The Effect Of The Assignment
48 The first main question debated was what rights of Westpac were assigned to the plaintiff, as Assignee. The competition was said to be between all rights which Westpac had against the defendants pursuant to the Guarantees and Indemnities given by them to Westpac, on the one hand, and such rights as Westpac had against the defendants after one had regard to the provisions of the Deed of Release, and particularly clause 5.1.3, on the other. The issue was whether the assignment was subject to an equity, to which s.12 required effect to be given, precluding the plaintiff, as Assignee, by virtue of clause 5.1.3, from taking any further steps whatsoever to enforce the Guarantees against the defendants, as Westpac was precluded from doing in the circumstances.
49 Another way of considering the point is that if Westpac had taken any steps in breach of clause 5.1.3, the defendants could in various ways have defended such proceedings by e.g. claiming damages for breach of the covenant in any amount to which Westpac was entitled, or by having the proceedings struck out because of circuity of action. If, therefore, Westpac's action against the defendants could be defeated, why should the plaintiff, as assignee, be in any better position.
50 The submissions in this regard, if I may say so with respect, tended to be diverted from the principal issue by a consideration of the effect of a covenant not to sue, which Mr Coles submitted was the effect of clause 5.1.3, on the one hand, and a discharge or release of a guarantor from indebtedness under the guarantees, which would also have the effect, at least in many cases, of discharging and releasing all other guarantors, on the other.
51 Mr Coles agreed that the Guarantee constituted a chose in action, but his short submission was that it was one which, by dint of the equity created by the covenant not to sue, precluded Westpac, and hence, Ostabridge as its Assignee, from suing the defendants. Mr Ireland did not submit that the operation and effect of such a chose in action could not be diminished by a contract entered into between Westpac and the defendants, as appears in clause 5.1.3, such that the assignment of the chose in action did not carry with it whatever equities were created by that clause.
52 It is necessary to concentrate on the subject matter of the assignment in the events which have happened. Mr Coles submitted that in relation to the guarantees given by the defendants, the assignment included Westpac's covenant not to sue those guarantors, which was an equity within s.12, subject to which the plaintiff took, thereby precluding it from suing them. In the end, Mr Ireland said that he did not contest that the plaintiff took subject to the equities, which included the covenant not to sue, which was consistent with his position to which I have referred in paragraph 50. In my opinion, that concession was properly made.
53 Mr Ireland submitted that clause 5.1.3, on the basis he accepted, deprived the Deed of Release of any operation, because the words of that clause meant that the plaintiff could not sue on any of the securities, whether given by the defendants or parties who had given securities, but were not parties to the Deed. Mr Coles submitted that the Deed of Release and the Deed of Assignment did not have this effect. He founded upon the fact that only some of the guarantors were parties to that Deed, and that it was those guarantors, who had subjected themselves to the Consent Orders, covenanted to carry out the requirements of clause 3 and subjected themselves to the release and indemnity in clause 4. In those circumstances, he submitted, Westpac's covenant in clause 5.1.3 was confined to its not taking any further steps whatsoever to enforce the Guarantees against the parties to the Deed of Release and, of course, they were the only parties at risk, the Proceedings not having been taken against any others. It seems to me that this must be the proper construction of the Deed of Release. Other matters point to this.
54 Mr Ireland submitted, initially, that clause 5.1.3 only "engaged" if the assignment had not occurred, because if that did not happen Westpac could then enforce the debt. I doubt whether that submission, thus stated, is correct, because the assignment followed compliance by the defendants, Stafford Quarries and Kerstanne with the terms of clauses 2, 3 and 4 and was subject to Westpac's rights under clauses 10 and 11. Even if Westpac had not made the assignment, the defendants would have been entitled to rely upon clause 5.1.3. That entitlement was not subject to an assignment being made, although in the view I take, it affected that which would be assigned if one took place.
55 Mr Ireland submitted nextly and, in my view correctly, that if there was not compliance with clauses 2, 3 and 4, or if Westpac's rights under clauses 10 and 11 were activated, Westpac could enter judgment. However, I do not consider, on a proper construction of the Deed, that the assignment or, as Mr Ireland put it, the absence of the assignment, would have absolved Westpac from complying with its covenants in clause 5 if there was compliance with clauses 2, 3 and 4 and clauses 10 and 11 were not activated.
