French v Queensland Premier Mines Pty Ltd & Ors [2006] VSCA 287

French v Queensland Premier Mines Pty Ltd & Ors [2006] VSCA 287 - VSCA 2006 case summary — Zoe

[44]

31 The overriding principle of statutory construction, however, as the High Court has emphasised in recent years, is that the words of the statute govern.[30] There is no substitute for giving attention to the precise terms in which the relevant provision is expressed.[31]

32 Her Honour's construction of the second limb of s.62(4) requires substitution of the words "which are secured by" for the word "under". In my respectful opinion, to do so would amount to rewriting the subsection and would exceed "the proper bounds of statutory interpretation".[32] As Lord Mersey said in the well-known passage from Thompson v Goold & Co,[33] "[i]t is a strong thing to read into an Act of Parliament words which are not there and in the absence of clear necessity it is a wrong thing to do".[34] If the words "which are secured by" were read in, the effect of the registration of a transfer of mortgage would be to vest in the transferee, in addition to the rights of the mortgagee under the mortgage, the rights of the mortgagee under any contract with a third party which created a debt secured by the mortgage. Clear statutory language would be required before I could accept that the Queensland Parliament had intended that result.

33 The present case partly illustrates the point. Under the first loan agreement, Mr and Mrs Beckinsale are joint debtors with QPM. There is a single, indivisible, obligation to pay French. Under the transferred mortgages, Marminta has contractual rights against QPM only. Yet, on the construction of s.62(4) which the Judge adopted, the transfer of the mortgages also had the effect of vesting in Marminta a contractual right under the first loan agreement as against Mr and Mrs Beckinsale - strangers to the mortgages - in their capacity as joint debtors with QPM.

Three key decisions: Naylor,[35] Phillips[36] and McFadyen[37]

34 It was common ground that there was no decision of the High Court or other appellate court in point. Nevertheless, her Honour considered that there were statements of general principle in three High Court decisions which could provide guidance on the proper construction of s.62. Her Honour's careful analysis of the cases and explanation of the relevant passages was strongly supported by senior counsel for the respondents. For the reasons which follow, however, I am, with great respect, unable to agree with her Honour that these decisions, or the particular passages, justify the construction of s.62(4) which she adopted.

35 In Naylor, the High Court was concerned with the New South Wales equivalent of s.62 (s.51 of the Real Property Act 1900). Under that provision, registration of the mortgage transfer had the effect of passing to the transferee -

[77]

When French was the mortgagee, this clause applied to the moneys payable by QPM (but not the Beckinsales) to French pursuant to the loan agreement. (It will be recalled that the original lender had assigned both the loan agreement and the mortgage to French[66]). Now that Marminta is mortgagee,[67] however, this clause has no application. Put simply, there are no moneys payable to "the mortgagee" pursuant to any facility agreement and, hence, no "Secured Moneys" to which QPM's obligation under the mortgage covenant can attach.

63 In short, the mortgage covenant - although valid and enforceable by Marminta against QPM - is empty. QPM is not indebted to Marminta. On this analysis, following the assignment the mortgage secured nothing and it was liable to be discharged. That is what occurred.

64 The position might have been different had the agreement (between French and Marminta) for the transfer of the mortgages also made provision for the transfer to Marminta of the benefit of the loan agreements. But Marminta has long since abandoned any contention that the agreement so provided. That contention did form part of Marminta's statement of claim in the Queensland proceeding (which resulted in French being ordered to transfer the mortgages), but the contention was not pressed at trial. The trial Judge upheld Marminta's claim that there was an agreement for the transfer of the mortgages. That conclusion was not challenged on the appeal, which concerned only the question whether the agreement should be specifically enforced. The Court of Appeal held that it should be. The Court rejected Marminta's attempt, at the last minute, to have the Court's order varied so as to alter the scope of the agreement ordered to be specifically enforced.[68] In this Court, both in their pleadings[69] and in argument, the defendants relied solely on s.62 as the basis for the vesting in Marminta of the right to recover moneys under the loan agreement.

