AVS Property Pty Ltd v McMaster

Counsel for the Second Respondent: D Hogan-Doran with J Shepard

Solicitor for the Second Respondent: Arnold Bloch Leibler

AND: BRIAN KEITH MCMASTER AND MARK FRANCIS XAVIER MENTHA (IN THEIR CAPACITY AS JOINT AND SEVERAL RECEIVERS OF THE MEWS SCHEME)

WESTERN RETIREMENT VILLAGE MANAGEMENT PTY LIMITED (IN LIQUIDATION) (ACN 091 443 239)

THE COURT ORDERS THAT:

1. The appeal be allowed.
2. Order 1 made on 14 November 2008 be set aside, and in lieu thereof it be declared: (a) that the appellant was entitled to interest on the sum of $4,100,282.64 at the rate or rates specified in the undated facility agreement between the third respondent, the appellant and others (which is exhibit YYC12 to the affidavit of Rina Yoke Yee Chang sworn 14 February 2008) from 17 March 2008 until 22 September 2008, totalling $451,551.07; (b) that the interest calculated in accordance with paragraph (a) was secured on the net proceeds of sale of the Mews Land; (c) that the payment of $451,511.07 by the first respondents on 20 November 2008 discharged the liability of the third respondent for interest calculated in accordance with paragraph (a). 3. The costs of the parties to the appeal be paid out of the bank account established pursuant to order 15 of the Court's orders of 28 November 2006.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website.

AND: BRIAN KEITH MCMASTER AND MARK FRANCIS XAVIER MENTHA (IN THEIR CAPACITY AS JOINT AND SEVERAL RECEIVERS OF THE MEWS SCHEME)

WESTERN RETIREMENT VILLAGE MANAGEMENT PTY LIMITED (IN LIQUIDATION) (ACN 091 443 239)

REASONS FOR JUDGMENT 1 This is an appeal from orders of the learned primary judge made on 14 November 2008: Australian Securities and Investment Commission v GDK Financial Solutions Pty Ltd (in Liq) (No 5) [2008] FCA 1700 (primary judgment). The appeal is brought pursuant to an extension of time granted by Ryan J on 14 May 2009: AVS Property Pty Limited ACN 094 311 645 v Western Retirement Village Management Limited (In Liquidation) ACN 091 443 239 [2009] FCA 512. The issues in the appeal arise from the winding up of an unregistered managed investment scheme known as the Mews Retirement Village (Scheme). Orders for winding up the Scheme and the appointment of receivers were made by the learned primary judge on 28 November 2006: Australian Securities and Investments Commission, in the matter of GDK Financial Solutions Pty Ltd v GDK Financial Solutions Pty Ltd (2006) 236 ALR 699. The appellant, together with Rental Fleets Australia Pty Ltd held a second registered mortgage over land that was the principal asset of the Scheme (Mews Land). The second mortgage secured funds advanced to the third respondent, Western Retirement Village Management Pty Limited (in liq), pursuant to a facility agreement between the third respondent and AVS. The first registered mortgage was held by National Australia Bank Ltd. 2 Following the winding up order the receivers were directed to sell the Mews Land and, on 6 December 2007, with the approval of the Court, they entered into a contract for sale which provided for completion on 28 February 2008. In preparation for settlement it was necessary to make arrangements for the discharge of the mortgages. The receivers and the appellant were not able to agree as to the amount due under the second mortgage; the amount being claimed by the appellant exceeded the balance of the purchase price that would be available once the amount due to the first mortgagee and the costs and expenses of the sale had been paid. The dispute concerned the ambit of the all monies clause in the mortgage. There was no certainty that the dispute as to the amount owed to the second mortgagees could be resolved before settlement and, that being so, the parties entered into correspondence as to how the situation might be addressed without delaying settlement and jeopardising the contract. 3 On 21 December 2007 Blake Dawson, the solicitors for the receivers, wrote to Deacons, the solicitors for the second mortgagees, outlining the following two possible approaches that had been raised by the primary judge: 1. payment in discharge of the [second mortgage] with a reservation of rights to allow future claims to claw back part or all of those moneys if it was later determined that the payment ought not have been made; or 2. an arrangement where the [second mortgage] is discharged, with the amount claimed to be required to discharge the mortgage being deposited into an account such as an interest bearing trust account pending determination of any claim made in respect of those funds. 4 Blake Dawson advised that the receivers preferred the latter approach because of the risk associated with relying on 'claw back' if AVS were to be overpaid. They asked if the second mortgagees would be prepared to accept the latter approach. By letter dated 29 January 2008 Deacons responded as follows: In relation to your letter of 21 December 2007 we confirm that our clients consider that it is appropriate that the first option (ie, payment of the amount owed with a reservation of rights) is undertaken. There is no basis for impugning our clients' financial standing and accordingly the second option (ie, payment into an interest bearing account) represents an unnecessary and unwarranted infringement on our clients' rights as registered mortgagee. You will appreciate that our clients are under no obligation to discharge their mortgage unless all amounts secured by their mortgage are paid in full. [Emphasis added]

