CEG Direct Securities Pty Ltd v Shining Pty Ltd

The Separate Questions

1. I set out below the separate questions for determination ("the Questions"): 1. Pursuant to UCPR r. 28.4, the Court Orders that the following questions of fact and law are to be decided separately from and in advance of all other questions in the proceedings: 1. Whether the third and fourth defendants or either of them respectively granted the purported Powers of Attorney? 2. Whether the First Mortgage and the Second Mortgage or either of them were entered into by the third or fourth defendants or by anyone acting with their knowledge or approval? 3. Whether the principal sums that the plaintiff alleges it advanced on or about, respectively, 10 May, 2017, 21 June, 2017 and 12 September, 2017 (or any of them) was advanced at the request or direction of the third and fourth defendants? 4. Whether, even if questions (a) to (c) be answered in the negative, upon the proper construction of the First Mortgage it secures, and the "First Property" at 131/94-116 Culloden Road, Marsfield (being the land in folio identifier 127/SP57169) is charged with, payment to the Plaintiff of: 1. the principal sum of $200,000 together with interest and costs, or alternatively 2. $nil? 1. Whether, even if questions (a) to (c) be answered in the negative, upon the proper construction of the Second Mortgage it secures, and the "Second Property" at 22/94-116 Culloden Road, Marsfield (being the land in folio identifier 20/SP57169) and the "Third Property" at 2 De Milhau Road, Hunters Hill (being the land in folio identifier 1/214616) are charged with, payment to the Plaintiff of: 1. the principal sum of $381,000 together with interest and costs, or alternatively 2. $nil? 1. Whether the Deed of Guarantee and Indemnity dated 10 May, 2017 purportedly entered into between the plaintiff and the second, third and fourth defendants was executed by the third and fourth defendants by the second defendant as their attorney pursuant to the purported Powers of Attorney? 2. Whether the Profit Sharing Deed dated 6 May 2017 and reproduced at pages 226-230 of the Exhibit LKO-1 to the Affidavit of Luke Owens affirmed 12 April 2019 was executed by the third and fourth defendants? 3. Whether, if question 1(a) is answered in the negative, the Court should order the purported Powers of Attorney be removed from the General Register of Deeds?
2. The list of separate questions may be divided into two issues as follows: 1. Questions (1)(a), (b), (c), (f), (g) and (h), which all relate to the question of whether the third and fourth defendants' signatures were forged on the powers of attorney; and 2. Questions (1)(d) and (e), which assume a finding in favour of the third and fourth defendants on the forgery issue and relate to the proper construction of the registered mortgages.

The first issue - were the signatures of the third and fourth defendants forged?

1. The answers to Questions (1)(a), (b), (c), (f), (g) and (h) depend upon whether I accept that the powers of attorney were validly executed by the third and fourth defendants or whether, contrary to that position, their signatures were forged.

The evidence of the third defendant

1. At the time of affirmation of his affidavit of 5 October 2018, the third defendant was 66 years of age. He derived his income from two investment units held with his wife, the fourth defendant (being the First and Second Properties). He had lived in Australia for approximately 26 years, residing at the Third Property in Hunters Hill for 10 years. His native language is Chinese Mandarin. His English is poor. He can only communicate in English at a basic level.
2. He came to Australia in 1993 and worked selling batteries to car repair shops by way of door-to-door sales.
3. In May 2017, he received a letter from NSW Land and Property Information, a division of the Department of Finance and Services, attaching a copy of a caveat, lodged by the plaintiff in respect of the First Property at Marsfield.
4. By that time he knew that his son, the second defendant, had been involved in investments because in 2015 he had been asked to guarantee some investments. After receipt of the May 2017 letter, he contacted his son asking whether he knew anything about it and was told "Don't worry I have resolved it".
5. Then, in February 2018, he was served with a number of documents including the statement of claim. At the time, he initially thought it was a scam.
6. In respect of the Power of Attorney alleged to have been given by him, he says in his first affidavit: "I did not sign the purported Power of Attorney dated 4 November 2015 registered with book 4699 and number 477, a copy of which is annexed hereto and marked 'C'. I am informed by my solicitor that the plaintiff alleges the second defendant purportedly executed documents on my behalf that are the subject of these proceedings, namely a Deed of Guarantee and Indemnity, Registered Mortgage AM488533, and Registered Mortgage AM607372. The signature on the said Power of Attorney is not mine and was not attached with my authority. I am familiar with the signature of my wife and have examined the Power of Attorney purporting to be that of my wife dated 4 November 2015 and registered with book 4699 and number 478. That signature is not the signature of my wife. A copy of the said purported Power of Attorney by my wife is annexed and marked 'D'."
7. In his first affidavit, he further details the events that have occurred since service of the statement of claim, including attendance at the Police and at his bank on the basis that he believed that he might be the subject of a scam or fraud. It is not necessary to further detail his evidence, except to say that his explanation as to his conduct since being served with the relevant documents is consistent with that of a person who had no understanding of what was happening and had no idea that it was being alleged that he had signed a power of attorney or had granted the mortgages.
8. In his subsequent affidavits of 29 October 2018 and 22 May 2019, he makes specific reference to the powers of attorney and then each of the documents which are alleged to have been signed pursuant to the power of attorney. He specifically states that he had no knowledge of these documents or their effect until being shown them as part of these proceedings.

