(b) the property charged or part of that property is released from the charge;
the person who was the holder of the charge at the time when the debt or other liability was so paid or discharged or the property or part of the property was released must, within 14 days after receipt of a request in writing made by the company on whose property the charge exists, give to the company a memorandum in the prescribed form acknowledging that the debt or other liability has been paid or discharged in whole or in part or that the property or that part of it is no longer subject to the charge, as the case may be.'
5 The applicant and the respondent, through related companies, had been involved in the supply of telecommunications to subscribers under varying arrangements since early 1998. On 31 October 2001, Digiplus Holdings Pty Limited purchased the applicant from Comvergent Telecommunications Limited, which was a related company of the respondent. On the same day, the Telecommunications Services Supply Agreement ('the Supply Agreement') was entered into between the applicant, the respondent and Digiplus Holdings Pty Limited. The recitals were as follows:
'A. Digiplus resupplies and proposes to continue to resupply telecommunications services provided by RSL COM to its customers.
B. RSL COM has agreed to continue to supply telecommunications services for resupply by Digiplus to its customers on the terms and conditions of this Agreement.'
Clause 10 of the first schedule of the Supply Agreement was as follows:
'10. Security
Digiplus must on before [sic] the Commencement Date provide (at Digiplus' cost) to RSL COM the security specified in Schedule 3 to secure the payment of any amounts owing by Digiplus to RSL COM under this Agreement at any time (whether or not those amounts are due and payable). The security provided under this clause shall be reviewed and varied as provided in Schedule 3.'
6 Among the provisions of Sch 3 was the following:
'Digiplus will grant a fixed and floating charge over the business and all assets of the company …'
7 The Supply Agreement contained elaborate provisions in relation to the supply of and billing for telecommunications services. It is unnecessary, for present purposes, to set those out or to endeavour to explain them. Suffice to say that they included provision for the fixing of rates, the entitlement to volume discounts, provision that, in the absence of manifest error, the respondent's network records were prima facie evidence that the services were supplied as recorded and dispute resolution provisions including time limits.
8 The security provided for by the Supply Agreement was a Deed of Charge made 31 October 2001 between the applicant, as Chargor, and the respondent, as Chargee (the Charge). It was a fixed and floating charge over all of the assets of the company, as security for the due and punctual payment of 'Secured Moneys' which was defined to mean:
' … all debts and monetary liabilities of the Chargor to the Chargee under or in relation to any Transaction Document …'
The Supply Agreement was a Transaction Document. Clauses of the Charge which related to discharge are as follows:
'3.1 Discharge
Subject to Clause 3.2, at the written request of the Chargor, the Chargee must discharge the Charge if the Secured Moneys have been paid in full.
3.2 Final Discharge
(a) The Chargee is not obliged to discharge the Charge under Clause 3.1 if, at the time the requirements of Clause 3.1 are satisfied, the Chargee is of the reasonable opinion that:
(i) the Chargor owes further Secured Moneys to the Chargee; or
(ii) the Chargor will owe further Secured Moneys to the Chargee within a reasonable time after the date the Chargor requests the discharge of the Charge.
(b) Clause 3.2(a) overrides any other Clause to the contrary in this Deed.
(c) The Parties intend that Clause 3.2(a)(ii) be severed from Clause 3.2(a) if Clause 3.2(a)(ii) is void or unenforceable under applicable law.
(d) The Parties do not intend Clause 3.2(c) to exclude the general law of severance from applying to this Deed.
3.3 Partial Release of Charge
(a) The Chargee may release a part of the Charged Property from the Charge at any time.
(b) A release under Clause 3.3(a) does not adversely affect:
(i) the Charge over other Charged Property;
(ii) any Collateral Security; or
(iii) a Transaction Document.'
9 Other relevant clauses are as follows:
'8.2 Money actually received
In applying any money towards satisfaction of the Secured Moneys the Chargor is to be credited only with so much of the money which is available for that purpose and which is actually received by the Chargee, Receiver or Attorney. The credit dates from the time of receipt.
…
8.5 Chargee's statement of indebtedness
A certificate signed by any Officer of the Chargee stating:
(a) the amount of the Secured Moneys due and payable; or
(b) the amount of the Secured Moneys, whether currently due and payable or not,
is prima facie evidence of that amount as at the date stated on the certificate or failing that as at the date of the certificate.
8.6 Chargee's receipts
(a) The receipt of any Officer of the Chargee for any money payable to or received by the Chargee under this Deed exonerates the payer from all liability to enquire whether any of the Secured Moneys have become payable.
(b) Every receipt of an Officer of the Chargee effectually discharges the payer from:
(i) any future liability to pay the amount specified in the receipt; and
(ii) being concerned to see to the application of, or being answerable or accountable for any loss or misapplication of, the amount specified in the receipt.
