The Appeal by Property Builders
32The written submissions filed on behalf of Property Builders as developed orally seemed to suggest that the appeal should be allowed for three reasons. First, that there was an equitable assignment of the debt in 2008 as a result of which Eurofinance retained no interest in the debt such as to enable a transfer to Adelaide Bank. Second, the transactions of 2 May 2008 resulted in the mortgage being paid out. Third, that no notice of the assignment was given to Property Builders under s 12 of the Conveyancing Act 1919.
33In my opinion, none of these propositions is correct. As to the first, 1 accept for the purpose of the argument that the resolutions of 2 May 2008 evidenced an agreement for valuable consideration to assign the debt due by Property Builders from Eurofinance to AIF, thereby effecting an equitable assignment ( Holroyd v Marshall (1862) 10 HLC 191 at 209; Tailby v Official Receiver (1888) 12 App Cas 523 at 531, 546-547). On that bais, Eurofinance remained the legal owner of the debt, albeit as trustee for the assignee, at least after the consideration was paid: Cator v Croydon Canal Co (1843) 160 ER 1149 at 1150; Fulham v M'Carthy (1848) 1 HLC 703 at 722. This does not mean that Eurofinance could not assign the legal interest in the debt or that it could not sue as legal owner of the debt to recover the money due.
34In this context it is necessary to have regard to the effect of the transfer of mortgage. This is set out in s 52 of the Real Property Act 1900, which provides as follows:
"52(1) By virtue of every such transfer, the right to sue upon any mortgage or other instrument and to recover any debt, sum of money, annuity, or damages thereunder (notwithstanding the same may be deemed or held to constitute a chose in action), and all interest in any such debt, sum of money, annuity, or damages shall be transferred so as to vest the same at law as well as in equity in the transferee thereof.
(2) Nothing herein contained shall prevent a Court from giving effect to any trusts affecting the said debt, sum of money, annuity, or damages, in case the transferee shall hold the same as a trustee for any other person."
35In the present case the mortgage contained a covenant to pay the principal sum secured thereby, namely the $2,400,000 advance and interest thereof. In these circumstances the right to recover such principal and interest was transferred to Adelaide Bank and vested in it by virtue of the transfer of mortgage. Property Builders first sought to argue that the mortgage only secured money due under a separate agreement, namely what was described as the 2006 loan agreement as varied in 2008, and as that agreement was not assigned to Adelaide Bank there was no debt upon which Adelaide Bank could sue. It relied in support of that submission on what was said by Kiefel J in Queensland Premier Mines Pty Limited v French supra as to the operation of s 62 of the Land Title Act 1994 (Qld), which is the equivalent provision of s 52 of the Real Property Act 1900:
"The words of the section are plain. Neither the historical reason for the provision nor its purpose, of effectuating a transfer of both security interest and the right to moneys arising from the mortgage transaction, supports a construction which extends the section to obligations arising otherwise than under the terms of the mortgage. It is no part of the purpose and function of a statute such as the Land Title Act to rewrite the bargain between transferor and transferee." (at [56])
36This submission is incorrect for two reasons. First, it ignores the fact that the mortgage contained the express covenant to pay the nominated principal sum and interest. As counsel for Property Builders properly conceded, the mortgagee could sue on the personal covenants contained in the mortgage without any reference to the loan agreement. Further, the loan agreement was merely an agreement to make a loan once certain conditions were satisfied. The loan was only made once those conditions were satisfied and then on the terms and conditions contained in the mortgage.
37The further difficulty for the appellants is that no notice of any assignment of the debt to AIF was given by Eurofinance prior to the transfer of the mortgage to Adelaide Bank. For there to be an effective assignment at law such notice would need to have been given (assuming there was an assignment in writing). Absent such notice there seems to be no basis for saying that AIF, as distinct from Eurofinance and subsequently Adelaide Bank, was the legal owner of the chose in action, namely the debt.
38It follows that Property Builders is not entitled to succeed on this argument.
39The second proposition, namely that the effect of the transactions of 2 May 2008 were to discharge the debt owed by Property Builders to Eurofinance, is also incorrect. It is, of course, inconsistent with the first proposition which depended on the debt being assigned. As the proposition was developed orally it was suggested that the fact that AIF had paid Eurofinance an amount equal to the amount due by Property Builders to obtain an assignment of Property Builders' debt had the effect of discharging the obligation of Property Builders. The proposition has only to be stated to be rejected. The monies were not paid by AIF to Eurofinance to discharge the liability of Property Builders but rather to obtain an equitable assignment of the debt due by it to Eurofinance.
40So far as the third proposition is concerned, it was conceded in argument that notice under s 12 of the Conveyancing Act 1919 was not necessary to vest the chose in action in Adelaide Bank. That concession was correct. Section 52 of the Real Property Act 1900 provides that the debt vests to the transferee at law as well as in equity by virtue of every such transfer. As such, the assignment does not need to be perfected by a notice pursuant to s 12 of the Conveyancing Act 1919. In that regard s 6(1) of the Conveyancing Act 1919 provides that where it is inconsistent with the Real Property Act 1900, the Conveyancing Act 1919 shall not apply to lands coming under the provisions of the Real Property Act 1900. This analysis is consistent with the analysis of Young J in Nemeth v Reachcord Pty Limited [1998] NSWSC 271; (1998) 9 BPR 16,557 at 16,559.
41It follows that the appeal against her Honour's order granting possession of the units to Adelaide Bank should be dismissed.
42So far as the claim under the personal covenant is concerned, in addition to the matters raised above, Property Builders and Mr Phontos appealed on the basis that her Honour erred in awarding $1,550,256.81 to Adelaide Bank in that it included legal costs of AIF and Eurofinance in an amount of $152,682.81 and that the mortgage provided that the mortgagee was only entitled to its reasonable costs. The matter was not addressed orally but in its written submissions Property Builders made the same claim without any elaboration.
43Adelaide Bank in its submissions pointed to the fact that there was no material in the appeal papers to demonstrate that her Honour was in error in her calculation of the amount due.
44The only material before her Honour was an affidavit from Mr Socratous setting out the amount he claimed to be due to Adelaide Bank. Whilst it included amounts for legal costs it did not identify the nature of these costs, nor whether they were incurred by the first, second or third respondent, nor for what they were incurred.
45The position is quite unsatisfactory, but absent any material which would suggest that the costs did not fall within the definition of Debt in the schedule to the mortgage, this ground of appeal also should be dismissed as no error by the trial judge was disclosed.
46It follows that the appeal so far as it concerns the claim by Adelaide Bank against Property Builders should be dismissed. Pursuant to orders made at the hearing of the appeal, the respondents filed an affidavit of Mr Colin Sherry of 29 July 2011. That indicated that since the orders of the primary judge, funds had been received, presumably from the sale of remaining units and that the amount due as at 29 July 2011 was $268,821.79. In the absence of any application to file evidence to contest the accuracy of that affidavit I will accept it.