Provincial Bank of England v Harle (1881) 6 QBD 626 was a decision of Pollock B who said that, as far as he knew, it was the first case in which s 25(6) had arisen for consideration. Harle held a legal mortgage from Hall and Harris. Harle assigned the mortgage to his bank to secure payment of his present indebtedness, together with further advances up to a certain sum. Notice of the assignment was given to Hall and Harris. The bank contended that there had been an absolute assignment by writing under the hand of Harle (not purporting to be by way of charge only) and that, notice having been given to Hall and Harris, the assignment was effective at law to enable the bank to sue. Hall and Harris contended that the assignment was not absolute and purported to be by way of charge only. 42Pollock B held that, on its face, the assignment purported to be by way of charge only. This was because of the inclusion of a proviso for redemption stating that if Harle should pay the bank the present indebtedness plus further advances up to the stated sum, together with interest, the bank would then reconvey the mortgaged premises to Harle. 43Section 25(6) of the Judicature Act was considered by a Divisional Court in Burlinson v Hall (1884) 12 QBD 347 which concerned a deed by which Tucker, whose indebtedness to Burlinson was recited, assigned to Burlinson certain debts described in a schedule (and all other debts due to Tucker from the several debtors mentioned in the schedule) and the whole of Tucker's right and title to those debts on the footing that Burlinson would, out of the proceeds of the debts, pay the expenses of collection, then retain for himself the sum for which Tucker was indebted to him (plus interest) and, as to any surplus, pay it to Tucker. 44Day J was of the opinion that the assignment was an "absolute assignment" which did not purport to be "by way of charge only"; and that this was so despite the obvious purpose of providing security to Burlinson for Tucker's indebtedness to him. Day J said (at 349-350): "But still the assignment is, in terms, absolute. Not indeed absolute as a sale, but absolute as contradistinguished from conditional, an assignment giving a title there and then. This deed does so. - True, if the debt due from the assignor were paid off, the assignor might be entitled to have the subject-matter of the assignment re-assigned to him. But the right of the assignee to whom it is assigned is absolute. No person can control him in dealing as he thinks fit with that which was assigned to him." 45As to the question whether the assignment purported to be by way of charge only, Day J said (at 350): "A charge differs altogether from a mortgage. By a charge the title is not transferred, but the person creating the charge merely says that out of a particular fund he will discharge a particular debt. But a charge differs from an assignment. A charge on a debt confers rights on the person to whom the charge is given to have it enforced by assignment - not by action against the debtor, but by proceedings against the person who created the charge to assign the debt." 46A L Smith J was of the same opinion. In his view (at 352), the provision under which any surplus proceeds would be held for Tucker did "not make it the less an absolute assignment" of the debts. As to the question posed by the words "by way of charge", A L Smith J agreed with Day J. 47Both Day and A L Smith JJ distinguished National Provincial Bank of England v Harle. They did so on the somewhat insecure footing that, in that case, there was an express proviso for redemption whereas the instrument before them contained no such provision. 48A distinct possibility of inconsistency between National Provincial Bank of England v Harle and Burlinson v Hall was noted in Tancred v Delagoa Bay and East Africa Railway Co (1889) 23 QBD 239. That case concerned a debt owed by the defendant to Tancred and assigned by Tancred, first, to Goslings by deed of mortgage containing a proviso for redemption and re-assignment upon payment of the secured moneys and, second (and subject to that first assignment), to Kingdon by deed of mortgage containing like provisoes. Upon action brought for the recovery of the debt, the defendant pleaded that Goslings and Kingdon were not assignees of the debt. 49A Divisional Court (Denman and Charles JJ) held that a master had been wrong to strike out the defence. The essence of the decision appears from the judgment of Denman J (at 242): "Now the document in this case does not appear to us to purport to be 'by way of charge only', either expressly or by necessary inference from its provisions, within the meaning of the section; it is an absolute assignment of the debt; a document given 'by way of charge' is not one which absolutely transfers the property with a condition for re-conveyance, but is a document which only gives a right to payment out of a particular fund or particular property, without transferring that fund or property." 50Both Denman and Charles JJ referred to possible inconsistency between National Provincial Bank of England v Harle and Burlinson v Hall and preferred to follow the latter, a decision of a Divisional Court, rather than the decision of Pollock B sitting alone. 