…
11. INDEMNITIES
11.1 General Indemnity
The Chargor must indemnify the Chargee and keep the Chargee indemnified against any claim, action, damage, loss, liability, cost, expense or payment which the Chargee, Receiver (whether acting as agent of the Chargor or of the Chargee) or Attorney pays, suffers, incurs or is liable for, in respect of any of the following:
(a) the non exercise, attempted exercise, exercise or delay in the exercise of any Power;
(b) any act or omission of the Chargor or any of its employees or agents;
…
(g) any other thing in respect of the Charge or the Charged Property.
…
11.3 Continuing indemnities
(a) Each indemnity of the Chargor contained in this Deed is a continuing obligation of the Chargor, despite:
(i) any settlement of account; or
(ii) the occurrence of any other thing;
and remains in full force and effect until:
(iii) all moneys owing, contingently or otherwise, under any of them have been paid in full; and
(iv) the Charge in respect of all the Charged Property has been finally discharged under Part 3.
(b) Each indemnity of the Chargor in this Deed:
(i) is an additional, separate and independent obligation of the Chargor and no one indemnity limits the generality of any other indemnity; and
(ii) survives the termination of any Transaction Document.
…
12.2 Costs and expenses
The Chargor must pay all costs and expenses of the Chargee and any employee, Officer, agent or contractor of the Chargee in relation to:
(a) the enforcement, protection or waiver, or attempted or contemplated enforcement or protection, of any rights under any Transaction Document or other agreement or document described in Clause 12.1(a); and
(b) any enquiry by any Governmental Agency involving the Chargor,
including, but not limited to any legal costs and expenses and any professional consultant's fees for any of the above on a reasonable basis.
…
13.2 Continuing security
The Charge is a continuing security despite any settlement of account or any other thing until the Chargee has given a discharge of the Charge in respect of all the Charged Property under Part 3.'
10 On 20 December 2002 the applicant gave three months notice of intention to terminate the Supply Agreement, which therefore terminated at midnight on 25 March 2003. Disputes arose as to various aspects of the relationship, and the applicant did not pay all of the amounts invoiced by the respondent in the latter stages of the Supply Agreement claiming to be entitled to withhold those amounts.
11 On 5 May 2003 the respondent served the applicant with a certificate purporting to be pursuant to cl 8.5 of the Charge in the following terms:
'NOW THEREFORE TAKE NOTICE:
1. RSL COM has served Tax Invoices in the amount of $10,247,830.17 upon Digiplus, which Tax Invoices are Exhibited to this certificate and marked "A", "B", "C" and "D".
2. This certificate is served pursuant to the provisions of sub-cl 8.5 of the Charge and is prima facie evidence of the debt due by Digiplus to RSL COM as at the date of this certificate.
3. The sum of $6,874,356.56 has been paid by Digiplus to RSL COM in respect of the Tax Invoices Exhibited hereto and marked "A", "B", "C" and "D".
4. The sum of $3,402.74 has been adjusted by RSL COM in favour of Digiplus in respect of the Tax Invoices Exhibited hereto and marked "A", "B", "C" and "D".
5. Interest on the Secured Moneys at the rate provided by sub-cl 9.4(a) of the Agreement as at the date of this certificate amounts to $13,825.13 and has been calculated in accordance with Exhibit marked "E".
6. $3,383,896.00 thereby are Secured Moneys due and payable to RSL COM pursuant to the Agreement and the Charge as at the date of this certificate.'
12 The evidence of the solicitor for the respondent is as follows:
'2. In addition to the principal sum of $3,369,171.34, as at 8 September 2003 the sum of $323,283.64 is secured by the Charge dated 31 October 2001 between the parties, calculated as follows:
(a) Solicitor's costs and disbursements paid
to 8 September 2003 by Respondent $81,951.96
(b) Solicitor's costs and disbursements billed to
31 August 2003, not yet paid $29,195.71
(c) Estimated Solicitors costs and disbursements
to 8 September 2003, not billed $5,000.00
(d) Senior Counsel's fees paid to 12 August 2003 $33,990.00
(e) Estimated Senior counsel's fees to 8 September
2003, not billed $5,000.00
(f) Junior counsel's fees paid to 13 August 2003 $29,832.00
(g) Estimated Junior counsel's fees to 8 September
2003, not billed $4,200.00
(h) Interest, as set out in Annexure "A" hereto $134,113.97
$323,283.64
3. In addition to the above, the anticipated costs of the proceedings with respect to the Charge and the determination of the sum payable by the Applicant under the Charge, based on the assumption that the hearing of such determination may occupy 10 hearing days and 5 hearing days in respect of interlocutory applications, may exceed $250,000.
