Nunn v Wily

Nunn v Wily - [2001] NSWSC 317 - NSWSC 2000 case summary — Zoe

COUNSEL : P Walsh (P) W Haffenden (D) SOLICITORS : Marks Griffiths Bova & Knox (P) KNPW Lawyers (D) CATCHWORDS : MORTGAGE - construction - whether parties intended to create a mortgage - where mortgage refers to an annexures A and B, whether annexures are identified though not labelled 'A' and 'B' - effect of mortgagee deferring execution - effect of absence of registration and lack of caveat - whether security prevails over trustee in bankruptcy of mortgagors - whether court should determine interest rate where interest rate has not been fixed under mortgage CONTRACT - rectification - whether mortgagee's right to rectify prevails over mortgagors' trustee in bankruptcy EVIDENCE - parol evidence - admissibility of evidence as to nature of transaction - admissibility of evidence to identify annexures LEGISLATION CITED : Bankruptcy Act 1966 (Cth) ss 58, 120, 121 Real Property Act 1900 (NSW) ss 41, 56, 57 AGC (Advances) Ltd v West (1984) 5 NSWLR 590 Ahmed v Kendrick (1987) 56 P & CR 120 Ayerst v C & K (Construction) Ltd [1976] AC 167 Barry v Heider (1914) 19 CLR 197 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Commercial Banking Co of Sydney Ltd v George Hudson Pty Ltd (1974) 131 CLR 605 Elders Trustee and Executor Co Ltd v EG Reeves Pty Ltd (1987) 78 ALR 193 Exton v Scott (1833) 6 Sim 31 Farrugia v Official Receiver in Bankruptcy (1982) 43 ALR 700 Finance & Investments Pty Ltd v Van Kempen (1986) 6 NSWLR 305 Gurfinkel v Bentley Pty Ltd (1966) 116 CLR 38 CASES CITED : J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546 JJ Leonard Properties Pty Ltd v Leonard (WA) Pty Ltd (1988) 6 ACLC 247 Joscelyne v Nissen [1970] 2 QB 86 Manks v Whiteley [1912] 1 Ch 735, 754 (on appeal, Whiteley v Delaney [1914] AC 132) Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 Person-to-Person Financial Services Pty Ltd v Sharari [1984] 1 NSWLR 745 Re Anglo Oriental Carpet Manufacturing Co [1903] 1Ch 914 Re Ashpurton Estates Ltd [1983] Ch 110 Smith v Chadwick (1880) 20 ChD 27 State Rail Authority of NSW v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170 Vector Capital Ltd v SNS Software Network Systems Pty Ltd (1988) 12 NSWLR 1 Westland Savings Bank v Hancock [1987] 2 NZLR 21 Williams & Glyn's Bank Ltd v Boland [1981] AC 487 DECISION : Declaration that Mortgage secures all four advances, and costs of proceedings, excluding interest

[7]

The proceedings 1 These proceedings relate to the validity and effect of a document expressed to be a mortgage between the plaintiff, Mrs Nunn, as mortgagee, and her son and daughter-in-law, David and Geraldine Ewins, as mortgagors, over a property at 15 Kennedy Place Bayview Heights, bearing the date 20 January 1997. I shall refer to this document for convenience as 'the Mortgage', but I do not thereby intend to pre-judge the effect of the document in law. The defendant, Mr Wily, is the trustee in bankruptcy of the estates of Mr and Mrs Ewins. 2 This is one of those cases, sadly quite common, where a parent is persuaded by her child to provide security for the child's borrowings. The child's financial failure brings down the parent as well. Here, there is a novel twist because, after losing her home, Mrs Nunn entered into an arrangement with Mr and Mrs Ewins, evidenced by the Mortgage and the loan agreement, which she now relies upon to give her priority over their unsecured creditors for loans she claims to have made to them. 3 The proceedings began by summons filed on 31 July 1998. Mrs Nunn initially sought only an order that the operation of her caveat against dealings in the Bayview Heights property, based on the Mortgage, be extended until further order of the Court. Subsequently Mrs Nunn filed an amended summons seeking declarations and rectification. Eventually, after the hearing had begun, she filed a further amended summons, by leave, in which she sought (inter alia): · a declaration that she has an interest in the Bayview Heights property created by the Mortgage; and · an order rectifying the Mortgage by inserting a provision having the effect that the Mortgage secured money advanced by Mrs Nunn pursuant to a loan agreement between her and Mr and Mrs Ewins dated 20 January 1997; · a declaration that the Mortgage secures repayment to Mrs Nunn of four specified advances, or some one or more of those specified advances as the Court may determine, together with interest on the secured advances, and an order that Mr Wily pay the secured advances and the interest to Mrs Nunn. 4 Unfortunately, the case did not proceed by pleadings. This is a case where pleadings would have been of real assistance in defining the issues and sharpening the submissions of the parties. However, Mrs Nunn's solicitor provided a letter dated 26 October 1998 which purported to set out the basis of her claim, and this provided some limited guidance. 5 The Bayview Heights property was sold after the commencement of the proceedings. Mrs Nunn's caveat was permitted to lapse when, on 5 August 1998, Mr Wily gave an undertaking noted by the Court to pay $150,904 upon settlement of the sale, to be held in a solicitor's controlled moneys account pending agreement between the parties or an order of the Court. I was informed from the bar table that the amount actually paid into Court and now awaiting my decision is $110,860.93. This case is about the destination of that money. Mrs Nunn says that because the Mortgage gave her an interest in the Bayview Heights property, or because it would do so after rectification, she is entitled to the money in priority to the unsecured creditors of her son and daughter-in-law. Mr Wily says that the Mortgage did not give Mrs Nunn an interest in the Bayview Heights property, and there is no case for rectifying it so as to extend the security to that property. Mr Wily further contends that even if she obtained an equitable interest under the Mortgage it would have no priority over the interest held by the trustee in bankruptcy for the benefit of creditors generally, and consequently the money should be made available to the unsecured creditors of Mr and Mrs Ewins. 6 The main question in these proceedings is whether the Mortgage, as a matter of construction of its express or implied terms or by means of rectification, provides Mrs Nunn with an equitable interest as mortgagee giving her security over the Bayview Heights property for the loans she has made. Mr Wily has not sought to challenge the Mortgage as a voidable transaction under s 121 of the Bankruptcy Act 1966 (Cth) or otherwise, although he purports to reserve his right to do so when the outcome of the present proceedings is known. He has, however, raised the contention that he has priority over Mrs Nunn's interest (if any) because of her postponing conduct. There being no cross-claim, it appears that the latter argument is advanced in order to defeat Mrs Nunn's claim to rectification, and to deny her any declaration that would expressly or impliedly recognise that she has an interest having priority over the interest of the trustee in bankruptcy.