51The Court of Appeal in due course held that National Provincial Bank of England v Harle had been correctly rejected. It did so in Durham Bros v Robertson [1898] 1 QB 765. In that case, the disposition by a builder of a sum to become due for building work not yet performed was held not to satisfy the requirements of s 25(6). The case is of value for the discussion by Chitty LJ (with whom A L Smith and Collins LJJ agreed) of the true characterisation of a legal mortgage for the purposes of the section. 52After referring to Tancred v Delagoa Bay and East Africa Railway Co (which, as he noted, concerned an assignment accompanied by a proviso for redemption), Chitty LJ said (at 772): "I think that the principle of the decision ought not to be confined to the case where there is an express provision for reassignment. Where there is an absolute assignment of the debt, but by way of security, equity would imply a right to a reassignment on redemption, and the sub-section would apply to the case of such an absolute assignment." 53He continued (also at 772): "A mortgage is not mentioned in the enactment; but where there is an absolute assignment of the debt, the limiting words as to a charge only are not sufficient to exclude a mortgage." 54The decision was that the case before the court was not within s 25(6) because "it is not an absolute but a conditional assignment". The conditional nature of the assignment came from the words "until the money with added interest be repaid to you". Chitty LJ (at 273) saw this as a conditional, as distinct from an absolute assurance, in the same way as "an assurance until JS shall return from Rome". 55Two other decisions of the English Court of Appeal should be mentioned. The first is Comfort v Betts [1891] 1 QB 737 which concerned numerous debts incurred by the defendant to various tradesmen. The tradesmen assigned their debts to the plaintiff by deed on terms that the plaintiff should proceed to recover the debts and, as and when moneys were recovered, make payments to the assignors in proportion to the debts assigned by them. This was held by the Court of Appeal to be a case of "absolute" assignment. Fry LJ observed (at 740) that, although a trust was constituted in respect of moneys recovered, "nevertheless the intention of the parties clearly is that it shall be absolute in the sense that the assignee shall have all the rights given by the 6th sub-section of the 25th section of the Judicature Act, 1873". 56The other Court of Appeal decision is Hughes v Pump House Hotel Co Ltd [1902] 2 KB 190. In that case, a builder assigned to his bank, as security for indebtedness, all moneys due or to become due to him under a particular building contract. The earlier cases to which I have referred caused Cozens-Hardy LJ to say (at 196): "Now, it has been repeatedly held that the word 'absolute' does not mean absolute by way of sale, and that the assignment may be 'absolute' though by way of mortgage." 57Mathew LJ said (at 193-4): "In every case of this kind, all the terms of the instrument must be considered; and, whatever may be the phraseology adopted in some particular part of it, if, on consideration of the whole instrument it is clear that the intention was to give a charge only, then the action must be in the name of the assignor; while, on the other hand, if it is clear from the instrument as a whole that the intention was to pass all the rights of the assignor in the debt or chose in action to the assignee, then the case will come within s 25, and the action must be brought in the name of the assignee." 58Mathew LJ also said (at 194): "The learned judge appears to have been of opinion that the assignment was not absolute, but purported to be by way of charge only, because the object was that it should be a continuing security for such amount as might from time to time be due from the assignor to the assignees. But, if that were the true criterion, it might equally well be argued that a mortgage is not an absolute assignment, because under a mortgage it may become necessary to take an account in order to ascertain how much is due; but, though a mortgage is only a security for the amount which may be due, it is nevertheless an absolute assignment because the whole right of the mortgagor in the estate passes to the mortgagee." 