5 On 28 February 2008, Blake Dawson sent an email to Deacons asking what was the amount "allegedly" secured by the mortgage and the applicable interest rate. Deacons responded by letter dated 3 March 2008. 6 In the meantime, on 21 February, following leave granted by Goldberg J, the receivers filed an interlocutory process seeking by exercise of the Court's powers under s 601EE(2) of the Corporations Act 2001 (Cth) and s 23 of the Federal Court of Australia Act 1976 (Cth) to compel the second mortgagees to provide a discharge of the mortgage without payment of any amounts due to the second mortgagees. On 5 March 2008, the receivers filed their outline of submissions in support of their interlocutory application. Paragraph 32 of those submissions states that the receivers "are not at present willing to agree to pay to AVS any amount in consideration of a discharge of the mortgage unless so authorised and directed by the Court". 7 At a directions hearing on 6 March 2008, the learned primary judge expressed some concern about the Court's powers to compel the execution of a discharge where the amount due to the mortgagee was not ascertained and added, And the only way that I know that [the amount due] could be ascertained is in a proceeding that calls for the taking of accounts. 8 The transcript of the hearing supports the appellant's submission that there had not, at least to that point, been any tender of the amount due to the appellant. Mr Van Hattem, senior counsel for the receivers, made the point that it was impossible to tender the amount required to satisfy both mortgages because the amounts claimed by the first and second mortgagees "far exceed the proceeds of sale". Later in the hearing his Honour said: [T]his strikes me as a perfectly good example of a set of circumstances where a mortgagor would be entitled, as of right, to an order for the taking of accounts for the purposes of determining how much is secured by the mortgage. … And the court works out, and it says, here's your certificate for what's due, pay that, and you get a discharge. 9 Mr Martindale, senior counsel for the appellant, argued that there should be an offer to redeem "before you get to a taking of accounts between the mortgagor and mortgagee". Following some discussion his Honour indicated that as a condition of ordering the mortgagee to provide a discharge he would be prepared to order that the money be paid into court or some other account depending on the interest rate. His Honour said to Mr Martindale, "my principal concern is to make sure that you are properly protected". 10 Mr Martindale expressed some concern about the calculation of interest and made the point, several times, that until 28 February 2008 the second mortgagees had not been asked for a payout figure. His Honour indicated that this could be dealt with later and said that he could allow the sale to go ahead and that the Court could protect the mortgagees by "interim relief outside an old fashioned redemption action". Mr Martindale further made the point that there had been no offer to redeem. The transcript of the hearing shows that, consistent with Mr Van Hattem's position above at [8], at no time during this exchange did the representatives of the receivers rise to suggest that there had been a tender on behalf of the mortgagor or that the second mortgagees had waived the necessity for tender. 11 On 13 March 2008 the learned primary judge ordered, inter alia, that "At the time and place appointed for the completion of the sale of the Mews land" the second mortgagees were to deliver to the solicitors for the receivers, "a duly executed discharge of the mortgage in registrable form". His Honour also ordered that after payment of the amount due to the National Bank and the costs and expenses of the sale, the balance of the proceeds of sale was to be paid into an interest bearing account in the name of the receivers (Receivership Account). The Receivership Account had been established pursuant to order 15 (a) made by the primary judge on 28 November 2006. Payment into the Receivership Account was made on 17 March 2008. The learned primary judge did not publish his reasons for making the orders of 13 March. 12 On 18 September 2008 the learned primary judge ordered that the receivers pay to the appellant from the funds held in the Receivership Account, the amount of $4,100,282.64 in respect of the principal owing and "interest on the principal until 17 March 2008" in the amount of $1,573,613.32. Those amounts were paid to AVS on 22 September 2008. AVS then sought an additional amount of interest in respect of the period from 17 March to 22 September 2008. This brings us to the primary judgment.