[9]

Observations as to credit 9 Oral evidence was given by Mrs Nunn, Mr and Mrs Ewins, and Mrs Nunn's solicitor, Ms Bova. Counsel for Mr Wily contended that Mrs Nunn and Mr and Mrs Ewins were unreliable witnesses whose evidence should not be believed. Although I have found some aspects of their evidence unsatisfactory, in ways that I shall indicate, I do not regard them as unreliable witnesses generally, and I am prepared to accept most of their evidence on its face. This is in a context in which Mr Wily did not adduce evidence challenging the evidence given by plaintiff's witnesses comprehensively, relying instead on documentary evidence and an affidavit by Mr John Hooper which was limited to some specific questions. 10 As to Mrs Nunn's evidence, counsel for Mr Wily submitted that she relied on her difficulties of recollection selectively. However, observing her in the witness box, I was satisfied, on balance, that she was endeavouring to tell the truth and to recollect matters put to her in cross-examination. She is an elderly woman whose memory has genuinely been weakened by Meniere's disease and her heart condition and consequent medication, as well as the stress of losing her home and seeing her son become bankrupt and have his home sold, notwithstanding the assistance she had given him. 11 This overall assessment is an answer to the numerous specific attacks on her evidence in the defendant's written submissions. For example, these considerations are sufficient, in my view, to explain her inability to recall seeing the ANZ Bank letter of 22 September 1993, and her difficulty in recalling Mr Kerridge's memorandum of fees of 29 January 1997, until various entries in the narrative account in that document were put to her. It is unnecessary to go through each of the defendant's criticisms, because my answer to each criticism is essentially the same. However, later in these reasons for judgment I shall make findings that events occurred which Mrs Nunn has been unable to recollect - for example, I find that she had one or more discussions with her son before she instructed Ms Bova to lodge a caveat against the title to the Bayview Heights property, although her evidence is that she cannot recollect any such discussion. 12 I have no difficulty accepting the factual evidence given by Mr Ewins. The evidence he gave about his purpose and intentions, and his understanding of the mortgage arrangements, and the caveat and the possession proceedings, was obviously self-serving, but nevertheless I found it generally plausible. My only general reservation is that his drafting of his mother's letter of instructions dated 18 December 1996 showed that he had an understanding of legal/commercial transactions which was rather better than the level of understanding of the lodgment of a caveat, the concept of registration and the nature of the possession proceedings conveyed by his oral evidence. My opinion, however, is that he engaged in a limited degree of understatement of his understanding in response to the cross-examiner's questions, rather than that he deliberately set out to mislead. 13 Thus, his evidence that he did not know 'the details' of the proceedings against his mother by the ANZ Bank for possession of the Wheeler Heights property, and that he did not 'specifically' understand the concept of possession, may be literally true, if 'the details' and a 'specific' understanding are taken to require sophisticated legal knowledge, but in my opinion he understood very well the commercial and practical significance of a possession order. Similarly, his evidence that he did not fully understand the concept and effect of registration of the Mortgage would be correct if it referred to a legal understanding, but in my opinion it would not be correct if it referred to a practical understanding of the effect of registration. I do not regard matters such as this as undermining his overall credibility. 14 However, there was one instance where I thought his evidence was unreliable. He denied that he had told his mother to lodge a caveat against the title to the Bayview Heights property, and claimed that he had not even discussed with her the question of lodging a caveat until after she had done so. I have been unable to reach a conclusion, on the evidence, as to whether he initiated lodgement of the caveat, but I find that he discussed the subject with her before she instructed Ms Bova on 29 April 1998. 15 I found Mrs Ewins to be a less satisfactory witness than Mrs Nunn or Mr Ewins. Her reliance upon a bad memory was less convincing than her mother-in-law's, since there was no equivalent medical or other explanation for the bad memory and it seemed to occur at convenient times in cross-examination. I formed the impression that she was 'holding back' in her oral evidence. At one stage she said, 'I know we had a caveat put on the house to try and salvage', and then she stopped, apparently believing that she had said the wrong thing, and then she endeavoured to qualify the effect of that evidence. As I shall explain, I have reached the view that her evidence on that point is not damaging in its overall context. I do not regard her evidence as totally unreliable, but it was not convincing. Generally, its significance is no more than that it corroborates the evidence of Mrs Nunn and Mr Ewins. 16 In one respect, however, Mrs Ewins' evidence is important. It establishes, to my mind, that she was aware of her husband's actions with respect to the Mortgage transaction and his borrowings from his mother, and that she consented to the granting of a security over her interest in the Bayview Heights property to secure those borrowings. There is a suggestion in the submissions of counsel for Mr Wily that Mrs Ewins may not have properly signed the documents on 24 January 1997, but I see no reason for doubting that she did so.

[10]

