Mango Boulevard Pty Ltd & Anor v Mio Art Pty Ltd & Ors [2016] QCA 148

PERSONAL PROPERTY - TRANSFER - CHOSE IN ACTION - APPLICATION OF STATUTORY REGIME TO ASSIGNMENTS - ELEMENTS OF STATUTORY REGIME - ABSOLUTE ASSIGNMENT - where the appellants contended that Mio Art, the first respondent, had made a statutory assignment of its right to sue for payment under an agreement to Standard Builders Pty Ltd - where the appellants alleged the assignment took effect in accordance with s 199 of the Property Law Act 1974 (Qld) - where the trial judge found that there was no 'absolute assignment not purporting to be by way of charge only' - where the appellants argued that the effect of the first respondents agreement with Standard Builders Pty Ltd was an absolute, unconditional assignment of the debt - where the relevant agreement used the words 'assign' and absolutely - where, pursuant to the relevant agreement, unless and until the first respondent defaulted all moneys in respect of the secured assets were to be received by it - whether there was an absolute assignment of the debt

PERSONAL PROPERTY - TRANSFER - CHOSE IN ACTION - APPLICATION OF STATUTORY REGIME TO ASSIGNMENTS - ELEMENTS OF STATUTORY REGIME - NOTICE AND WRITING - where the appellants contended that Mio Art, the first respondent, had made a statutory assignment of its right to sue for payment under an agreement to Standard Builders Pty Ltd - where the appellants alleged the assignment took effect under s 199 of the Property Law Act - where a judge of the trial division held that if there was such an assignment it was not effective because of the absence of the required 'express notice in writing' - where the appellant argued that notice was given via its receipt of a copy of a letter to Standard Builders from its solicitor referring to a (separate) dispute between Standard Builders and the appellants - where the appellants alleged that notice was also given by the first respondent's disclosure of the relevant agreement in separate litigation involving the parties - where the appellants argued that notice was also given by a later admission in the first respondent's reply pleading in the separate litigation - where s 199 requires 'express notice in writing' - where no special form of notice is required - where notice must convey an intention of the author to notify the debtor of the assignment - where notice must expressly or by implication draw the debtor's attention specifically to the fact of assignment - whether the documents were intended to notify the debtor of the assignment - whether the documents were sufficient to satisfy the 'express notice in writing' requirement of s 199

Property Law Act 1974 (Qld), s 199

Agnew v Commissioner of Inland Revenue [2001] 2 AC 710; [2001] UKPC 28, followed

Anning v Anning (1907) 4 CLR 1049; [1907] HCA 13, considered

APT Finance Pty Ltd v Bajada [2008] WASCA 73, cited

Austino Wentworthville Pty Ltd v Metroland Australia Ltd [2013] NSWCA 59, considered

Bateman v Hunt [1904] 2 KB 530, considered

Consolidated Trust Co Ltd v Naylor (1936) 55 CLR 423; [1936] HCA 33, considered

CPT Custodian Pty Ltd v Commissioner of State Revenue (Vic) (2005) 224 CLR 98; [2005] HCA 53, followed

Denney, Gasquet and Metcalfe v Conklin [1913] 3 KB 177, considered

Grizonic v Suttor [2011] NSWSC 471, considered

Herkules Piling Ltd & Anor v Tilbury Construction Ltd (1992) 61 BLR 111, considered

James Talcott Ltd v John Lewis & Co Ltd and North American Dress Co Ltd [1940] 3 All ER 592, considered

Jenkins v Visualeyes Pty Ltd [2005] VSC 218, considered

Lloyd v Banks (1868) LR 3 Ch App 488, considered

Markets Nominees Pty Ltd v Commissioner of Taxation [2012] FCA 262, considered

Ramsey v Hartley [1977] 1 WLR 686, considered

Re Kenneth Wright Distributors Pty Ltd (in liq) [1973] VR 161; [1973] VicRp 14, cited

Tea Trade Properties Ltd v CIN Properties Ltd [1990] 1 EGLR 155, cited

The Halcyon the Great [1984] 1 Ll LR 283, considered

Van Lynn Developments Ltd v Pelias Construction Co Ltd [1969] 1 QB 607, considered

Walter & Sullivan Ltd v J Murphy & Sons Ltd [1955] 2 QB 584, considered

W Sofronoff QC, with D J Butler, for the first and second appellants

F M Douglas QC, with D D Keane, for the first respondent

[1] FRASER JA: A Judge in the Trial Division declared that, subject to any right to set off any sum as pleaded in specified paragraphs of the appellants' defence (which is not in issue in this appeal), the first respondent ("Mio Art") was entitled to payment of the sum of $602,729 by the first appellant ("Mango") pursuant to cl 5.1(a) of a "Share Sale Agreement" dated 4 July 2003 (the "SSA"). I will refer to Mio Art's contractual entitlement to the amount payable under cl 5.1(a) as "the cl 5.1(a) right". The second appellant ("BMD") guaranteed Mango's obligation under the SSA.

[2] The hearing before the primary judge concerned the standing of Mio Art to sue for payment under cl 5.1(a). The appellants contended that Mio Art had made a statutory assignment of the cl 5.1(a) right to Standard Builders Pty Ltd ("Standard Builders") by an agreement between them entitled "Security Over Shares and Rights" and dated 23 November 2007 ("the security agreement"). That company was subsequently deregistered so, according to the appellants' arguments, the cl 5.1(a) right vested in the Australian Securities and Investments Commission.

[3] The appellants argued that the alleged assignment took effect in law under s 199(1) of the Property Law Act 1974 (Qld), which relevantly provides:

(1) Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to claim such debt or thing in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to claim such debt or thing in action, is effectual in law (subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice -

(a) the legal right to such debt or thing in action; and

(c) the power to give a good discharge for the same without the concurrence of the assignor."

[4] The primary judge concluded that the security agreement did not create a statutory assignment of the cl 5.1(a) right because upon the proper construction of the security agreement there was no "absolute assignment ... not purporting to be by way of charge only...". The primary judge also held that if there was such an assignment it was not effective under s 199 because of the absence of the required "express notice in writing".

[5] The appellants challenge both conclusions.

Did the security agreement create an absolute assignment not purporting to be by way of charge only?

[6] The question whether the security agreement created an assignment of the cl 5.1(a) right turns upon the proper construction of that agreement and its characterisation. It is necessary to refer also to the SSA, under which the cl 5.1(a) right arose, and also a "consultancy agreement", since aspects of these documents feature in the appellants' arguments about the proper construction of the security agreement.

[7] The SSA was made in 2003. The background to it was that the second respondent ("Perovich") and Spencer as trustee of the Spencer Family Trust held all the shares in Kinsella Heights Developments Pty Ltd ("Kinsella"). Kinsella was entitled to the benefit of a contract made by Neolido Pty Ltd as agent for Kinsella to buy land suitable for development. Mango is a subsidiary of a land development company. Spencer and Perovich caused Kinsella to enter into a suite of contracts, including the SSA, with Mango and others with a view to Mango funding the purchase of the land and its subsequent development. Mio Art subsequently replaced Spencer as trustee of the Spencer Family Trust.

[8] By the SSA, Spencer and Perovich agreed to sell one half of their shares in Kinsella to Mango at a price calculated in accordance with cl 4, payable in accordance with cl 5 and cl 6, and secured by guarantees issued by a bank and by BMD. Clause 4 specified that the purchase price of the shares was the greater of (a) the difference between the purchase price of the land and its improved market value immediately after the "Effective Date" (a date on which a council approval for the proposed development takes effect) less $2 million, and (b) $5 million, reduced by certain costs and fees. The SSA made provision for the pursuit of the required approval and for a valuation of the land in the event that the parties were unable to agree upon its improved market value.

[9] Clause 5.1(a) provided for the payment of the first component of the share purchase price, (see cl 5.1(a)) $5 million reduced by the fees and costs, seven days after the "Completion Date" (meaning the Effective Date or the date of settlement of the land purchase contract, whichever was the last to occur). Clause 5.1(b) provided for the payment of the second component of the share purchase price, the amount (if any) by which the price calculated under cl 5.1(a) exceeded $5 million, on the last to occur of the date of settlement of the land purchase contract and two days after the determination of the purchase price pursuant to cl 4. Whether or not cl 5.1(b) requires any additional payment is currently being arbitrated.

[10] The suite of contracts between these parties and associated companies included a "consultancy services agreement" dated 26 June 2003. The parties to the consultancy services agreement were Neolido Holdings Pty Ltd (the "Consultant"), Mango, and Kinsella. Clause 4 of the consultancy services agreement provided that, in consideration for various matters, including the identification and acquisition of the land, the preparation of the development application, and the performance of specified contractual duties by the Consultant, Mango shall reimburse the Consultant for certain expenses it incurred on behalf of Kinsella in relation to the project up to the Effective Date and pay to the Consultant a "Development Facilitation Fee" in respect of the sale of lots forming the whole or any part of the land. Clause 4 also provided for Mango, if it acquired Spencer and Perovich's shares in Kinsella, to pay to the Consultant a "Development Management Fee" pursuant to cl 7. The Development Management Fee comprised two components. Mango promised to pay the Consultant a "Monthly Development Management Fee" of $25,000 per month from the date of that agreement to the last to occur of the date of settlement of the land purchase contract and the date of grant of the contemplated approval for development of the land. Secondly, Mango promised to pay to the Consultant by instalments a "Lump Sum Development Management Fee" of $2 million (plus GST), the first instalment to be paid on the Effective Date and the last instalment to be paid on the earlier of 30 September 2004 or the taking effect of the 'Development Permit authorising the Material Change of Use' of the land.

[12] In the following provisions of the security agreement "Chargor" refers to Mio Art and "Chargee" refers to Standard Builders:[1]

1. The Chargor has agreed to mortgage and charge to the Chargee all the Secured Assets to secure financial accommodation now or in the future to be provided to or at the request of the Chargor.

...

2.1 Mortgage of Secured Assets

The Chargor transfers, mortgages and assigns by way of security to the Chargee the Secured Assets to be held by the Chargee absolutely, but subject to the provisions for redemption contained in clause 2.2

2.2 Redemption

If the Chargor pays or causes to be paid to the Chargee the Secured Money and if the Chargor otherwise performs and observes the covenants, conditions and agreements on its part contained in this document and the Transaction Documents then the Chargee shall at the request and cost of the Chargor execute a release of the Secured Assets from this document and where applicable re-deliver to the Chargor any share or unit certificates and the transfers thereof delivered pursuant to this document or if the Secured Assets have been transferred and registered in the name of the Chargee, the Chargee shall execute and deliver a re-transfer to the Chargor as the Chargor shall direct.

2.3 Deposit of Certificates

The Chargor shall deposit with the Chargee any share of unit certificates relating to the Secured Assets and the Chargee shall be entitled to retain possession of those certificates until all Secured Money has been paid or repaid.

2.4 Dividend/Voting Rights

Until the occurrence of an Event of Default all dividends, distribution and other moneys in respect of the Secured Assets shall be received by the Chargor and the Chargee shall not exercise any voting power in respect of the Secured Assets at any meeting but upon the occurrence of an Event of Default the provisions of this clause shall cease to have further effect and, at the option of the Chargee, all dividends and other moneys payable in respect of the Secured Assets will be receivable by the Chargee and all voting rights associated with the Secured Assets shall be enjoyed and be exercisable by the Chargee alone without any without interference by the Chargor.

2.5 Charge

Until such time as the assignment referred to in clause 2.1 is perfected the Chargor hereby charges the Secured Assets to the Chargee for payment of the Secured Money. The Chargor does this as beneficial owner except for those Secured Assets which the Chargor owns as trustee of a trust, in which case the Chargor does this as sole trustee of the relevant trust.

1. During the continuance of this security (and where appropriate from time to time) the Chargor must comply with the following provisions.