The evidence of the fourth defendant

1. As at the date of her affidavit of 3 October 2018, the fourth defendant was 64 years of age. She is not a pensioner. She obtains her income from the two investment units held with her husband (being the First and Second Properties). She lives with her husband at their Hunters Hill home.
2. Her evidence is similar to that of the fourth defendant. Further, she refers to a strained relationship with her son. She did not know his address in 2018. She believes that the main reason for the strained relationship with her son and daughter-in-law is because she and her husband did not support her son financially. She refers to a conversation in 2012 with her daughter-in-law, at which time her daughter-in-law asked her to invest and support them. She declined on the basis that they were retired and did not have the capacity to do so.
3. She says that their son moved back in with them in 2015 for approximately 11 months when their daughter-in-law and grandson returned to China. When the daughter-in-law returned from China, they all lived together at the Third Property for approximately 3 months after which the second defendant, his wife and their child moved to a property in Burwood, although it is not clear why they moved out.
4. In respect of the mortgages and power of attorney, she says in her first affidavit: "37. I have never seen those mortgages before they were shown to by my solicitor in course of preparing this affidavit. My son did not speak to me about those mortgages at any time. I have never been asked by anyone to consent to those mortgages or either of them being given. I did not receive any advice about them. I did not know about them until recently. 38. I have been shown by my solicitor a copy of a Power of Attorney dated 4 November 2015 and registered 4 December, 2015, Book 4699 No. 478. A copy of the Power of the Attorney is annexed hereto and marked 'C'. I did not sign it. The signatures purporting to be my signatures on the document (pages 1, 2, 3, 4, 5 and 6) were not signed by me. I have never seen that document before being shown it by my solicitor in the course of preparing this affidavit. 39. On each of pages 1, 2 and 3, there is a signature above the signature that purports to be my signature. That signature has the Chinese characters of my husband's name WANG Xi Hai, but I do not recognise it as my husband's signature - as his way of writing or signing his name. 40. I was not asked by anyone to consent to giving that Power of Attorney. I did not receive any advice about it. I did not know about it until recently. 41. I do not know "Sisi Song" or who she might be. 42. I do not know "Juan Uzabeaga" or who he might be. 43. I deny ever meeting the person named "Juan Uzabeaga" of 15/88 Victoria Avenue Chatswood NSW who supposedly witnessed what is purported to be my signature on the Power of Attorney."
5. Neither the third nor the fourth defendant was required for cross-examination. There is no challenge to any of their evidence.

The report of Steven Dubedat dated 12 June 2020

1. Mr Dubedat was retained on behalf of the third and fourth defendants. He was asked to address two questions: "(a) Whether in your opinion the signatures purporting to be those of Xihai Wang on the Power of Attorney (being document Q1) are those of Xihai Wang; and, (b) whether in your opinion the signatures purporting to be those of Xihai Wang and Hairong Li on the Power of Attorney (being document Q2) are those of Xihai Wang and Hairong Li."
2. He was also asked to compare and opine on the signatures set out in a number of documents (the genuine specimen signatures) with the signatures purporting to be those of the third and fourth defendants on: 1. a signed acknowledgment by the third and fourth defendants that they were aware that their son was going to borrow $200,000 from the plaintiff and had given him a power of attorney; 2. a signed direction and authority in respect of the loan agreement; and 3. a profit sharing deed purportedly signed by the third and fourth defendants.
3. Mr Dubedat made the following findings: "(i) There is 'evidence to suggest' that the questioned 'Xihai Wang' signatures on documents Q1 to Q4 and Q6 are not genuine (when compared individually). (ii) There is 'evidence to suggest' that the questioned 'Hairong Li' signatures on documents Q2, Q3, Q5 and Q6 are not genuine (when compared individually)." (Emphasis in original.)
4. There were some limitations in the methodology adopted by Mr Dubedat. As he says, the quality of the documents provided to him does not enable any useful microscopic examinations to be conducted on the signatures. A detailed assessment of the line quality and other finer details in the signatures is thus restricted. There are thus some limitations of the comparison of the signatures.
5. However, he concluded that the questioned signatures are probably not genuine when compared collectively, that is, on the assumption that all of the questioned signatures have been written by the same writer.
6. Again, there is no challenge to this evidence. Whilst the Registrar-General made some reference to shortcomings in the report in its submissions, having regard to the way in which the hearing was conducted, the shortcomings have been rendered irrelevant.
7. The third and fourth defendants say that they did not sign the powers of attorney, did not sign the other documents, such as the authorities that they are alleged to have signed, and have no knowledge of the mortgages. Whilst the absence of any challenge does not necessarily mean that their evidence must be accepted, there is no reason not to accept their evidence in this matter. Further, it is, at least to a certain extent, corroborated by the opinion of Mr Dubedat, even allowing for the shortcomings in methodology.