The Moorlife businesses, and guarantees of Moorlife debts 17 The circumstances which led to the Mortgage and loan agreement have quite a long history. Mr Ewins and Mrs Nunn acquired a shelf company in 1985 and changed its name to Moorlife Australia Pty Ltd in December 1985. Initially two shares were allotted, one each to Mr Ewins and Mrs Nunn, both of whom were appointed directors. 18 Mrs Nunn was only involved for a brief time as a director and shareholder. Shortly after the company was acquired, Mr Ewins entered into a 'partnership' with Mr Starr Prendergast, in the sense that they commenced to carry on a business through the company. Thereafter Mrs Nunn had no shareholding interest in that company, and was not an officer or employee of it. 19 The business was the supply of skincare products under the 'Moorlife' brand to pharmacies and other retail outlets. The business and some stock were purchased by the company from their previous owner. The company was a wholesaler, acquiring products from Europe, selling them through agents in Queensland and New South Wales, and despatching the product from Sydney to meet orders. 20 The business was financed by borrowings from the ANZ Bank. In 1985 Mr Ewins and Mr Prendergast approached the ANZ Bank, which agreed to provide a loan facility to the company if the loan was supported by adequate personal guarantees and security. 21 After exploring other avenues, Mr Ewins approached his mother for assistance. Mrs Nunn was the registered proprietor of a property at 246 South Creek Road, Wheeler Heights, which had been the home where she had lived with her first husband before they separated. The property was subject to an existing mortgage to the ANZ Bank. She agreed to provide a guarantee, supported by the existing mortgage, after being told by Mr Ewins that the borrowing by the company would be no more than $25,000. Her evidence is that she believed her liability was limited to that amount, but it is unnecessary for me to decide whether that was so, and I decline to do so. 22 On 5 November 1985, Mr Ewins and Mr Prendergast executed an unsecured guarantee in respect of debts owed by Moorlife Australia to the ANZ Bank. On 25 March 1986, Mrs Nunn executed a guarantee in similar terms, unlimited as to amount and secured over the Wheeler Heights property. 23 The business of Moorlife Australia operated for only about two years. Mr Ewins gave evidence that the selling agents were not able to live up to their own sales projections. Mr Prendergast dropped out of the business and Mr Ewins acquired another shelf company, which was re-named Moorlife International Pty Ltd. The business of the new company has been to sell skincare products with an emphasis on herbal products, principally by export, the main country of export being New Zealand. Mr Ewins purchased the remaining stock of the business of Moorlife Australia and made it available to the new company. The business of the new company has continued to operate until the hearing, notwithstanding the intervening bankruptcy of Mr Ewins. 24 Mr Ewins and Mrs Nunn were appointed directors of Moorlife International on 26 February 1988. Mr Ewins was a director until after his bankruptcy, and Mrs Nunn has been a director and the secretary at all relevant times. Initially ten shares were issued, Mr Ewins holding nine and Mrs Nunn holding one share. There is some evidence before me to indicate that on 5 May 1989 Mr Ewins sold eight shares to Mrs Nunn, and an additional forty shares were allotted to Mrs Nunn on 2 February 1992, so that at all relevant times thereafter Mrs Nunn has held forty nine shares and Mr Ewins has held one share. 25 The evidence about share ownership consists of Mr Ewins' oral evidence at the hearing, a statutory declaration of Mr Ewins and Mrs Nunn dated 7 November 1997, a copy of a letter dated 12 November 1997 from an accountant on behalf of the company to the Australian Securities and Investments Commission and a letter from the same accountant to the Office of State Revenue dated 19 December 1997, and the company's 1997 annual return and other notifications to the Commission signed by Mr Ewins and dated 19 September 1997. That evidence is inconsistent with the annual returns of the company up until 1997, and most of it came into existence in the months just before Mr Ewins became bankrupt. If the evidence is true, it places control of Moorlife International and its business beyond the reach of Mr Ewins' trustee in bankruptcy, Mr Wily. 26 Counsel for Mr Wily has attacked this evidence, inviting me to disbelieve it and to conclude that Mr Ewins was an unreliable witness. Counsel pointed out that Mr Ewins signed various company returns prior to 1997 which showed him as the majority shareholder. In his oral evidence Mr Ewins said that the shareholding information in these returns was included through an accountant's mistake. Counsel drew attention to the fact that the alleged meeting of directors which is said to have allotted forty shares to Mrs Nunn occurred, conveniently, just over five years prior to Mr Ewins' bankruptcy, and therefore beyond the scope of s 120 of the Bankruptcy Act. Counsel contends that a claim in the statutory declaration of Mr Ewins and Mrs Nunn, that it was resolved on 2 February 1992 (presumably at a meeting of the shareholders) that the memorandum and articles of association of Moorlife International be amended to provide that if any shareholder was to die or become bankrupt his or her shares in the company would be forfeited to the remaining shareholders, was implausible and not supported by other records. 27 I agree with counsel for Mr Wily that these are all matters that give the evidence about share ownership an air of implausibility. On the other hand, that evidence was consistently supported by the oral evidence of Mr and Mrs Ewins and Mrs Nunn, and (apart from the previous annual returns) no evidence was adduced to contradict it. The accountant was not called to give evidence. I am not satisfied that the suspicious aspects of the evidence entitle me to disbelieve it, or to draw adverse conclusions about Mr Ewins' reliability as a witness. It is unnecessary for me to make any firm finding as to the ownership of the shares of Moorlife International for any other purpose, and in the circumstances I decline to do so. 28 Initially Moorlife International conducted its banking with a branch of the Westpac Bank in Queensland. In 1990 Mr Ewins decided that the company should open a Westpac account in Sydney. The Bank required directors' guarantees. Mrs Nunn was concerned about giving a guarantee to Westpac Bank, because Moorlife Australia owed a substantial amount of money to the ANZ Bank, for which she had given a guarantee. Mr Ewins reassured her by saying that the guarantees were just like account application opening forms, and it was a formality that each director had to sign the forms at the Bank. He said to her, 'I won't to allow the bank to take out any borrowing against any of your property'. Mr Ewins and Mrs Nunn executed separate guarantees to support debts incurred by Moorlife International to Westpac Bank, unlimited as to amount, on 12 October 1990. Subsequently, Westpac took mortgage security to support Mr Ewins' guarantee over the property of Mr and Mrs Ewins at Bayview Heights, but it did not take security over the Wheeler Heights property owned by Mrs Nunn. 29 Although Mrs Nunn was a director and the secretary of the company, and she lent it $30,000 and gave a guarantee, the business of the company was managed by Mr Ewins until his bankruptcy. Mrs Nunn and Mrs Ewins assisted him, principally by packing and despatching purchase orders. Mr Ewins gave evidence that he consulted her from time to time, but I infer that the consultation was insubstantial. According to his evidence, when he was overseas in New Zealand or elsewhere, Mrs Nunn had the day-to-day management of business. But I infer that this did not involve her in significant business decisions, and was principally the continuation of packing and despatching products in accordance with purchase orders. I make these inferences on the basis of the evidence of Mr and Mrs Ewins and Mrs Nunn, and my observation of Mrs Nunn as a witness. She was very vague and unclear on business matters, and had been seriously ill from time to time since 1994, when she contracted Meniere's disease and developed a heart condition. 30 Mrs Nunn received no financial benefit from her position as a company officer or shareholder, or from her work for the company, except for occasional payments of no more than $100 per week, made after she became ill in 1994.