Not sell, assign, let, part with possession, mortgage, charge, encumber or otherwise dispose of or deal with the Secured Assets despite any power implied by statute or otherwise without the Chargee's prior written consent. Unless an Event of Default occurs, the Chargor may retain possession of the Secured Assets and may use, operate, maintain, and control the Secured Assets in the ordinary course of its business.

Maintain the Chargor's right to and under the Secured Assets. The Chargor must not cause or permit anything to be done by which any part of the Secured Assets may be rendered void, voidable, unenforceable, or of limited or reduced force, effect, or value.

Promptly cause this document to be registered or recorded in any places the Chargee reasonably requires and also in each place where failure to do so would render this document or the charge created by it void under the Corporations Act (or similar legislation applicable in any jurisdiction where the Secured Assets are situated at any time) or void as against a liquidator or judgment creditor. The Chargee may elect to effect the registration itself.

The Chargor shall, if required to do so by the Chargee, at the Chargor's own cost, execute and do all such assurances, transfers or acts for effectually vesting the Secured Assets in the Chargee and, upon the occurrence of an Event of Default, for enabling the Chargee to receive any sums of money which become due or receivable in respect of the secured Assets. Without limiting or foregoing the Chargor shall promptly notify the Chargee in writing if the Chargor becomes entitled to any Benefits in relation to the Secured Assets and the Chargee may in its absolute discretion (without being obliged to do so) accept the transfer or allotment of any Benefits and make or pay all calls or other moneys as is payable in respect thereof (which money will immediately form part of the Secured Money) and if required by the Chargee, the Chargor shall cause any such Benefits to be transferred, received, paid or allotted to the Chargee.

8.1 Despite any other provision of this document, at any time after an Event of Default occurs how and when the Chargee in its absolute discretion decides, the Chargee may sign anything and do anything the Chargee considers appropriate to recover the Secured Money and deal with the Secured Assets.

In this document unless the context otherwise requires:

Debt means all money (and where the context permits or requires any part of that money) which Mango Boulevard at any time and from time to time is or becomes liable to pay to the Chargor under or arising from Share Sale Agreement;

(a) all Marketable Securities owned or held by the Chargor from time to time (whether beneficially or not) in Kinsella Heights Developments Pty Limited ACN 100 373 368;

(b) all Benefits accruing in respect of any of the above and any Marketable Securities issued in lieu of any of the above and the evidence of title in relation to any of the above;

(c) all present and future rights, title, estate and interest of the Chargor in or arising from all or any of the following:

(viii) any other document or transaction ancillary or collateral to any of the foregoing or which is contemplated by any of the foregoing.

Share Sale Agreement means the Share Sale Agreement dated 4 July 2003 between Richard William Spencer as Trustee for the Spencer Family Trust (as "Spencer"), Silvana Perovich (as "Perovich") and Mango Boulevard (as "[Mango] Boulevard)..."

Did the security agreement create a statutory assignment of the cl 5.1(a) right?

[13] In Agnew v Commissioner of Inland Revenue,[2] the Privy Council explained that,

"the court is engaged in a two-stage process. At the first stage it must construe the instrument of charge and seek to gather the intentions of the parties from the language they have used. But the object at this stage of the process is not to discover whether the parties intended to create a fixed or a floating charge. It is to ascertain the nature of the rights and obligations which the parties intended to grant each other in respect of the charged assets. Once these have been ascertained, the court can then embark on the second stage of the process, which is one of categorisation. This is a matter of law. It does not depend on the intention of the parties. If their intention, properly gathered from the language of the instrument, is to grant the company rights in respect of the charged assets which are inconsistent with the nature of the fixed charge, then the charge cannot be a fixed charge however they may have chosen to describe it."

[14] A similar process was described in a different context by the High Court in CPT Custodian Pty Ltd v Commissioner of State Revenue (Vic)[3] and also should be adopted here.

[15] The primary judge discussed various authorities concerning the differing characteristics of assignments and charges, but for present purposes it is sufficient to quote to the summary of the relevant principles by Barrett JA (with whom Beazley P and Meagher JA agreed) in Austino Wentworthville Pty Ltd v Metroland Australia Ltd:[4]

"1. An 'absolute' assignment is one that is unconditional and does not attempt to affect part only of the chose in action.

1. The fact that an assignment otherwise absolute is accompanied by an express proviso for redemption, an implied right of redemption or the creation of a trust in respect of future proceeds does not deprive it of its absolute character.
2. An assignment by way of charge is one the effect of which is to give a right of payment out of the subject matter assigned without outright transfer of that subject matter. Such an assignment occurs when, for example, there is a transfer of a right to be paid out of a particular fund or of so much of a debt as is sufficient to satisfy a future indebtedness.
3. The character of the assignment must be ascertained from the terms and effect of the instrument, according to the construction of it as a whole."

[16] I will use the word "assignment" to describe what s 199(1) of the Property Law Act 1974 calls an "absolute assignment ... (not purporting to be by way of charge only)". The question about the security agreement raised by the parties' arguments in the Trial Division was whether it created an assignment of the Secured Assets by way of mortgage to Standard Builders securing repayment of its loan to Mio Art or whether it instead created a charge over the Secured Assets securing repayment of that loan. Upon the latter construction, there would not be an assignment with reference to which s 199(1) could operate.

[17] The appellants' argument appropriately emphasised cl 2.1, particularly the words "assign" and "absolutely". The appellants invoked the rule of construction that words with a relevant legal meaning used in a contract drafted by lawyers should be presumed to be used in their legal sense unless that presumption is displaced by other facts.[5] The primary judge acknowledged that rule and also that the word "mortgages" in cl 2.1 may refer to a mortgage by way of assignment, although it might also refer to a mortgage by way of a "mere charge".[6] The primary judge nevertheless accepted the respondents' argument that, when the agreement was construed as a whole, it emerged that it did not provide for an absolute assignment but instead for a charge only and that any assignment was conditional upon the future happening of an Event of Default. (For ease of reference I will call an Event of Default a "default".) It was not submitted that, if the security agreement created only a charge, there had been a default followed by the conversion of the charge into an assignment.

[18] The primary judge considered that cl 2.4 and cl 3(f) made a distinction between the position before default and the position after default. Unless and until the Chargor (Mio Art) defaulted, the moneys in respect of the Secured Assets were to be received by the Chargor but after default all such moneys were to be received by the Chargee at its option. Clause 2.4 was therefore irreconcilable with a statutory assignment of the cl 5.1(a) right, because an assignment of part of a debt cannot be an absolute assignment and where there is a statutory assignment a discharge for a debt can be given only by the statutory assignee. The primary judge considered that cl 3(c) also supported the respondents' argument because an agreement by the Chargor not to assign the Secured Assets was inconsistent with that property having been assigned by cl 2.1.

[21] The Secured Assets as defined in the security agreement, including the cl 5.1(a) right, are choses in action which could be received and used in the ordinary course of the Chargor's business only by it disposing or otherwise dealing with them, and the security agreement does not require the Chargor to account to the Chargee for such receipt or other use prior to default. Accordingly, upon the primary judge's construction of cl 2.4 and cl 3(f), which I would affirm, those provisions are consistent only with a floating charge. (A charge must be floating if the chargor is free to collect charged debts for its own benefit.[10]) To express the result with reference to the terms of the statute, clauses 2.4 and 3(f) are inconsistent with an assignment because they make it plain that the intention was not "to pass all the rights of the assignor in the debt or chose in action to the assignee...".[11]

[22] To take as another example the shares in Kinsella (which are within paragraph (a) of the definition of Secured Assets), the effect of the provisions is that the right to possess, use, control, and receive dividends, distributions, and other moneys, and to vote at meetings of Kinsella in respect of those shares, are to pass to the Chargee only upon it exercising an option after default. Those rights of ownership of the shares thus remain with the Chargor before default, and those rights are also themselves "Secured Assets" (as "Benefits"), yet cl 2.4 excludes them from the rights conferred upon the Chargee before default.

[23] As the respondents submitted, when cl 2.1 is read together with cls 2.4 and 3(f) (as it must be), the security agreement is seen to resemble cl 8 of the contract in issue in The Halcyon the Great.[12] That clause provided that the "Owner" assigned and charged to Bankers all of its rights under the Contract, subject to a proviso that, "unless and until the Owner shall fail to observe and perform the obligations on its part to be observed and performed under the Contract ... and the Bankers shall have given notice to the Builder and Owner the owner shall be entitled to exercise all its rights under the Contract ... in all respects as if this Agreement had not been made ...". Staughton J referred to Hughes v Pump House Hotel Co and held that, having regard to the Owner's entitlement to exercise its property rights as owner for the time being until default, there was a charge rather than an assignment.[13] The appellants argued that there are differences between the contract construed in The Halcyon the Great and the security agreement, notably the presence in cl 2.1 of the word "absolute", that the contract in The Halcyon the Great provided for an assignment and charge, that the proviso was construed to mean that the owner was entitled to exercise its rights as owner, and that the proviso was part of the assignment and charge clause. The suggested differences are not substantial grounds for distinguishing The Halcyon the Great. Clauses 2.4 and 3(f) also have the effect that before default the Chargor is entitled to exercise its rights as owner. Given that those provisions identify the way in which the charge was intended to operate in practice, although they are not expressed as provisos to the reference in cl 2.1 of a transfer, mortgage and assignment of assets to be held by the Chargee absolutely, the supposedly absolute nature of that holding is necessarily qualified by the recognition in clauses 2.4 and 3(f) of the Chargor's continuing ownership rights.

[24] The appellants argued that Ramsey v Hartley[14] supported their argument that the security agreement did not qualify the absolute nature of the assignment in cl 2.1. The appellants relied upon part of a passage in the judgment of Lawton LJ. I will set out the whole passage:

"The assignment is a statutory one, and, provided that it complies with the provisions of section 136(1) of the Law of Property Act, 1925, the assignee can sue on it in his own name. I can see no reason why the deed of assignment here is not an assignment which complies with section 136(1). Mr Pickering's submission that it was not an absolute assignment at all because the plaintiff had undertaken to pay to the trustee 35 per cent. of the net proceeds of the action disregards the plain words of the deed as set out in clause 1. The trustee, in consideration of the plaintiff's covenants, which included the covenant to pay 35 per cent. of the net proceeds of the action to the trustee, agreed to transfer, convey and assign to the plaintiff "all those rights in title to and choses in action relating to or in any wise arising out of the matters giving rise to the claim," which was identified with particularity. It was only after the plaintiff had tried to enforce the claim and in the event of his bringing it to a successful conclusion that anything would be paid to the trustee. At all times before the conclusion of the action, when the cause of action would become either a judgment or a settlement by agreement, it would vest in the plaintiff and no one else."

[25] The highlighted text reveals a substantial point of distinction between this case and Ramsey v Hartley. In this case, an effect of the clauses I have discussed is that before default the Secured Assets may be received by, remain in the possession of, and be used by the Chargor in the ordinary course of its business. The document construed in Ramsey v Hartley was quite different. By that document a trustee in bankruptcy assigned to the bankrupt all the rights relating to matters giving rise to a claim set out in a statement of claim "to the intent that hereafter the assignee shall be solely entitled (subject as hereinafter mentioned) to all proceeds, profits, damages, interest or other monies of whatever kind or how so ever arising out of such action". The assignee covenanted that if the action was successful the assignee would pay the trustee 35 per cent of the net proceeds. The primary judge pointed out that, consistently with Lawton LJ's reasons, Ramsey v Hartley is cited in Young, Croft, Smith, On Equity as an authority for the proposition that:

"The absolute character of the assignment would not be lost if, when received, the assignee covenants either to pay part of the proceeds of the chose in action to the assignor, or to hold all or part of the proceeds in trust for the assignor".

As the primary judge also observed, cl 2.4 of the security document does not provide for the Chargee to receive monies in respect of the Secured Assets before default and then to hold or distribute those monies in a certain way; rather it provides that until default the monies are to be received by the Chargor.