4. In the event that these proceedings are not completed until 1 January 2004, as contemplated by the letter dated 4 August 2003 received from Tress Cocks and Maddox, being Annexure "A" to the Affidavit of Nick Kotzohambos sworn 6 August 2003, the amount of interest owing shall be $236,019.86 whilst it is expected that the interest earned on the monies paid into Court shall be $112,692.27 leaving a differential of $123,327.59.'
13 In Paragraph 15 of the Statement of the Claim which was served on 21 May 2003 the applicant required the respondent to provide a statutory memorial of acknowledgment pursuant to s 269(1) of the Corporations Act. The period for providing that memorial passed on 4 June 2003.
14 The amount which had been alleged by the respondent to be due at the time of payment into Court was the amount paid in, namely $3,369,171.34.
15 Section 171 of the Conveyancing Act 1919 (NSW) is as follows:
'171 Effect of payment into court
Payment of money into court under the provisions of this or any other Act shall effectually exonerate therefrom the person making the payment.'
It is accepted that that section is to be applied by this Court sitting in New South Wales.
16 The contention of the applicant is simply stated. The payment into Court on 14 April 2003 was pursuant to Order 3 of the orders made on that day pursuant to the power conferred by s 23 of the Federal Court of Australia Act 1976 (Cth). The payment into Court was thus under the provisions of that Act and the express terms of s 171 effectually exonerated Digiplus from any further payment of the amount outstanding on 14 April 2003. The ordinary meaning of exoneration includes 'to relieve from obligation' and exoneration in this context must mean the complete release from all obligations. In essence payment into court is thus treated as equivalent to payment to the Chargee. It is submitted that s 171 of the Conveyancing Act regulates the legal consequences of payment into court but does not determine, on a final basis, the existence or otherwise of the debt or its quantum. If, on accounting it is determined that the debt was less than the amount paid into court, then s 171 operates to exonerate the applicant up to the amount that was in truth owing.
17 It is submitted that s 269 of the Corporations Act provides for a statutory memorial of satisfaction up to the amount of the payment as it refers to payment or discharge in whole or in part. It is submitted that this accords with common sense and also the prescribed form which provides for partial satisfaction of debt. It is submitted that the procedure provided for by operation of s 171 and s 269 is the same, in theory, as a chargor paying an amount claimed to the chargee in exchange for discharge while reserving its rights as to whether the amount has been properly claimed. It is submitted for the applicant that the sum said to be owing on 14 April 2003 is no longer owing. It follows that the alleged disputed debt the payment or the discharge of which was secured by the Charge has been paid or discharged in whole and so Digiplus is entitled to its statutory memorial pursuant to s 269.
18 On that basis, it is submitted that claims by the respondent that it is not bound to give a statutory memorial because interest and costs continue to accrue pursuant to the terms of the Charge is misconceived. If, as the applicant contends, exoneration in relation to the debt occurred on 14 April 2003 then, obviously enough, no interest will run on the debt. If, as the respondent contends, costs continue to accrue pursuant to the terms of the Charge this is no answer to the obligation to provide a statutory memorial of discharge of the amount of the debt. The applicant's position is that there is no amount owing for the principal and interest because of exoneration. The statutory memorial will provide that the debt has been paid in whole and discharged but it will not be in itself a discharge of the Charge. The question of a proper figure for costs and what should be done about it is a separate issue.
19 It should be noted that the initial contention of the applicant was that s 171 operated to entitle it to a statutory memorial of discharge in whole. It was on that basis that I ordered a separate question to be tried. The notion of partial or pro tanto discharge is a later refinement.
20 It is submitted for the respondent that the applicant's argument is plainly wrong and misconceived. The topic of payment to a chargee and redemption by a chargor is governed by well established principles referred to by the Privy Council in Bank of New South Wales v O'Connor (1889) 14 App Cas 273 at 282-3 and applied in a number of local cases. Furthermore, Part 7 of the Conveyancing Act makes detailed provision for the rights of mortgagees and mortgagors and if there were to be a change to those rights effected by that Act it would be expected that it would have been effected in that Part. It is submitted that the text of s 171 requires a two stage process - first a particular provision must be found in a statute (such as sections 12, 66 and 98 of the Conveyancing Act and s 95 of the Trustee Act 1925 (NSW)) which authorises payment in to court and then the second stage is the exoneration effected by s 171 upon that payment in being made.
21 It is submitted that the payments into Court here took place as the necessary price for seeking and obtaining interlocutory relief. The general provisions of the Federal Court Act which are appealed to by the applicant are not a substantive provision in the required sense. There has been no payment of money into Court under the provisions of any other Act in the sense in which that expression in s 171 is to be understood. It was submitted there was nothing in the history of s 171 or the Conveyancing Act, including consideration of the original Commissioner's report which lead to the introduction of the Act, which supports the construction of the applicant and the original form of the section and its place in the Act would tend against it having any substantive effect in itself. (See Sir John Harvey, Commissioner's Report into Conveyancing Act, 1918.)