[11]

Proceedings by ANZ Bank for recovery 31 When the business of Moorlife Australia came to an end, there was a substantial debt to the ANZ Bank. Notwithstanding that debt, the company was deregistered and dissolved on 13 April 1992. Perhaps discovery of this fact, coupled by the failure of the guarantors to discharge the debt, caused the Bank to write its letter of 22 September 1993. 32 That letter was addressed to Mr Ewins as secretary of Moorlife Australia, and was copied to Mrs Nunn. The purpose of the letter was said to be to confirm the Bank's attitude to the conduct of lending facilities held with the Bank, and to re-affirm the Bank's intentions should its requirements not be met. The letter demanded payment of arrears in the sum of $8,050. The Bank noted that Moorlife Australia had been deregistered, and that the new operating company was Moorlife International, but that strike-off action was in progress against that company, and it required the position to be rectified by 30 September 1993. The letter said that the 'only tangible asset' securing the loan facilities was an unlimited mortgage over the Wheeler Heights property supporting a guarantee of the debt given by Mrs Nunn. The letter warned that the Bank would move to obtain possession of and execute its power of sale over the Wheeler Heights property unless the default was remedied by 1 October 1993. 33 Although the Bank's letter referred to Mrs Nunn's mortgage and guarantee as the 'only tangible asset' supporting the debt, it appears that Mr Ewins and Mrs Nunn believed the Bank could have recourse to his interest in the Bayview Heights property, by virtue of his guarantee. In fact Mr Ewins' guarantee of debts of Moorlife Australia to the ANZ Bank was not secured over the Bayview Heights property, although Westpac Bank had security over that property in respect of the debts of Moorlife International. 34 After the Bank's letter of 22 September 1993, there were discussions involving the Bank's representatives, Mr Ewins and Mrs Nunn, as a result of which the Bank wrote to Mr Ewins on 12 October 1993, confirming that action to take possession of Mrs Nunn's property would be suspended subject to the fulfilment of certain conditions, including payment of regular monthly instalments to reduce the debt. Nothing was said in the letter of 12 October 1993 about the deregistration of Moorlife Australia. In May 1994 the ANZ borrowings were restructured when the existing overdraft was paid out and a new facility at $45,300 was fully drawn down. It is not clear whether the restructuring took into account the fact that Moorlife Australia had been deregistered, but a Bank letter to Mrs Nunn dated 6 May 1994 seems to have assumed that the company was still in existence. 35 By mid-1996 the Bank was again pursuing Mr Ewins for payment of arrears. By that time the debt stood at over $48,000. The registration of Moorlife Australia was restored, on the application of the ANZ Bank, by court order made on 29 May 1996, to facilitate the Bank's enforcement of its security. Mrs Nunn and her son discussed their financial predicament. Mrs Nunn understood that the only way to pay the ANZ Bank would be by selling her house at Wheeler Heights, or her son and daughter-in-law's house at Bayview Heights. Mrs Nunn decided to sell her home at Wheeler Heights and to provide her son with sufficient money from the proceeds of sale to pay out the ANZ debt. She told her son that the house had become too big for her to manage, and it was therefore better to sell her house than the house where he lived with his family. She calculated that she would have enough money left over to pay for a home unit or to move into a retirement village. During discussions on the subject, her son said to her, 'If you lend me the money I will give you a mortgage over my house so your money will be secure'. Mr Ewins gave evidence that he made this promise following discussions with his father. 36 Counsel for Mr Wily contended that no arrangements for a mortgage were made as early as mid-1996. He submitted that the evidence by Mr Ewins to this effect was an attempt to try to locate the commencement of the Mortgage agreement at a point in time before any relevant relation-back period in his bankruptcy. However, I find the evidence by Mr Ewins and Mrs Nunn on this point to be plausible. It is clear that the ANZ Bank had become active and was applying strong pressure by 1996. It served a notice on Mrs Nunn under s 57(2)(b) of the Real Property Act 1900 (NSW) on 26 June 1996. It is likely that discussions for the sale of the Wheeler Heights property and for the protection of Mrs Nunn by a mortgage would have taken place about the time of service of the notice, if not earlier. This finding is not inconsistent with the fact that Ms Bova was not instructed to prepare the Mortgage until December 1996. 37 Arrangements to sell the Wheeler Heights property were made with the ANZ Bank. On 2 August 1996 the Bank wrote to Mr Ewins, evidently for the purpose of confirming the arrangements. The letter advised Mr Ewins that the action to take possession of the Wheeler Heights property would be brought to judgment, but once judgment was obtained the Bank would review the matter before actually taking possession. The letter confirmed that Mrs Nunn had agreed to make the necessary efforts to sell the Wheeler Heights property, and advised her to contact a local real estate agent for a valuation of the property, and to attend to some repairs, with a view to finalising the sale within 'a suitable time frame'. 38 On 1 October 1996 the Bank served a statement of claim on Mrs Nunn for possession of the Wheeler Heights property. Mrs Nunn obtained legal advice on the Bank's possession proceedings from Mr Kerridge of Kerridge and Osborne, and contemplated filing a defence on the ground that she did not understand the effect of the guarantee and mortgage. However, by 20 November 1996 she had decided not to do so, in order to protect her son, who might be pursued by the Bank if Mrs Nunn established a good defence. The Bank's solicitors set out their proposals for settlement of the possession proceedings in a letter dated 1 November 1996, a copy of which Mr Kerridge forwarded to Mrs Nunn, with comments, under cover of a letter dated 20 November 1996. The Bank proposed that it be paid by 31 March 1997. Mr Kerridge advised that a further period should be negotiated, which would enable Mrs Nunn to exchange contracts for the sale of her home at any time up to 31 March 1997. However, he reported that the Bank's solicitors had refused to agree to that proposal. 39 During October and November 1996 Mr Ewins endeavoured to find an alternative source of finance, so that he could pay off the ANZ debt. When the alternative finance failed to materialise, Mrs Nunn signed consent orders by which she accepted the written proposal by the Bank for settlement of the proceedings. She authorised Mr Kerridge to send the consent orders to the Bank's solicitor on 19 December 1996. Under the consent orders, the Bank obtained judgment for possession and the Court noted an agreement between the parties. The agreement was that the Bank promised not to exercise its power to sell the property before 31 March 1997, and Mrs Nunn acknowledged her liability under her guarantee and agreed to pay the Bank by 31 March 1997.