59Some of these English cases were referred to by Herring CJ in Re Row Dal Constructions Pty Ltd [1966] VR 249 where the question was whether an assignment purported to be by way of charge only. The Chief Justice said this (at 259): "[T]here can be no question I think that in fact the assignment was given by way of security. The bank asked for it as security, obtained it as security and regarded it as security; and, in my view, though the document says nothing whatever about redemption or re-assignment on repayment, equity would imply a right to a re-assignment on redemption: Durham Bros v Robertson [1898] 1 QB 765, at p 772. This means, I think, that the substance of the transaction here is a mortgage and it is just as much a mortgage as if a right of redemption had been expressly given by the document which effected the transfer of the property from mortgagor to mortgagee. The transaction is clearly not a 'charge' in the strict sense, for as was point out by Denman, J., in Tancred v Delagoa Bay & East Africa Railway Co. (1889), 23 QBD., 239, at p 242, 'a document given 'by way of charge' is not one which absolutely transfers the property with a condition for re-conveyance, but is a document which only gives a right to payment out of a particular fund or particular property, without transferring that fund or property'. The Court of Appeal approved this decision in Durham Bros. v Robertson, supra: see particularly at pp 771-2 in the judgment of Chitty, LJ." 60The finding in that case was thus that an outright assignment clearly by way of security but not accompanied by any proviso for redemption was in truth a mortgage and did not purport to be by way of charge only. 61This is consistent with a later observation of Mason J in Clyne v Commissioner of Taxation [1981] HCA 40; (1981) 150 CLR 1. Mason J said (at 20) that "absolute assignment", for these purposes, denotes an assignment that is unconditional and includes an assignment coupled with an express or implied provision for re-assignment on the happening of a future event, such as repayment of a loan. Reference may also be made to the decision of this Court in One.Tel Ltd v Watson [2009] NSWCA 282. 62Relevant principles emerging from the cases are these:

Construction - preliminary matters 63In approaching the question of construction in the present case, it is necessary to remember that, according to the position accepted both at trial and on appeal, the deed of assignment was executed by its parties and delivered, so as to be effective as a deed; and that notice in writing in the form set out in annexure "A" was given to Global and Metroland after execution and delivery. 64It follows that all elements necessary for an effective legal assignment under s 12 of the Conveyancing Act existed, if positive answers are given to the questions posed by the words "absolute assignment" and "not purporting to be by way of charge only".

Construction - "not purporting to be by way of charge only" 65It is convenient to consider first the question whether the assignment, if otherwise effective, was one "purporting to be by way of charge only". Its purport is, of course, to be gathered from its terms, considered in the light of surrounding circumstances. 66The role to be played by the deed of assignment in the parties' relationship was made clear on the face of the document. It was referred to at three points. 67First, Recital B, after referring to BOC's agreement to lend money to Austino on the security of "the Securities", stated that Austino had agreed to provide "an assignment of any and all of its rights in and to the Rental Guarantee and the Management Contract" as "part of the Securities". 68Second, the "Securities" were then defined by clause 1 as four particular items (a mortgage of land, a fixed and floating charge, a deed of covenant and indemnity and certain guarantees) together with "this Deed of Assignment of the Rental Guarantee and the Management Contract" - that is, the deed itself. 69Third, clause 3 stated that the assignment thereby effected was "[i]n further pursuance of the consideration provided to the Assignor by the Assignee", that is, BOC's agreement to lend money to Austino. 70These aspects of the deed make it plain that the subject matter of the assignment was intended to be, in the hands of BOC, security for the performance of Austino's financial obligations to BOC; and that the assignment, if effective, was to operate as a mortgage according to the well-known description by Lindley MR in Santley v Wilde [1899] 2 Ch 474 (at 474): ". . . a mortgage is a conveyance of land or an assignment of chattels as a security for the payment of a debt or the discharge of some other obligation for which it is given . . . and the security is redeemable on the payment or discharge of such debt or obligation, any provision to the contrary notwithstanding.". 71The deed of assignment contained no express proviso for redemption. There was therefore no legal right to redeem the mortgaged property upon satisfaction of the secured obligations, but the nature of the assignment (if effective) as a mortgage caused Austino to have in equity a right of redemption upon due satisfaction of its obligations to BOC: Gurfinkel v Bentley Pty Ltd [1966] HCA 75; (1966) 116 CLR 98 at 107. 72The deed of assignment is indistinguishable in character from the kind of mortgage described by Chitty LJ in the passages in Durham Bros v Robertson at [52] and [53] above. It is also indistinguishable from the mortgages referred to in Re Row Dal Constructions Pty Ltd (above) and in Clyne v Commissioner of Taxation (above). The assignment, if otherwise effective, constituted a legal mortgage. It was not an assignment "purporting to be by way of charge only". 73The primary judge's decision on this point was, in my respectful opinion, correct.