[26] The appellants also argued that it is an available construction of cl 2.4 that it merely permits the Chargor to receive and use money owned by the Chargee as assignee under cl 2.1, with the result that it would necessary for there to be an accounting in due course. This was submitted to be an available construction in light of the context of the long term land development project, in the course of which, so the appellants submitted, the Chargor would be permitted to use the costs, fees, and expenses paid to it under the Consultancy Services Agreement as well as the payments to it under the SSA of the purchase price of the shares. But the security agreement contains no provision for Mio Art to account to Standard Builders for Mio Art's receipt or use of those or any other Secured Assets. Thus if, as the appellant's argument suggested and as seems entirely unsurprising, the parties to the security agreement contemplated that Mio Art would receive and use the Secured Assets in the ordinary course of carrying on its business, that would of itself strongly indicate that the security agreement created only a floating charge before default; if the parties to a charge contemplated that the chargor would continue to carry on business, "they must be taken to have agreed on a form of charge which did not possess the ordinary incidents of a fixed charge."[16] The hallmark of a floating charge, that which distinguishes it from a fixed charge, is that the floating charge contemplates that, "until some future step is taken by or on behalf of those interested in the charge, the company may carry on business in the ordinary way" as far as concerns the charged assets, without the consent of the chargee.[17]

[27] The appellants advanced an alternative argument that the expression in cl 2.4 "dividends, distributions and other moneys in respect of the Secured Assets" comprehended the expenses, fees, and costs payable under the Consultancy Services Agreement but did not comprehend the "Debt" defined in cl 14.1 of the security agreement, being the purchase price for the shares in Kinsella payable under cl 5.1 of the SSA. The appellants referred to the separate definition of "Debt" in cl 14.1 and the reference to it in (c)(i) of the definition of "Secured Assets" in the same clause. The appellants argued that in this context cl 2.4 should be regarded merely as a permission by the Chargee as the owner of the Debt for the Chargor to receive and use income ("dividends, distributions and other moneys") in respect of the Debt and other Secured Assets, but that cl 2.4 did not apply to the Debt itself. The primary judge rejected that argument: the word "distributions" in cl 2.4 could apply to distributions of capital and income, it was not clear that there was "a kind of payment which is described by the words "dividends" and "distributions" and which would exclude a payment under cl 5.1(a)", and in light of the definition of "Secured Assets" the appellants' interpretation of the expression in cl 2.4 ""other moneys in respect of the Secured Assets" would seem to give that expression no effective operation".[18] I agree. It is difficult to articulate the distinction sought to be made in the argument between a debt and moneys in respect of the debt. This argument would also make cl 2.4 seem incongruous with cl 3(f), whereas upon the primary judge's construction those provisions are reconciled with each other.

[28] I would add that, if the proper construction is that the security agreement purported to assign the debt whilst it remained uncollected but did not preclude the Chargor from receiving and using the proceeds of that debt without any liability to account to the Chargee, then Agnew v Commissioner of Inland Revenue[19] would seem to compel the conclusion that the security agreement created only a floating charge. It was held in that case that, because alienation and receiving the proceeds of a debt are merely different ways of collecting the debt, a restriction on the disposal of a debt which leaves the chargor free to collect and use the proceeds of the debt is inconsistent with the charge being fixed. The case involved only a choice between a fixed charge and a floating charge, but the reasoning seems to compel the conclusion that, upon the construction I have described, the purported "absolute assignment" in the security agreement could amount to no more than a floating charge. I refrain from expressing a concluded view on the point because the respondents did not rely upon the decision.

[29] The primary judge held that cl 2.2 was not inconsistent with the respondents' argument because it provided for a re-transfer only of those Secured Assets which had been transferred. In my respectful opinion that answers the appellants' arguments that cl 2.2 contemplated a transfer (before default) of the Secured Assets and also provided for a re-transfer to Mio Art upon repayment of its debt to Standard Builders.

[30] The appellants argued that the reference to "charge" in recital A was not significant because cl 2.5 created a charge for an interim period before the assignment was perfected and the word "mortgage" is capable of comprehending a mortgage by way of assignment. Nevertheless, the absence of any reference to an agreement to assign in recital A and the description of the parties only as "Chargor" and "Chargee" seems distinctly odd if the intention were to create an immediate equitable assignment which, upon the giving of the notice required by s 199 of the Property Law Act (Qld), would take effect as a statutory assignment. Even so, I agree with the primary judge's conclusion that cl 2.5 is more favourable to the appellants' argument than to the respondent's argument because it suggests that there was to be a charge only pending completion of further steps required for a legal transfer of some of the Secured Assets.

[31] I have mentioned my view that cl 3(c) is ambiguous. In Markets Nominees Pty Ltd v Commissioner of Taxation,[20] Tracey J held that a clause in the same terms was not inconsistent with a fixed charge, but his Honour's reasons reveal that this conclusion was influenced by three contextual considerations which are not applicable in this case. First, in Markets Nominees Pty Ltd v Commissioner of Taxation the nature of the secured assets, which included real estate, plant equipment and machinery and computer software and computer records, was such that they (or at least many of the substantial assets) could be controlled and used without being transferred. Here the definition of "Secured Assets" comprehends only choses in action, including the book debts described in the definition of "Benefits". Secondly, in that case a contemporaneous irrevocable authority would have been rendered inconsistent with the charge if it were held to be a floating rather than fixed charge, whereas the converse is true in this case (see [38] of these reasons). Thirdly, the decision was influenced by the other terms of the charge in issue in that case. Whilst the effect of cl 3(c) in this case is debatable, upon the construction which I prefer it supports the primary judge's conclusion.

[32] The respondents argued that cl 3(d) contemplated the Chargor taking action to protect the Secured Assets, for example, bringing proceedings to enforce a claim which was a secured asset in the event of a pending limitation period. That was submitted to be inconsistent with an absolute assignment under which the Chargor would have no such right. The appellants replied that cl 3(d) must be read in the context of cl 2.5. In that context, the covenants in cl 3(d) were designed to preserve the value of Standard Builders' security only whilst Mio Art remained the legal owner of the Secured Assets before a notice was given under s 199. That argument is not readily reconcilable with the introductory words of cl 3, which oblige the Chargor to comply with cl 3(d) "during the continuance of this security". Clause 3(d) is not limited in its operation to the period between execution of the security agreement and the giving of a notice under s 199. Nor is it easy to construe the first sentence of cl 3(d) as referring merely to a right to redeem. In my view cl 3(d) supplies some support for the respondents' construction, particularly because of its apparent consistency with clauses 2.4 and 3(f).

[33] The primary judge concluded that there was "no clear and rational means for reconciling the terms of cl 2.1" with other provisions of the document, "most importantly cl 2.4 and cl 3(f)" but that, for reasons already mentioned, the better construction of the document was that it operated only as charge until an Event of Default occurred.[21] For the reasons already given I agree. That conclusion is supported also by these matters: the recital in A does not refer to an 'assignment" but to a "mortgage and charge"; throughout the security agreement the parties are referred to as "Chargor" and "Chargee" (which the primary judge regarded as being "not irrelevant");[22] cl 3(e) refers to "the charge created by" the security agreement"; and the introductory paragraph in cl 8.1 may be construed as contemplating that the Chargee may become a "Mortgagee or Charge[e] in possession" only after default.

[34] The respondents argued that another powerful circumstance supporting their construction was that, contemporaneously with the security agreement, the parties entered into a Bill of Sale and a Deed of Assignment by which Mio Art unconditionally assigned by way of mortgage to Standard Builders Mio Art's right under the SSA to receive the balance of the share price payable under cl 5.1(b) sufficient and necessary to discharge its obligations under "the Loan Agreement" (the Deed of Assignment) and "$1 million...plus a premium to be determined upon the calculation of the proceeds due under cl 5.1(b) of the [SSA] of the Assignor's right title and interest in the debt" (the Bill of Sale). The respondents argued that those agreements would have been superfluous and the parties' conduct in executing them inexplicable if the security agreement created a legal mortgage of the debt owing under the SSA upon notice being given to Mango. The respondents relied upon the rule in the case of documents executed contemporaneously with each other that a construction should not be adopted which would render other documents superfluous.

[35] The primary judge accepted that those other documents were admissible as an aid to construction of the security agreement as part of the surrounding circumstances known to them and as documents which cast light on the commercial purpose or objects to be secured by the SSA, and they favoured the respondents' construction.[23]

[36] The appellants argued that a conclusion that the Bill of Sale and Deed of Assignment would have been superfluous if the security agreement effected an absolute assignment could not safely be drawn because the "Loan Facility Agreement" and "Loan Agreement" secured by the assignments under those agreements were not disclosed or put into evidence. This was one aspect of the appellants' argument before the primary judge that if the respondents had wanted the court to consider surrounding circumstances to assist in the construction of the security agreement then it should have adduced evidence of the entirety of the surrounding circumstances. The primary judge found that argument unpersuasive; evidence of relevant surrounding circumstances was not rendered inadmissible merely because every potentially relevant fact or circumstance was not also proved.[24] I agree. The absence of the agreements referred to in the Bill of Sale and Deed of Assignment does not negate the evidence of those documents that, contemporaneously with the security agreement, Mio Art made assignments of its rights under cl 5.1(b) of the SSA which would have been unnecessary if the security agreement effected a legal assignment of any chosen action comprehending a debt under the SSA.

[37] The appellants cited Big River Timbers Pty Ltd v Stewart,[25] Beaufort Developments (NI) Ltd v Gilbert-Ash Ltd,[26] and Lewinson & Hughes, The Interpretation of Contracts in Australia,[27] for their proposition that any presumption that the parties did not intend to enter into superfluous agreements was not a strong one. The cited authorities concern the principle that, because it is a corollary of the principle that a document must be construed as a whole that effect must be given to each part of the document, "in general every part of the document is taken to have been deliberately inserted, having regard to all other parts of the document, with the result that there is a presumption against redundant words...".[28] That presumption is generally regarded as a weak one in the construction of securities because, in the words of Hoffmann J (as his Lordship then was) in Tea Trade Properties Ltd v CIN Properties Ltd,[29] "draftsmen traditionally employ linguistic overkill and try to obliterate the conceptual target by using a number of words or phrases expressing more or less the same idea".

[38] Similar considerations might in some cases also justify attributing little weight to an argument from redundancy where the contract to be construed is one of a number of contracts dealing with the same subject matter and executed contemporaneously, but each case must depend upon its own facts. In this case, where the provision for assignment "absolutely" in the security agreement is practically irreconcilable with other important provisions in the same agreement which point to a floating charge, it strikes me as being significant that the same parties contemporaneously entered into other securities which are sensibly explicable only upon the basis that the security agreement created a charge rather than an assignment. That circumstance, which is not said to be inadmissible in the construction exercise, supports the primary judge's construction.

[39] I would affirm the primary judge's decision that the security agreement did not create an assignment of the cl 5.1(a) right.

If the security agreement created an absolute assignment not purporting to be by way of charge only, was express notice in writing given to Mango of that assignment?

[40] Although it is strictly unnecessary to consider any other question, I will discuss the question whether notice required by s 199(1) of the Property Law Act 1974 (Qld) was given.

[41] The primary judge rejected the appellants' arguments that notice was given by receipt by Mango of a copy of a letter dated 11 February 2009 to Standard Builders from its solicitor or by Mio Art's disclosure of the security agreement in the litigation in September 2014. In this appeal, without objection by the respondents the appellants added an argument that notice was given in October 2014 by an admission in Mio Art's reply pleading.