Conclusion on the first issue

1. I thus accept that the third and fourth defendants did not sign the purported Powers of Attorney. Someone forged their signatures.
2. It is not necessary to make any further findings about how or why that occurred or who might have been involved or make any findings about purported witnessing of signatures and the roles of any solicitors in the process.
3. I thus determine the Questions on the first issue as follows: (1)(a) Whether the third and fourth defendants or either of them respectively granted the purported Powers of Attorney? - NO (1)(b) Whether the First Mortgage and the Second Mortgage or either of them were entered into by the third or fourth defendants or by anyone acting with their knowledge or approval? - NO (1)(c) Whether the principal sums that the plaintiff alleges it advanced on or about, respectively, 10 May 2017, 21 June 2017 and 12 September 2017 (or any of them) was advanced at the request or direction of the third and fourth defendants? - NO (1)(f) Whether the Deed of Guarantee and Indemnity dated 10 May 2017 purportedly entered into between the plaintiff and the second, third and fourth defendants was executed by the third and fourth defendants by the second defendant as their attorney pursuant to the purported Powers of Attorney? - NO (1)(g) Whether the Profit Sharing Deed dated 6 May 2017 and reproduced at pages 226-230 of the Exhibit LKO-1 to the Affidavit of Luke Owens affirmed 12 April 2019 was executed by the third and fourth defendants? - NO (1)(h) Whether, if question 1(a) is answered in the negative, the Court should order the purported Powers of Attorney be removed from the General Register of Deeds? - YES