[12]

Other financial difficulties in late 1996 40 In late 1996 Mr Ewins was not only in financial difficulty with the ANZ Bank. He and his wife were being sued by Mr John Hooper in the District Court, and they were under pressure from Westpac Bank in respect of the overdraft of Moorlife International and arrears on their home loan. I should mention, as well, that on 30 October 1996 Mr Ewins signed an acknowledgment that he was unable to pay his father, Terrence Ewins, a debt of $357,756.75. However, it does not appear that he was under any particular pressure to pay that debt, and I shall say no more about it. 41 The District Court action by Mr Hooper was not explained by the evidence before me. It was a claim for over $100,000, and appears to have arisen out of some unsuccessful investments made by Mr Hooper with a Mr John Gagne, allegedly as a result of misrepresentations by Mr and Mrs Ewins. There was a hearing in 1996 but the case was adjourned until March 1997. Although Mr Ewins said in evidence that the case was not of particular concern to him, it must have added to the financial pressure he was already under. Apart from the possibility of losing the case, Mr and Mrs Ewins were incurring costs for legal representation. As I shall explain, their costs to Messrs Kerridge and Osborne had risen to $28,000 by early 1997. Mr and Mrs Ewins gave evidence that they did not discuss the case in detail with Mrs Nunn. I find this plausible, having regard to Mrs Nunn's illness at the time, and her concern with respect to the sale of the Wheeler Heights property to meet demands of the ANZ Bank, and to forestall the recovery action by Westpac Bank. 42 Westpac Bank had made loans to Moorlife International beginning in August 1990, supported by the guarantees of its directors, Mr Ewins and Mrs Nunn. Westpac held first and second mortgages over the home of Mr and Mrs Ewins at Bayview Heights, to secure a home loan as well as the loan to Moorlife International. By October 1996 the Bank was seeking to reduce or eliminate the overdraft, and to recover arrears of home loan repayment instalments. On 6 October 1996 the Bank issued demands to Mr and Mrs Ewins. By 6 November 1996 their arrears in respect of home loan repayments amounted to $30,220. 43 Mrs Nunn was upset that Westpac Bank was threatening proceedings against her son, for possession of the Bayview Heights property. She wanted to help him to keep his family home. In December 1996 her son said to her: 'I need to borrow some more money from you to pay Westpac.' She agreed to this request, and her son said to her that the mortgage that he had already promised would also cover this fresh loan. 44 Westpac took proceedings for recovery of the home loan and for possession of the Bayview Heights property in 1997. I shall describe what happened after I deal with some important intervening events.

[13]