65 The only question raised before the Judge concerning the agreement to transfer the mortgages was whether the parties had evidenced an intention to "contract out" of the operation of s.62, it having apparently been common ground that the parties to a transfer of mortgage could agree that the vesting provision did not apply. Her Honour assumed, without deciding, that this was so.[70] The argument for the defendants (now respondents) was that the correspondence constituting the agreement disclosed no such intention. Her Honour agreed, holding that there was -

[93]

77 The respondents have argued that her Honour's decision should be understood as "a simple application of the doctrine of res judicata." On that view, they argue, the Court of Appeal's decision - that in the interests of finality of litigation neither party would be permitted to raise new issues - is a permanent bar to either party raising those issues in any other forum. They rely on Blair[79] and Gibbs.[80]

78 I do not agree. As counsel for French correctly contended, the decision of the Court of Appeal was made in the exercise of a discretion on a procedural issue. It was a decision not to reopen - or permit the reopening of - the Queensland proceeding. The effect of the decision was confined to the Queensland proceeding itself, which came to an end with the Court of Appeal's decision that the agreement should be specifically performed.

79 The Court of Appeal did not address the merits of either French's claim for rates and taxes or Marminta's claim for interest. There is no res judicata with respect to the substantive issues. Nor did the Court of Appeal address the question of Anshun estoppel with respect to those claims. As the Court's footnote makes clear, the Anshun question would have had to be addressed by the Queensland trial judge had the Court of Appeal agreed to permit the proceeding to be reopened. But the proceeding was not reopened, and the Anshun question was left unanswered.

80 Counsel for French conceded that, if this Court concluded that his rates and taxes claim against QPM did not vest in Marminta, French would not persist with his (alternative) unjust enrichment claim against Marminta.[81] It is accordingly unnecessary to deal further with that claim.

81 I would therefore allow the appeal. I would order that there be judgment for French against the first three respondents for the balances outstanding under the respective loan agreements. I would direct that those balances be assessed by the learned Judge on a date to be fixed. I would further order that there be judgment for French against the first respondent for the amounts claimed in respect of rates and taxes. I would hear counsel on the final form of the order.

[94]

82 I have had the considerable advantage of reading in draft the reasons for judgment prepared by the learned President. I agree with his Honour that the appellant should succeed against the first, second and third respondents for the balance outstanding pursuant to the first loan agreement and against the first respondent for the balance outstanding pursuant to the second loan agreement and in his claim against the first respondent for rates and land tax.[82] It may be that my

reasoning is not identical with the President's, so I shall endeavour to state it briefly in my own words. For simplicity, I shall do so as if there were only one loan agreement and one mortgage.

83 The debt arises from the loan agreement and the advance made thereunder. The mortgage secures repayment of the debt. The covenant to pay in the mortgage is purely collateral. The debt delimits the extent of the proprietary interest created by the mortgage.

84 The debt is not "a debt or ... a liability under the mortgage" within the meaning of s.62(4) of the Land Title Act 1894 (Qld). Both limbs of that provision address the same issue. In the case of a debt, the first limb says that the transferee may sue and the second limb says that the transferee may not only sue but also recover. That is the natural construction of the words. As the President explains, it is not precluded by authority.

85 When a mortgage is transferred, it will very often be the case that the debt is transferred too. That is not a consequence of s.62 but of the agreement, express or implied, between the parties. In the present case that agreement was relied on only to exclude s.62. No doubt that could be done by agreement, at least in equity,[83] but there was no need to do so in relation to the debt.

86 The transfer of the mortgage served a useful commercial purpose. It effectively disencumbered the land. As the mortgage was then discharged, it is unnecessary to consider what rights, if any, it conferred on the fourth respondent.