The second issue - the proper construction of the mortgages

1. The remaining Questions (1)(d) and (e) relate to the construction of the mortgages.
2. The reason that there remain questions as to the entitlement of the plaintiff under the mortgages is that the mortgages were registered. As the High Court emphasised in Cassegrain v Gerard Cassegrain & Co Pty Ltd [2] in relation to s 42 of the Real Property Act 1900 (NSW): "[18] Section 42(1) provides that the estate of a registered proprietor is paramount. It provides that, subject to some exceptions which are not relevant to this case: 'Notwithstanding the existence in any other person of any estate or interest which but for this Act might be held to be paramount or to have priority, the registered proprietor for the time being of any estate or interest in land recorded in a folio of the Register shall, except in case of fraud, hold the same, subject to such other estates and interests and such entries, if any, as are recorded in that folio, but absolutely free from all other estates and interests that are not so recorded'." (Emphasis in original.)
3. There is no suggestion of fraud on the part of the registered proprietor of the estate or interest, being the plaintiff.
4. The First and Second Mortgages are relevantly identical for the purposes of the construction issue. I will refer to them in the singular for ease of reference.
5. The general position was summarised by Giles J in PT Ltd v Maradona Pty Ltd [3] as follows: "The general position thus indicated is, I think, as follows. That which is attained by registration is, in the words of s 42, an estate or interest in the land. Registration does not validate all the terms and conditions of the instrument which is registered. It validates those which delimit or qualify the estate or interest or are otherwise necessary to assure that estate or interest to the registered proprietor."
6. The issue arising in these proceedings is the issue somewhat famously identified by Campbell J in Small v Tomassetti: [4] "Notwithstanding that registration confers indefeasibility on a mortgagee, there is still a question 'indefeasibility for what?'."
7. Indefeasibility of a mortgage may extend to a covenant for payment. [5] The question that arises is: what is the debt secured by the mortgage? The charge of the debt on the land is part of the interest rendered indefeasible [6] but it is still necessary to identify the debt secured by the mortgage on registration.
8. In Perpetual Trustees Victoria Ltd v English, [7] a case involving a forged signature on a mortgage, Sackville AJA summarised the relevant principles by reference to the following eight points: "1. Registration of a mortgage does not transfer the fee simple estate, but the mortgage takes effect as a security over the land: Real Property Act, s 57(1). Upon registration, the land becomes liable as security in manner and subject to the covenants set forth in the mortgage: Real Property Act, s 41(1); Provident Capital v Printy at [25], per Basten JA (with whom Tobias and McColl JJA agreed). 2. Registration of a forged mortgage confers an indefeasible title on the mortgagee, provided that the mortgagee has not been party or privy to the fraud and no other exception to indefeasibility applies: Breskvar v Wall; Yazgi v Permanent Custodians at [14], per Beazley JA (with whom Ipp and Tobias JJA agreed); Pyramid Building Society (In Liq) v Scorpion Hotels Pty Ltd [1998] 1 VR 188, at 191, per Hayne JA (with whom Brooking and Tadgell JJA agreed). 3. Registration of the mortgage does not necessarily ensure the validity of every term of the mortgage, irrespective of the relationship between the term and the estate or interest created by the mortgage itself: Travinto Nominees Pty Ltd v Vlattas [1973] HCA 14; 129 CLR 1, at 17, per Barwick CJ (with whom McTiernan and Stephen JJ agreed). Hence a personal right created by a covenant in a mortgage, such as a guarantee, is not rendered indefeasible by registration of the mortgage: Mercantile Credits Ltd v Shell Co of Australia Ltd [1976] HCA 9; 136 CLR 326, at 343, per Gibbs J; PT v Maradona. 4. In New South Wales, the view has been taken that a personal covenant in a registered but forged mortgage to pay the amount of the mortgage debt, where the debt exceeds the value of the property, is not protected by the indefeasibility provisions of the Real Property Act : Grgic v Australia and New Zealand Banking Group Ltd (1994) 33 NSWLR 202, at 224, per Powell JA (with whom Meagher and Handley JJA agreed); cf Pyramid Building Society v Scorpion Hotels, at 196, where a different view may have been taken. 5. The registration of a forged mortgage validates those terms of the mortgage which delimit or qualify the estate or interest of the mortgagee or are otherwise necessary to assure that estate or interest to the registered proprietor: PT v Maradona, at 679; Yazgi v Permanent Custodians, at [19]-[20]. 6. It is necessary to construe the terms of a mortgage to determine the scope of the estate or interest in respect of which indefeasibility is conferred by registration of the mortgage: Yazgi v Permanent Custodians, at [22]. Thus whether registration of a forged mortgage allows the mortgagee to enforce its security interest in the land in relation to a debt or obligation arising under an agreement separate from the mortgage is a question of construction of the mortgage: Westpac v Clark, at [43], per Blanchard, Tipping and Wilson JJ. 7. Generally speaking, if the mortgagee specifies a sum of money (plus interest) as the amount secured by the mortgage, the charge created by the mortgage will secure the amount so specified even if the document creating the indebtedness is void under general law principles: [Small v Tomassetti]. 8. However, if as a matter of construction, the mortgage does not take effect as a security over the land in relation to a claimed debt or obligation, registration of the mortgage will not entitle the mortgagee to exercise remedies, such as the power of sale, to enforce any such claimed debt or obligation: Provident Capital v Printy, at [50]-[52]; Yazgi v Permanent Custodians, at [25]ff. The question of construction may be particularly difficult where the registered mortgage refers to antecedent documentation which is not incorporated in the Torrens register and which may be invalid on general law principles."
9. This matter involves the application of those principles having regard to the terms of the mortgage. Each party sought to compare and contrast the terms of the mortgage with mortgages in other cases.
10. The plaintiff highlighted cases where it was submitted the terms of the mortgages were so similar that the same result should necessarily ensue. The third and fourth defendants highlighted other cases pointing to similarities in the terms of the mortgages where the position adopted by the third and fourth defendants in this matter was accepted by the Court in those other matters.
11. The Registrar-General generally adopted the third and fourth defendants' submissions on the construction issue.
12. The plaintiff did not suggest that it could enforce the deed of guarantee and indemnity. It is a separate agreement which, based on my findings in respect of the first issue, is unenforceable.