[42] The letter dated 11 February 2009 to Standard Builders from its solicitor was headed, "Strictly Private and Confidential". The reference at the commencement of the letter was, "Re: Mio Art - Share Sale Agreement". The letter referred to a dispute, inferentially between Mio Art and Mango. It referred to one of the alternative methods of calculating the payment as being that provided in cl 5.1, and in that context referred to the provision for payment of "(a) $5 M with interest; ...(b) any amount by which "the improved market value of the property immediately after the effective date" exceeds $29 M...". There is also a reference to the deduction of monthly management fees and certain fees for bank guarantees. After some further discussion about the issues in the dispute, the solicitor wrote:

"By virtue of the suite of documents signed by Mio Art Pty Ltd in November 2007 in your favour to secure the advance that you have made to it of in the vicinity of $1 M Mio Art's rights under the Share Sale Agreement outlined above have both been assigned to and mortgaged in favour of you."

[43] The evidence was that the solicitor emailed that letter to a person (who was not said to have been a representative of Standard Builders or of Mio Art), that person emailed the letter to someone else (who was also not said to be connected to Standard Builders or Mio Art), and he emailed the letter to a director of Mango on 12 February 2009. In that surprising fashion Standard Builder's solicitor's private and confidential legal advice to Standard Builders found its way to Mango.

[44] The primary judge quoted the statement by Dixon and Evatt JJ in Consolidated Trust Co Ltd v Naylor:[30]

"The object of the requirement made by the words 'of which express notice in writing shall have been given' is, we think, correctly stated in Warren's Choses in Action (1899), at pp. 177, 178. 'The term "express notice" is doubtless employed by way of opposition to notice arising by implication or operation of law, and to what was known in equity as constructive notice. It means a notice which indicates an express intention - a direct and definite statement of a thing, as distinguished from supplying materials from which the existence of such a thing may be inferred.' The purpose is to make essential actual notice that the debt has been assigned. 'One of the objects of the giving of notice to the debtor is that he shall "know with certainty" in whom the legal right to sue him is vested' (McIntosh v Shashoua [1931] HCA 56; (1931) 46 CLR 494 at p 515, per Evatt J)."

[45] Dixon and Evatt JJ quoted with approval Hyndman JA's conclusion in General Motors Acceptance v Johnson,[31] that "no special form of notice is necessary, it being sufficient if the effect upon the debtor is to convey to him with sufficient certainty that the fact that the obligation is transferred to a third person as assignee". Dixon and Evatt JJ referred also to Hyndman JA's conclusion "that a writing written for another purpose amounted to a sufficient notice because it conveyed the information that an assignment had taken place, to a debtor who actually had seen the document constituting the assignment". It will be apparent in the present case, however, that Standard Builders' solicitor's letter conveyed only the solicitor's private and confidential legal advice to Standard Builders that a suite of documents involved an assignment and there was no suggestion that Mango had at that time seen any of those documents.

[46] After pointing out that the solicitor did not write the letter as a notice under s 199 but as a letter of advice to the solicitor's client, and that the solicitor did not send the letter by way of giving notice of the assignment, and nor was it ultimately received as such a notice by the director of Mango, the primary judge concluded that:

"It could not be said that the email to him, containing those other emails and the attachment, served the purpose of the defendants "knowing with certainty" in whom the legal right to sue them was vested. The express notice in writing of an assignment is an essential element in the vesting of title in the assignee: J G Starke, Assignments of Choses in Action in Australia (Butterworths, 1972 (at [63])) and the cases there cited at N 38. It could not be thought this alleged assignment was effected by information about it reaching the defendants in such an indirect way."

[47] That decision finds powerful support in Anning v Anning,[32] in which the High Court unanimously rejected an argument that express notice in writing of an assignment had been given to a bank. The relevant part of the decision concerns legal choses in action in the form of bank deposits. The facts upon that topic are not stated in much detail in the report. From the report of Cooper CJ's decision[33] from which the appeal to the High Court was brought, it appears that, after the assignor executed the deed a few days before he died, the deed was given to one of the witnesses to its execution, that person handed the deed to one of the bank's employees to read, and that employee read it and passed on his accurate knowledge of it to the relevant bank officers. The High Court overturned Cooper CJ's decision[34] that upon those facts notice of the assignment was given in accordance with the statute. Griffith CJ held that "written notice means a document addressed to, and intended to be retained by, the debtor".[35] Isaacs J observed that, "the facts proved in relation to its custody were so far removed from any intended notification of assignment to the bank as debtor that is impossible to regard them as the requisite notice."[36] Higgins J agreed. I will set out the whole of the relevant passage in his Honour's reasons because it is instructive for the present case:

"As regards the choses in action, and in particular the bank deposits, the position is more difficult. The bank deposits were debts owing to the deceased - what are called legal choses in action. At common law such a chose in action could not be assigned. This is the central fact of the position, and gives rise to the main difficulty. Those who support the deed have to show that there is some Act of Parliament, or some recognized principle, by virtue of which these deposits can be assigned by this deed. Of late years, a mode of assignment has been created by Statute (Judicature Act 1876, sec. 5 (6)); and if this mode be adopted, the assignee can sue the debtor direct (the bank in this case) without making the assignor the plaintiff. But this mode has not been adopted in this case before this action. There has been no notice in writing given to the bank of the assignment as required by the Act. Counsel for the defendants has urged that as the deed was left with the manager of the Bank of New South Wales, after the death, this constituted notice in writing to the bank. But I cannot accede to such an argument. The Statute requires that the notice in writing is to be "given" to the debtor; and the notice contemplated is a notice addressed to the debtor, either expressly or by implication, calling his attention specifically to the fact of assignment. A notice to quit would not be treated as given to a tenant if there fell into his hands a letter, say, from the landlord to his agent, stating that he wished the tenant to leave possession. Knowledge of the contents of the deed - even assuming that the bank manager's casual holding of the deed can be treated as knowledge on the part of the bank - is not notice in writing given to the bank of the assignment."[37]

The argument that notice was given under the statute is much weaker in this case.

[48] The pages of Griffith CJ's judgment and Higgins J's judgment which contain the quoted passages are cited in Starke, Choses in Action in Australia, for the proposition that the notice "should be addressed to, and intended to be retained by the debtor or fund holder, and expressly or by implication call the debtor's attention specifically to the fact of the assignment."[38] To my mind, the propositions for which Anning v Anning is authority include the proposition that notice is not given in accordance with the statute unless an intention to notify the debtor of the assignment is conveyed by the relevant writing when it is read in the light of the circumstances proved in evidence. The conclusion is inevitable that the intention requirement is not fulfilled in this case.

[49] The contrary is not suggested by Dixon and Evatt JJ's decision in Consolidated Trust Co Ltd v Naylor (at 438) "that a writing written for another purpose amounted to a sufficient notice because it conveyed the information that an assignment had taken place, to a debtor who had actually seen the document constituting the assignment". The very letter upon which the appellants rely in this case reveals, not only that it was written for a purpose other than giving notice of an assignment, but that it was private and confidential legal advice of a general kind which was directed to and intended to be read only by Standard Builders.

[50] The appellants argued that the primary judge's decision was based upon a view that s 199 required the notice to be given by the assignor or the assignee. This part of the appellants' argument was based upon the following passage in the reasons for the primary judge:[39]

"[34] For the plaintiff it was submitted that a notice under s 199(1) must be given by or on behalf of the assignee. For that submission, the plaintiff cited Herkules Piling Ltd & Anor v Tilbury Construction Ltd, a judgment of Hirst J in the Commercial Court of the Queen's Bench Division. In that case, an argument that the disclosure of a written agreement under which a claimant's assets had been purchased constituted notice, was rejected. Hirst J said that the apparent argument was that if a debtor "merely learned by any credible means that the money does not or may not belong to the assignor but to the assignee", the debtor must pay the assignee, an argument which he said was unsupported by authority and which was wrong. He said:

Mr Wilmot-Smith submits that it did constitute such notice. I am unable to accept this submission. As was stated by Parker LJ, giving the judgment of the Court of Appeal in Walter & Sullivan v Murphy [1955] 2 QB 584 at page 588, the whole object of the notice to the debtor is to protect the assignee, since after receipt of that notice the debtor pays the assignor at his peril. It follows that, in my judgment, to constitute valid notice, there must be some kind of formal notification by the assignee, or possibly by the assignor on his behalf, to the debtor in order to achieve the object described in the Walter & Sullivan case. This view is also consistent with the decision of the Court of Appeal in Talcott v John Lewis & Co Ltd [1940] 3 All ER 592, where it was held that a notice stamped by a creditor on his invoice stating that the invoice should be transferred and payment made to the assignee, was ineffective, both because it was insufficiently plain in its wording, and because it was not a notice sent by the assignee to the debtor (per MacKinnon LJ at page 595F, with whom Du Parcq LJ agreed). The mere receipt by a debtor of a document on discovery does not meet these criteria."

However, the judgment of MacKinnon LJ in Talcott, upon which Hirst J relied, may not support the proposition that a notice in this context must be sent by the assignee. The question in Talcott was whether a statement upon a supplier's invoices that the invoice had been transferred to the appellant company and that payment should be made to it was a sufficiently plain statement to the debtor of an assignment. The invoices with that statement upon them were held to be insufficiently plain to constitute notice of an assignment. It was in construing the invoices that MacKinnon LJ said that it was relevant that the invoices had been sent by the assignor and not by the appellants. He said that:

"If it was sent direct by the [appellants] to the first [respondents], the mere fact that it emanated from them would go some little way to indicate that they were doing so pursuant to a right of theirs."

It is that statement upon which Hirst J relied in Herkules Piling in the passage which I have set out above. MacKinnon LJ added that the appellant could have given a correct notice or insisted that the assignor "in clear terms give that intimation" instead of the words upon the invoices being "couched in this extremely vague and obscure language". In the same case, Goddard LJ dissented, holding that the notice was sufficiently plain. But as to the relevance of the notice being given by the assignor in that case, Goddard LJ said:

"Notice may be given by the assignor or by the assignee. For myself, I think that the fact that the notice is given by the assignor may strengthen the position, as far as the debtor is concerned, in this way. I should not draw any inference which is adverse by reason of the fact that it is given by the assignor, because, if the debtor gets a notice from B telling him to pay B the money he owes to A, he will naturally want to know if he is safe in doing so, and he will apply to A, the assignor. If he gets a notice from the assignor, then, of course, he can safely pay, because he will be paying in accordance with the directions of his creditor."

[35] In Anning v Anning, Griffith CJ said of the then equivalent of s 199(1) that:

"The section does not say by whom the notice is to be given, but it is, I think, clear that it may be given either by the assignor or the assignee."

To the same effect was a statement by Walsh J, sitting in the Supreme Court of New South Wales, in Cossill v Strangman. These cases and others are cited for this proposition in Young, Croft, Smith On Equity at [10.150]."

[51] The primary judge went on to observe that the email which attached the letter from Standard Builders' solicitor was not sent by or on behalf of Mio Art or Standard Builders and that, whilst Mango was given information "indicating that there had been an assignment" by that communication, "it is another thing to say that it was an unambiguous and reliable communication to the debtor to the effect that only a payment to Standard Builders would constitute a payment or part payment of the debt".[40]

[52] It is not necessary to consider whether notice to a debtor of an assignment which is not sent by or with the express or implied authority of either the assignor or the assignee or the successor in title of either of them is on that account alone ineffective as notice under the statute. Contrary to the appellants' argument, the primary judge's conclusion was not based upon a decision that notice by a party to the assignment was essential. The primary judge instead took into account the circumstance that the relevant writing was not given by or on behalf of either party to the security agreement as a relevant factor in the decision whether or not the writing was sufficiently definite and reliable to amount to an express notice given in accordance with s 199(1). The circumstances that what was communicated to Mango was written by the Chargee's solicitor to the Chargee and that the communication to Mango came from a person who had no apparent connection either with the solicitor or the parties to the supposed assignment plainly bear upon the effect and apparent reliability of the writing claimed to amount to notice.