The primary judgment 13 The learned primary judge considered AVS's application to be paid interest from the date on which the proceeds of sale were paid into the Receivership Account to 22 September 2008, the date on which the amounts referred to in [12] were actually paid. On 14 November 2008, his Honour ordered the receivers to pay AVS out of the funds held in the Receivership Account "the interest which has actually accrued from 17 March 2008 to 22 September 2008 on the principal debt of $4,100,282.64 (together with any interest which has accrued on interest)". AVS now appeals from that order claiming that it should have been awarded interest at the rate payable under the second mortgage, not the lower rate which was applicable to the Receivership Account. 14 The learned primary judge addressed two questions which, at [2] of his reasons he expressed as follows: The first is whether the interest due under the mortgage ceased to run when the second mortgagees discharged their mortgage and the proceeds of sale were paid into the receivers' account. If the answer to that question is 'yes', the second question is who is entitled to the interest that has accrued on the debt, being a portion of the money in the receivers' account.

15 As his Honour observed, at [3], the general rule is that "until a mortgage is discharged by the actual payment and acceptance of the amount due, the rights and obligations imposed by the mortgage remain in force" with the consequence that interest under the mortgage continues to run until the principal is paid out. His Honour then referred to exceptions to the general rule, such as for example, where the mortgagor's tender of the amount due under the mortgage is refused or where actual tender is not required because the mortgagee has made clear that any such tender would be refused. Addressing the circumstances before him, his Honour observed, at [7]: In the case at bar the second mortgagees made it clear that they would not discharge the second mortgage at the settlement unless AVS received the whole of the proceeds. It was for this reason that the vendor, Western Retirement Village Management Pty Ltd (in liq), took proceedings to obtain the discharge of the second mortgage and to have determined what was due under that mortgage. The money was paid into the receivers' account to protect AVS in the event it could establish a claim. It was placed into an interest bearing account rather than being paid into court as this would result in a better return. In substance, if it matters, the payment into the receivers' account was the equivalent of a payment into court. At that point, the obligation to continue paying interest under the mortgage was discharged. 16 Having found that the obligation to pay interest under the mortgage was discharged when the balance of the proceeds of sale was paid into the Receivership Account, the learned primary judge turned to consider whether the second mortgagee was entitled to the interest which had accrued on the amount found to be due while it was held in the Receivership Account. His Honour held that the second mortgagee was entitled to trace its security interest into the proceeds held in the receivers' account and, consequently, it was entitled to the "fruit" of that property, namely the interest generated by the principal amount together with any interest on interest.