87 The further amended notice of appeal shows that the appellant's claim for

rates and land tax is made primarily against the first respondent and only in the alternative, on the basis of unjust enrichment, against the fourth respondent. Unlike the debt, the first respondent's liability for rates and land tax is prima facie "a liability under the mortgage" within the meaning of s.62(4). The difficulty is that it is not the kind of liability intended to be transferred, the breach of the relevant clause of the mortgage having been committed before the transfer. That breach gave rise to a cause of action in contract that enured to, and was not lost by, the appellant.[84]

88 In the Trial Division the respondents conceded that, "if they failed on the s.62 argument", the appellant would succeed in his claim against the first respondent for rates and land tax. The appellant was not, in my opinion, obliged to make that claim in the proceedings in Queensland to which the first respondent was not a party. He was entitled to take the risk of losing his alternative claim against the fourth respondent without forfeiting his claim against the first respondent. It is unnecessary to consider the argument based on s.24 of the Land Tax Act 1915 (Qld) or whether the Queensland proceedings did result in the appellant's losing his claim for unjust enrichment.

[95]

89 I have had the considerable benefit of reading the draft reasons for judgment of Maxwell P and those of Callaway JA. I agree that the appeal should be allowed and that there should be judgment for the appellant against the first, second and third respondents for the balance outstanding pursuant to the first loan agreement dated 30 October 1989 and judgment against the first respondent for the balance outstanding pursuant to the second loan agreement dated 24 November 1989.

90 None of the parties in either the Queensland or Victorian proceedings contended that there was an agreement to transfer or assign the loan agreement debts. For the reasons given by Maxwell P and Callaway JA, I am of the view that the right to recover the debt or enforce the liability under either loan agreement was not a right which vested in the transferee upon registration of the mortgage. Registration of the transfer of mortgage by the mortgagee conferred upon the transferee only the rights which the mortgagee had under the mortgage.[85] It was the right to sue "on the terms of the mortgage" and "to recover a debt... under the mortgage"[86] which vested in the transferee upon registration of the mortgage.

91 The learned trial Judge placed particular reliance upon passages in the judgments of the High Court in Naylor, Phillips and McFadyen. The cases to which the learned trial Judge referred support the conclusion that provisions such as s. 62 are intended to transfer the interest in land and the powers incidental thereto - that is to say rights which belong to the estate or interest transferred.[87]

92 Despite her Honour's careful analysis of those judgments and the language which appears to give support to her Honour's conclusions, I am, with great respect, unable to agree with her Honour that they are authority for the proposition that personal rights outside the terms of the mortgage become enforceable under the mortgage by virtue of registration. The covenant to pay in the mortgage was a covenant to comply with the obligation under the loan agreements.[88] It did not confer a direct right of action. The mortgage did not create a personal liability in the mortgagor for the mortgage debt. The right to enforce the personal liability under the loan agreements was not, in my view, a right which could be said to be "intimately connected with rights of property arising out of the mortgage transaction."[89]

93 In relation to the first loan agreement, the Beckinsales were joint borrowers with QPM. The promise to pay under the first loan agreement was, as the learned trial Judge found, an indivisible joint debt. The Beckinsales had no interest in the mortgaged land and were not parties to either mortgage. Even if s. 62 were to be construed in the manner found by the learned trial Judge, it would not vest a right in the transferee of the mortgage to sue the Beckinsales on the terms of the mortgage or permit recovery of the debt from them under the mortgage. That is to say, the mortgage contained no personal covenant, either by the Beckinsales or by all three joint borrowers, to pay the debt. The transfer of the mortgage did not constitute an assignment of the debt owed under the first loan agreement.

94 I am also of the view that the appeal should be allowed with respect to the appellant's claim for rates and land tax from QPM. For the reasons given by Maxwell P and Callaway JA, the appellant's right to recover such rates and land tax from the first respondent was not lost upon registration of the transfer of mortgage. The respondents conceded at trial that if they failed on their claim under s. 62, the appellant was entitled to succeed against the first respondent, whether the claim be based upon the doctrine of practical compulsion, s.24 of the Land Tax Act (Qld) or as a consequence of the application of the principle in McFadyen. It was not suggested at trial or before this Court that the conduct of the Queensland proceedings or Anshun principles precluded the appellant from proceeding with his claim for rates and land tax against the first respondent. I would therefore order judgment for the appellant against the first respondent in the amount of $173,202.02 for rates and land tax paid by the appellant in respect of the land mortgaged by the first respondent to the appellant together with interest thereon.