22 In my opinion the respondent's argument is sound. There are three basic sources of regulation of company charges in New South Wales. The first is the set of general law rules governing mortgages and charges generally (including the terms of the Charge itself), the second is Part 7 of the Conveyancing Act and the third is the Corporations Act 2001 (Cth). The basic principle is that a mortgage or charge is not discharged without payment to the mortgagee or chargee. That is reflected in the express terms of the Charge. Equity permitted an exception to this in certain limited circumstances explained by the opinion of the Privy Council in Bank of New South Wales v O'Connor as follows (at p 283):
'To some extent the strictness of that rule has been relaxed in modern times, and it 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 would be contrary to equity to order a mortgagee to deliver up the title deeds of property on which he has a security upon any other terms. A mortgagor has no right even to see the deeds before payment. 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. A form of order adapted to such a case is to be found in Seton on Decrees, 4th ed., p. 1040.
No doubt it is the duty of a mortgagee, on proper notice, or without notice in a case where notice is not required, to accept a proper tender. No doubt that duty is founded upon contract. But there are other terms of the contract of at least equal importance. 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. That is not within the province or power of a jury. If a mortgagee rejects a tender he rejects it at his own risk, and in an action for redemption he may be refused his costs in consequence, or may even be ordered to pay costs. Further a proper tender will stop the running of interest if the mortgagor keeps the money ready to pay over to the mortgagee: Gyles v Hall [(1726) 2 P Wms 378]. But there is no authority for saying that refusal to accept a proper tender is a breach of contract, for which an action at law will lie.'
23 As the separate questions are not based upon that exception, I need not explore its ramifications for the present case. Suffice it to say that it has been discussed in a number of Australian cases including Forsyth v Blundell (1973) 129 CLR 477 at 504, 505, 511; Meredith v Davis (1933) 33 SR (NSW) 334 at 336; Project Research Pty Ltd v Permanent Trustee of Australia Ltd (1990) 5 BPR 11,225 at 11,229; Overton Investments Pty Ltd v Cuzeno RVM Pty Ltd [2003] NSWCA 27 at [61-63]; Equus Financial Services Ltd v RMBL Investments Pty Ltd (1997) 22 ASCR 744 at 746; Clarke v Japan Machines (Australia) Pty Ltd (No 2) (1984) 1 Qd R 421 at 423 (see also Devon Nominees Ltd v Hampstead Holdings Ltd [1981] 1 NZLR 477 at 484).
24 Part 7 of the Conveyancing Act includes provisions which have some effect upon the position of a mortgagor seeking to pay a mortgage debt. Section 93 gives a right to redeem before the time fixed for redemption. Section 98 facilitates redemption in the case of absent or unknown mortgagees. Section 113 relates to a mortgagee's receipts and discharges. None of those sections relieve a chargor from the obligation to pay the chargee in the ordinary case. As counsel for the respondent pointed out there are other provisions of the Conveyancing Act apart from s 98 and provisions of other Acts which expressly authorise payment into court in certain eventualities. There is no other provision of Part 7 which affects the present issue.
25 Legislation regulating companies has contained provisions in relation to charges created by companies since prior to the Conveyancing Act. The general scheme of registration of company securities was introduced to New South Wales by the Companies (Registration of Securities) Act 1918 (NSW). Section 8 was as follows:
'The registrar may, on evidence being given to his satisfaction that the debt for which any registered mortgage or charge was given has been paid or satisfied, enter a memorandum of satisfaction on the register, and shall, on payment of the prescribed fee, furnish the company with a copy thereof.
That section was a forerunner to s 269 of the Corporations Act 2001 (Cth). It will be observed that neither it, nor s 269, deal with how a debt is paid or satisfied.
26 With that background it is inherently unlikely that a provision appearing in Part 20 of the Conveyancing Act entitled 'Procedure: Orders: Execution' would be the vehicle to effect a significant change to the relations between chargee and chargor particularly in relation to charges made by a company. No such intention appeared from the report of the Commissioner which preceded the introduction of the Act. The relevant explanation was as follows:
'Clause 171 deals with certain matters of procedure and follows the provisions of the English Conveyancing Act of 1881, with certain minor alterations.'
27 It is also of some significance that the applicant was unable to point to any authority since 1881 which has given s 171 or the equivalent section in statutes in other jurisdictions the effect for which he contended.
28 In my opinion payment into court in the present case did not lead to exoneration as a result of the operation of s 171 of the Conveyancing Act. Hence, each separate question is answered "no" and the applicant is ordered to pay the costs of the respondent of and incidental to the separate question including the application therefor.
I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles.