Rathner (Liquidator), in the matter of PE Capital Nominees Pty Ltd (In Liq) v Runner Investment Limited

Division: General Division

Registry: Victoria

National Practice Area: Commercial and Corporations

Sub-area: Corporations and Corporate Insolvency

Number of paragraphs: 280

Date of hearing: 27-29 September 2022

Counsel for the plaintiffs: Mr Ian Martindale KC and Mr Sergio Freire

Solicitors for the plaintiffs: HDL Legal and Consulting

Counsel for the first and third defendants: Mr Peter Bick KC with Mr Carl Möller

Solicitors for the first and third defendants: SBA Law

Counsel for the second defendant: Mr Paul Ehrlich KC and Mr Ryan Kornhauser

Solicitors for the second defendant: P&B Law

Counsel for the fourth defendant: The fourth defendant filed a submitting notice save as to costs

Solicitors for fourth defendants: Macpherson Kelly

Counsel for the second cross respondent by the second cross claim: The second cross respondent by the second cross claim filed a submitting notice save as to costs

Solicitors for the second cross respondent by the second cross claim: Cornwalls

Counsel for the fifth cross respondent by the second cross claim: The fifth cross respondent by the second cross claim filed a submitting notice save as to costs

Solicitors for the fifth cross respondent by the second cross claim: Meerkin & Apel

ORDERS VID 585 of 2021 IN THE MATTER OF PE CAPITAL NOMINEES PTY LTD (IN LIQ) V RUNNER INVESTMENT LIMITED (ACN 615 298 201) BETWEEN: GIDEON ISAAC RATHNER AND MATTHEW BRIAN SWEENY IN THEIR CAPACITY AS JOINT AND SEVERAL LIQUIDATORS OF PE CAPITAL NOMINEES PTY LTD (IN LIQUIDATION) (ACN 615 298 201) First plaintiff

PE CAPITAL NOMINEES PTY LTD (IN LIQUIDATION) (ACN 615 298 201) Second plaintiff

AND: RUNNER INVESTMENT LIMITED (A COMPANY REGISTERED IN THE REPULIC OF SEYCHELLES) (INCORPORATION NO: 224221) First defendant

MT DUNEED INVESTMENTS PTY LTD (ACN 631 976 326) Second defendant

JASPER MANAGEMENT LIMITED (A COMPANY REGISTERED IN THE REPUBLIC OF SEYCHELLES) (INCORPORATION NO: 216646) (and another named in the Schedule) Third defendant

AND BETWEEN: MT DUNEED INVESTMENTS PTY LTD (ACN 631 976 326) Cross claimant of first cross claim

AND: RUNNER INVESTMENT LIMITED (A COMPANY REGISTERED IN THE REPULIC OF SEYCHELLES) (INCORPORATION NO: 224221) Cross respondent of first cross claim

AND BETWEEN: RUNNER INVESTMENT LIMITED (A COMPANY REGISTERED IN THE REPULIC OF SEYCHELLES) (INCORPORATION NO: 224221) First cross claimant of second cross claim

JASPER MANAGEMENT LIMITED (A COMPANY REGISTERED IN THE REPUBLIC OF SEYCHELLES) (INCORPORATION NO: 216646) Second cross claimant of second cross claim

AND: MT DUNEED INVESTMENTS PTY LTD (ACN 631 976 326) First cross respondent of second cross claim

LANCE ADRIAN GODFREY KOCH Second cross respondent of second cross claim

PE CAPITAL NOMINEES PTY LTD (IN LIQUIDATION) (ACN 615 298 201) (and others named in the Schedule) Third cross respondent of second cross claim

order made by: MCEVOY J DATE OF ORDER: 5 July 2023

THE COURT ORDERS THAT:

1. The second cross claim dated 16 December 2021 be dismissed.
2. The proceeding and the second defendant's interlocutory process be listed for case management and interlocutory hearing at 4:15pm on 6 July 2023.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