Instructions to Ms Bova 45 By December 1996 it had become a matter of great importance to Mrs Nunn and Mr Ewins that a purchaser be found for the Wheeler Heights property. When a real estate agent contacted them to say that he had found a buyer, Mr Ewins and Mrs Nunn decided to give effect to their arrangements for a mortgage from him and his wife to her over the Bayview Heights property. 46 I find, on balance, that the purpose of Mr and Mrs Ewins and Mrs Nunn in doing so was to give Mrs Nunn some protection in respect of the loans that she would make out of the settlement money in order both to repay the ANZ Bank and reduce the Westpac debt. Although they must have been concerned about the prospect of possession proceedings by Westpac, I accept Mr Ewins' evidence that he expected, at this stage, that he could capitalise the arrears of his home loan debt and re-arrange future instalment payments, once he had paid out the Westpac overdraft from Mrs Nunn's settlement money. 47 Mr Kerridge, who was acting for Mr Ewins and Mrs Nunn with respect to the ANZ possession proceedings and the sale of the Wheeler Heights property, told them he could not act for Mrs Nunn on the proposed mortgage. He referred her to Ms Mary Bova. 48 Ms Bova gave evidence that she received a telephone call from Mrs Nunn on 18 December 1996. Mrs Nunn told her she would like Ms Bova to act for her to draw up papers for a loan to her son and his wife. Mrs Nunn explained that she was selling her property at Wheeler Heights and her solicitor in that transaction advised her to have another solicitor prepare the loan documents to protect her interests. Mrs Nunn said the mortgage should be an 'all moneys mortgage' since she did not at that stage know how much her son would require. Mrs Nunn said the mortgage would be a second mortgage. 49 Ms Bova responded by accepting instructions and saying she would telephone Mr Kerridge to discuss the matter, so that the documents could be ready prior to settlement of the sale of the Wheeler Heights property. Ms Bova said (in paragraph 1 of her affidavit) that she asked for written confirmation of her instructions. That evidence corresponds with the evidence of Mr Ewins. I disagree with a submission by counsel for Mr Wily that there was a discrepancy between the evidence of Mr Ewins and Ms Bova on this subject. 50 On 18 December 1996 Mrs Nunn wrote a letter to Ms Bova instructing her to prepare a second mortgage over the Bayview Heights property. Mr Ewins gave evidence that he drafted the letter in discussion with Mrs Nunn, and she made some edits to the draft. During the hearing, questions were raised as to whether the letter was ever actually received by Ms Bova, or (if received) was received much later than the date it bears. But the original letter was produced and I am satisfied that it was received by Ms Bova on or shortly after its date. 51 The letter, which is in evidence, says: 'Under an agreement entered into between us, I have agreed to advance David and Georgie funds in excess of $120,000 in order to pay bank obligations with the ANZ and Westpac banks, taking a security over their property to secure these advances to my estate. Initially, settlement [presumably, settlement of the sale of the Wheeler Heights property] is scheduled for January 10, 1997, but we are advised that it is unlikely this date can be met by the purchasers' bank - therefore I intend to allow the purchasers to move in under licence until settlement can be effected. It is important that the mortgage document be prepared and executed by David and Georgie prior to any funds being released at settlement - some of which will be deducted by the ANZ Bank upon settlement. 'As I do not have final payout figures, it will be necessary to prepare the mortgage as an 'all moneys' mortgage, payable on demand, together with any applicable interest, charges, and costs. 'For the purposes of attending to this matter, I would like by way of this letter, to authorise you to execute any and all documents on my behalf as may be necessary. ...' 52 Counsel for Mr Wily contended that this letter was misleading, for two reasons. First, he criticised the letter because it contained no reference to the financial difficulties and pressures to which Mr Ewins was subject at the time. It is undeniable that Mr Ewins was in serious financial difficulties at the time, though whether he was insolvent would probably have depended upon an assessment of his prospects in the litigation brought by Mr Hooper, and of the likelihood that his father would require payment of his debt. The contention by counsel for Mr Wily is that information about Mr Ewins' financial difficulties was omitted in order to minimise the risk that the Mortgage transaction might be challenged under s 121 of the Bankruptcy Act. In my view, however, the omission of such material is insignificant, given that the letter (though substantially drafted by Mr Ewins) was a letter from Mrs Nunn to her independent solicitor giving instructions as to work to be done for her. 53 Secondly, counsel for Mr Wily criticised the letter because it failed to record that Mrs Nunn was herself a guarantor of the ANZ and Westpac debts, and that the payment of those debts out of the settlement money would discharge her own liability. I disagree. In my opinion, a layman observing the transaction between Mrs Nunn and Mr Ewins would regard it as accurate to say, when Mrs Nunn paid the bank debts at her son's request, that she was paying his debts. Moreover, my view is that the evidence shows that Mr Ewins indemnified his mother in respect of her guarantee liability for the Westpac debt, and that either he impliedly indemnified her in respect of the ANZ debt, or he put himself in a position where he was not entitled to claim contribution from her in respect of his own guarantee liability for the ANZ debt. Therefore, the legal position of Mrs Nunn and Mr Ewins inter se corresponded with lay observation. 54 As regards the Westpac debt, there is fairly clear evidence of an express oral agreement between Mr Ewins and Mrs Nunn that in consideration of her agreeing to give a guarantee for the borrowing by Moorlife International, he would indemnify her and hold her harmless from any claims made by Westpac on her guarantee. It is true that they were both directors and shareholders and therefore she stood to gain if the business was successful. As a co-director and co-shareholder providing a guarantee for the company's debt, she would normally have no more than a right of contribution from her co-guarantor. But Mr Ewins said to her: 'Mum, don't worry, these are really just like account application opening forms. It's a formality that all directors, each of the directors has to sign the forms at the bank. This does not permit any borrowing from the bank, and I won't allow the bank to take out any borrowing against any of your property. ... Don't worry Mum, I won't hold you, I won't make you responsible for running up any debts to the company.' 55 In my opinion that is a clear offer to indemnify her, which she accepted by then agreeing to give the guarantee. 56 There is no evidence of any similarly categorical express offer in the case of the ANZ debt. However, the evidence of Mr Ewins, which I accept, is that during the conversation in which he asked her to give a guarantee to the ANZ Bank for borrowings by Moorlife Australia, Mrs Nunn asked him how long the money would be needed, and he said: 'I would hope it won't be very long once we get the products out on the market place. We hope to be able to pay it out with six months to a year.' 57 By 'we' he meant to refer to himself and Mr Prendergast. His statement clearly implied a promise to her that he and Mr Prendergast would ensure that the debt was paid, and that in turn implied a promise to her to indemnify her in respect of any liability under her guarantee. In my opinion, the implied promise of indemnity satisfies all the ingredients for the implication of terms into a commercial contract, as set out in such cases as BP Refinery (Western Port) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 283. 58 Even if there were no contract of indemnity between Mr Ewins and Mrs Nunn in respect of the ANZ debt, it is probable that Mr Ewins and the other guarantor, Mr Prendergast, would not have against Mrs Nunn the normal right of contribution enjoyed by one co-surety against another, in the circumstances of this case. Mr Ewins and Mr Prendergast enjoyed all the benefits of the guarantee, since Mrs Nunn had no interest in Moorlife Australia and gave the guarantee solely to assist her son. In such a case it appears that the guarantor who receives no benefit has a defence to an action for contribution: J O'Donovan and J Phillips, The Modern Contract of Guarantee (3rd ed, 1996), p 641. 59 Professors O'Donovan and Phillips rely on overseas authority for this proposition, and they acknowledge that there is no direct Australian authority for it. However, in AGC (Advances) Ltd v West (1984) 5 NSWLR 590, 603-4, Hodgson J contemplated that the burden of guarantees by co-sureties might be shared unequally where one surety enjoys a disproportionate benefit from the guarantee, although on the facts he thought equal contributions were appropriate. Further, there is an analogy, supporting the approach of Professors O'Donovan and Phillips, in the equitable right of exoneration enjoyed by one of two joint borrowers, where what was borrowed has been applied for the benefit of the other borrower. The borrower who receives no benefit is treated, as between the borrowers, as if he or she were merely a surety entitled to be indemnified by the principal debtor: Farrugia v Official Receiver in Bankruptcy (1982) 43 ALR 700, 702-3. 60 Therefore, I conclude that it would be wrong to say, as counsel for Mr Wily submitted, that Mrs Nunn was doing no more than paying her own debt when she made funds available to discharge corporate obligations to the ANZ and Westpac Banks. She was paying debts both of which would ultimately have fallen on Mr Ewins, given the departure (in the case of the ANZ debt) of Mr Prendergast. The letter of instructions was not misleading. 61 After receiving instructions from Mrs Nunn, Ms Bova telephoned Mr Kerridge. Mr Kerridge explained to Ms Bova that Mrs Nunn was a guarantor for her son and his wife who had defaulted in repayments to the bank. He explained that he had suggested to Mrs Nunn that, since he was acting for her son and his wife in relation to another matter, she should obtain independent legal advice from Ms Bova. 62 According to Ms Bova's file note of 23 January 1997, Mrs Nunn told her that she did not want to have the Mortgage registered, and that she understood that her son could use the property as security for other loans. Mr Ewins denied that Mrs Nunn told Ms Bova any such thing. The file note also says that Mrs Nunn told Ms Bova that her son would look after her. That is not disputed. It appears to me likely that the question of Mr Ewins making other borrowings was raised by Ms Bova in order to explain to Mrs Nunn the effect of non-registration. Ms Bova explained the position to Mrs Nunn and was satisfied that Mrs Nunn understood, and she made the file note accordingly. But the matter was of no particular significance to Mrs Nunn, and she has forgotten the conversation (a conclusion consistent with a concession made by counsel for both parties during the hearing). 63 Mr Ewins gave evidence that, at the time, he did not understand that non-registration of the Mortgage to his mother would permit him to make other borrowings. I accept that at the time of his mother's discussion with Ms Bova, Mr Ewins did not intend to make further borrowings (except from his mother) and so it is unlikely that he would have considered the question of the effect of non-registration on his capacity to do so. 64 Ms Bova became aware that the settlement date for the sale of the Wheeler Heights property was 24 January 1997. She prepared a letter to Mr and Mrs Ewins bearing that date, enclosing a form of mortgage, a schedule and a loan agreement, and telling them to read the documents carefully and sign them where indicated, and to return them with cheques for costs and stamp duty. In fact she handed the letter and draft documents to Mr Ewins at her office, telling him that she could not advise him about the documents since she had prepared them on behalf of his mother, and advising him to see another solicitor. He said that would not be necessary. 65 Ms Bova also prepared a written direction to Mrs Nunn dated 24 January 1997, signed by Mr and Mrs Ewins, directing Mrs Nunn to pay $63,216.48 'being part of our second mortgage facility as secured over 15 Kennedy Place, Bayview Heights' to Moorlife Australia Pty Ltd. The amount referred to in this direction is the amount owing to ANZ Bank. Mr Kerridge acted on the direction.