Construction - "absolute" assignment - some textual features 74I turn now to the question whether the assignment was an "absolute assignment". Mr Young SC pointed out that the operative words of clause 3 were "the Assignor . . . assigns to the Assignee"; and that the adverb "absolutely" was not used. Mr Young accepted, however, that there is, generally speaking, no difference in meaning between "I assign" and "I assign absolutely"; and that the question whether an assignment is absolute in nature is to be determined as a matter of construction of the instrument as a whole. 75The first point to be made in that connection is that nothing in the deed of assignment indicates that the assignment is conditional - that being, on the authorities, an important matter in deciding whether an assignment is absolute in the relevant sense. The absence of condition points to an intention that the assignment should be absolute. 76Second, the authorities also show that the fact that the assignment is accompanied by an express or implied right of redemption by the assignor upon payment of secured moneys does not mean that it is not absolute in the relevant sense. 77Third, the description of the assignment adopted by the parties in the schedule "A" notice that, by clause 7, both agreed to execute contains the words "assigned absolutely". The parties thus agreed to represent to Global and Metroland that the assignment was absolute in character.

Construction - "absolute" assignment - "is forthwith subrogated" 78The fourth matter for consideration in relation to the question whether the assignment was "absolute" is the part of clause 3 stating that: "the Assignee is forthwith subrogated to all rights of the Assignor under or pursuant to the Rental Guarantee and the Management Contract". 79This, Austino says, indicates that the assignment was to have some future operation only, in that the assignee was not to acquire immediate ownership of the relevant rights and that the assignment was, in terms, not absolute. 80Mr Young SC emphasised the nature of subrogation as a process by which equity assists someone to enjoy rights that, in the eye of the common law, belong to another - so that, for example, a guarantor who has paid the guaranteed debt is enabled by equity to assert the right of recovery against the debtor that remains exercisable at law by the creditor who has been made whole by the guarantor. On that basis, it was submitted, there was recognition in the deed of assignment that the assignee stood in need of a form of assistance in achieving full enjoyment of rights that would not have been needed had the assignment been complete. 81The particular reference to subrogation of the assignee to the assignor's rights cannot be construed as indicating that the assignment is intended to be otherwise than absolute. Several steps must be taken before s 12 of the Conveyancing Act causes an assignment of the kind it describes to be "effectual in law". There must be a written instrument. It must be executed by the assignor. And express notice of the assignment must be given to the debtor. Pending the giving of notice, the assignment takes effect in equity only: Norman v Federal Commissioner of Taxation [1963] HCA 21; (1963) 109 CLR 9 at 28 per Windeyer J. In the present case, the first and second steps were taken when Austino executed the deed. The third step was not taken until some future time. The material before the Court does not permit any finding as to the length of the period between execution of the instrument by Austino and the giving of written notice to Global and Metroland, but it may be accepted that there was some delay or, at all events, that the parties to the deed, when formulating its terms, assumed that there was likely to be. 82The part of clause 3 referring to subrogation - which uses words of immediate import ("is forthwith subrogated") - was, to my mind, intended to cater for that delay. It is instructive to note the second and third meanings of "subrogation" in the Oxford English Dictionary (the first being described as obsolete): "2. The replacement of one person or thing by another; substitution. Now rare. 3. Law. The substitution of one party by another, esp in respect of a debt or insurance claim, accompanied by the transfer of any associated rights and duties." 83The part of clause 3 stating that BOC was "forthwith subrogated" to Austino's rights indicated a mutual intention that, upon the deed's being executed, BOC was to be substituted immediately for Austino in the matter of the exercise of Austino's rights (necessarily with Austino's assistance) and that this was to continue pending the taking of the third step in the process of achieving an assignment at law, at which point BOC could itself sue in its own name to enforce those rights. 84The subrogation provision was thus in the nature of a temporary expedient for the period during which the assignment was incomplete at law. It indicated that, pending the giving of notice, the assignment was to have the fullest and most comprehensive operation that it was able to have. The inclusion of that provision did not detract from the quality of the assignment as an absolute assignment. Rather, it confirmed that quality.

