Perpetual Trustees Victoria Ltd v Tsai [2004] NSWSC 745 | Case summary

JUDGMENT 1 HIS HONOUR: This an appeal from Master Harrison who gave summary judgment for a mortgagee against a mortgagor. The learned Master's order was that the mortgagee have possession of the subject premises and that the mortgagor pay the mortgagee a sum of money in excess of $500,000. 2 The notice of appeal suggests that the learned Master erred in admitting certain evidence and that she erred in holding that a decision of Studdert J in Ginelle Finance Pty Ltd v Diakakis [2004] NSW Conv R 56-064 was determinative of these proceedings. 3 There is no doubt at all that mortgage number 9412518J affecting the whole of Folio Identifier 1/73633 binds the title of that property in favour of Perpetual Trustees Victoria Limited, the plaintiff. The registered proprietor is the present appellant. That mortgage is a simple two page document which merely incorporates the memorandum No 3161863 filed with the Registrar General under s 80A of the Real Property Act 1900. 4 That document is in what is colloquially called the plain English form. It defines the word "me" as meaning the person named and described as the mortgagor in the mortgage form (which in the present case means the appellant), and it defines "you" as the person described as the mortgagee in that form (which in the present case means the first respondent, Perpetual Trustees Victoria Limited). 5 The definition section under the heading "Understanding the Mortgage" defines "Secured Agreement" as meaning: "Any present or future agreement between me or us, or any one of us, and You or an agreement which varies such an agreement".