[14]

Payments by Mrs Nunn on settlement of the sale of the Wheeler Heights property 66 Completion of sale of the Wheeler Heights property, for a purchase price of $302,500, took place on 24 January 1997. Out of the proceeds of settlement, $63,216.48 was paid to Moorlife Australia to discharge the ANZ debt. 67 On about 7 February 1997 Mrs Nunn paid $55,300 into the account of Moorlife International operated with Westpac Bank. The effect of this payment was to discharge Moorlife International's business debt to Westpac, and consequently to discharge the guarantee liability of Mrs Nunn to Westpac. The payment did not reduce the liability of Mr and Mrs Ewins on their home loan. I accept the evidence of Mr Ewins that it was the Bank's idea, rather than his, that Mrs Nunn's payment should be allocated to the business debt. Westpac did not have any security from Mrs Nunn to support her guarantee, and the security against Mr Ewins and his wife for the business debt was a second mortgage. It would have suited Westpac's interests to remove the business debt and confine the banking relationship to the home loan. The arrears on the home loan were in excess of $30,000 on a loan of about $248,000. I reject the contention that the payment was made for the purpose of removing Mrs Nunn's guarantee liability. 68 In January 1997 Mr Ewins asked Mrs Nunn to lend him some money to pay Custom Credit. According to her evidence, her son said that this loan would also be covered by the Mortgage. She agreed to it. On about 7 February 1997 she paid $4387.52 to Custom Credit. There was some evidence to the effect that the Custom Credit loan was connected with an American Express card issued to Mr Ewins on which Mrs Nunn was a supplementary cardholder. But it appears that the Custom Credit debt, though made available by American Express, was drawn down by Mr Ewins alone, and Mrs Nunn had no liability in respect of it. Therefore the payment was a true loan by her to discharge her son's debt. 69 Messrs Kerridge and Osborne, solicitors, rendered an account for their costs and disbursements in the Hooper litigation, in which Mr and Mrs Ewins were the clients, on 29 January 1997. It was necessary for Mr and Mrs Ewins to pay this account so they could continue with their defence, the case being part heard at that time. On 7 March 1997 Mrs Nunn paid the account at her son's request and on his promise that the mortgage would cover the loan. Again, this payment was a true loan by her to discharge her son's debt. 70 Thus, the total amount paid by Mrs Nunn at her son's request, which is said by her to be secured by the Mortgage, is $150,904. That is the amount which Mr Wily undertook to pay into a controlled moneys account on settlement of the sale of the Bayview Heights property, although (as I have mentioned) it appears that a lesser amount has in fact been paid, presumably by arrangement between the parties. On 10 February 1997, evidently anticipating the payment she would make to Messrs Kerridge and Osborne, Mrs Nunn signed a memorandum by which she purported to confirm that she had lent Mr and Mrs Ewins the sum of $151,000, pursuant to the Mortgage and loan agreement dated 20 January 1997. This document is rather self-serving and of no probative value.

[15]

The Mortgage and loan agreement 71 As I have said, on 24 January 1997 Ms Bova handed to Mr Ewins a form of mortgage, a schedule and a draft loan agreement. All three documents were signed by Mr and Mrs Ewins on the same day without alteration, and their signatures were witnessed by Ms Bova's secretary. They left the documents at Ms Bova's office for her attention. The Mortgage and loan agreement were subsequently dated (incorrectly, as I shall explain) 20 January 1997. Mrs Nunn did not sign the documents at that time. However, I infer from the facts that Mr and Mrs Ewins signed and delivered the documents as a bundle (though it is not clear whether they were stapled or pinned together at that time) to the firm of solicitors representing Mrs Nunn, with the intention of being immediately bound by them. 72 The Mortgage was in the standard Real Property Act form. It purported to be a mortgage over the Bayview Heights property, subject to two specified registered encumbrances, and identified Mrs Nunn as the mortgagee and Mr and Mrs Ewins as the mortgagors. It stated that the mortgagor covenanted with the mortgagee that the provisions set out in 'Annexure A & B hereto [sic]', and Memorandum No Q 860000 filed in the Land Titles Office, were incorporated in the mortgage. However, there were no annexures A and B to the form of mortgage. Instead, physically attached to or accompanying the Mortgage were a schedule (headed ' SCHEDULE HEREINBEFORE REFERRED TO ') and the form of loan agreement, neither of which was labelled 'A' or 'B'. 73 The schedule contained two provisions. By the first provision the mortgagor irrevocably appointed the mortgagee as attorney to exercise rights in the name of the mortgagor at any time after breach or default by the mortgagor. The second provision was a series of covenants by the mortgagor, one of which was to pay to the mortgagee 'the Principal Sum' at such time and on such dates and in such manner as would be agreed in writing between them from time to time. The words 'Principal Sum' were not defined. 74 The loan agreement appears to be a standard form used by Ms Bova's firm, in which most of the variable details (other than the name of the Lender) are in schedules rather than in the body of the agreement. Mrs Nunn is identified as the 'Lender' in the body of the agreement, and Mr and Mrs Ewins are identified together, in Schedule Two, as the 'Borrower'. The body of the agreement recites that the Borrower has requested the Lender to make advances but does not specify any particular sums. The words 'Principal Sum' are used and are defined (clause 1 (c)) to include, inter alia, all moneys advanced under the agreement. The agreement (clause 2 (b)) provides for a 'first advance' in an amount specified in Schedule One, but that part of the schedule has not been completed. The agreement (clause 2 (c)) provides for further advances by the Lender upon receipt of a written application by the Borrower prior to the advance. The repayment of the loan is expressed to be 'upon demand' (clause 3) and interest (clause 4 (a)) is expressed to be 'at the rate or rates and at the times and in the manner which shall be specified by the Lender (in its absolute discretion)' and 'notified in writing by the Lender to the Borrower from time to time'. Under the heading 'description of security' in Schedule Two, the following entry has been made: 'A third ranking registered mortgage from the Borrower over the whole of the land comprised in Certificate of Title Folio Identifier 28/216125 being Lot 28 in Deposited Plan 216125 situated at Church Point in the Municipality of Pittwater Parish of Narrabeen and County of Cumberland commonly known as 15 Kennedy Place, Bayview Heights.' 75 Ms Bova gave evidence that it was her normal practice, when drafting mortgages and loan agreements, to refer to the schedule to the mortgage as annexure A and to annex the loan agreement as annexure B to the mortgage. She said that in this case she overlooked the fact that the mortgage schedule and the loan agreement attached to the mortgage were not identified as annexures A and B. 76 Although the Mortgage and loan agreement bear the date 20 January 1997 (the schedule is undated), they were not given to Mr Ewins for signature until 24 January 1997. Ms Bova's evidence is that she mistakenly believed that the mortgage money was to be advanced on 20 January 1997, and dated the documents accordingly, after they were returned to her duly executed by Mr and Mrs Ewins. She said the correct date should have been 24 January 1997. The Mortgage has never been registered. Ms Bova said she was instructed by Mrs Nunn not to do so.