Construction - "absolute" assignment - "as beneficial owner" 85The fifth matter relevant to the question whether the assignment was "absolute" is the inclusion in clause 3 of the words "as beneficial owner" in the phrase: ". . . the Assignor, as beneficial owner, assigns to the Assignee . . .". 86The contention of Austino is that if someone who has the full ownership of a legal chose in action assigns "as beneficial owner", the person's manifested intention is that the assignment should operate only upon some beneficial interest in the chose falling short of that full ownership, so that the assignment is not an "absolute assignment" of the chose. 87There are two very significant problems with this argument. The first is that, as the High Court has emphasised in DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties [1982] HCA 14; (1982) 149 CLR 431 and Commissioner of Taxation v Linter Textiles Australia Ltd [2005] HCA 20; (2005) 220 CLR 592, a person who is the full owner of property cannot be viewed as owning a collection of separate interests each of which is assignable. The "beneficial ownership" or a beneficial interest cannot be selected from any such collection of interests and separately assigned, although, of course, the owner can, by declaration of trust or in certain other ways, create an equitable interest which becomes grafted on to the legal estate, rather than subtracted from it. It is not possible, as a simple matter of language, to regard an assignor who professes to assign a chose in action "as beneficial owner" as thereby intending to constitute himself as a trustee of that property for the named assignee. 88This leads to the second significant problem with the proposition that the words "as beneficial owner" indicate something less than an absolute assignment. The proposition misunderstands, in a way explained by Sir Frederick Jordan more than seventy years ago, the established purpose of those words in assurances and conveyancing generally. 89In Discount & Finance Ltd v Gehrig's NSW Wines Ltd (1940) 40 SR (NSW) 598, a mortgagor claimed that moratorium legislation relieved it of liability under its mortgage. The mortgagee sought to resist or sidestep that claim by establishing an estoppel preventing the mortgagor from proving matters necessary to be established to make good that claim. One matter relied on by the mortgagee was the fact that the operative words of the mortgage were: "... the mortgagor as beneficial owner hereby charges ..." 90The mortgagee contended that the words "as beneficial owner" constituted a representation of fact as to the status or role of the mortgagor giving rise to the postulated estoppel. Jordan CJ, with the concurrence of Halse Rogers and Bavin JJ, rejected that argument. He said (at 604): "But this phrase is clearly not a statement of fact at all. It is inserted for the purpose of entitling the mortgagee, as against the mortgagor, to the benefit of the covenants for title which are implied in a mortgage by virtue of s 78(1)(C) of the Conveyancing Act, 1919, whenever the mortgagor is expressed to convey 'as beneficial owner'. So far even from implying that there is no other person beneficially interested, the phrase imports a covenant by the mortgagor that every other person having or claiming any estate or interest in the subject matter of the conveyance will on request perfect the conveyee's title." 91The position in the present case is the same. Section 78(1)(C) of the Conveyancing Act causes certain covenants to be implied in "a conveyance by way of mortgage" executed after 1 July 1920 by a "person therein expressed to convey as beneficial owner". Section 7(1) of that Act defines "conveyance" as including "any assignment . . . by deed of any property"; "property" as including "any thing in action"; and "mortgage" as including "a charge on any property for securing money or money's worth". There is no relevant definition of "deed". 92There can, to my mind, be no doubt either that the deed of assignment between Austino and BOC was a "conveyance by way of mortgage" as referred to in s 78(1)(C); or that the purpose of the words "as beneficial owner", used in relation to Austino as "the person therein expressed to convey as beneficial owner", was precisely that to which Jordan CJ referred, that is, to cause the implied covenants to be imported for the benefit of BOC as assignee. The covenants include a covenant that the conveying party has full power to convey and a covenant for further assurance. Under s 74, covenants so implied may be negatived by express provision, but there is no such provision in the deed under consideration. 93The use of the words "as beneficial owner" in the deed of assignment does not indicate in any way an intention to convey something less than full ownership of the relevant subject matter. The words do not qualify the absolute nature of the assignment. Rather they are intended to bring into operation covenants entirely consistent with that absolute nature and calculated to underwrite it.