The plaintiff's position

1. The plaintiff summarised the construction issue as follows: "(a) in the case of the First Mortgage, whether the indefeasibility of the First Mortgage extends to the covenants for payment contained in clauses 2, 3 and 4 of the Agreement forming part of Annexure A to the First Mortgage …; and (b) in the case of the Second Mortgage, whether the indefeasibility of the Second Mortgage extends to the covenants for payment contained in clauses 2, 3 and 4 of the Agreement."
2. The plaintiff submits: "There is thus in each of the First Mortgage and the Second Mortgage both a promise or obligation to pay and the identification of a specified sum ($200,000 in the case of the First Mortgage and $381,000 in the case of the Second Mortgage) delimiting the estate or interest conferred by the mortgage, indebtedness for which is acknowledged by the mortgagors. This is on all fours with PT Ltd v Maradona and Small v Tomassetti. On their proper construction, the indefeasibility of each of the First Mortgage and the Second Mortgage accordingly extends to the covenants for payment therein referred to above. The estate or interest in the subject Properties which was created by the registration of the First and Second Mortgages was a charge which secured at the least the principal sum and interest thereon."
3. The agreement forming part of Annexure A to the First Mortgage ("the Agreement") is in the following terms: "You (the mortgagor) agree with us (the mortgagee) as follows: 1. The mortgage Common Provisions in this annexure are incorporated in this mortgage. You acknowledge that you received, read and understood a copy of the Mortgage Common Provisions before signing this mortgage. A reference to "this mortgage" in the cover sheet, this Annexure A, or in any other annexure to this mortgage is a reference to the mortgage constituted by the cover sheet and those annexures including the Mortgage Common Provisions. 2. You acknowledge giving this mortgage and incurring obligations and giving rights under it for valuable consideration received from us. 3. You acknowledge that, as at the date of this mortgage, we have agreed to lend $200,000.00 to you or at your request. This amount, together with any further advances and any other amounts more fully described in the Mortgage Common Provisions, is called the secured money. 4. You acknowledge indebtedness to us for the secured money and agree to pay to us the secured money, together with interest and all other money due to us at the times agreed with us, or failing agreement on demand. You agree that the covenants set out in the facility(s) in respect of the secured money are deemed to be covenants included in this mortgage." (Emphasis in original.)
4. The plaintiff's alternative submission is that the loan agreements are incorporated into the mortgage as collateral documents. The plaintiff adopts the approach of Kirby J in Caradonna at [214]-[217].
5. His Honour accepted that the facility agreement in that matter was a collateral agreement and that, as a matter of construction, the mortgage secured the obligations arising under the facility agreement by its terms. This created an enforceable debt which was secured by the mortgage.
6. The plaintiff says that the mortgage secures the obligation to pay in the loan agreement and the first variation agreement.

The position of the third and fourth defendants and the Registrar-General

1. The third and fourth defendants and the Registrar-General adopt similar positions.
2. They accept the fundamental principle that the effect of registration is that covenants which delimit or qualify the estate or are otherwise necessary to assure the estate or interest of the mortgagee forms part of the registered title that describes the mortgagee's interest in the land and therefore may be enforced against the land.
3. However, they say that on a proper construction of the mortgage, the mortgage secures nothing.
4. They say that the mortgage will only secure something if, on its proper construction, it is found that there has been a sum actually advanced, receipt of which is acknowledged in the mortgage.
5. They submit: "The authorities emphasise that in every case the answer will depend upon the terms of the particular instrument. A question repeatedly encountered by Courts is whether the particular clause is expressed to charge the land unconditionally with a sum certain, or refers rather to money that is to be advanced and charges the land only with so much as is actually advanced. In the latter case the mortgage will not secure any sum that is not found, on the facts, to have been actually advanced to or at the direction of the mortgagor or otherwise in accordance with the terms of the instrument."
6. They say that the covenants contained in the mortgage do not impose any obligation on the third and fourth defendants to repay the monies sought by the mortgagee and that the covenants should not be construed as an acknowledgment of receipt of any monies.
7. They say that as they have not received any amount then they cannot be obliged to repay any amount. [8]
8. They rely on the comments of Young CJ in Eq in Perpetual Trustees Victoria Ltd v Tsai [9] to the effect that if no monies are lent under the mortgage, the mortgage is just completely void. As his Honour later said in Vella v Permanent Mortgages Pty Ltd, [10] reflecting on his decision in Tsai: "A ratio of the decision was that there was just no evidence that there was any obligation on the defendant to repay the money sought by the mortgagee because of the form of mortgage adopted and that as the collateral agreement was forged and no money was actually lent to the mortgagor, the mortgage was indefeasible but it secured nothing."
9. Further, they point to the recent decision of Kunc J in Winau Aust Pty Ltd v LCC Property Development Pty Limited (No 2). [11] His Honour did not accept that a clause similar to clause 2 of the Agreement in the present case should be construed as an acknowledgment of receipt.
10. The Registrar-General submits that, properly construed, there is no acknowledgment in the mortgage that any money was in fact advanced. The Registrar-General essentially supports the approach of the third and fourth defendants.
11. Further, it submits that the Court should find that no money was in fact advanced at the time of the mortgage was purportedly executed. In those circumstances, the Registrar-General submits that there was no secured money within the definition of that term in clause 13.1 of the mortgage common provisions. If there was no secured money, then there was no relevant indebtedness under clause 4 of the Agreement.
12. In the circumstances, the extent of the estate or interest of the mortgagee is not identified on the face of the mortgage. The Registrar-General submits that as the mortgages do not operate so as to create any obligation on the purported mortgagors, then the mortgages secure nothing. [12]