MCEVOY J: 1 These proceedings concern the disputed sale of a parcel of land situated at 623-645 Torquay Road, Mt Duneed (the Land). The Land was initially owned by PE Capital Nominees Pty Ltd in its capacity as trustee of the PEC Mt Duneed SPV Trust. PE Capital subsequently went into liquidation. For reasons which it is unnecessary to describe here, the Land was later transferred to the fourth defendant, Oratango Pty Ltd. 2 The proceedings have been conducted on the basis that the Land was the subject of three registered mortgages to the following parties: (a) the first mortgage to the first defendant, Runner Investment Limited; (b) the second mortgage to the second defendant, Mt Duneed Investments Pty Ltd; and (c) the third mortgage to the third defendant, Jasper Management Limited. 3 Although the liquidators of PE Capital, Gideon Isaac Rathner and Michael John Sweeny, commenced the proceedings on 13 October 2021 by way of originating process under r 2.2 of the Federal Court (Corporations) Rules 2000 (Cth) seeking to be appointed receivers of trust assets and seeking declarations and orders in relation to the Land, the real dispute has evolved and has primarily been conducted between Mt Duneed on the one hand, and Runner and Jasper on the other. The liquidators have supported Mt Duneed's position, and indeed at the hearing indicated that they only sought relief if Runner and Jasper were successful in their claims against Mt Duneed. 4 Mt Duneed, by way of cross claim dated 9 December 2021, has sought to exercise a power of sale it asserted as second mortgagee under s 77 of the Transfer of Land Act 1958 (Vic) (TLA) and sell the Land for the sum of $7,400,000 to the second cross respondent, Lance Adrian Godfrey Koch, pursuant to a Contract of Sale which it entered with Mr Koch on 3 December 2021 and which, Mt Duneed says, would have settled on 20 December 2021 but for Runner's refusal to permit the settlement. Runner and Jasper have contended, however, that Mt Duneed was not able to sell the Land by reason of a priority/subordination agreement entered into by Manda Capital Holdings Pty Ltd, Martyn Craig Barnes and Mt Duneed (the original three mortgagees of the Land), and PE Capital as mortgagor on or about 10 April 2019 to regulate and subordinate the priorities of their respective mortgages (Priority Deed). Runner and Jasper have maintained that under this Priority Deed Mt Duneed covenanted not to take any steps to enforce its mortgage while the First Mortgage Debt (as defined in the Priority Deed), which had become owing to Runner, was still outstanding. The proceedings have been conducted on the basis that the First Mortgage Debt remains due and owing. 5 Mt Duneed has contended that as Runner is not a party to the Priority Deed, Runner cannot rely on the deed to its benefit. If Runner can rely on the Priority Deed, Mt Duneed has said that to allow Runner and Jasper to restrain it from selling the Land would be unconscionable and contrary to established equitable principle. Thus it has been Mt Duneed's position that the court should permit it to sell the Land and require Runner to deliver up control of the electronic certificate of title in accordance with s 116A of the TLA. Mt Duneed has sought injunctive and other relief to this end, proposing that at settlement the Land would be freed and discharged of all liability on account of Runner's mortgage and that any proceeds of sale over and above the sum of $3,038,960.57 (the amount of the principal claimed by Runner to be owing under its mortgage) be paid into court pending a taking of accounts, and it has sought an order for a taking of accounts. 6 Runner and Jasper, by way of second cross claim dated 16 December 2021, have argued that the parties should be held to their bargain (as Runner and Jasper have contended it should be understood by reference to the Priority Deed). They have maintained that Runner is entitled to the benefit of the Priority Deed on its terms, or that Manda holds the benefit of the Priority Deed on trust for Runner, thereby enabling Runner to enforce the Priority Deed (or have Manda enforce it as Runner's trustee) and prevent Mt Duneed from selling the Land. Because of the operation of the Priority Deed, Runner and Jasper have contended that Mt Duneed was not entitled to give a notice of default under s 76 of the TLA and accordingly that the notice, and the Contract of Sale that Mt Duneed subsequently entered, are of no force and effect. Thus Runner has sought declaratory relief that Mt Duneed has no power to sell the Land, that Mt Duneed's notice pursuant to s 76 is invalid and of no effect, that the Contract of Sale is of no force or effect or is at an end, as well as injunctions restraining the completion of the sale and restraining Mt Duneed from breaching the Priority Deed. Runner has also sought an order requiring Manda to assign to it the benefit of the Priority Deed. Jasper has sought an injunction restraining Mt Duneed from completing the Contract of Sale, and an order setting it aside. 7 If Mt Duneed is unsuccessful in its claims against Runner, the liquidators' position has been that they seek to sell the Land as part of the liquidation. If Mt Duneed and Mr Koch are restrained from completing the sale of the Land, PE Capital and the liquidators have sought a declaration under s 468 of the Corporations Act 2001 (Cth) that the transfer of the Land by Runner from PE Capital to Oratango is void, and, or alternatively, orders for Oratango to transfer the Land back to PE Capital, and orders that the liquidators be appointed as receivers of the Land with a power of sale under s 90-15 of the Insolvency Practice Schedule (Corporations) contained in Schedule 2 of the Corporations Act, s 63 of the Trustee Act 1958 (Vic), and the court's general equitable jurisdiction. Runner has opposed this course and in addition has sought an order under s 90(3) of the TLA to remove a caveat lodged by PE Capital claiming an interest in the Land as chargee arising from its right of indemnity in trust assets as a former trustee, as well as a declaration that the liquidators' equitable lien over the trust assets rank in priority behind any registered mortgage. 8 Oratango, Mr Koch and Manda have each filed submitting notices in the proceedings, save as to costs. 9 Notwithstanding the submission of Runner and Jasper that their case is entirely responsive to Mt Duneed's case, and that Mt Duneed is effectively the moving party, the most logical starting point is the case brought by Runner and Jasper on the second cross claim. It presents the following issues for determination. 10 The first is whether Runner is entitled to enforce the substance of the Priority Deed, whether by reference to the deed itself, or pursuant to a trust under which choses in action contained in the Priority Deed are held by Manda as trustee for Runner as beneficiary. This involves consideration of the following questions: (a) is Runner a "successor in title" or an "assign" of Manda having regard to the definition of "person" in cl 1.2(c) of the Priority Deed so as to be a person named in the Priority Deed? (b) do the benefits of cll 5.1(a), 5.1(b) and 5.2(a) of the Priority Deed run with the Land by operation of s 78(1) of the Property Law Act 1958 (Vic) (PLA)? (c) does s 45(2) of the TLA operate to transfer rights under the Priority Deed to Runner? (d) does Manda hold the benefit of the Priority Deed on trust for Runner? (e) does s 56(1) of the PLA operate to entitle Runner to the benefit of the Priority Deed? 11 For reasons I will explain, I have determined each of these questions against Runner and Jasper. That is to say, I have concluded that Runner is not entitled to rely on the Priority Deed and that Manda does not hold the benefit of the Priority Deed on trust for Runner. 12 Because the balance of the case advanced by Runner and Jasper is predicated on the operation of the Priority Deed in Runner's favour, on one view it may be strictly unnecessary to give further consideration to the question of whether Mt Duneed was contractually entitled to issue the notice of default, the validity of that notice and thus the Contract of Sale, and whether there is any basis for Runner and Jasper to be granted the discretionary relief they seek: see, in this regard, DBB16 v Commonwealth of Australia [2022] FCA 783 at [17] (Raper J), citing Boensch v Pascoe [2019] HCA 49; 268 CLR 593 at 600-601 [7]-[8] (Kiefel CJ, Gageler, and Keane JJ). In the present circumstances, however, and noting that I would resolve these further questions against Runner and Jasper also, I consider that it is desirable to deal at least briefly with these further matters: see Massoud v Nationwide News Pty Ltd [2022] NSWCA 150 at [35] (Leeming JA); Gulic v Boral Transport Ltd [2016] NSWCA 269 at [7]-[8] (Macfarlan JA). 13 It is then necessary to turn to Mt Duneed's case on the first cross claim, which involves consideration of the following questions: (a) does Mt Duneed have the power to sell the Land under s 77(1) of the TLA? (b) if so, can Mt Duneed validly exercise that power by discharging Runner's mortgage at settlement from the proceeds of sale rather than by tendering the amount necessary to discharge Runner's mortgage prior to settlement of the Contract of Sale? (c) is there utility in granting relief to Mt Duneed in circumstances where Runner and Jasper maintain that Mr Koch may not have been able to complete the Contract of Sale? (d) if Mt Duneed is entitled to relief, does Runner's entitlement to continue to capitalise interest on its own mortgage debt end as at 20 December 2021, the date the Contract of Sale would have settled had it not been for Runner's refusal to permit the settlement? 14 For reasons I will explain, I have resolved each of these questions in favour of Mt Duneed. 15 Subject to certain significant developments which have apparently occurred since the hearing of the competing claims and while judgment has been reserved, this leaves only the liquidators' applications which are the subject of their originating process and their interlocutory application of 22 November 2021, together with the responses of Runner and Jasper to those applications. As has been mentioned, it was submitted on behalf of the liquidators that their applications were only pressed in the event that Mt Duneed and Mr Koch were restrained from completing the Contract of Sale. Having regard to the resolution of Mt Duneed's case in its favour, the liquidators' applications and the responses of Runner and Jasper to them would seem to fall away. 16 Were it not for the further matters which I now describe, it would have been appropriate for Mt Duneed to have had, substantially, the orders sought on its cross claim. However, on 26 June 2023, shortly before judgment was to be delivered, Mt Duneed filed an interlocutory process seeking orders, amongst other things, for leave to file and serve an amended cross claim in the proceedings - in effect to re-open its case. 17 It did so because, as an affidavit filed in support of its application on 26 June 2023 by a Mr Paul Turner (the director of Mt Duneed) attests, Runner has now transferred the Land to South Reeve Pty Ltd. It is alleged by Mt Duneed in a proposed amended cross claim that the Land has been sold for $4,820,000, being $2,580,000 less than the $7,400,000 payable under the Contract of Sale with Mr Koch, which sale represents a breach of Runner's obligation to exercise its power of sale in good faith and having regard to the interests of Mt Duneed pursuant to s 77(1) of the TLA. Mt Duneed's interlocutory process accordingly seeks to amend the claim and the relief sought by Mt Duneed in the proceedings. 18 After usual court hours in the afternoon of 26 June 2023 I conducted a case management hearing in relation to Mt Duneed's interlocutory process filed that day. Upon the court's indication that it would shortly deliver judgment on the claims in the terms which they had been agitated by the parties at the hearing on 27-29 September 2022, senior counsel for Mt Duneed accepted that the hearing of his client's interlocutory process and the formulation of any amended claims and consequential relief should be adjourned pending publication of these reasons for judgment. 19 Accordingly, what follows should be understood as the court's determination of only those matters raised by the first cross claim of 9 December 2021 and the second cross claim of 16 December 2021. In light of what has apparently occurred it would seem that it is unlikely to be appropriate to make the orders sought by Mt Duneed on the first cross claim in its present form. It will be necessary to hear from Mt Duneed on the form of its proposed amended cross claim and related matters, and from the parties more generally on the future conduct of the litigation. The second cross claim dated 16 December 2021 will be dismissed.