Under the heading "Mortgage Obligations" clause 2.2 of the memorandum is headed, "Pay Secured Money". It then goes on to say: "The Mortgage is security for payment to you of the Secured Money and for the performance of all of my obligations under the Mortgage. I agree to pay the Secured Money as and when the Secured Money becomes due and payable in accordance with the provisions of each Secured Agreement or the Mortgage." 6 The mortgage is dated 5 February 2003. There is a loan agreement bearing the same date purportedly between the same parties under which the first respondent agrees to lend money to the appellant and the appellant agrees to borrow and repay. 7 The schedule suggests that what is granted is a facility to draw down $500,000 to be secured by first mortgage with what is called a notional monthly repayment of $3337.30, the final repayment on 15 October 2031. 8 The statement of claim was filed on 17 July 2003. It recited the loan agreement. It said that under that agreement the first respondent agreed to lend the appellant $500,000, that a mortgage was granted, that pursuant to the loan agreement and the mortgage the appellant was under an obligation to repay the principal sum, and that the loan agreement and the mortgage contained terms the effect of which upon default being made the whole principal sum became due and payable. The plaintiff claimed possession of the property, the principal, interest and costs. 9 The defence denied that the defendant had ever signed any loan agreement or mortgage as alleged. 10 It will be noted that there is a surprising omission from the statement of claim and that is any allegation that the money was actually advanced to the defendant. That being so it would be very hard to see how the plaintiff could have, without amendment, been entitled to any judgment for the money. However, that point was not taken before the learned Master and the argument before the learned Master appears with respect to have delved into a large number of irrelevant matters. Before the learned Master it was common ground that the mortgage had been registered and that the first respondent had advanced $500,000 though the appellant said there is no evidence that it had been given to him. 11 It was almost common ground between the parties that the learned Master could assume the mortgage was forged. Further that the authorities binding the learned Master meant that she would need to hold that even if the mortgage was forged, its registration made it indefeasible. It was common ground that the registration was in no way caused through any fraud on the part of the first respondent or its privies. She was certainly correct in taking that approach (see the cases on the subject which were recently considered by the High Court in Davis v Williams [2003] NSWCA 371). 12 The Master appears to have been led into a blind alley by submissions that were made about the decision of Studdert J in Ginelle's case (supra). That was a case where that learned judge held that there was no personal equity in a mortgagor merely because his signature was forged. However, the case before the learned Master had nothing to do with equity, it was a pure common law claim for possession and debt. I respectfully agree Ginelle's case could give her no guidance in the decision that she had to make. 13 There is no doubt at all that under the Torrens system a forged mortgage which might be a nullity under the old system title when registered without fraud is fully efficacious as conferring on the mortgagee the interest in land described in the mortgage. It is often said in a shorthand way that the mortgagee gets an indefeasible interest. However, as Campbell J said in Small v Tomasetti [2002] NSW Conv R 56,011 at page 58,306 [9]: "Notwithstanding that registration confers indefeasibility on a mortgagee there is still a question, 'Indefeasibility for what?'". 14 The cases show in order to answer his Honour's question that to some extent what is protected will depend on the exact wording of the Real Property Act in each State. Thus, interstate cases must be considered with some care: Caleo Bros Pty Ltd v Lyons Bros (Aust) Pty Ltd (1980) 1 BPR 9496 per M McLelland J. 15 Ordinarily a guarantee is sufficiently close to the mortgage to be protected (Consolidated Trust Pty Ltd v Naylor (1936) 55 CLR 423, 434-5) as is a personal covenant to repay (P T Limited v Maradona Pty Ltd (1992) 25 NSWLR 643 at 681; Pyramid Building Society v Scorpion Hotels Pty Ltd (1998) 1 VR 188 per Hayne JA (with whom Brooking and Tadgell JJA agreed) and Parker v Mortgage Advance Securities Pty Ltd [2003] QCA 275). 16 However, one must be very careful about these wide statements. First of all, the question to a great degree will depend on the wording of the covenant concerned. Secondly, Powell JA in Grgic v Australian and New Zealand Banking Group Ltd (1994) 33 NSWLR 202 at 224, made the statement with which Meagher and Handley JJA agreed, that, notwithstanding indefeasibility, a personal covenant which is contained in a forged document is not enforceable. 17 Mr Donaldson SC, who appeared for the first respondent, put to me that that statement was odd and dealt with something that did not form part of the argument and must be considered as obiter dicta. I consider that a considered statement of that nature in a Court of Appeal decision is something that I must take to be binding upon me. That statement is also consistent with first principles that the reason why the personal covenant is considered to be part of the package of rights protected by the indefeasibility principle is that it maps out or may map out the extent of the quantum of the interest of the mortgagee in the land and in that sense is closely related to title requiring it to be considered as to limiting the rights. That seems to be what Giles J is saying in Maradona (supra) at 681. See also what Bryson J said in Challenger Managed Investments Ltd v Direct Money Corp Pty Ltd [2003] NSWSC 1072 at [52-53]. 18 On that basis unless there was material to show to the strong degree required in applications to strike out or applications for summary judgment that the loan agreement was in fact signed by the appellant, the application for summary judgment could not succeed. The mere fact that the memorandum under the mortgage, at least so far as clause 2.2 is concerned, was indefeasible would not have been enough. 19 The traditional form of mortgage described by Mr Wales SC, who appeared for the appellant, as the "old fashioned form" did not cause the same problems as the forms used by financial institutions at present to enable them to secure all monies lent or monies lent from time to time. 20 Under the old fashioned form of mortgage there was a statement of the principal sum lent and an acknowledgment that the money had been lent. The authorities show that the present type of problem was rarely likely to arise with that type of mortgage because the production of the security document was prima facie evidence of the existence of the debt (Piccock v Brown (1734) 3 P Wms 288; 24 ER 1069) and that, unless the fact was put in issue by the pleadings, the security itself was sufficient evidence of the payment (Minot v Eaton (1826) 4 LJ (OS) Ch 134, but see Wansworth Norton Solicitors Nominee Company Limited v Edmonds [1992] 1 NZLR 596). This is set out in the Australian edition of Fisher and Lightwood on Mortgages at par [16.45] and [39.8]. The modern clause, however, does not go that far especially in a facility mortgage requiring drawn downs to be made later. It would thus not seem that any of the traditional protections to mortgagees apply to mortgagees who use this form of loan agreement and mortgage. 21 It is clear that if no monies are lent under a mortgage then the mortgage is just completely void: see Re GM Industries Pty Ltd and the Companies Act (1980) ACLC 40-665 per Needham J. His Honour was there dealing with a company charge rather than a registered mortgage so that the GM decision has to be read subject to the effect of indefeasibility of a registered mortgage. However, as Mr Walsh, who appeared for the Registrar General, so eloquently put it, there may be a registered mortgage, but it may be a registered mortgage which secures nothing. 22 I have already set out the principal part of clause 2.2. 23 It is, to my mind, a rather ambiguous clause. Mr Donaldson SC said as sweetly as he could that any sensible commercial lawyer looking at it would know what it meant but unfortunately I do not appear to be in that category. However, whatever it means, it refers back to whatever is owing under the secured agreement. As the secured agreement itself does not bring with it any concept of indefeasibility and as there is an issue between the parties as to whether or not it was ever signed by the appellant or merely signed by a person impersonating the appellant, there is not the material to demonstrate to the required standard that there was a loan to the appellant. 24 If there was no loan to the appellant he could not be in default not repaying the loan and, therefore, the mortgagee was not entitled to possession. 25 It seems to me that when one strips aside extraneous issues and looks at the facts and law that were before the Master she should have dismissed the motion for summary judgment and I should do that now. That makes it otiose to consider the evidentiary points. 26 It would seem from the transcript before the Master that she was affected by the inflammatory statement made by then counsel for the mortgagee that the defendant had never ever sworn an affidavit that he did not owe the money. However, an applicant for summary judgment cannot succeed merely by demonising the defendant. It has to put before the Master material to show that there is no arguable case. 27 It is insufficient to put forward an affidavit which says that there is an agreement by which the plaintiff agreed to advance to the defendant a certain sum, pursuant to that agreement the defendant is under an obligation to repay, and that the amount owing is $X. What is required, where the issues joined on the pleadings are a denial of signing of the agreement, is evidence that the loan was made and it was made to the defendant. That was entirely absent. 28 The passages which the learned Master took into evidence I do not think she should have taken into evidence because they are really evidence of nothing at all except contentions which seems to be the way the learned Master first thought they were, but later was talked out of it. 29 Accordingly, the appeal should be allowed with costs. The order of the learned Master is set aside. Stood over for further directions before the Registrar on Tuesday 10 August at 9 am.

Perpetual Trustees Victoria Ltd v Tsai

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