[53] In Bateman v Hunt,[41] to which the appellants referred in this context, successive assignees of a mortgage deed died without giving the debtors any notice of the assignments. The legal personal representatives of the last assignee sued the debtors on the covenant for payment in the mortgage deed. The Court of Appeal rejected the debtors' argument that the plaintiffs were not entitled to sue because neither of their successors in title ever acquired a legal right to sue. In that context Collins MR, Stirling LJ, and Mathew LJ held that the statute did not "lay down that the notice must be given by any particular person; and we can see no good ground for holding that the notice given by the plaintiffs was ineffectual".[42] The case is not authority for a proposition that the identity of the person who communicates the information said to amount to notice is irrelevant to the question whether the communication is effective as notice. That no such proposition was intended appears from the Court of Appeal's reference to the equitable rules upon which the statute was probably founded. As the appellants submitted, in Lloyd v Banks,[43] to which the Court of Appeal referred, Lord Cairns LC held that, although express notice by an equitable incumbrancer to a trustee was not in all circumstances necessary to protect the equitable interest, each case depended upon its own facts; it was to be expected that "those who alleged that the trustee had knowledge of the incumbrance had made it out, not by any evidence of casual conversations, much less by any proof of what would only be constructive notice - but by proof that the mind of the trustee has in some way been brought to an intelligent apprehension of the nature of the incumbrance which has come upon the property, so that a reasonable man, or an ordinary man of business, would act upon the information and would regulate his conduct by it in the execution of the trust...".[44] (I do not endorse this as the relevant test under the statute. I mention it to make the point that it is consistent with the view that the identity of the person giving notice may be relevant to the effect and apparent reliability of what is conveyed.)

[54] The appellants argued that it was irrelevant whether the written notice was intended to serve as notice of an assignment when it was written. For that proposition they cited Van Lynn Developments Ltd v Pelias Construction Co Ltd.[45] There the Court of Appeal found to be valid as a notice under the statute a letter from the assignees' solicitor to the debtor conveying the assignees' instructions "to apply to you for the payment of a [specified sum] ...outstanding to them following the assignment of the debt to them by National Provincial Bank Ltd" and stating that notice of that assignment had already been given. The statement that notice had already been given was wrong. The decision of the Court of Appeal was that the error did not invalidate the letter as a notice under the statute. Lord Denning MR (with whom Davies and Widgery LJJ agreed) affirmed Atkin J's interpretation in Denney, Gasquet and Metcalfe v Conklin[46] that it was sufficient if the notice brings "to the notice of the debtor with reasonable certainty the fact that deed does assign the debt due from the debtor so as to bind the debt in his hands and prevent him from paying the debt to the original creditor". Lord Denning MR observed that the notice should make it "plain that there has in fact been an assignment so that the debtor knows to whom he has to pay the debt in the future." Widgery LJ added that the section "does not speak of "a notice": it speaks of "notice"", so that it was not necessary for there to be "a separate document purposely prepared as a notice, and described as such..."; "the notice was "given by the assignee in order to prevent the debtor continuing to deal with the assignor" and it was "clearly necessary that the debtor should be given information which tells him that an assignment has been made, which identifies the debt, and which sufficiently identifies the assignee...".[47]

[55] In that case the purpose and effect of that solicitor's letter plainly was to give notice of the assignment in order to satisfy the statute. Widgery LJ's reasons should not be understood as establishing that the apparent purpose for which a notice is prepared is necessarily irrelevant. No such proposition was endorsed by Brereton J in Grizonic v Suttor:[48] his Honour relevantly held only that, "save that it must be in writing and express, there are no formal requirements for notice under s 12 [of the Conveyancing Act 1919 (NSW)], though it must not mislead; all that is required is "notice in writing", not "a notice in writing"...", and..."[a]though it would have been insufficient for want of identifying the relevant debts had the letter alone been sent, sufficient particularity was provided by the accompanying deeds..." In that case the assignee's letter of demand gave to the debtor "official notice that I have paid certain debts...I have taken over assignments of debts from third parties whom [sic] paid debts...[y]ou have been well aware of these debts having been paid and assigned...Please find attached all deeds assigning debts to myself...".[49]

[56] The apparently fortuitous and unlooked for delivery to the director of Mango of a letter marked "Strictly Private and Confidential" which contained legal advice in general terms by a solicitor to his client about the effect of a "suite of documents" which were not in Mango's possession could not satisfy the test expressed in Denney, Gasquet and Metcalfe v Conklin. As the primary judge held, it could not amount to "actual notice that the debt has been assigned" such that Mango should "know with certainty"[50] that the legal right to sue him was vested in Standard Builders.

[57] The second matter upon which the appellants relied as notice was the receipt by a solicitor acting for Mango in the litigation in the Trial Division of a copy of the security agreement by way of Mio Art's disclosure of documents on 2 September 2014. I do not accept the appellants' argument that the primary judge did not deal with this contention. The primary judge explained that the question whether there was an unambiguous and reliable communication to the debtor to the effect that only a payment to Standard Builders would constitute a payment or part payment of the debt related both to the solicitor's letter and to the disclosure of the security agreement.[51] The primary judge's analysis of Consolidated Trust Co Ltd v Naylor and his Honour's conclusion that no notice as required by s 199(1) had been given[52] applied equally to the disclosure of the security agreement. I record my agreement with that analysis.

[58] Mango relied upon a statement by Hargreave J in Jenkins v Visualeyes Pty Ltd,[53] that the statute (in that case s 134 of the Property Law Act 1958 (Vic)) did not require that the notice in writing must be given within any time period. In that case it was held that sufficient notice was given by a caveat and a pleading in the proceeding. Those conclusions were reached in a case in which the assignee, as plaintiff, alleged in her pleading that a company which held contractual rights assigned them to her before that company was deregistered; she alleged that she was entitled, as assignee of all of that deregistered company's rights, to enforce the contract against the defendant.[54] The plaintiff lodged a caveat over the land the subject of the contract in which she stated as grounds for her claim that she was the "nominated purchaser" under the contract of sale.[55] Those facts bear no resemblance to the present case, in which Mio Art denied in its pleadings that it had assigned the relevant property to Mango. The same point distinguishes another decision upon which the appellants relied, Ramsey v Hartley,[56] in which solicitors for the assignee delivered particulars years after commencing action against the debtor which stated that the plaintiff "has been assigned his claim against your client's and the co-defendant in this action, by his trustee in bankruptcy".

[59] The appellants' argument was that receipt of the security agreement which (upon the current assumption) constituted the underlying assignment necessarily amounted to effective notice. However, the security agreement could hardly be regarded as unambiguous in relation to the question whether it created an assignment or a floating charge. I am unable to accept that disclosure of the security agreement by the supposed assignor in the context both of a claim by it upon the chose in action and a pleaded denial that the chose had been assigned could be regarded as express notice of the supposed assignment. It does not seem to be necessary to discuss additional authorities cited by the appellants. None of them concerned a remotely similar factual situation. The same is true in relation to the third matter upon which the appellants relied as notice, namely, an admission in the respondents' reply pleading that Mio Art had entered into the security agreement. That admission occurred in the very paragraph which denied that the security agreement constituted an assignment, alleged that no assignment of the proceeds of the SSA was ever perfected, and alleged that there "can be no more than a charge over the funds payable under cl 5.1(a) of the SSA".[57] In that context, I respectfully consider that it is not open to doubt that the admission could not reasonably be regarded as express notice of an assignment.

If the security agreement assigned the cl 5.1(a) right but the notice required by s 199 of the Property Law Act 1974 was not given does Mio Art have standing to enforce the cl 5.1(a) right?

[60] In the appellants' outline of submissions in this appeal they described the only issue in the appeal as being whether or not Mio Art effected a statutory assignment pursuant to s 199 the Property Law Act 1974 to Standard Builders of Mio Art's right title and interest under the SSA. In addition to arguments addressed to that question, however, Mango argued at the hearing of the appeal that even if the security agreement created only an equitable assignment Mio Art's claim could not succeed because it did not sue on behalf of the assignee, Standard Builders. Senior counsel for the appellants frankly acknowledged that no such submission about standing was made before the primary judge. He argued, however, that the point was pleaded, that it involved only a question of law, and it was therefore expedient for the Court to determine it.

[61] Because I conclude that the point was neither pleaded nor argued before the primary judge, I would hold that the Court should not consider it. That would not seem to involve any serious risk of injustice to third parties, given that the primary judge granted only declaratory relief and that, as I understand the facts, there is no proof that it is likely that, after about a decade of litigation about the SSA and related matters in the Supreme Court, ASIC or anyone who was once interested in Standard Builders before it was deregistered might now wish to contest Mio Art's entitlement to the cl 5.1(a) right.

[62] It is true, as the appellants' senior counsel argued, that paragraph 32 of the current (sixth) further amended defence denied that Mio Art had any standing to bring a proceeding for the cl 5.1(a) right and that, amongst the reasons assigned for that conclusion was the contention in subparagraph (b) that, "the effect of the Security Agreement was to make an absolute assignment on or about 23 November 2007 of all of Mio Art's rights under the SSA, and any debt owed pursuant to cl 5.1 of the SSA, to Standard Builders..."; but the expression "absolute assignment" conveyed reliance upon s 199 of the Property Law Act 1974, that provision was in fact relied upon in the immediately following subparagraph, and the subsequent conclusions asserted in subparagraph (g) that Mio Art "does not have any rights under the SSA to bring a proceeding for a debt arising pursuant to cl 5.1(a) of the SSA, and no debt is owed to the plaintiff pursuant to cl 5.1(a) of the SSA, ..." were explained by the following words, "as any such rights and debt were assigned absolutely to Standard Builders and have vested in ASIC and notice of the assignment has been given to the first defendant for the purposes of s 199 P L Act...". That this pleading was intended to invoke only a statutory assignment of the cl 5.1(a) right is confirmed by the appellants' acknowledgement that it was the only point argued before the primary judge.

[63] Mio Art objected to this new point being raised for the first time in oral argument at the hearing of the appeal. For the reasons I have given I would uphold that objection.

[64] Mio Art advanced an additional defensive submission that if the appellants' arguments were correct it nonetheless would be inappropriate to dismiss the proceedings because Mio Art retained standing to bring its claim. The argument was that, as a mortgagor of personal property, Mio Art had standing in equity to protect the mortgaged property upon joinder of the mortgagee, that no proceeding should be defeated merely by an omission to join a proper party, and that if the Court considered that Mio Art had assigned its interest in the cl 5.1(a) right the proper course was to order Mango to pay the money it owed into Court and that ASIC be joined as a party pursuant to r 62 of the Uniform Civil Procedure Rules. The appellants argued that the decision upon which Mio Art relied (Van Gelder Apsimon & Co v Sowerby Bridge United District Flour Society),[58] concerned only the question whether a mortgagor's equitable interest in property gave it standing to obtain an injunction to prevent damage to the mortgaged property. Mio Art did not seek an injunction to prevent injury to the mortgage property but instead sued for a debt, and only the legal owner of a debt has standing to sue for it in its own name.[59]

[65] I am inclined to accept the appellants' argument. That would seem to be required by the assumption for the purposes of this argument that there had been a statutory assignment of the cl 5.1(a) right. If so, s 199(1) of the Property Law Act 1974 would make that assignment "effectual in law (subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice...the legal right to such a debt or thing in action...and...all legal and other remedies for the same...and...the power to give a good discharge for the same without the concurrence of the assignor". If the right to the cl 5.1(a) right has passed and transferred to the assignee as s 199(1) provides, then it would seem that the assignor could have no entitlement to sue to recover it (or a declaration that it was entitled to the debt), regardless of what other rights it may possess as mortgagor. However it is not necessary to decide this question.

[67] GOTTERSON JA: I agree with the orders proposed by Fraser JA. I also agree that, for the reasons given by his Honour and those given separately by Dalton J, the Security Agreement did not effectuate an assignment for the purposes of s 199(1) of the Property Law Act 1974 (Qld) of the first respondent's contractual right to be paid the amount payable under cl 5.1(a) of the Share Sale Agreement.