RELEVANT BACKGROUND 20 PE Capital was incorporated on 12 October 2016, and on 17 October 2016 the Trust was established by deed (Trust Deed). Pursuant to the Trust Deed, PE Capital was appointed the initial trustee of the Trust. 21 On 15 May 2017, Mr Barnes was appointed director of PE Capital, and since 17 July 2018 Mr Barnes has been the sole director of PE Capital. The sole shareholder of PE Capital is Barnes Capital Projects Pty Ltd. 22 From 19 February 2018 to 6 August 2021, PE Capital was registered as the sole proprietor of the Land. It would seem, by reference to the fact that PE Capital's books and records show that substantial funds were advanced to it in its capacity as trustee of the Trust by at least three lenders on the security of mortgages over the Land, that PE Capital held the Land in its capacity as trustee of the Trust. The Land was acquired and developed as a 34-lot subdivision by PE Capital through a special purpose vehicle. As to certain of the underlying circumstances see ASIC v PE Capital Funds [2022] FCA 76 at [4], [21]-[23] (Cheeseman J). 23 In early 2019 PE Capital (as trustee) entered into several loan agreements on the security of registered mortgages over the Land. The details of these loans are outlined below. They are described in order of their current priority; that is, by the date of registration of the relevant mortgage, rather than the date the initial loan agreement was entered into.