95 For completeness, I should state that, like the President, I am not persuaded that the Queensland Court of Appeal, in refusing to permit the appellant to pursue his claim against the fourth respondent, made any finding or order which would have prevented the appellant from proceeding with his claim that the fourth respondent had been unjustly enriched by the appellant's payment of unpaid land tax and unpaid rates. But as it was the appellant's position that if he obtained judgment against the first respondent, he would not pursue this alternative claim against the fourth respondent, it is unnecessary to give that claim any further consideration.

[96]

[1] French assigned the mortgages as a result of litigation in Queensland, which is described in paragraphs [72-76] below.

[2] Transfer of Land Act 1958 (Vic) s.46; Real Property Act 1900 (NSW) s.52; Real Property Act 1886 (SA) s.151; Transfer of Land Act 1893 (WA) s.83; Land Titles Act 1980 (Tas) s.60; Land Titles Act (ACT) s.78; Land Title Act 2000 (NT) s.62.

[3] Fisher and Lightwood's Law of Mortgage (2nd Australian Ed, 2005) at 121 [4.1].

[4] English Scottish and Australian Bank Limited v Phillips [1937] HCA 6; (1937) 57 CLR 302 at 321.

[5] Phillips at 323.

[6] Groongal Pastoral Co Limited v Falkiner [1924] HCA 54; (1924) 35 CLR 157 at 163; Phillips at 315-6; Fisher and Lightwood at 122 [4.2].

[7] Fisher and Lightwood at 122 [4.2]; Fink v Robertson [1907] HCA 7; (1907) 4 CLR 864 at 891.

[8] Fisher and Lightwood's Law of Mortgage (11th Ed., 2002) at 379 [14.13].

[9] At 308-9, citing Fink at 871, 872.

[10] At 164.

[11] Fisher and Lightwood (2nd Australian Ed. 2005) at 421 [17.11].

[12] At 164.

[13] Grundy v Ley (1984) 2 NSWLR 467.

[14] At 473; see also Callachor v Moses (1931) SR (NSW) 424.

[15] Sutton v Sutton (1882) 22 Ch D 511.

[16] NZI Capital Corporation Pty Ltd v Child (1991) 23 NSWLR 481.

[17] Re Midland Bank Ltd [1941] 1 Ch 350.

[18] I refer in the singular to "the mortgage" and "the loan agreement" because the terms of the two mortgages are identical, as are the terms of the two loan agreements.

[19] Schedule 2 to the Land Title Act 1994 defines "lot" to mean "a separate, distinct parcel of land".

[20] See [5] above.

[21] Chan v Cresdon Pty Ltd [1989] HCA 63; (1989) 168 CLR 242 per Mason CJ, Brennan, Deane and McHugh JJ.

[22] At 249.

[23] The Commissioner of Taxation for the Commonwealth of Australia v Sara Lee Household and Body Care [2000] HCA 35; (2000) 201 CLR 520.

[24] At 537.

[25] Griffith University v Tang [2005] HCA 7; (2005) 221 CLR 99.

[26] At 130 [89].

[27] At 124 [67], and the cases there cited.

[28] Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355.

[29] At 382 [71] per McHugh, Gummow, Kirby and Hayne JJ (footnotes omitted).

[30] Weiss v The Queen [2005] HCA 81; (2005) 80 ALJR 444 at [9]; Stingel v Clark [2006] HCA at [26]-[27] per Gleeson CJ, Callinan, Heydon and Crennan JJ and per Gummow J at [43] and Kirby J at [117]; Central Bayside General Practice Association Limited v Commissioner of State Revenue [2006] HCA 43 at [81]- [84] per Kirby J, and the cases there cited.

[31] Weiss at [31] citing Fleming v The Queen [1998] HCA 68; (1998) 197 CLR 250 at 256 [12].

[32] Smith v The Queen [1994] HCA 60; (1994) 181 CLR 338 at 346 per Mason CJ, Dawson, Gaudron and McHugh JJ.

[33] [1910] AC 409 at 420.

[34] See also BP Refinery Pty Ltd v Hastings Shire Council (1977) 53 ALJR 20 at 25; Director-General of Education v Suttling [1987] HCA 3; (1987) 162 CLR 427 at 433.