[16]

The intention of Mr and Mrs Ewins in executing the documents 77 Mr Ewins gave evidence that at the time he signed the Mortgage and loan agreement, it was his intention and understanding that the Mortgage secured payment of all moneys which his mother had agreed to lend him, and would subsequently lend, in the total sum of $150,904. The oral evidence of Mrs Nunn about her intentions at the time Mr and Mrs Ewins signed the documents is to the same effect. Mrs Ewins gave evidence that, at the time when she signed the Mortgage and loan agreement, she believed that her husband was borrowing money from his mother, and that she and her husband were mortgaging their home to secure the repayment of whatever money he might borrow from her. 78 Counsel for Mr Wily has attacked this evidence. He submits that it was never intended by Mrs Nunn or Mr and Mrs Ewins that the arrangements would be a mortgage in the true sense. This is one of the major points of controversy between the parties, and I shall return to it later. 79 At this point I shall deal with some evidence which, according to Mr Wily, demonstrates that neither Mrs Nunn nor Mr and Mrs Ewins had any intention to create any form of security in the true sense. In his proceedings in the District Court against Mr and Mrs Ewins, Mr Hooper issued a subpoena for production to Mrs Nunn on 19 February 1997, requiring production of (inter alia) documents having any connection with Mr and Mrs Ewins and Moorlife Australia and any bank account in connection with any transaction from 1 January 1990 to the return date of the subpoena. The subpoena was wide enough to require production of the Mortgage and loan agreement, as well as the documentary records of loans made by Mrs Nunn to Mr Ewins. However, Mrs Nunn responded by letter saying that she had no records to produce. Mr Hooper also served a notice to produce on Mr and Mrs Ewins, requiring production of (inter alia) documents identifying any encumbrance against the title to the Bayview Heights property. Counsel for Mr and Mrs Ewins informed the District Court that they had no documents to produce. 80 These responses to the subpoena and notice to produce are relied upon by Mr Wily to demonstrate that at the time of the responses, neither Mrs Nunn nor Mr and Mrs Ewins regarded the Mortgage as a true security. In my view, there are other more plausible explanations for their failure to produce the Mortgage and loan agreement, including the explanation that so much material was required to be produced that they overlooked documents which, as far as I understand the Hooper litigation, had very little relevance.

[19]

Mrs Nunn's caveat 85 As I have mentioned, Mrs Nunn did not sign the Mortgage, schedule and loan agreement in January 1997, and the Mortgage was not registered. Evidently the documents were simply retained by Ms Bova. According to Ms Bova's evidence, Mrs Nunn's omission to sign the documents was simply an oversight. 86 Mrs Nunn attended the office of Ms Bova on 29 April 1998, and signed the Mortgage, schedule and loan agreement. Having signed those documents, Mrs Nunn lodged a caveat against the title to the Bayview Heights property, claiming an interest as equitable mortgagee. 87 It appears that Mrs Nunn took these steps in response to moves by the trustee in bankruptcy and Westpac to obtain possession of the Bayview Heights property. She knew she could not stop these processes, but she believed she could at least recover the money she had lent to her son. Notwithstanding Mr Ewins' denial, the evidence shows, in my opinion, that there were some discussions between Mr Ewins and Mrs Nunn before Mrs Nunn saw Ms Bova, and that the proposal to lodge a caveat against the title emerged from those discussions, though it has not been established that Mr Ewins initiated the proposal. 88 It is clear from the evidence that Mrs Nunn and Mr and Mrs Ewins were very concerned about the prospect of sale of the Bayview Heights property. In her evidence Mrs Ewins said 'we put a caveat on the house to try and salvage'. That seems to me an accurate description of what happened, provided that 'salvage' is understood as meaning 'recover for Mrs Nunn', since her recovery of money would be likely to indirectly benefit Mr and Mrs Ewins through her subsequent generosity or under her will. Mrs Nunn was motivated to protect her own interest in recovery of the money she had lent, by relying on the Mortgage to give her priority over unsecured creditors. 89 On 15 July 1998 Mr Wily served a lapsing notice with respect to Mrs Nunn's caveat, leading to Mrs Nunn's commencement of the present proceedings. 90 Mr Wily does not recognise the validity of the Mortgage but he has not commenced any proceedings to avoid the Mortgage pursuant to any provisions of the Bankruptcy Act 1966 (Cth) or otherwise. There is no cross-claim in the proceedings.

[49]

122 However, in case the proceedings go further, I shall make findings with respect to the common intention of the parties to Mortgage. My findings are as follows: · Mrs Nunn and Mr Ewins made an express oral agreement in mid-1996 that in consideration of her agreeing to make available funds sufficient to discharge the debt of Moorlife Australia to the ANZ Bank, he would grant her a mortgage over the Bayview Heights property; · they made an express oral agreement in December 1996 that in consideration of her agreeing to advance $55,300 to pay Moorlife International's debt to Westpac Bank, he would extend the promised mortgage to provide security for repayment of that amount; · they made an express oral agreement in January 1997 that in consideration of her agreeing to advance $4387.52 to pay his debt to Custom Credit, he would extend the promised mortgage to provide security for repayment of that amount; · they made an express oral agreement in January, February or March 1997 that in consideration of her agreeing to advance $28,000 to pay costs due to Messrs Kerridge and Osborne, that amount would be treated as an advance under the Mortgage which, by that time, had been executed by Mr and Mrs Ewins; · Mr Ewins had his wife's authority to make these four agreements; · the agreements may or may not have been complete enough to constitute oral contracts, but they were, in each case, finally concluded common intentions sufficient for the purposes of the law of rectification (as to which, see Joscelyne v Nissen [1970] 2 QB 86; Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336); · the common intentions were, in each of the four cases, communicated by Mrs Nunn and Mr Ewins to one another, satisfying any retirement of the law of rectification that there be an outward expression of common intention (see, for example, Elders Trustee and Executor Co Ltd v EG Reeves Pty Ltd (1987) 78 ALR 193) and continued until execution ( Westland Savings Bank v Hancock [1987] 2 NZLR 21, 30); · the evidence establishing the common intention of the parties is convincing proof, and sufficient for the purposes of the law of rectification (Joscelyne v Nissen, at 98; generally as to rectification, see GE Dal Pont and DRC Chalmers, Equity and Trusts in Australia and New Zealand (1996), 675ff; DW Greig and JLR Davis, The Law of Contract (1987), 932ff).

At a glance

Court

Decision date

Before

Source

Judgment (84 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (13)

Cited By (4)