[68] DALTON J: In long-running litigation, a judge of the trial division determined that a separate question ought to be determined in advance of trial pursuant to r 483(1) of the Uniform Civil Procedure Rules 1999. The question was whether an amount of money, part of the purchase price for shares under a Share Sale Agreement, was owing to Mio Art. The primary judge determined that it was, subject to some questions of set-off.

[69] The Share Sale Agreement provided for payment in two tranches. The first, pursuant to cl 5.1(a), was of $5 million, less fees, and was due seven days after completion. The second amount was due pursuant to cl 5.1(b) of the Share Sale Agreement. It was to be in an amount calculated by reference to the improved value of land owned by the company in which the shares were held.

[70] The issue before the trial judge was a narrow one. He described it this way:

"[6] The present questions concern the plaintiff's claim to be paid an amount under cl 5.1(a). The parties asked the court to determine certain questions in relation to that claim in advance of others, under r 483 of the Uniform Civil Procedure Rules. Those questions concern the standing of the plaintiff to claim a payment under cl 5.1(a).

[7] The first and fourth defendants (which I will call the defendants) say that this debt has been assigned at law to a third party under a document made in November 2007. The fact of the document and that it then bound the plaintiff is admitted. But the plaintiff denies that it resulted in any legal assignment of the debt and argues that in any case, it is at least the equitable owner of the debt and has sufficient standing to sue for it. The third party to which the defendants say the debt was assigned is a company which is now deregistered."

[71] The document made in November 2007 was called the Security Agreement in the pleadings. It was one of several documents all dated 23 November 2007. By these documents a company called Standard Builders Pty Ltd lent money to Mio Art and took security for that lending. The part of the defence which raises the point about assignment is as follows:

(b) the effect of the Security Agreement was to make an absolute assignment on or about 23 November 2007 of all of Mio Art's rights under the SSA, and any debt owed pursuant to clause 5.1 of the SSA, to Standard Builders;

(c) for the purposes of s.199 Property Law Act 1974 (Qld) (PL Act), express notice in writing of the assignment effected by the Security Agreement was given to the first defendant by:

(i) receipt by the first defendant of the letter pleaded in paragraph 32(f), below, on or about 12 February 2009; or

(ii) receipt by the first defendant of the Security Agreement by disclosure in this proceeding on 1 September 2014; or

(iii) receipt by the first defendant of both the letter pleaded in paragraph 32(f), below, and the Security Agreement;

(d) Standard Builders was deregistered on 16 January 2011;

(e) pursuant to s.601AD(2) Corporations Act 2001 (Cth) (Corporations Act), all of Standard Builders property vested in the Australian Securities and Investment Commission (ASIC) as a consequence of its deregistration;

(f) in a letter from Lillas & Loel to Standard Builders dated 11 February 2009, Lillas & Loel relevantly states:

By virtue of the suite of documents signed by Mio Art Pty Ltd in November 2007 in your favour to secure the advance that you have made to it of in the vicinity of $1M Mio Art's rights under the Share Sale Agreement outlined above have both been assigned and mortgaged in favour of you.

(g) in the premises, the plaintiff does not have any rights under the SSA to bring a proceeding for a debt arising pursuant to clause 5.1(a) of the SSA, and no debt is owed to the plaintiff pursuant to clause 5.1(a) of the SSA, as any such rights and debt were assigned absolutely to Standard Builders and have vested in ASIC and notice of the assignment has been given to the first defendant for the purposes of s.199 PL Act;

(h) further, in the premises, the plaintiff had no standing to commence a claim for a debt owed pursuant to clause 5.1(a) of the SSA or, in the alternative, had no standing to continue such a claim after 1 September 2014."

[72] The relevant parts of the reply deny that the terms of the Security Agreement, "properly construed were intended to make an absolute assignment but was [sic] to operate merely as a charge and as the provision of security." - paragraph 17(e). Further, paragraph 17(k) of the reply reads as follows:

"k. Denies that the first and fourth respondents received express notice of the assignment in the terms of s 199 of the PL Act as:

1. The letter of Lillas & Loel dated 11 February 2009 was not addressed to either the first or fourth defendants but to Standard Builders;
2. The letter of Lillas & Loel dated 11 February 2009 was marked 'Strictly Private and Confidential;
3. The First and Fourth defendants have not pleaded that they were served with the letter of 11 February 2009, who it was served by or how it came into the possession of the first and fourth defendants;
4. The letter of 11 February 2009 was not under the hand of the Plaintiff or Standard Builders;
5. As a matter of law and practice the disclosure of the Security Agreement in these proceedings could not operate as notice pursuant to the terms of the PL Act;
6. Say further that such notice could not be effective following the deregistration of Standard Builders;

[73] Section 199 of the Property Law Act 1974 (Qld) provides as follows:

(1) Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to claim such debt or thing in action, is effectual in law (subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice -

(a) the legal right to such debt or thing in action; and

(c) the power to give a good discharge for the same without the concurrence of the assignor."

[74] The trial judge determined that the Security Agreement was properly construed as a charge and not an absolute assignment within the meaning of s 199 of the Property Law Act - [30] and [31] of the judgment below. Even if there were an absolute assignment, the trial judge was of the view that no notice, as required by s 199(1) of the Property Law Act, had been given - [42] of the judgment below. Both these determinations were contested on appeal. As well, a third point was raised: if the Security Agreement did not effect a legal assignment because it failed to comply with s 199(1) of the Property Law Act, it nonetheless effected an equitable assignment so that, it was argued, the plaintiff could not sue without joining the assignee. This third point was not raised below, nor was it raised in the notice of appeal nor the written outlines of argument on appeal. It was raised for the first time in argument on appeal. Standard Builders, the assignee, was deregistered on 16 January 2011, and its assets are owned by ASIC.

Effect of Security Agreement to Create a Charge Only

[75] There was no dispute as to the applicable law. The trial judge outlined it this way:

"[12] The meaning of 'absolute assignment' in this context was discussed by Barrett JA (with whom Beazley P and Meagher JA agreed) in Austino Wentworthville Pty Ltd v Metroland Australia Ltd. Barrett JA there discussed several judgments, including the observation of Mason J in Clyne v Deputy Commissioner of Taxation (Cth) that an 'absolute assignment' in this context 'signifies one which is unconditional' embracing 'an assignment notwithstanding that the document effecting the assignment provides or implies the need for re-assignment or reconveyance on the happening of a future event, e.g. the repayment of a loan for which the assignment is being held as a security'. Mason J there noted that in Durham Bros v Robertson, Chitty LJ had said that an unconditional assignment of a debt by way of mortgage to secure repayment of a loan would be an absolute assignment, although it was subject to an equity of redemption.

[13] Barrett JA summarised the relevant principles emerging from the cases as follows:

'(1) An "absolute" assignment is one that is unconditional and does not attempt to affect part only of the chose in action.

(2) The fact that an assignment otherwise absolute is accompanied by an express proviso for redemption, an implied right of redemption or the creation of a trust in respect of future proceeds does not deprive it of its absolute character.

(3) An assignment by way of charge is one the effect of which is to give a right of payment out of the subject matter assigned without outright transfer of that subject matter. Such an assignment occurs when, for example, there is a transfer of a right to be paid out of a particular fund or of so much of a debt as is sufficient to satisfy a future indebtedness.

(4) The character of the assignment must be ascertained from the terms and effect of the instrument, according to the construction of it as a whole.'" (footnotes omitted).

[76] The only dispute was as to the construction of the Security Agreement. It contained provisions which were rightly described as conceptually confused on the hearing of the appeal. I agree with the conclusion of the primary judge that parts of it were irreconcilable with other parts.[60] There are some parts of the document which are consistent only with it being a charge, and some which are consistent only with it being a transfer. There is no available construction which gives a harmonious effect to each and every part of the document. I agree with the approach of the primary judge, which was to construe the document as a whole. When this is done, I think the preponderance of indicators show that the document is a charge.

[77] The clauses which most favoured the appellants were clauses 2.1 and 2.2:

The Chargor transfers, mortgages and assigns by way of security to the Chargee the Secured Assets to be held by the Chargee absolutely, but subject to the provisions for redemption contained in clause 2.2.

If the Chargor pays or causes to be paid to the Chargee the Secured Money and if the Chargor otherwise performs and observes the covenants, conditions and agreements on its part contained in this document and the Transaction Documents then the Chargee shall at the request and cost of the Chargor execute a release of the Secured Assets from this document and where applicable re-deliver to the Chargor any share or unit certificates and the transfers thereof delivered pursuant to this document or if the Secured Assets have been transferred and registered in the name of the Chargee, the Chargee shall execute and deliver a re-transfer to the Chargor as the Chargor shall direct."

In particular the verbs in cl 2.1 - "transfers" and "assigns"; the words "absolutely" and "redemption", and the provisions which contemplate transfer and provide for re-transfer at cl 2.2, support the idea that the document effects an absolute assignment within the meaning of s 199(1). I note the provisions of cl 2.2 are not unambiguous, they contain a provision for the assets to be "released from the charge", and stand in contrast to the clear provisions for re-assignment in the other documents which formed part of this transaction - see [87] below.

[78] I accept that cl 2.5 also provides support for the appellants' argument. It provides:

"Until such time as the assignment referred to in clause 2.1 is perfected the Chargor hereby charges the Secured Assets to the Chargee for payment of the Secured Money. ..."

Were the document only a charge, this sentence would be unnecessary. Moreover, it is an indication that the overall effect of the document is an assignment, not a charge.

[79] The two clauses between 2.2 and 2.5 in the agreement are inconsistent with an absolute assignment. They are:

The Chargor shall deposit with the charge any share of [sic] unit certificates relating to the Secured Assets and the Chargee shall be entitled to retain possession of those certificates until all Secured Money has been paid or repaid.

Until the occurrence of an Event of Default all dividends, distributions and other moneys in respect of the Secured Assets shall be received by the Chargor and the Chargee shall not exercise any voting power in respect of the Secured Assets at any meeting but upon the occurrence of an Event of Default the provisions of this clause shall cease to have further effect and, at the option of the Chargee, all dividends and other moneys payable in respect of the Secured Assets will be receivable by the Chargee and all voting rights associated with the Secured Assets shall be enjoyed and be exercisable by the Chargee alone without any interference by the Chargor."

[80] As to cl 2.4, it was argued by the appellants that the provisions entitling the chargor to dividends and voting rights were necessary because the document otherwise effected an absolute assignment and deprived the chargor of these rights. That is, it was argued that the clause supported the idea that the document effected an absolute assignment. Construing the document as a whole, however, there are numerous clauses which give the chargee rights upon the occurrence of an event of default - see below. These are rights which would not need to be separately given if the document operated as an assignment. Viewed together, this collection of clauses giving rights on an event of default shows that what was intended by the parties was something akin to a floating charge, with the chargee obtaining rights to deal with the secured assets only on default. This construction fits with the definition of secured assets, which includes assets owned by the chargor from time to time, and present and future rights and interests of the chargor, in or arising under various agreements.

[81] The chargor's covenant given at cl 3(c) is inconsistent with the idea that the Security Agreement created an absolute assignment:

During the continuance of this security (and where appropriate from time to time) the Chargor must comply with the following provisions.

Not sell, assign, let, part with possession, mortgage, charge, encumber, or otherwise dispose of or deal with the Secured Assets despite any power implied by statute or otherwise without the Chargee's prior written consent. Unless an Event of Default occurs, the Chargor may retain possession of the Secured Assets and may use, operate, maintain, and control the Secured Assets in the ordinary course of its business.

If the Security Agreement operated as an absolute assignment, the prohibition on dealing with property rights in the secured assets would not be necessary; the chargor would have no property rights. This covenant is one of the clauses in the documents which show that, at least, unless an event of default occurs, the security interest is to operate only as a charge.