56 Mr Ireland continued that it was "pivotal" to the whole arrangement that Westpac would make the assignment to the plaintiff and that all parties must have been aware of that. He noted, in particular, that two of the defendants' obligations were to procure the Assignee to complete the purchase of the assignment pursuant to clause 3.2.2, and to procure the payment pursuant to clause 3.2.3.
57 There is no doubt, in my opinion, that the plaintiff's involvement in the transaction was necessary, although in so far as clauses 3.2.2 and 3.2.3 are concerned the defendants were left to procure its compliance with them. However, that all having been said, it does not seem to me that it answers the short question as to what, as against the defendants, Westpac had to assign to the plaintiff. The determination of that must depend upon a proper construction of the contractual rights as between all parties.
58 Further submissions, essentially in reply, which were put by Mr Ireland, involved several additional propositions. He submitted that one construction of clause 5.1.3 was that Westpac had agreed not to take any further steps whatsoever against any of the guarantors or mortgagors or pursuant to the Further Securities, including those who were not parties to the Deed. A literal reading of the words taken out of context may support that construction. But it seems to me that it is one which should be rejected. First, prima facie the Deed only bound the parties to it. Secondly, no other guarantors or mortgagors or indemnifiers were at risk by dint of the Proceedings, and no others had joined in the Consent Orders. Thirdly, compliance with clauses 2, 3 and 4 was a matter for the defendants. Fourthly, the rights under clause 10 were confined to the Sureties and the Debtors, who and which were parties to the Deed, and the first event of default related solely to them.
59 In my opinion, a proper construction of the Deed of Release leads to the conclusion that the only parties being released were the parties to it. Thus, the plaintiff would be able to proceed against the other p;arties who and which had given securities and the principal debtors, who and which in turn may well be able to claim contribution from the defendants.
60 Mr Ireland submitted that s.36C of the Conveyancing Act assisted the conclusion that persons not parties to the Deed of Release could none-the-less take the benefit of it. Mr Coles submitted that that section did not have the wide effect of avoiding the requirement of privity as the plaintiff submitted, and that the section did not effect the creation of rights, but only assisted the protection of those shown to exist: Concrete Constructions Pty Limited v Government Insurance Office of New South Wales (1966) 85 NSW WN 104, in which Macfarlan J said, at p.118:-
"In my opinion, having regard to these authorities I am obliged to decide that s.36C does not alter the conclusion I have reached from a consideration of the common law principles. Although there are plainly doubts as to what is the affirmative meaning of the section, it is, in my opinion, clear that it does not, in any respect that is material to this case affect or alter what has been called the rule in Tweddle v Atkinson ; cf Green v Russell and Commissioner for Probate Duties (Vic) v Mitchell ."
61 For these reasons I do not consider that s.36C assists the plaintiff.
62 In the present case the parties to the Deed of Release and Ostabridge were clearly aware of the existence of other guarantors, mortgagors and indemnifiers. They were not joined as parties to the Deed and, in my opinion, they have not been shown as having any rights which the application of s.36C would assist in protecting. Rather, the application of the section in the circumstances of this case, contrary to accepted principle, would have the effect of creating rights they were not given.
63 Finally, Mr Ireland submitted that clause 5.1.3 was only intended to protect the position between the date of the Deed of Release and the assignment. Not only was this at variance with his original submissions, but, as Mr Coles submitted, that could not be correct because clause 5.1.3 did not take effect until there was compliance with clauses 2, 3 and 4 and clauses 10 and 11 were not activated. Clause 6.1 provides for precisely the same requirements before an assignment would be effected. Therefore, so the submission ran and, in my opinion correctly, clause 5.1.3 did not become operative until the position had been reached that an assignment could be obtained and, thereafter, it continued to operate. It represented an essential part of that for which the defendants had bargained, viz that if they fulfilled their obligations under the Deed, Westpac would not take any action against them. Consequently, it could not have been effective to protect the position between 3 and 10 November 1995.
64 Mr Coles submitted that by clause 5 Westpac engrafted on its right, title and interest, a qualification, namely that at the time of the assignment and thereafter it would take no further steps to enforce the Guarantees against the defendants. He agreed that clause 5.1.3 was a covenant not to sue and not a release. He further submitted that it did not contain a covenant by Westpac not to sue the principal debtors nor the other guarantors not parties to the Deed of Release, and he noted that when the right under clause 6.1 arose, so also did the obligation of Westpac under clause 5.1.3. In my opinion, these submissions should be accepted.