Construction - "absolute" assignment - further assurance 94The sixth matter to which Austino points in support of its contention that the assigment should not be construed as an absolute assignment is what it says are qualifications or reservations introduced by clause 5 and clause 6(a). 95Those clauses can be considered together. Each requires the assignor to act if and when requested by the assignee - in one case to do something the assignee reasonably requires for perfecting the assignment made by the deed and in the other to do something that the assignee requires for the purpose of the exercise of the rights under the Rental Guarantee or the Management Contract. 96Austino argues that these clauses, by contemplating the need for future action of the assignor, recognise that the deed assures to the assignee something less than the full benefit of the assigned rights, so that the assignment is not absolute. 97That submission cannot be accepted. Clause 5 is a covenant for further assurance of a well-recognised kind. Clause 6(a) is a covenant to substantially like effect. In each case, further and future action of the assignor is to be taken by the assignor only if the assignee requests it. 98Covenants of this kind are adopted by way of safeguard against some unexpected future difficulty. Thus, in Commissioner of Stamp Duties v Hopkins [1945] HCA 14; (1945) 71 CLR 351 at 370, for example, Rich J described a covenant for further assurance as "available to the trustee in case the transfer should turn out to have been in any way defective". Relying on such a covenant, an assignee for value may require the assignor to procure the removal of any encumbrance to which the assigned property is found to be subject; and in that respect the covenant has, in such a case, an operation similar to that of a covenant against encumbrances: Re Jones; Farrington v Forrester [1893] 2 Ch 461. 99The inclusion of clauses 5 and 6(a) therefore cannot be taken as some form of acknowledgment that something less than a full, absolute and immediate assignment was intended. To the contrary, the clauses show that there was an intention that there should be a full, absolute and immediate assignment, with the assignor fixed with the responsibility of remedying any defect or otherwise ensuring the assignee's enjoyment of the full benefit should some deficiency or difficulty later emerge. 100As Ms Collins SC pointed out on behalf of Mr Levi, it was expressly stated by Cozens-Hardy LJ in Hughes v Pump House Hotel Company Ltd (above) at 198 that the inclusion of a covenant for further assurance does not detract from the absolute nature of an assignment which is otherwise absolute.

Construction - "absolute" assignment - conclusion 101 None of the matters put forward by Austino, taken separately, produces a conclusion that the assignment by Austino to BOC was otherwise than an "absolute" assignment. Nor does the combination of those matters produce any such conclusion. 102The primary judge's decision on this point was, in my respectful opinion, correct.

Outcome of the appeal 103Given the narrow focus of the appeal, the conclusions stated at [73] and [102] above mean that the primary judge's conclusion that the assignment took effect as a legal assignment was correct and the appeal must be dismissed 104It is therefore unnecessary to deal with Metroland's notice of contention, but it is desirable that I express some opinion on it. As a preliminary, I should describe the effect of the deed of company arrangement and the relief sought by Austino beyond that referred to at [7] above.