[82] Both the appellants and respondents relied upon the covenant at cl 3(f):

The Chargor shall, if required to do so by the Chargee, at the Chargor's own cost, execute and do all such assurances, transfers or acts for effectually vesting the Secured Assets in the Chargee and, upon the occurrence of an Event of Default, for enabling the Chargee to receive any sums of money which become due or receivable in respect of the Secured Assets. Without limiting or foregoing the Chargor shall promptly notify the Chargee in writing if the Chargor becomes entitled to any Benefits in relation to the Secured Assets and the Chargee may in its absolute discretion (without being obliged to do so) accept the transfer or allotment of any Benefits and make or pay all calls or other moneys as is payable in respect thereof (which money will immediately form part of the Secured Money) and if required by the Chargee, the Chargor shall cause any such Benefits to be transferred, received, paid or allotted to the Chargee.

[83] The appellants relied upon the first part of the clause to show that it had a right to have the secured assets vested in it without more. The respondents relied upon the second part of the clause to show that it was not until an event of default that the chargee was entitled to receive the income (or capital) from the secured assets. In my view the covenant is contradictory, yielding support for both the appellants and the respondents.

[84] Clause 10.19 provides that the chargee has priority over any subsequent security. Again, the chargor would not have the right to create any subsequent security if the Security Agreement acted as a transfer. Another sentence in cl 10.19 reinforces the notion that what is created by the Security Agreement is a floating charge: "This document operates as a continuing security even though at any time the Chargor's account with the Chargee is in credit."

[85] Lastly, cl 10.23 provides that a purchaser [from the chargee] need not enquire as to whether or not default had been made by the chargor prior to any appointment of a receiver or the sale [by the chargee]. Again, rights of the chargee are expressed to be contingent on default, rather than as a consequence of an absolute assignment.

[86] I agree with the conclusion of the primary judge that it is legitimate to look at the other documents executed on 23 November 2007 in construing the Security Agreement, for they were all part of the same transaction.[61] In my view, these documents support the construction of the Security Agreement as a charge only. In particular, the provisions of the Security Agreement stand in contrast with the clear provisions for assignment in the Deed of Assignment and Bill of Sale, both dated 23 November 2007.

[87] The relevant clauses from the Deed of Assignment are:

The Assignor assigns to the Assignee that part of the Assignor's right title and interest under the Share Sale Agreement to receive the balance share price payable under clause 5.1(b) thereof which is sufficient and necessary to discharge the Assignor's obligations under the Loan Agreement.

(h) Further assurances: the Assignor must do all acts and things, including without limitation the execution of all such documents, as may be reasonably required by the Assignee to give effect to the assignment contemplated by this Deed.

(j) No contrary direction: the Assignor will not, without the prior written consent of the Assignee, direct Mango to make payment of the balance share price payable under clause 5.1(b) of the Share Sale Agreement to itself or its nominee without first discharging the creditors entitled by rights of assignment including the Assignee and will first complete all of the obligations of the Assignor under the Loan Agreement.

The Assignee covenants with the Assignor to re-assign to the Assignor the interests assigned hereunder upon completion of all of the obligations of the parties under the Loan Agreement."[62]

[88] It is not just the language of the Deed of Assignment and the Bill of Sale which contrasts with that of the Security Agreement. The Security Agreement purports to deal with all monies payable under the Share Sale Agreement, i.e., monies payable under cl 5.1(a) and cl 5.1(b). If the Security Agreement was to operate as an assignment there would have been no need for a separate Deed of Assignment in relation to monies due under cl 5.1(b) of the Share Sale Agreement, or for the Bill of Sale.

Notice Required by Section 199(1) of the Property Law Act

[89] Having regard to my conclusion about assignment, there is no necessity to consider whether notice was given. However, I will make these obiter observations.

[90] There was no formal notice given of any assignment pursuant to the Security Agreement. Mango Boulevard relies upon three communications, or a combination of them, to prove notice.

[91] The first of these communications is information that came its way informally and coincidentally. A director of Standard Builders was negotiating with a Mr Lancini about an entirely separate project. In the course of general conversation he gave Mr Lancini the impression that he would very much like to be rid of the legal disputation concerning the Mango Hill development. Apparently as a favour to a friend, Mr Lancini let a director of Mango Boulevard (Mr Thomson) know this on 9 February 2009. Two days later Mr Lancini received an email from the director of Standard Builders. The evidence did not explain how this came about. The email attached a short, and informal, letter of advice to Standard Builders from its lawyers, concerning the Mango Hill development. Mr Lancini forwarded the email to Mr Thomson. There was no evidence explaining why he did this.

[92] The letter from Standard Builders' lawyers to Standard Builders discussed the dispute over payment for the shares under the Share Sale Agreement and said:

"By virtue of the suite of documents signed by Mio Art Pty Ltd in November 2007 in your favour to secure the advance that you have made to it of in the vicinity of $1M Mio Art's rights under the Share Sale Agreement outlined above have both been assigned to and mortgaged in favour of you."

[93] The letter is expressed to be a letter of advice. It is marked, "Strictly Private and Confidential" and was sent by an email which contained qualifications that the email and any attachments were confidential and for the use only of the intended recipient (i.e., Standard Builders). Further, qualifications on the email advised any unintended recipient not to read, copy, print, re-transmit, store, or act in reliance on the communication. If the reader was not the intended recipient, then any use or dissemination of the email was prohibited.

[94] The primary judge cited the following passage which emphasises the purpose of the requirement of express notice in s 199(1):

"[38] The authorities emphasise the requirement that the notice of the assignment be an express notice. In Consolidated Trust Co Ltd v Naylor, Dixon and Evatt JJ said:

'The object of the requirement made by the words "of which express notice in writing shall have been given" is, we think, correctly stated in Warren's Choses in Action (1899), at pp. 177, 178. "The term 'express notice' is doubtless employed by way of opposition to notice arising by implication or operation of law, and to what was known in equity as constructive notice. It means a notice which indicates an express intention - a direct and definite statement of a thing, as distinguished from supplying materials from which the existence of such a thing may be inferred." The purpose is to make essential actual notice that the debt has been assigned. "One of the objects of the giving of notice to the debtor is that he shall 'know with certainty' in whom the legal right to sue him is vested" (McIntosh v Shashoua [1931] HCA 56; (1931) 46 CLR 494 at p 515, per Evatt J).'" - footnotes omitted.

[95] The primary judge concluded that in the circumstances the email communication to Mr Thomson of Mango Boulevard was not "an unambiguous and reliable communication to the debtor to the effect that only a payment to Standard Builders would constitute a payment or part payment of the debt." - [37] of the judgment below and, to the same effect, that "it could not be said that the email to him, containing those other emails and the attachment, served the purpose of the defendants 'knowing with certainty' in whom the legal right to sue them was vested." - [40]. Referring to the language from Naylor's case, the primary judge concluded that the communication relied upon as notice was not "a direct and definite statement" of the fact of the assignment - [41].

[96] James Talcott Ltd v John Lewis & Co Ltd and North American Dress Co Ltd[63] dealt with the clarity of the notice required by an equivalent to s 199(1). MacKinnon LJ cited Macnaghten J:

"The language is immaterial if the meaning is plain. All that is necessary is that the debtor should be given to understand to that the debt has been made over by the creditor to some third person. If the debtor ignores such a notice, he does so at his peril."[64]

"It may be that the section is not complied with unless the notice further proceeds to bring to the notice of the debtor with reasonable certainty the fact that the deed does assign the debt due from the debtor so as to bind the debt in his hands and prevent him from paying the debt to the original creditor."[65]

He himself said, "plainness of meaning is necessary in order that the debtor who has received a notice to pay a third party shall be rendered liable to pay the money over again if he disregards the notice." - p 559.

[97] In that case MacKinnon LJ had regard to the fact that the notice relied upon was not sent by the assignee. He indicated this was not a major part of his thinking, but had it been sent by the assignee, "the mere fact that it emanated from them would go some little way to indicate that they were doing so pursuant to a right of theirs." - p 595.

[98] In Talcott, the majority of the Court of Appeal took the view that the words of the written notice were not sufficiently clear to amount to notice of an assignment of debt. du Parcq LJ said:

"I am far from saying that it is clear from this notice that there has not been an assignment of the debt. It may be that a businessman might have suspicions about it in his mind. How far he has suspicions may depend very much on his knowledge of the parties concerned. However, I do find it impossible to say ... that this is a plain and unambiguous notice that there has been an assignment of the debt." - pp 599-600.

[99] Both the debtor and assignee of a debt have obvious interests in there being given an effective notice of the assignment which makes it clear whom the debtor is to pay. The passage from Naylor (above) emphasised the interest of the debtor. In Walter & Sullivan Ltd v J Murphy & Sons Ltd[66] Parker LJ remarked that, "the whole object of the notice to the debtor is to protect the assignee". Both the debtor and assignee need to know of the assignment with sufficient certainty that they are confident to pay the debt or give a discharge. This need for commercial certainty is the measure by which the Court must judge whether express notice has been given in any particular case. A similar need for certainty was central to the judgment of Lord Cairns in Lloyd v Banks.[67] That was a case dealing with notice in equity, but I think it well expresses the need for the person propounding notice to show information so reliable that a business person would act upon it. The following passage from Lloyd v Banks is similar to the principles discussed in Naylor and Talcott:

"It must depend upon the facts of the case; but I am quite prepared to say that I think the Court would expect to find that those who alleged that the trustee had knowledge of the incumbrance had made it out, not by any evidence of casual conversations, much less by any proof of what would only be constructive notice - but by proof that the mind of the trustee has in some way been brought to an intelligent apprehension of the nature of the incumbrance which has come upon the property, so that a reasonable man, or an ordinary man of business, would act upon the information and would regulate his conduct by it in the execution of the trust. If it can be shewn that in any way the trustee has got knowledge of that kind - knowledge which would operate upon the mind of any rational man, or man of business, and make him act with reference to the knowledge he has so acquired - then I think the end is attained, and that there has been fixed upon the conscience of the trustee, and through that upon the trust fund, a security against its being parted with in any way that would be inconsistent with the incumbrance which has been created."[68]

[100] In this case the information which Mr Thomson received in the email from Mr Lancini may have raised suspicions in his mind, to adapt du Parcq LJ's language from Talcott. He might have been motivated to make enquiries. However, in my view no reasonable business person would act on information which was qualified, imprecise and unverified, and which had been acquired by such indirect means. In my view, the primary judge was plainly correct about this matter: the receipt of the email by Mr Thomson did not amount to notice of assignment. In my view, another reason supporting his conclusion was that notice had not been given to Mango Boulevard - it had merely happened upon the information about assignment.

[101] Alternatively to the argument that the email just discussed constituted notice, the appellants rely upon events occurring during the litigation as constituting notice. The evidence before this Court shows that on 2 September 2014 the defendants disclosed a copy of the Security Agreement signed by both Mio Art and Standard Builders, but with a printed watermark, "terminated" across each page. On 29 September 2014 Mango Boulevard filed its sixth amended defence in the matter which contained the pleading that the Security Agreement made an absolute assignment - see [71] above. At some time which is not apparent from the documents which this Court has, Mio Art amended its reply to admit that the Security Agreement had been entered into, but to deny that it constituted an absolute assignment, and alternatively to deny that notice had been given of the assignment. Then on 29 October 2014 Mio Art provided a copy of the Security Agreement without the watermark in response to a request pursuant to r 222, requesting the document referred to in the amended reply.

[102] The appellant relied upon these matters - disclosure and pleadings - as constituting notice of the assignment. The point as to the disclosure of the Security Agreement was raised before the primary judge, but there was no reliance on the pleadings. I see no reason why it might not be raised on appeal.