This appeal 17 The appellant submits that his Honour erred in finding that there had been a tender of the amount due and that the tender had been refused. In the alternative, it submits that his Honour erroneously found that there had been a waiver of the need to tender the amount due. As any such finding was made as a prelude to making the order of 13 March 2008 that the second mortgagees provide a discharge of their mortgage, any challenge to such a finding should have been made in respect of those orders. The written submissions for the second respondent take this point, submitting that questions as to the findings made by the learned primary judge in conjunction with the 13 March orders are not properly before the Court. 18 Strictly speaking the second respondent is correct, however, the basis on which his Honour made the 13 March orders is relevant to his Honour's reasons for holding, in the primary judgment, that interest did not run under the mortgage during the period between 17 March and 22 September 2008. This much is clear from his Honour's own reference to the effect of the 13 March orders in the extract from para [7] of the primary judgment set out at [15] above. Unless one is to regard the last sentence of that extract as a complete non sequitur, the preceding explanation must have been intended as an explanation for the conclusion stated in the last sentence. 19 In any event, while his Honour did not publish reasons for the orders made on 13 March, we do not understand the learned primary judge to have made either of the findings suggested by the appellant. Similarly, we do not find in his Honour's reasons in the primary judgment that he relied on any such finding. 20 The position of the receivers at the time they were seeking to have the Court compel the second mortgagees to provide a discharge is apparent from their submissions filed on 5 March 2008 (see [6] above) and the transcript of the hearing on 6 March 2008. The receivers did not submit that the mortgagees had rejected a tender of the amount due. Nor was it submitted that the mortgagees had advised the receivers that it would be futile for them to do so. Rather, as outlined at [6]-[8] above, the receivers' position was that they were not able to tender the amount required to satisfy the mortgage and were not willing to pay any amount to AVS "unless so authorised and directed by the Court". That this was the position is confirmed by the comments made by Mr Martindale: see [9]-[10] above. In the circumstances, particularly in the absence of published reasons for the orders of 13 March, we do not see any basis on which to hold that his Honour made findings inconsistent with the position of both parties. 21 From the reasons for the judgment under appeal, however, it is tolerably clear that his Honour regarded the second mortgagees' statement that they would not provide a discharge unless they received the whole of the proceeds as analogous to the waiver cases. It is apparent that his Honour was of the opinion that two things flowed from this conclusion: first, that the Court could order the second mortgagees to provide a discharge without the necessity for the receivers to tender the amount due, on condition that the balance of the proceeds were paid into the Receivership Account; and second, that once the funds had been deposited in the Receivership Account interest under the mortgage ceased to run. 22 His Honour's comment that "if it matters" the payment into the receivers' account was equivalent to payment into court appears to be a subsidiary comment directed to the timing of when interest ceased to run under the mortgage. This is consistent with the following comment of Lord Macnaghten in Bank of New South Wales v O'Connor (1889) 14 App Cas 273 at 283: [I]t is now the practice, where a proper tender has been made and refused, to make an order giving the mortgagor liberty to pay into Court a stated sum sufficient to cover the amount of principal and interest and the probable costs of the suit, and then upon payment into Court, but not till then, the mortgagee is required by the order to deliver up the title-deeds. … It is no hardship upon the mortgagor, for if he has made a proper tender he can always obtain his deeds on a summary application on the terms of substituting for the security a sum of money equal to the amount secured, with a proper margin. [Emphasis added]

23 Quite apart from the timing issue, it is clear from Lord Macnaghten's comment that it is essential for the mortgagor to have made "a proper tender" which, his Lordship held, would be refused at the mortgagee's own risk; it will, among other things, stop the running of interest. There are many authorities as to what constitutes a proper tender however it is clear that the conduct of the mortgagee may dispense with the need for the mortgagor to make an actual tender: Scarfe v Morgan (1838) 4 M & W 270; Kerford v Mondel (1859) 28 LJ Ex 303. As the learned primary judge observed this is consistent with modern authority. 24 Modern authority, extending well beyond tender of payment under a mortgage, confirms that as a matter of contract law, as well as in equity, the law will not require a party to perform a futile action. In Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235 Dixon CJ said at 246-7: Now long before the doctrine of anticipatory breach of contract was developed it was always the law that, if a contracting party prevented the fulfilment by the opposite party to the contract of a condition precedent therein expressed or implied it was equal to performance thereof. … But a plaintiff may be dispensed from performing a condition by the defendant expressly or impliedly intimating that it is useless for him to perform it and requesting him not to do so. If the plaintiff acts upon the intimation it is just as effectual as actual prevention.