The deed of company arrangement 105The deed of company arrangement was executed by Metroland very soon after the passing of the resolution of creditors resolving that it should be executed. The deed is dated 5 October 2012, the date of the passing of the resolution. Its parties are expressed to be Metroland ("the Company") and Mr Levi (who was designated "Deed Administrator"). By operation of s 444D of the Corporations Act, the deed bound all creditors of Metroland so far as concerned "Claims" arising on or before 31 August 2012, being the day specified in the deed pursuant to s 444A(4)(i). The binding force of a deed of company arrangement is wholly statutory: MYT Engineering Pty Ltd v Mulcon Pty Ltd [1999] HCA 24; (1999) 195 CLR 636. 106Clause 5.1 of the deed of company arrangement was headed "Conditions". It set out two events that "must occur" before a particular deadline: "(a) the Trust Deed must be entered into by the Deed Administrator and the Company; and (b) the DOCA Deed of Deferral must be entered into by the Deferred Creditors." 107"Deferred Creditors" were defined as certain named persons. The "Trust Deed" was identified as a deed in substantially the form set out in a schedule to the deed of company arrangement. 108Clause 6 set out things that had to be done "[t]o satisfy the conditions in clause 5.1". Clause 6.2 authorised the Deed Administrator to enter into the Trust Deed as trustee. Clause 6.3 provided: "Immediately upon satisfaction of the conditions in clause 5.1, the Creditors' Trust will take effect and: (a) the DOCA Trust Contribution will be transferred from the Company to the Trustee which is to occur as soon as reasonably practicable; (b) the Deed Administrator (in his capacity as Trustee) will give notice to Creditors of the commencement of the Creditors' Trust by placing a notice confirming the same by an appropriate newspaper advertisement; and (c) the Creditors shall have their rights and entitlements provided for in the Trust Deed." 109The "DOCA Trust Contribution" was, in essence, the cash resources of Metroland plus a contribution of $200,000 to be received from external sources, less certain expenses. 110Clause 11.3 was the main operative provision. It provided that, upon satisfaction of the clause 5.1 conditions and creation of the Creditors' Trust, all "Claims" of creditors were extinguished. 111The deed identified as the "Trust Deed" - that is, the deed constituting the creditors' trust - was executed also on 5 October 2012. Its parties were Metroland ("the Company"), Mr Levi ("the Trustee") and a Ms Kelly ("the Settlor") whose role was confined to settling an initial sum of $10 on the Trustee. The Trustee declared that he held that sum and would hold the "DOCA Trust Contribution" (defined in the same way as in the deed of company arrangement), when received, upon trust for the beneficiaries and subject to the trusts established by the trust deed. The beneficiaries were, in substance, the creditors of Metroland whose claims were extinguished by the deed of company arrangement (other than "Deferred Creditors") in proportion to the amounts of their extinguished debts as ascertained by a system of proof and adjudication provided for in the trust deed itself. 112The Deed referred to as the "Deed of Deferral" was also executed on 5 October 2012. Its parties were Metroland, Mr Levi and the named persons constituting the Deferred Creditors. Those persons covenanted, in effect, to surrender all claims arising out of their status as creditors of Metroland.

The further relief sought by Austino 113The Corporations Act relief sought by Austino, over and above review of the administrator's decision as to the amount for which Austino should have been recognised for voting purposes, was: (a) an order pursuant to s 1321 or s 447A that the resolution for execution of the deed of company arrangement "be declared void"; (b) an order pursuant to s 1321, s 447A or s 445G that the deed of company arrangement be "declared void ab initio", with the rights of creditors of Metroland "being treated as if that Deed had never been entered into"; (c) an order pursuant to s 1321 or s 447A that the voluntary administration of Metroland "shall resume forthwith"; and (d) "such further or other orders as the Court sees fit pursuant to s 1321 and/or s 447A of the Corporations Act by way of providing restitutio in integrum with respect to the voiding of the Deed of Company Arrangement ab initio".