Consideration

1. As under s 42 of the Real Property Act, the registered proprietor for the time being of any estate or interest in land recorded in a folio of the Register (being the mortgagee) holds the estate or interest free from all other estates and interest that are not recorded, then the question remains as to what is the estate or interest which is secured?
2. Of course, as noted by Simpson J in Perpetual Trustees Victoria Ltd v English, [13] it might be considered odd that the liability of innocent owners in the position of the third and fourth defendants depends on whether the drafters of the mortgage have included, with sufficient specificity in the mortgage documents, the debt which is the subject of the mortgage.
3. However, although there might be some commentary questioning the correctness of such decisions, [14] it remains possible that the mortgage will remain indefeasible as to the estate or interest of the mortgagee in the land (the debt), depending on the construction of the mortgage.
4. Whether the registered mortgage does secure the debt is a question of fact depending on a consideration of the terms of the mortgage. Earlier cases are only a guide, although they demonstrate that differing results can ensue depending on the precise words used in the mortgages.
5. As identified in English (NSWCA) at [97], a registered mortgage may not secure an invalid antecedent collateral agreement. However, if the debt is expressed in the registered mortgage then the mortgage may be secured. In this matter, the loan agreements are not said to be invalid. They were not infected by fraud.
6. The plaintiff thus relies on the covenants contained in the mortgage and the covenants in the loan agreements, which it says are incorporated into the mortgages as collateral agreements.
7. There is merit in the plaintiff's submission that in respect of a third party mortgage such as the mortgages in question in this matter, there could never be an acknowledgment of receipt by the mortgagor. Nor could there be any acknowledgment of the obligation to repay monies that have not been received. In this way, it might be said that the terms of the mortgages in this matter may be distinguished from the mortgages relied upon by the third and fourth defendants in cases such as Cox and Winau (No 2).
8. However, in my view, there are a number of difficulties with the plaintiff's approach to construction.
9. Firstly, in my view, clause 2 of the Agreement is not an acknowledgment that the consideration has actually been received. It is merely an acknowledgment that the mortgagors are incurring obligations and giving rights under it for valuable consideration. The words "received from us" must be construed in the context of the provisions as a whole.
10. I agree with the approach of Kunc J in Winau (No 2) at [7] and [52] to a similar clause as Clause 2 in the Agreement.
11. It is plain that no amount had been received from the plaintiff as at the time of execution of the mortgage. Having regard to the affidavit of Luke Owens affirmed on 12 April 2019 at para 9(e) and paras 10-12, it is apparent that the advances were made subsequent to receipt of the documents.
12. Further, having regard to clause 3 of the Agreement, the mortgagor has merely acknowledged that, as at the date of the mortgage, the mortgagee has agreed to lend $200,000 "to you or at your request".
13. I agree with the Registrar-General's submission that clause 3 is merely an acknowledgment in terms of there being an agreement (prospectively) to lend an amount which forms part of the secured money, together with further advances. It does not record that any specific sum has in fact been advanced.
14. Secondly, even adopting the plaintiff's submissions that it is not necessary that there be an acknowledgment of receipt or agreement to repay, as this is a third party mortgage, it will still be necessary to identify the debt that represents the charge on the land.
15. There could not be any dispute that the acknowledgment in clause 4 of the Agreement is only for the secured money. It seems to me that much depends on what is meant by the term "Secured Money".
16. Secured Money is defined in the mortgage common provisions as follows: "13.1 Definitions: In the Mortgage unless the context otherwise requires: … Secured Money means all money (and any part of that money) which directly, indirectly, contingently, or otherwise at any time is or becomes due by the Mortgagor (whether alone or not) to the Mortgagee for any reason and includes any money due: (a) pursuant to the Mortgage or a Collateral Document; (b) to any person on whose behalf the Mortgagee holds the Mortgage; on any guarantee, bond, account, document, negotiable instrument, or other instrument; because of anything by which the Mortgagee is or becomes in any manner a creditor of the Mortgagor; (c) on account of any person on the order, request, or under the authority of the Mortgagor; arising from anything done or omitted to be done by the Mortgagor which gives rise to a payment, expense, or loss by the Mortgagee; (d) because of the Mortgagee drawing, accepting, endorsing, paying, or discounting any order, draft, cheque, promissory note, bill of exchange, or other negotiable instrument on behalf of the Mortgagor; (e) under any bond, guarantee, letter of credit, or indemnity issued or given by the Mortgagee on behalf of the Mortgagor; and (f) Interest or an amount in the nature of interest on all money described in this clause at the highest rate prescribed for that money or, if none, as determined by the Mortgagee".
17. Secured Money is referred to in the mortgage common provisions in the following way: "2.3 Secured money: The Mortgage secures payment of the Secured Money. The Mortgagor must pay to the Mortgagee the Secured Money on the date agreed between the parties or, if there is no agreement, on demand."
18. The mortgage thus only secures payment of the Secured Money. The liability of the Mortgagor is only to pay the Secured Money.
19. I agree with the third and fourth defendants that there are not two definitions of Secured Money. The second sentence in clause 3 of the Agreement, which states, "this amount, together with any further advances and other amounts more fully described in the Mortgage Common Provisions is called the secured money" (emphasis in original) must be read compendiously with that defined in clause 13.1 of the mortgage common provisions.
20. In Hepples v Commissioner of Taxation, [15] Gummow J stated: "As a general proposition, the use of the expression 'means … and includes' indicates an exhaustive explanation of the meaning which for the purposes of the statute must be attached to the term the subject of the definition, and conveys both the idea of enlargement and exclusion." (Citations omitted.)
21. So, what is the Secured Money?
22. As set out in clause 3 of the Agreement, the plaintiff "agreed to lend $200,000 to you or at your request". In the next sentence there is a further explanation of what is the "secured money" for the purposes of the mortgages, as follows : "This amount, together with any further advances and any other amounts more fully described in the mortgage common provisions, is called secured money". (Emphasis in original.)
23. In circumstances in which no amount had been lent to the third and fourth defendants at the time of the registration of the mortgage and the terms speak prospectively of an agreement to lend, it does not seem to me that the proper construction of clause 3 of the Agreement permits a form of selectivity in the consideration of what is secured by the mortgage. That which is secured is the sum which is to be lent to the third and fourth defendants or at their request. The identification of the proposed amount, i.e. $200,000, does not mean that the remaining words in clause 3 should be ignored for the purposes of determining what is the interest secured by the mortgage.