[35] [1936] HCA 33; (1936) 55 CLR 423.

[36] The English Scottish and Australian Bank Ltd v Phillips [1937] HCA 6; (1936) 57 CLR 302.

[37] Measures v McFadyen [1910] HCA 74; (1920) 11 CLR 723.

[38] At 426.

[39] At 434 (emphasis added).

[40] At 432.

[41] At [12] above.

[42] Real Property Act 1886 (SA) s.151.

[43] At 317 (emphasis added).

[44] At 321-2 (emphasis added).

[45] At 324.

[46] At 324.

[47] [1910] HCA 74; (1910) 11 CLR 723.

[48] At 731.

[49] At 737 (emphasis in original).

[50] At 737-8.

[51] [2002] QCA 529.

[52] Jodaway Pty Ltd v Langton [2004]) 2 Qd R 272.

[53] Gilmour v Pyramid Building Society (in liq.) (1995) NSW Conv R 55.

[54] Meagher JA, with whom Priestley and Clarke JJA agreed.

[55] At 55,763.

[56] The NSWCA's view is consistent with the language of the vesting provision, since the rights against the guarantor are rights "under the mortgage". As noted in para [37] above, Dixon and Evatt JJ acknowledged in Naylor that the language could be so read, but excluded the guarantee on the basis that it was not "intimately connected" with the rights of property arising out of the mortgage transaction.

[57] PT Limited v Maradona Pty Ltd (1992) 25 NSWLR 643.

[58] At 681.

[59] Karacominakis v Big Country Developments Pty Ltd & Ors [2000] NSWCA 313.

[60] At [54]-[59] per Giles JA, with whom Handley and Stein JJA agreed.

[61] Hutchens v Deauville Investments Pty Ltd [1986] HCA 85; (1986) 68 ALR 367.

[62] Gibson CJ, Mason, Wilson, Brennan and Deane JJ.

[63] At 370.

[64] At 372-3.

[65] See [20] above.

[66] See [3] above.

[67] As the trial Judge noted at [167], "mortgagee" is defined in cl 1.1(l) of the mortgage to include the successors and assigns of the original mortgagee.

[68] AB C485ff.

[69] Defence at [16] (adopting [34] of the statement of claim); counterclaim at [2] and at [A] of the prayer for relief.

[70] Reasons [161].

[71] Reasons [170].

[72] cf. for example, Partnership Act 1958 ss.95, 96(1).

[73] Reasons at [244]. No defence of Anshun estoppel was pleaded in relation to the claim against QPM.

[74] AB C287.

[75] AB C289; see also C298.

[76] AB C293.

[77] AB C295.

[78] [2003] QCA 577 at [7].

[79] Blair v Curran [1939] HCA 23; (1939) 62 CLR 464 at 510 and 531-2.

[80] Gibbs v Kinna [1998] VSCA 52; [1999] 2 VR 19 at 26-7.

[81] Outline of submissions at [39].

[82] The first respondent is Queensland Premier Mines Pty. Ltd., the second and third respondents are Mr and Mrs Beckinsale and the fourth respondent is Marminta Pty. Ltd.

[83] See, by analogy, the exclusion of s.141 of the Property Law Act 1958 (Vic.) discussed by Bongiorno, J. in G. & A. Lanteri Nominees Pty. Ltd. v. Fishers Stores Consolidated Pty. Ltd. [2005] VSC 336; (2005) V.Conv.R. 54-708 at [15]- [25]. Strictly speaking, the section is not excluded. It is given full effect at law, but the transferee holds the relevant right on trust for the transferor.

[84] Compare Measures v. McFadyen [1910] HCA 74; (1910) 11 C.L.R. 723 at 731, 732-733 and 737-738.

[85] Katsikalis v Deutsche Bank (Asia) AG [1988] 2 QdR 641 at 646 per Andrews CJ.

[86] S.62(4)

[87] Naylor at 432 per Starke J and at 434 per Dixon and Evatt JJ; McFadyen at 730 - 731.

[88] Clause 4.1(A).

[89] Naylor at 434.

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