25 Dixon CJ referred to the comments of Lord Mansfield in Jones v Barkley (1781) 2 Dougl. 684 at 694; 99 ER 434 at 439-440, where his Lordship said: The defendant pleads, that the plaintiff did not actually execute an assignment and release; and the question is, whether there was a sufficient performance. Take it on the reason of the thing. The party must shew he was ready; but, if the other stops him on the ground of an intention not to perform his part, it is not necessary for the first to go farther and do a nugatory act. [Emphasis added]

26 In summary, these authorities show that a plaintiff seeking to be relieved from performance must be ready, willing and able to perform the obligation albeit that he or she is excused from actual performance because it would be futile. The point is made clearly by Brennan J in Foran v Wight (1989) 168 CLR 385 at 417 where his Honour observed: Where the respective obligations of parties to a contract are mutually dependent and concurrent, the primary rule is that neither party who fails to perform his obligation when the time for performance arrives can rescind for the other party's failure at that time to perform his obligation. Each party's obligation is conditional on performance by the other; neither can complain of non-performance by the other when the condition governing the other's obligation goes unfulfilled. But if one party intimates to the other that it is useless for the other to fulfil his obligation and the other acts on the intimation, the party to whom the intimation is given is dispensed from a nugatory tender of performance.

27 In this case there is no finding that the receivers were ready to discharge the debt due under the mortgage. On the contrary, through their counsel at the directions hearing on 6 March and in their written submissions of 5 March, they indicated that they were not in a position to tender the amount due, there being no agreement as to that amount. 28 As it turned out, once there had been a taking of accounts, the amount claimed by the second mortgagees was greatly in excess of the amount found to be due however the mere fact that a claim is erroneous does not, in itself, constitute a waiver of the mortgagor's obligation to make a proper tender: Scarfe v Morgan at 279; Kerford v Mondel at 306. As previously mentioned there is no submission that the dispute was other than genuine. 29 That being so, the question whether interest under the mortgage ceased to run when the balance of the sale proceeds were paid into the Receivership Account cannot be answered by application of the authorities in which it is held that interest has ceased to accrue consequent upon the rejection of a proper tender or waiver of the obligation to make a proper tender. 30 In the appellant's submission, upon discharge of the second mortgage, the proceeds of sale were bound as security for AVS's loan in substitution for the security interest in the Mews Land that AVS had been ordered by the Court to release. Accordingly, it submitted, after 17 March, interest on the principal sum owed under the second mortgage continued to accrue in accordance with the terms of the facility agreement until the principal was repaid on 22 September 2008. 31 The distinction between the contractual and the proprietary aspects of a mortgage are critical to the analysis of the issue of the rate at which interest accrued after 17 March 2008 and to the parties' respective submissions on the point. Similarly, there must be a clear appreciation of the role of the court in ordering payment into court and imposing conditions in relation to that payment. 32 As Lord Mansfield said, "Take it on the reason of the thing". Completion of the contract for the sale of Mews Land could not proceed while the land was encumbered by the proprietary interest created by the second mortgage. This was the only reason why it was necessary or appropriate to deprive the appellant of its security over the Mews Land without payment. The obligation to release land from the burden of a mortgage so that an unencumbered interest can be transferred on settlement is a common feature of contracts for the sale of land. The usual practice is for that to be effected by paying the mortgagee what is due under the mortgage in exchange for a properly executed discharge or, in the case of Torrens title land, a discharge in registrable form. 33 In this case, the usual practice was not possible because there was a dispute as to the amount due on discharge. No suggestion has been made that this was other than a genuine dispute which ought properly to be resolved by taking of accounts. In the circumstances, his Honour clearly decided that the sale of the Mews Land should not be jeopardised by the delay that would inevitably be involved in the taking of accounts. There has been no challenge to the appropriateness of his Honour's order that the mortgagees should provide a discharge and that the balance of the proceeds should be paid into the Receivership Account pending resolution of the dispute over the amount owed under the second mortgage. 34 In Equus Financial Services Ltd v RMBL Investments Pty Ltd (1996) 22 ACSR 744 at 747-8, Bryson J referred to Lord Macnaghten's comment quoted at [22] above and added: In my view it has been established that the court has power by an interlocutory order to require the mortgagee to give up the security while the accounts have not been settled, the amount payable to the mortgagee has not been ascertained and there is still a difficult course to follow before these things happen. It should be clear before the court does so that reasonable protection is available and that a fund of money sufficient to pay any amount likely to be found to be due is under the control of the court. What the court is asked to do is to require an unwilling mortgagee to accept a sort of security, namely a fund of money, different to the security which it has bargained for and wishes to have, and while the court does have that power, it should only do so where it is satisfied that the interests of justice require an interlocutory order to that effect.