24. As a matter of fact, no money had been or was ever lent to the third and fourth defendants and they did not make any request for money to be lent.
25. I reject the plaintiff's contention that the words "to you or at your request" are merely part of the recitals and do not form part of the personal covenant. I do not consider that the words "this amount" must be taken as a reference only to the specified sum (i.e. $200,000), as if no meaning should be given to all the other words in clause 3.
26. Further, clause 4 of the Agreement does not constitute an acknowledgment of indebtedness for a specific amount. It is only an acknowledgment of indebtedness for "the secured money". To the extent that it is an agreement to pay rather than repay, it is an agreement to pay "the secured money".
27. In my view, the mortgage could hardly be said to secure a specific sum that had been advanced to the mortgagors when in fact no amount had been advanced to the mortgagors at the time of registration. In these circumstances, the identification of a specific sum does not assist the plaintiff.
28. Money is only due by the mortgagor pursuant to the mortgage if it is due in accordance with clauses 2, 3 and 4 of the Agreement. For the reasons I have set out, no money is due as no money had been lent to the third or fourth defendant or at their request, or indeed ever was lent to the third or fourth defendant or at their request.
29. I reject the plaintiff's submission that the mortgage under consideration in this matter is consistent with the form of the second mortgage considered by Studdert J in Printy v Provident Capital Ltd. [16] The relevant wording of the second mortgage in Printy is not identical to the mortgage in this matter.
30. In Printy, the mortgagor expressly acknowledged receipt of the principal sum of $50,000 and covenanted with the mortgagee to pay that sum to the mortgagee. In my view, the terms of the mortgage in this matter are quite different.
31. The alternative argument advanced by the plaintiff is that the loan agreement (or first variation agreement) constitutes a collateral document within the meaning of that term as defined in the mortgage common provisions. That is, the obligation to pay arises not through the covenant in the mortgages but as a result of the incorporation of the loan agreement into the mortgage.
32. Collateral Documents are defined in the mortgage common provisions as follows: "13.1 Definitions: In the Mortgage unless the context otherwise requires: Collateral Documents means: (a) any present or future loan agreement, mortgage, bond, charge, guarantee, or other document under which the Mortgagor either alone or together with any other person agrees with the Mortgagee in any way; (b) any document under which the Mortgagor either alone or with any other person agrees to pay money to the Mortgagee; (c) any document which is agreed to be collateral to the Mortgage or is specified as collateral in the Mortgage; and (d) any other security given to the Mortgagee to secure the Secured Money".
33. The plaintiff relies on paras (c) and (d). The plaintiff submits that the loan agreement and the first variation agreement are documents agreed to be collateral in the mortgages or as specified as collateral in the mortgages.
34. Plainly, the third and fourth defendants were not party to the loan agreements and, thus, paras (a) and (b) of the definition of Collateral Documents would not apply.
35. The plaintiff submits that the Court should follow the approach taken by Kirby J in Caradonna at [214]-[217]. In that matter, his Honour found that the mortgage secured the obligations arising under the facility agreement and that the facility agreement created an enforceable debt which was then secured by the mortgage.
36. The plaintiff submits: "Applying that to the present instance, the Loan Agreement dated 10 May 2017 was duly executed by the first defendant (borrower), which received the amount advanced of $200,000. There is no suggestion that the Loan Agreement is not binding on and enforceable against the first defendant. It falls within the meaning of Collateral Documents as defined in clause 13.1 in Annexure A. It creates an enforceable debt which is secured by the First Mortgage. Similarly, the Variation Agreement dated 22 June 2017 is binding on and enforceable against the first defendant, which received the principal sum of $381,000. It falls within the definition of Collateral Documents within clause 13.1 of Annexure A in the Second Mortgage. It creates an enforceable debt which is secured by the Second Mortgage.
37. Unlike some of the other cases, the loan agreement and the first variation agreement are not void. They were not infected by fraud.
38. Monies were lent to the first defendant as the borrower under each of the loan agreement and the first variation agreement. Those agreements are binding on and enforceable against the first defendant who received the loan amounts.
39. However, in my view, there are two fundamental difficulties with the plaintiff's alternative argument.
40. Firstly, clause 4 of the Agreement provides: "You agree that the covenants set out in the facility agreement(s) in respect of the secured money are deemed to be covenants included in this mortgage." (Emphasis in original.)
41. The deeming of the covenants contained in the facility agreements (being the loan agreement and first variation agreement) into the mortgages does not overcome the difficulty that the covenants must be in respect of the secured money. It is thus again necessary to have regard to the secured money as that term is understood in the mortgages. The same problems as previously canvassed arise in respect also of the identification of the Secured Money here.
42. Secondly, the plaintiff's reliance on the definition of Secured Money in clause 13.1 of the mortgage common provisions, which refers to money due pursuant to the mortgage or a collateral document, does not assist the plaintiff. The specified amounts would not be money due pursuant to a collateral document.
43. The third and fourth defendants were not parties to the loan agreement or the first variation agreement. Neither agreement imposes any obligation on the third and fourth defendants. Any amount payable pursuant to the collateral document could not be Secured Money as that term is defined in clause 13.1 because it is not money (as described in the opening words of the definition) which directly, indirectly, contingently or otherwise at any time is or becomes due by the mortgagors to the mortgagee.
44. The difficulty for the plaintiff is that this is a third party mortgage. The mortgagors are not the persons to whom the monies were lent or would be lent.
45. As such, no money is due by the third and fourth defendants to the plaintiff under any collateral document.
46. In the circumstances, I do not accept the alternative argument advanced by the plaintiff in respect of the collateral documents.
47. It is notable that in Caradonna, the mortgagors received the money under the facility agreement, such that as a result of the incorporation of a valid document (as a collateral document) into the mortgage, the estate or interest of the mortgagee was qualified or delimited with reference to the amount payable by the mortgagors under the facility agreement.
48. Again, the circumstances are different in this matter. Incorporation of the loan agreement and first variation agreement into the mortgage does not assist in identifying any amount which would fall within the meaning of Secured Money, having regard to clauses 3 and 4 of the Agreement and the definition in clause 13.1 of the mortgage common provisions.
49. Nor is any amount payable by the third and fourth defendants under the collateral documents.