First loan 24 On 9 April 2019 a loan agreement was entered into between Manda as trustee for Torquay Road Mount Duneed Unit Trust (as lender), and PE Capital as trustee for the Trust (as borrower) (Manda Loan Agreement). Under the Manda Loan Agreement, Manda agreed to lend PE Capital $2.7 million at an interest rate of 19.5 per cent per annum (with a discount rate of 12.5 per cent per annum), repayable on 9 April 2020. 25 This loan was provided on the security of a first registered mortgage over the Land, registered on 10 April 2019 in favour of Manda. PE Capital and Manda also entered into a General Security Agreement on 9 April 2019, whereby PE Capital granted Manda general security for the payment of all money owing in respect of the loan. Specifically, PE Capital granted a security over all of its present and after acquired personal property, including its right to be indemnified over the trust assets and a fixed charge over all of its present and after acquired property that is not personal property. 26 On 12 January 2021, Manda served a Notice of Default under s 76 of the TLA demanding repayment of the amount of $2.74 million. 27 By transfer of mortgage registered on 13 April 2021, the first mortgage was transferred from Manda to Mr Barnes for a stated assignment fee of $3,038,960.57. By transfer of mortgage registered on 14 April 2021 the first mortgage was, in turn, transferred from Mr Barnes to Runner. 28 PE Capital remains in default of the First Mortgage Debt, and consequently interest has been accruing at a rate of 19.5 per cent per annum capitalised on a compounding monthly basis, subject to the outcome of this litigation. It should be observed that of the three relevant loans, the first loan was made last; but the mortgage by which it was secured was registered first. As will be seen, the Priority Deed gives this loan first priority, which is why Manda (now Runner) is referred to as the "first mortgagee" in the Priority Deed and in these proceedings.

Second loan 29 On 8 March 2019 a loan agreement was entered into between Mt Duneed (as lender) and PE Capital as trustee for the Trust (as borrower). Under the loan agreement Mt Duneed agreed to lend PE Capital $2 million at an interest rate of 30 per cent per annum and repayable on 31 March 2020. The loan was provided on the security of a second registered mortgage over the Land, registered on 2 February 2021 in favour of Mt Duneed. It should be observed that of the three relevant loans, this loan was made second in time; but the mortgage by which it was secured was registered last. This is why Mt Duneed is referred to as the "third mortgagee" in the Priority Deed. The Priority Deed gave this mortgage second ranking priority, which is why Mt Duneed has come to be referred to as the "second mortgagee" in these proceedings.

Third loan 30 On 23 July 2018 a loan agreement was entered into between Mr Barnes (as lender) and PE Capital as trustee for the Trust (as borrower). Under this loan agreement Mr Barnes agreed to lend PE Capital $7.5 million at an interest rate of 1 per cent per week on the principal sum (and a default interest rate of 4 per cent per week on the principal sum commencing on the repayment date), and repayable on 20 August 2018. 31 This loan was provided on the security of a third mortgage over the Land, registered on 2 February 2021, in favour of Mr Barnes. By deed of assignment of debt and mortgage, this third mortgage was transferred from Mr Barnes to Jasper on 8 April 2021 and was registered on 14 April 2021. Once again, it should be observed that this loan was made first in time, and the mortgage by which it was secured was registered second. This is why Mr Barnes is referred to as the "second mortgagee" in the Priority Deed. The Priority Deed gave this mortgage third ranking priority, which is why Mr Barnes (and now Jasper) has come to be referred to as the "third mortgagee" in these proceedings.

The Priority Deed 32 As has been mentioned, on or about 10 April 2019 Manda, Mr Barnes and Mt Duneed (the original mortgagees) entered into the Priority Deed, which regulates the priorities between their respective security interests. 33 Clause 3 of the Priority Deed deals with the question of priority. Clause 3.1(q) is in the following terms: The Securities will rank and operate at law and in equity so as to confer: (i) First priority of [Manda's] Securities over [Mr Barnes'] Securities and [Mt Duneed's] Securities up to the amount specified Item 5 of the Schedule ("First Mortgagee's Priority") reduced by the net proceeds received by [Manda] upon any partial discharge of [Manda's] Securities; (ii) Second priority of [Mt Duneed's] Securities over [Manda's] Securities up to and including the amount specified in Item 7A of the Schedule ("Third Mortgagee's Priority"); (iii) Third priority of [Mr Barnes'] Securities over [Manda's] Securities up to and including the amount specified in Item 7 of the Schedule ("Second Mortgagee's Priority"); (iv) Fourth priority of [Manda's] Securities for the balance of money thereby secured, if any. 34 It will be necessary to return to other terms of the Priority Deed, in particular cl 5 which concerns the subordination of Mt Duneed's mortgage.

Liquidation of PE Capital 35 On or about 30 April 2021 Mt Duneed served on PE Capital a creditor's statutory demand in respect of its loan, although this was subsequently withdrawn and re-issued on 7 May 2021. Wollert Project Investment Pty Ltd, another creditor of the PE Capital, also served a creditor's statutory demand on PE Capital on 7 May 2021 in respect of money advanced by it to PE Capital. 36 On 20 May 2021 the liabilities of PE Capital as trustee of the Trust far exceeded PE Capital's assets and PE Capital was clearly insolvent. On that same date Barnes Capital Projects, by its director Mr Barnes, and in its apparent capacity as the sole unit holder in the Trust, removed PE Capital as trustee of the Trust pursuant to cl 88 of the Trust Deed and appointed Oratango as a new trustee pursuant to cl 85 of the Trust Deed, with immediate effect. There is some question about the validity of this appointment, but nothing seems to turn on it for present purposes. 37 On 4 August 2021 the Supreme Court of Victoria made an order to wind up PE Capital in insolvency, an application for this relief having been made by Wollert on 6 July 2021. Orders were also made for the appointment of the liquidators.