35 In our view the interests of justice required that an interlocutory order made in such circumstances be limited to what is necessary to achieve the unencumbered sale of the land. This involved removing the proprietary interest over the land created by the mortgage and substituting for it a security interest in the proceeds of sale. It does not require any interference with contractual rights of the mortgagee which stipulate, inter alia, the rate of interest that applies under the mortgage. 36 The second respondent supported his submission that interest under the mortgage ceased to run on payment of the balance of the proceeds of sale into the Receivership Account by reference to the decision of the High Court in Forsyth v Blundell (1973) 129 CLR 477. That case concerned an application by a mortgagor for a permanent injunction to restrain completion of a contract entered into by the mortgagee in exercise of its power of sale. There was no dispute that the mortgagor was in breach of the payment obligations under the mortgage or that the power of sale was exercisable, however, both Fox J in the ACT Supreme Court and Walsh and Mason JJ in the High Court found that in the manner of its exercise, the mortgagee had breached its duty to the mortgagor. 37 Prior to the hearing before Fox J, an interlocutory injunction to this effect had been granted by Gibbs J on condition that the mortgagor paid into court the sum of $155,000, an amount which "was accepted by the parties as being sufficient to cover all moneys secured by the mortgages": per Walsh J at 504. In compliance with the condition, the mortgagor arranged for the deposit with the Court of securities for the required amount over interest-bearing deposits with the Commonwealth Trading Bank of Australia on 23 April 1970. At first instance Fox J rejected the mortgagee's claim that it was entitled to interest on the principal at the rate provided in the mortgage. His Honour held, at 19 FLR 45, that "the liability to pay interest at the contractual rate should be regarded as having ceased as soon as the payment in was made". His Honour did not come to this conclusion because he regarded the payment in as a tender. Rather he regarded it "as an exercise of the equitable jurisdiction to do what is just and reasonable between the parties". His Honour accepted the general rule that a mortgagor who seeks to restrain the exercise of the mortgagee's power of sale is required to bring into court the amount of the principal, interest and costs payable under the mortgage. His Honour noted that the rule is not completely rigid or inflexible adding, at 46: It is a rule which was introduced in relation to the ordinary case to enable the court to do justice between both parties. … such a rule, if applied inflexibly, could obviously be productive of considerable hardship and injustice.

38 In rejecting the mortgagee's claim for interest at the contractual rate after the payment into court, his Honour said: In the present case, if [the mortgagee] had not wanted to justify the sale, it could have taken the amount to which it is entitled out of court, giving at the same time a discharge of the mortgages. It may be that the amount brought in was slightly excessive, or slightly inadequate, and it may be necessary for an account to be taken to ascertain precisely what was payable. It was, however, agreed at the time to be close enough to the correct amount, and the necessity for the account can hardly in the circumstances be relied upon as a ground for treating interest as running. But for the mortgagee's unsuccessful defence of its action in agreeing to sell, the account, if necessary could have been taken at the outset.

39 It is clear from Fox J's remarks that the need to do justice between the parties was the dominant imperative behind the court's discretion to impose conditions in relation to the interest on the principal under the mortgage. 40 In the High Court Walsh J (with whom on this point Mason J agreed) confirmed Fox J's analysis, commenting, at 129 CLR 504-5: The question to be decided is not whether what occurred was the equivalent of payment of the debt or was a proper legal tender of the amount due which the mortgagee had a duty to accept. The payment into Court was not an act done under and in accordance with the contract between the parties in order to satisfy a contractual right of the mortgagee. The mortgagee had no doubt a contractual right to payment of the debt, including interest, secured by the mortgage. But it had no contractual right, when the [mortgagors] were claiming that they were still entitled to redeem and [the mortgagee] was disputing that claim, to have the amount of the debt paid into Court. The deposit of the securities was made in accordance with a condition imposed on the mortgagor by the Court for the benefit of the mortgagee and as a means of doing justice between the parties. In my opinion, the Court when making such an order had power to make it upon such terms and conditions as it thought proper in the circumstances to ensure that the objective of doing justice between the parties was achieved. [Original emphasis]