Conclusion on the second issue

1. Accordingly, the answer to each of Questions (1)(d) and (e), which are set out above at [36], is $nil.

Orders

1. I direct that the parties have liberty to approach on 24 hours' notice for the purposes of consequential orders and costs.

Endnotes

1. CEG Direct Securities Pty Ltd v Shining Pty Ltd [2020] NSWSC 858 ("CEG Direct Securities (No 1)").
2. (2015) 254 CLR 425; [2015] HCA 2 at [18].
3. (1992) 25 NSWLR 643 at 679.
4. [2001] NSWSC 1112 at [9].
5. Pyramid Building Society (In Liquidation) v Scorpion Hotels Pty Ltd [1998] 1 VR 188 at 196 (Hayne JA).
6. MDN Mortgages Pty Ltd v Caradonna [2010] NSWSC 1298 at [207].
7. [2010] NSWCA 32 at [68] ("English (NSWCA)").
8. Perpetual Trustees Victoria Ltd v Cox [2014] NSWCA 328.
9. [2004] NSWSC 745 at [21].
10. [2008] NSWSC 505 at [314].
11. [2020] NSWSC 586 ("Winau (No 2)").
12. Maradona; Yazgi v Permanent Custodians Limited [2007] NSWCA 240 at [19]-[20]; Winau Aust Pty Ltd & Ors v LCC Property Development Pty Limited [2020] NSWSC 434 at [118]-[121] ("Winau (No 1)").
13. [2009] NSWSC 478 at [126]-[128] ("English (NSWSC)").
14. Jeremy Stoljar, 'Mortgages, indefeasibility and personal covenants to pay' (2008) 82 ALJ 28.
15. (1990) 22 FCR 1 at 21.
16. [2007] NSWSC 287 at [42]-[45].

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