Transfer of the Land to Oratango 38 Clause 89 of the Trust Deed provides that upon liquidation PE Capital's appointment as Trustee is automatically terminated. Further, cl 90 requires that the former trustee must immediately hand over the property of the Trust to the new trustee, and do everything necessary to vest the assets of the Trust in the new trustee. 39 On 6 August 2021, in purported exercise of the power of attorney incorporated by reference into its mortgage, Runner caused the Land to be transferred from PE Capital to Oratango as the new trustee of the Trust. SBA Law, which at that time acted for PE Capital, executed and registered the transfer of Land on PE Capital's behalf. It is the liquidators' positon that this was not done with their authority or consent. 40 On 21 September 2021 the liquidators lodged a caveat over the Land to secure PE Capital's right of indemnity over assets of the Trust. They claimed an interest in the Land as chargee arising from the former trustee's right of indemnity from trust assets.

Appointment of Mr Yeo as receiver 41 On 11 November 2021 the liquidators received an offer for sale for the Land in the amount of $7,050,000 and informed the other parties of this offer the following day. Mt Duneed advised that it supported the proposed sale, whereas Runner and Jasper, through their solicitors, requested further information. 42 On 17 November 2021 Runner appointed Mr Andrew Yeo of Pitcher Partners as receiver of PE Capital's right of indemnity from the Trust and its equitable lien over the assets of the Trust. It was in response to this that on 22 November 2021 the liquidators filed the interlocutory application which has been mentioned, seeking orders that they be appointed receiver of PE Capital's right to be indemnified from the assets and property of the Trust with the power to sell the Land.

Sale of the Land to Mr Koch 43 On 3 December 2021 Mt Duneed served on PE Capital a Notice of Default and Demand under Mortgage and s 76 of the TLA, pursuant to which it demanded repayment of the amount then secured by the second mortgage, being $4,420,122.78. As has been mentioned, on the same day Mt Duneed entered into the Contract of Sale for the Land with Mr Koch, for a purchase price of $7,400,000 and with a settlement date of 20 December 2021. Subsequently, on 16 August 2022, a Deed of Variation of the Contract of Sale was entered into by Mt Duneed and Mr Koch providing that settlement would only take place 20 days after Runner delivered up control of the electronic certificate of title. 44 The Contract of Sale provided for the satisfaction of the First Mortgage Debt. Special condition 1(c) is in the following terms: settlement is conditional upon the property being freed and discharged from all liability on account of the first mortgage and the Balance due at settlement shall be applied in first instance (subject to any court order permitting said monies, or part thereof, to be paid into court) in full satisfaction of the first mortgage and thereafter in accordance with section 77(3) of the Transfer of Land Act 1958 (Vic). 45 Special condition 3 is in the following terms: The obligation of the vendor to settle the sale of the land pursuant to this contract is conditional upon the vendor's power of sale becoming exercisable at the expiration of the notice period specific in the section 76 notice (condition). 46 As has been mentioned, the liquidators have supported the sale of the Land to Mr Koch on the terms and conditions of the Contract of Sale. If they had been permitted to do so they would have sold the Land to Mr Koch on the same terms and conditions. 47 Against this background it is necessary to turn to the case advanced by Runner and Jasper. The first and critical aspect of this is whether Runner can rely on the Priority Deed or otherwise take the benefit of it even though it is not named, explicitly, as a party to it.

CAN RUNNER RELY ON THE PRIORITY DEED? 48 In its written submissions Runner says that it is entitled to enforce the Priority Deed on the following four bases: (a) that the definition of "person" in cl 1.2(c) is such that its provisions extend to "successors in title" and "assigns" of Manda; (b) that cll 5.1(a), 5.1(b) and 5.2(a) of the Priority Deed are covenants that "touch and concern" or "relate to" the Land and accordingly run with the first mortgage, by way of the operation of s 78(1) of the PLA; (c) by reason of s 45(2) of the TLA, the rights under the Priority Deed, specifically cll 5.1(a), 5.1(b) and 5.2(a), were transferred to Runner; and (d) that Manda holds the benefit of the Priority Deed on trust for Runner. 49 It should also be mentioned that Runner made reference in its written submissions to s 56(1) of the PLA. Whilst in terms Runner's written submissions were limited to the four bases noted above, it is not apparent how the reference to s 56(1) of the PLA could have been relevant unless Runner meant to advance it as a fifth basis for asserting that it is entitled to the benefit of the Priority Deed. In this respect s 56(1) does not appear to be a condition precedent to the establishment of an entitlement to enforce the Priority Deed on any of the four bases expressly mentioned by Runner in its submissions. Nonetheless, I will also consider the significance of s 56(1) as a basis for Runner's submission that it is entitled to enforce the Priority Deed. 50 Plainly, and as Mt Duneed submits, Runner bears the onus of proving that it is entitled to enforce the Priority Deed: Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154 at [54] (Beazley, Basten and Campbell JJA); Winterton Constructions Pty Ltd v Hambros Australia Limited (1991) 101 ALR 363 at 370-371 (Gummow J); and McLellan v Sharantelli Pty Ltd [2000] VSC 174 at [9] (Warren J). With this in mind I turn to the first of Runner's arguments that it is entitled to rely on the Priority Deed.