41 Walsh J added a reference to Lord Macnaghten's comment in Bank of New South Wales v O'Connor at 283 that a court of equity "can take all the circumstances of the case into consideration, and do complete justice between the parties, however complicated their relations may be". 42 In our view the learned primary judge erred in failing to consider the question of justice between the parties. The last two sentences in [7] of his Honour's reasons (see [15] above) suggest that his Honour concluded that it necessarily followed from the fact of payment into the Receivership Account that interest ceased to run under the mortgage. There is no indication that his Honour gave any consideration to whether this was a reasonable and just outcome in all the circumstances. 43 In our view the justice between the parties in this case requires a different outcome from that in Forsyth v Blundell. In this case the order that the second mortgagees provide a discharge of mortgage without being paid the amount due under the mortgage contract was made for the benefit of the mortgagor, not the mortgagee. If the sale had been postponed pending the taking of accounts, with discharge of the mortgage and payment of the amount due under it occurring on settlement, there would have been no question that the mortgagee was entitled to interest at the contractual rate. The practicalities of the situation here led to a different approach, namely the taking of accounts following rather than preceding settlement. AVS was not in the position of being able to take the amount to which it was entitled before the taking of accounts; the disparity between the parties' respective estimates of what was due was too great. In the circumstances, there is no reason why the need to complete the contract of sale before the taking of accounts should lead to the appellant being deprived of interest under the mortgage for the period that it was kept out of its funds. We therefore hold that in the period from 17 March 2008 to 22 September 2008 interest accrued on the outstanding principal at the rate provided under the mortgage. 44 For these reasons the appeal must be allowed. Order 1 made on 14 November 2008 must be set aside and, in lieu thereof, there be declarations as to the appellant's entitlement to interest in the sum of $451,511.07 and an order for the costs of the parties to the appeal to be paid out of the Receivership Account. Among the declarations sought by the appellant is a declaration to the effect that a payment of $451,511.07 made by the first respondents on 20 November 2008 discharged the third respondent's liability for interest. This declaration requires a little explanation. 45 The explanation is to be found in the affidavit of Woodrow Gary Wunsch sworn on 1 May 2009 and filed in support of the appellant's application for an extension of time to appeal. Mr Wunsch is the Group Company Secretary for the group of companies of which the appellant is a member. He has day to day supervision and management of its commercial activities including the litigation concerning the Scheme referred to in [1] above. Mr Wunch deposes that in calculating the amount of interest to be paid pursuant to order 1 made on 14 November 2008, he misunderstood the order to refer to the amount of interest payable under the facility agreement between the third respondent and AVS. Accordingly, on 17 November 2008 he sent an email to Mr Jack James of KordaMentha, the receivers' firm, setting out a calculation of interest payable to AVS in accordance with his understanding of order 1. He states: That email attached a copy of his Honour's reasons for judgment and a spreadsheet detailing calculations of the interest. The email stated that $451,150.05 was payable to AVS and provided AVS's bank account details. 46 According to Mr Wunsch payment of the interest was arranged by Mr McMaster, one of the receivers, and on 20 November 2008, the receivers paid the sum of $451,150.05 to AVS. Mr Wunsch had not realised that he had misunderstood the order until 4 March 2009 when he received a letter from Mr McMaster advising him that AVS had been overpaid and requesting a refund of the amount of the overpayment. Although not specifically stated, it is apparent that there was no repayment and that the request for repayment was the genesis of the application for an extension of time and of this appeal. In the circumstances we believe that a declaration in the terms requested by the appellant is appropriate to ensure that the controversy over entitlement to the payment of interest is finally settled. I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Sundberg, Stone & Edmonds.