The notice of contention 114The central argument raised by Metroland (with the support of Mr Levi) through its notice of contention is that the deed of company arrangement executed by Metroland pursuant to the resolution of 5 October 2012 has been fully effectuated and performed in such a way that it has no remaining work to do. Furthermore, it is said, legal consequences (in the form of entitlements under the subsequently and separately created creditors' trust) have arisen from actions taken as envisaged (but not required, procured or effected) by the deed of company arrangement and those legal consequences are effectively beyond the reach of any of the forms of Corporations Act relief outlined at [113] above. For that reason, Metroland says, none of the Corporations Act orders will be of utility even if some theoretical case for the making of such an order is shown. Metroland relies, in this respect, on obiter dicta concerning s 447A of the Corporations Act in Parkview Constructions Pty Ltd v Tayeh [2009] NSWSC 186; (2009) 71 ACSR 65 at [68]-[72]. 115Austino's response is that, in this case, the broad effect of s 447A - which it says may be more comprehensive than was recognised in the case just mentioned - is supplemented by an even broader effect of s 1321 which enables the court, upon an appeal of the kind with which it deals, to "make such orders, and give such directions, as it thinks fit". That, in Mr Young's submission, allows the court, in a case like this, to divest interests under the creditors' trust as part of the rectification of action of the administrator susceptible to appeal under s 1321. Austino thus advocates, in relation to s 1321, an approach akin to that which Davies J of the Supreme Court of Victoria has recently held to be available upon a liquidator's application for directions. Her Honour said in Re Willmott Forests Ltd (No 2) [2012] VSC 125; (2012) 88 ACSR 18 (at [38]-[58]) that there is no bar, in that context, to the making of orders of a substantive kind affecting third party rights. 116That leads, however, to the second matter raised by Metroland's notice of contention, namely, whether the court could (or should), whether under s 447A, s 1321 or otherwise, make orders affecting the persons who are now beneficiaries of the creditors' trust without those persons having had an opportunity to be heard. Mr Newlinds SC referred, in that connection, to John Alexander's Clubs Pty Ltd v White City Club Ltd [2010] HCA 19; (2010) 241 CLR 1 where the High Court stated (at [131]) that, if a court is invited to make, or proposes to make, orders directly affecting the rights or liabilities of a non-party, the non-party is a necessary party and ought to be joined. 117Mr Young's response was that, although the rights of beneficiaries of the creditors' trust might be affected, there is no need for any such beneficiary to be a party. He presumably draws an analogy with the principle that trust beneficiaries, although proper parties to litigation, are not, in any practical sense, necessary parties if their interests in the litigation will be represented by the trustee. The matter is put thus at p 187 of the eighth edition (1914) of "Daniel's Chancery Practice": "According to the practice of the Court of Chancery all cestuis que trust were, subject to certain exceptions and statutory relaxations, necessary parties to suits against their trustees, by which their rights were likely to be affected; but according to the practice of the High Court, trustees may be sued on behalf of or as representing the property or estate of which they are trustees without joining any of the persons beneficially interested in the trust or estate, and are to be considered as representing such persons in the action; but at any stage of the proceedings any of such persons may be ordered to be made parties either in addition to, or in lieu of, the previously existing parties." 118An important question is whether Mr Levi, as trustee of the creditors' trust, is in a position fully and effectually to protect the position of the trust beneficiaries. 119There is, in my opinion, much to be said for the proposition that, in the particular context where the principal attack was on Mr Levi's decision-making as administrator under the Part 5.3A administration (and therefore as chairman of the meeting of creditors), there is a real question whether he does occupy a position from which he can fully and effectually protect the position of those beneficiaries. That question is accentuated by the third matter (not so far mentioned) that Metroland puts forward in its notice of contention, that is, whether, if Mr Levi's decision to reject Austino's proof in the sum of $2,826,496, based on the effect of the deed of assignment, was incorrect, the course he should have taken was to admit it for a nominal sum only (on the basis that Austino's claim was unliquidated or contingent and therefore had to become the subject of a "just estimate" under regulation 5.6.23(2)). 120Mr Levi has, in relation to that issue, an interest of his own potentially going beyond matters relevant to the protection of the interests of the beneficiaries of the creditors' trust as such beneficiaries. 121Because, on the view I take, it is by no means clear that the proceedings are constituted in such a way as to make it appropriate for decisions to be made on the questions raised by the notice of contention, the desirable course is that no final opinion be expressed on those questions. The matter before this Court should be left to rest solely on the basis that the appeal itself does not succeed.

Proposed disposition 122I propose the following orders:

1. Appeal dismissed.
2. That the appellant pay the respondents' costs of the appeal.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 March 2013