Ground one: is Runner a "person" named in the Priority Deed? 51 It is uncontroversial that Manda was a party to the Priority Deed at the time of its execution. Runner submits that by reason of the extended meaning of "person" in cl 1.2(c) of the Priority Deed, which includes "an individual, a body corporate and a government and includes that person's trustees, executors, administrators, successors in title and assigns", Runner is itself a person named as a party to the Priority Deed and is entitled to enforce its covenants, including those found in cll 5.1(a), 5.2(b) and 5.2(a). Runner submits that because of the assignment of the first mortgage from Manda to Mr Barnes, and then from Mr Barnes to Runner, Runner is an "assign" from Mr Barnes who was an "assign" from Manda, and references to the "First Mortgagee" in the Priority Deed should be regarded as references to Runner not Manda. Further, and in the alternative, Runner contends that it is a "successor in title" to Manda because it enjoys the same proprietary interest that Manda had under the first mortgage. 52 Runner submits that this construction is supported by cll 4.2(c), 5.2(c) and 10.2 of the Priority Deed. These clauses provide that a mortgagee that transfers, assigns or otherwise deals with its mortgage cannot do so without causing the transferee, assignee or other party "to enter into a deed by which it undertakes to be bound by the terms of this deed." It is said that the additional deed contemplated would ensure that the assignee or successor in title is subject to the obligations under the Priority Deed, especially given that it would be entitled to enforce the Priority Deed as a "person" named as a party (by virtue of cl 1.2(c)). 53 I do not accept that Runner is relevantly a successor in title or an assign of Manda and thus a "person" for the purposes of cl 1.2(c) of the Priority Deed. As Mt Duneed submits, the deeds of assignment of security (dated 1 April 2021 and 13 April 2021) of the First Mortgage and First Mortgage Debt from Manda to Mr Barnes and then from Mr Barnes to Runner did no more than assign Manda's right, title and interest in the debt and securities (see cl 2.1 of the 1 April 2021 deed and cl 2.2 of the 13 April deed, and noting the entire agreement clauses in both deeds). They did not assign the benefits and burdens of the Priority Deed itself. The benefits and burdens of the Priority Deed are distinct from the mortgages to which it relates and, absent a separate assignment, a transferee of the mortgage is not automatically entitled to the covenants of the Priority Deed. As Mt Duneed submits, cl 1.2(c) does not operate to give the benefit of the Priority Deed to a person who would not otherwise have it. 54 Further, and as Mt Duneed also submits, the construction of "successors in title" and "assigns" in the definition of "person" in cl 1.2(c) of the Priority Deed must be considered in context. The context here is the definition of each party being concerned with the Priority Deed and those who succeeded to or received an assignment of the benefits and burdens of the Priority Deed. On its proper construction a person will only be a "person" named in the Priority Deed if, relevantly, they are an assignee of Manda's right, title, and interest in the Priority Deed or a successor in title of Manda in respect of the Priority Deed. It is not sufficient for a person merely to be a successor in title or an assign of the first mortgage or the First Mortgage Debt. 55 It follows from this that I reject Runner's submission that cll 4.2(c), 5.2(c) and 10.2 of the Priority Deed support its construction. I accept, as Mt Duneed submits, that these clauses do no more than permit a mortgagee, who is also a party to the Priority Deed, to assign or transfer its mortgage so long as the mortgagee first procures the agreement of the assignee or transferee to be bound by obligations in the same terms as those created by the Priority Deed. 56 It should also be noted that Runner's submissions that it is a "person" named in the Priority Deed and can take the benefit of the covenants contained within it sit uncomfortably with the repeated, and unsuccessful, attempts made by Runner's solicitor, to persuade Manda's solicitors that Manda should assign the benefit of the Priority Deed to Runner in the period 11 December 2021 to 16 December 2021 (see the relevant emails exhibited to the affidavit of Mr Nicholas Witherow affirmed 3 August 2022).

Ground two: do cll 5.1(a), 5.1(b) and 5.2(a) of the Priority Deed run with the Land by operation of s 78(1) of the PLA? 57 Runner contends that Manda's rights under the Priority Deed were transferred to Runner because cll 5.1(a), 5.1(b) and 5.2(a) of the Priority Deed are all covenants which "relate to" the Land and as such are deemed to be made with Manda and its successors in title pursuant to s 78(1) of the PLA. It submits that these clauses are covenants that "touch and concern" Manda's interest in the Land, and accordingly run with the first mortgage. 58 As the parties accept, it is convenient to deal with these points together as a covenant "relating to" land for the purposes of s 78(1) of the PLA is one which "touches and concerns" the land at common law: Federated Homes Ltd v Mill Lodge Properties Ltd [1980] 1 WLR 594; (1980) 1 All ER 371 at 378 (Brightman LJ, with Browne LJ and Megaw LJ agreeing); Simmons v Lee [1998] 2 Qd R 671 at 674 (McPherson JA, with Thomas and Dowsett JJ agreeing).