[103] So far as the point regarding disclosure is concerned, Mio Art relied upon a decision of Herkules Piling Ltd & Anor v Tilbury Construction Ltd.[69] In that case, during the course of the action, the plaintiff disclosed a document said to amount to an assignment of the right to receive the sum sued for. Hirst J sitting in the Commercial Court of the Queen's Bench Division found that the document relied upon was not an assignment. Then, by way of obiter said, "The mere receipt by a debtor of a document on discovery does not meet [the criteria for express notice of an assignment under the Act]."[70] The primary judge expressed diffidence as to whether or not Hirst J had correctly stated the criteria for express notice,[71] and I think that diffidence was warranted. It appears that Hirst J was proceeding under a misapprehension that the dicta to which I have referred at [97] above meant that some kind of formal notification from either the assignee or the assignor was necessary to achieve express notice under the Act.[72]

[104] No other authority on this point was referred to the Court by either the appellants or the respondents. In my view, disclosure of a written assignment is capable of amounting to notice, if it otherwise fulfilled the requirements, for example, of reliability and certainty necessary to constitute express notice. In this case my view is that the disclosure of the Security Agreement with the watermark "terminated" upon it is too ambiguous to be direct and reliable notice of assignment.[73] My view is that the watermark "terminated" across the document raised questions as to whether it was, or ever had been, effective. Receipt of this watermarked document would not have been a safe basis to proceed upon, for either the assignee or the debtor, without enquiry. In these circumstances, I do not think that the later disclosure of a version of the Security Agreement without the watermark made the position unambiguous. It follows in my view, that disclosure alone, in this case, did not give express notice of the assignment within the meaning of s 199(1) of the Property Law Act.

[105] I turn to the question whether or not, by acknowledging in its reply that it had entered into the Security Agreement, Mio Art would have given express notice to Mango Boulevard of an assignment (had there been one by the Security Agreement).

[106] Once again there is little authority on point. Mango Boulevard relied on a decision of Brereton J in Grizonic v Suttor & Ors; Wade v Suttor.[74] In that case Ms Wade had been employed by a partnership which was dissolved. She took assignments from several other creditors of the partnership and then sued on her own behalf (in respect of her own debt) and as assignee. Ms Wade made considerable efforts to properly serve a formal notice of assignment in relation to all the debts, but there were difficulties in proving some of them. To prove her right as assignee, she relied on the formal notices given, and alternatively, on service of the pleadings in the proceeding by which she claimed the debts (09/287047), and by way of cross-claim in earlier related proceedings (03/087265). Brereton J found that was good notice for the purposes of the analogue to s 199(1). He said:

"30. I prefer the view of Scrutton LJ (contra Slesser LJ) in Williams v Atlantic Assurance Co [1932] 1 KB 81, 98, 106, to the effect that for the purposes of s 12, notice may sufficiently be given by the pleadings. This view is consistent with the rule that service of proceedings may operate to terminate a tenancy at will without prior notice to quit [Martinali v Ramuz [1953] 1 WLR 1196], or to dissolve a partnership [Smith v Smith [1925] NZGazLawRp 160; [1926] NZLR 311], and is reinforced nowadays by provisions such as (NSW) Uniform Civil Procedure Rules 2005, r 14.17 (which permits the pleading of matters arising after the commencement of proceedings) and (NSW) Civil Procedure Act 2005, s 64(3) (which permits amendment to add a cause of action arising after commencement of proceedings) - all the more so as notice of assignment is required only to perfect title of the assignee at law, Ms Wade already being entitled in equity [cf Weddell v Pearce & Major [1988] 1 Ch 26 at 42].

1. Accordingly, if my conclusion as to notice by the 2 July 2008 letter were incorrect, nonetheless notice of the assignment of the debts of Matthew Trnka, Dickenson, Ares, Extner, Charles Firns and City Meats was sufficiently given at least by Ms Wade's summons filed in proceedings 09/287047 on 2 January 2009. Further, notice of all the relevant assignments was sufficiently given by service of her cross-claim filed in proceedings 03/087265 on 5 May 2009."

[107] I would follow the decision of Brereton J. As well as the authority he cites, there is some support for his decision in Jenkins v Visualeyes Pty Ltd.[75] The case in Wade was easier than the present case, because the assignee was suing, and giving notice by her pleading in that suit. Nonetheless, there is no reason in principle why, if circumstances come to light during the course of litigation such that the debtor receives reliable notice of the assignment, that should not be effective, even if it is by way of the interlocutory processes of the litigation. In my view, had the Security Agreement constituted an assignment, its provision on disclosure, together with the admission by way of reply that Mio Art had entered into the agreement, would constitute express notice within the meaning of s 199(1) of the Property Law Act. There was no pleading in the reply that the agreement did not operate according to its terms, so that the uncertainty created by the watermark was sufficiently resolved. It is not to the point that notice occurs after litigation.[76] Nor does it matter that notice was received after Standard Builders was deregistered.[77]

[108] As noted above the appellants sought to run a point on appeal which was not raised below: if the Security Agreement did not effect a legal assignment because it failed to comply with s 199 of the Property Law Act, it nonetheless effected an equitable assignment, so that Mio Art could not sue without joining the assignee.

[109] The point does not arise given my conclusion that the Security Agreement did not constitute an assignment. Had my conclusion on this point been different, I would not have entertained this new point on appeal. I do not think it fairly arises on the pleadings in the matter. Nor was it argued below in circumstances where what was determined below was a separate question before trial. If correct, this point only goes to whether or not the assignee ought to be a party to the proceedings. That is a point better dealt with in the trial division than on appeal.

[110] I agree that the appeal should be dismissed with costs.

[1] The first page of the security agreement wrongly describes Standard Builders as "Chargor" and Mio Art as "Chargee". Nothing turns upon that mistake.

[2] Agnew v Commissioner of Inland Revenue [2001] UKPC 28; [2001] 2 AC 710 at 725.

[3] [2005] HCA 53; (2005) 224 CLR 98.

[4] [2013] NSWCA 59 at [62].

[5] Phoenix Commercial Enterprises v City of Canada Bay Council [2010] NSWCA 64 at [174] (Campbell JA); Re Metroland Australia Ltd [2013] NSWSC 98 at [17] (Brereton J), a decision upheld in Austino Wentworthville Pty Ltd v Metroland Australia Ltd [2013] NSWCA 59.

[6] Teal Investments Ltd v Higham Motors (1975) Ltd [1982] 2 NZLR 123 at 126 (Cooke J, as he then was).

[7] The primary judge cited Deposit Protection Board v Dalia [1994] 2 AC 367 at 380 - 381 (Simon Brown LJ).

[8] [2013] NSWCA 59 at [94]- [100].

[9] [2015] QSC 116 at [24].

[10] Agnew v Commissioner of Inland Revenue [2001] UKPC 28; [2001] 2 AC 710 at 729 paras 45-48.

[11] Hughes v Pump House Hotel Co [1902] KB 190 at 194 (Mathew LJ).

[12] [1984] 1 Ll LR 283 at 287-288.

[14] [1977] 1 WLR 686.

[15] Appellants' submissions in reply at para 19.

[16] Agnew v Commissioner of Inland Revenue [2001] UKPC 28; [2001] 2 AC 710 at para 7.

[17] Agnew v Commissioner of Inland Revenue [2001] UKPC 28; [2001] 2 AC 710 at 719 paras 12-13.

[18] [2015] QSC 116 at [21].

[19] Agnew v Commissioner of Inland Revenue [2001] UKPC 28; [2001] 2 AC 710 at para 7.

[20] [2012] FCA 262.

[21] [2015] QSC 116 at [29], [30].

[22] [2015] QSC 116 at [30].

[23] Electricity General Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 at [35] cited by the primary judge, [2015] QSC 116 at [31].

[24] [2015] QSC 116 at [32].

[26] [1998] UKHL 19; [1999] 1 AC 266 at 274.

[27] Thomson Reuters, 2012 at 291 [7.03].

[28] Lewinson & Hughes, The Interpretation of Contracts in Australia, at 291 [7.03].

[29] [1990] 1 EGLR 155 at 158.

[30] (1936) 55 CLR 423 at 438-439.

[32] [1907] HCA 13; (1907) 4 CLR 1049.

[33] [1906] St R Qd 317 at 318, 321.

[34] [1906] St R Qd 317 at 322.

[35] [1907] HCA 13; (1907) 4 CLR 1049 at 1060.

[36] [1907] HCA 13; (1907) 4 CLR 1049 at 1069-1070.

[37] [1907] HCA 13; (1907) 4 CLR 1049 at 1078-1079. I have added the emphasis.

[38] At p 44, under the heading "64 Form and Contents of Notice".

[39] [2015] QSC 116 at [34]- [35].

[40] [2015] QSC 116 at [37].

[41] [1904] 2 KB 530 at 538.

[42] [1904] 2 KB 530 at 538.

[45] [1969] 1 QB 607 at 613, 614, 615.

[46] [1913] 3 KB 177, 180.

[47] [1969] 1 QB 607 at 615.

[48] [2011] NSWSC 471 at 17 para 25.

[49] [2011] NSWSC 471 at 16 para 22.

[50] Consolidated Trust Co Ltd v Naylor (1936) 55 CLR 423 at 438-439.

[51] [2015] QSC 116 at [37].

[52] [2015] QSC 116 at [42].

[53] [2005] VSC 218 at para 191.

[54] [2005] VSC 218 at para 10 and 119 ("the plaintiff alleged that the deregistered company "assigned all of its right title and interest in its assets, undertakings and choses in action to her" and that she was entitled to have the relevant contract completed").

[55] [2005] VSC 218 at para 112.

[56] [1977] WLR 686 at 689-690 and 695.

[57] Third further amended reply of the plaintiff, para 17: AB 796, 797.

[58] (1890) 44 Ch D 374.

[59] The appellants cited Read v Brown (1888) 22 QBD 128 at 132; Hobbs v Rawson [1961] WAR 79 at [86]; Carob Industries Pty Ltd (in Liq) v Simto Pty Ltd [2000] WASCA 362; (2000) 23 WAR 515 at [24]- [35].

[61] I note that objection to the Court having regard to these documents was withdrawn during the hearing of the appeal.

[62] See also recital F and cll 1.1, 1.2 and 3.2 of the Bill of Sale.

[63] [1940] 3 All ER 592.

[64] Macnaghten J in Brandt's (William) Sons & Co v Dunlop Rubber Company [1905] AC 454, 462.

[65] Atkin J in Denney, Gasquet & A Metcalfe v Conklin [1913] 3 KB 177, 180.

[66] [1955] 2 QB 584, 588.

[67] (1868) LR 3 Ch App 488.

[68] (1868) LR 3 Ch App 488, 490-491.

[69] (1992) 61 BLR 111.

[72] See pp 118 and 119 of Herkules Piling.

[73] It appears that Mio Art terminated, or purported to terminate its agreement with Standard Builders, alleging default by Standard Builders in its performance of the loan transaction for which the agreement was security. In ordinary circumstances such termination would not operate to deprive Standard Builders of accrued rights, so that I am not expressing a view that Mio Art could have "undone" the effect of the Security Agreement simply by stamping it "terminated".

[74] [2011] NSWSC 471.

[75] [2005] VSC 218 and see also Labocus Precious Metals Pty Ltd v Thomas [2007] FCA 1154, [39] and Ramsey v Hartley [1977] 1 WLR 686.

[76] APT Finance Pty Ltd v Bajada [2008] WASCA 73.

[77] Re Kenneth Wright Distributors Pty Ltd (in liq) [1973] VicRp 14; [1973] VR 161, followed in Carob Industries Pty Ltd (in liq) v Simto Pty Ltd [2000] WASCA 362 and see s 601AD(2) of the Corporations Act 2001 (Cth) and Total Eden Pty Ltd v Pipeline Properties Pty Ltd (1990) 8 ACLC 1075.