The requirement for two estates in land as a condition precedent to the operation of s 78(1) 59 It is axiomatic that for the benefit of a restrictive covenant to run with a particular piece of land (whether running by annexation, assignment, a scheme of development or a statutory mechanism such as s 78(1) of the PLA or s 45(2) of the TLA), there must be two estates in land the subject of the covenant, one of which is burdened by the covenant and one of which is benefitted by the covenant: Formby v Barker [1903] 2 Ch 539 at 542-543, 551-552 (Vaughan Williams LJ), 554 (Romer J) and 555 (Stirling LJ); London City Council v Allen [1914] 3 KB 642 at 654 and 660 (Buckley LJ), 664 and 672 -673 (Scrutton J). In the Australian context see: Quadramain Pty Ltd v Sevastapol Investments Pty Ltd (1976) 133 CLR 390 at 408-413 (Jacobs J); Pirie v Registrar-General (1962) 109 CLR 619 at 627 (Kitto J); Toohey v Gunther (1928) 41 CLR 181 at 202-203 (Higgins J); Deguisa v Lynn [2019] SASCFC 107 at [167]-[168] and [228]-[229] (Peek J); Clarke v Burnie City Council [2008] TASSC 75 at [17] (Blow J); Midland Brick Company Pty Ltd v Welsh [2006] WASC 122; (2006) 32 WAR 287 at 326-330 [205]-[222] (Hasluck J); Fitt v Luxury Developments Pty Ltd [2000] VSC 258 at [152]-[156] (Gillard J). 60 The converse of this principle is that there can be no restrictive covenant on land (i.e. a covenant capable of running with the land as opposed to being merely an in personam covenant) where the covenant does not generate a benefit to one estate in land and a correlative burden to another; and that is the case even if the restrictive covenant in question concerns a (singular) piece of land. 61 Allen was a case which involved a private individual covenanting with a local council. The local council covenanted to give the individual statutory permission to build a new road on his property in exchange for the individual covenanting not to build on a plot of land which fell at the end of the proposed street. The council, however, did not have any estate in land adjacent to, or nearby, the property to which the restrictive covenant was to apply. The individual later sold the land to a third party, who took with notice of the covenant. The third party built homes on the land without the consent of the council. In disposing of the case, Buckley LJ relevantly said the following at 654: In the present case we are asked to extend the doctrine of Tulk v Moxhay [[1848] EWHC Ch J34; (1848) 41 ER 1143] so as to affirm that a restrictive covenant can be enforced against a derivative owner taking with notice by a person who never has had or who does not retain any land to be protected by the restrictive covenant in question. In my opinion the doctrine does not extend to that case. The doctrine is that a covenant not running with the land, but being a negative covenant entered into by an owner of land with an adjoining owner, binds the land in equity and is enforceable against a derivative owner taking with notice. The doctrine ceases to be applicable when the person seeking to enforce the covenant against the derivative owner has no land to be protected by the negative covenant. The fact of notice is in that case irrelevant. (Emphasis added.) 62 Formby concerned a purchaser who, upon the sale of the entirety of a plot of land, covenanted with the vendor so as to restrict the purchaser's use of the land. An assign of the purchaser acted in a way contrary to the covenant and the administrator and beneficiary of the vendor's estate sought injunctive relief against the assign. 63 In dismissing the plaintiff's claim, Vaughan Williams LJ observed at 550-553: It becomes necessary, therefore, to see whether an action for an injunction can be brought, upon the principle established by the judgment of Lord Cottenham L.C. in Tulk v Moxhay. Now in the marginal note of that case it is said: "A covenant between vendor and purchaser, on the sale of land, that the purchaser and his assigns shall use or abstain from using the land in a particular way, will be enforced in equity against all subsequent purchasers with notice, independently of the question whether it be one which runs with the land so as to be binding upon subsequent purchasers at law." But at the beginning of the Lord Chancellor's judgment he said: "That this Court has jurisdiction to enforce a contract between the owner of land and his neighbour purchasing a part of it, that the latter shall either use or abstain from using the land purchased in a particular way, is what I never knew disputed." These words do not cover the present case, because the land company did not purchase a part only of the vendor's land, but the whole of it. It becomes necessary, therefore, to ascertain whether the principle of Tulk v Moxhay applies to a case in which the vendor sells his whole estate. I have not been able to find any case in which, after the sale of the whole estate in land, the benefit of a restrictive covenant has been enforced by injunction against an assignee of the purchaser at the instance of a plaintiff having no land retained by the vendor, although there are cases in which restrictive covenants seem to have been enforced at the instance of plaintiffs, other than the vendor, for the benefit of whose land it appears from the terms of the covenant, or can be inferred from surrounding circumstances, that the covenant was intended to operate. In all other cases the restrictive covenant would seem to be a mere personal covenant collateral to the conveyance. It is a covenant which cannot run with the land, either at law or in equity, and therefore the burden of the covenant cannot be enforced against an assignee of the purchaser. But it is said that the doctrine of Tulk v Moxhay is independent of the question whether there is in law or in equity a covenant running with the land, and that the doctrine is based upon obligations on the conscience of a person taking an estate with notice of a restrictive covenant binding it. The answer, I think, is to be found in a passage in the judgment of Collins L.J. in Rogers v Hosegood [[1900] 2 Ch. 388, 407]. He said: "These authorities establish the proposition that, when the benefit has been once clearly annexed to one piece of land, it passes by assignment of that land, and may be said to run with it, in contemplation as well of equity as of law, without proof of special bargain or representation on the assignment. In such a case it runs, not because the conscience of either party is affected, but because the purchaser has bought something which inhered in or was annexed to the land bought. This is the reason why, in dealing with the burden, the purchaser's conscience is not affected by notice of covenants which were part of the original bargain on the first sale, but were merely personal and collateral, while it is affected by notice of those which touch and concern the land. The covenant must be one that is capable of running with the land, before the question of the purchaser's conscience and the equity affecting it can come into discussion." It seems to me that in the passage I have just read Collins L.J. assumes that the doctrine of Tulk v Moxhay will not apply to a contract which is merely personal and collateral. In my judgment, the covenant in the present case is merely personal and collateral; it has not been entered into for the benefit of any land of the vendor, or of any land designated in the conveyance; it is a covenant which, in my judgment, would not pass to the heirs of the vendor, notwithstanding the words of the covenant are, "covenant with the said R.H. Formby, his heirs, executors, and administrators." There is no land designated to which the word "heirs" can be applied. R.H. Formby could have sued the purchasers for breaches in his lifetime, and I think that his executrix could have sued the purchasers for breaches after his death, but I do not think that the executrix can sue the assignee of the purchasers. There is no contractual privity and no relation of "dominancy" and "serviency" of lands which will enable an action to be brought against a person not a party to the original contract, nor do I think that the benefit of this covenant could be dealt with by a devise. [His Lordship then quoted a passage from Jessel MR in South Western Railway Co v Gomm (1882) 20 CH D 562 at 583, before concluding:] I think that in both these paragraphs Jessel M.R., whether describing the doctrine of Tulk v Moxhay as an extension of Spencer's Case [(1583) 5 Co Rep 16a] or of the equitable doctrine of negative easements, regards it as something arising from the relation of two estates one to the other. (Emphasis added.) 64 In the present case there is only one relevant parcel of land - the Land itself; and we are only concerned with one estate in the Land. There is no other estate in land (whether in the Land itself or in another parcel of land) which is said to be burdened by any benefit which is said by Runner to be attached to the Land and, therefore, to have run with the mortgage interest in the Land which is now held by Runner. 65 Accordingly, the submission that any benefit under the Priority Deed has passed with the interest of the First Mortgage from Manda to Mr Barnes and then to Runner, by the relevant covenant "touching and concerning" the Land by operation of s 78(1) of the PLA should be rejected. It is sufficient to say that there is no second estate in land to which the burden of the covenant has been attached such that the benefit is capable of flowing with the correlatively benefitted counterpart estate in land. 66 For these reasons it may be accepted that the covenants in the Priority Deed invoked by Runner are not covenants of the kind to which s 78(1) of the PLA applies.

The meaning of "relating to any land" in s 78(1) of the PLA 67 Runner's argument that the relevant covenants under the Priority Deed are ones "relating to any land" for the purposes of s 78(1) of the PLA must fail for much the same reasons as those advanced above in relation to the requirement for there to be two estates in land. Nonetheless, it is necessary to consider the statutory regime carefully. 68 Section 78(1) of the PLA provides that: A covenant relating to any land of the covenantee shall be deemed to be made with the covenantee and his successors in title and the persons deriving title under him or them, and shall have effect as if such successors and other persons were expressed. (Emphasis added.) 69 As has been observed, the words "relating to" in s 78(1) are to be read as if the words "that touches and concerns" were substituted for them. As much is clear from understanding s 78(1) of the PLA in light of its history and context, rather than reading the words "relating to any land" devoid of context. 70 Runner's argument (assuming, wrongly, that there was a covenant on the Land the benefit of which could run with the Land) is that the words "relating to any land" are such that they capture the relevant covenants in the Priority Deed. This is said to be because those covenants deal with regulation of a series of interests which, in turn, are tied to the Land; and the definitions of "land" in s 18 of the PLA and in s 38 of the Interpretation of Legislation Act 1984 (Vic) (Interpretation Act) seem to support a view that "land" includes interests in land. However, this is not correct. 71 Section 18 of the PLA is relevantly as follows: land includes land of any tenure, and mines and minerals whether or not held apart from the surface, buildings or parts of buildings (whether the division is horizontal, vertical or made in any other way) and other corporeal hereditaments; and also a rent and other incorporeal hereditaments, and an easement, right, privilege, or benefit in, over, or derived from the land and also an undivided share in land; and mines and minerals include any strata or seam of minerals or substances in or under any land, and powers of working and getting the same. 72 Before proceeding further, it is important to note that the wording of s 78(1) of the PLA is derived from s 78(1) of the Law of Property Act 1925 (UK) (LPA), which latter provision is in the following relevant terms: A covenant relating to any land of a covenantor or capable of being bound by him, shall, unless a contrary intention is expressed, be deemed to be made by the covenantor on behalf of himself his successors in title and the persons deriving title under him or them, and, subject as aforesaid, shall have effect as if such successors and other persons were expressed. 73 The definition of "land" in the LPA (as originally enacted) was even more expansive than that to be found in s 18 of the PLA. Section 205(ix) of the LPA in its original terms provided: "Land" includes land of any tenure, and mines and minerals, whether or not held apart from the surface, buildings or parts of buildings (whether the division is horizontal, vertical or made in any other way) and other corporeal hereditaments; also a manor, an advowson, and a rent and other incorporeal hereditaments, and an easement, right, privilege, or benefit in, over, or derived from land; but not an undivided share in land; and "mines and minerals" include any strata or seam of minerals or substances in or under any land, and powers of working and getting the same but not an undivided share thereof; and "manor" includes a lordship, and reputed manor or lordship; and "hereditament" means any real property which on an intestacy occurring before the commencement of this Act might have devolved upon an heir[.] 74 This version of s 205(ix) of the LPA was the version which was in force at the time of the enactment of the Property Law Act 1928 (Vic) and was the version which remained in force at the time of the enactment of the PLA in 1958. The PLA replaced the 1928 Victorian Act. The original English version provided the basis for the definition of "land" as it appeared in both the 1928 and 1958 Victorian Acts. 75 Notwithstanding the broad definition of "land" in the LPA (which definition is broader than the definition of "land" in s 18 of the PLA), the words "relating to any land" in s 78(1) of the LPA have consistently been interpreted in the English cases as if they were statutory shorthand for the phrase "touches and concerns the land", as that phrase existed in the general law prior to the enactment of the LPA. In this regard, Brightman J in Federated Homes Ltd v Mill Lodge Properties Ltd [1980] 1 WLR 594; (1980) 1 All ER 371 at 378 said: There is in my judgment no doubt that this covenant [being the one there under consideration] 'related to the land of the covenantee', or, to use the old fashioned expression, that it touched and concerned the land … 76 The breadth of the definition of the word "land" was not, therefore, taken to expand the operation of the words "relating to any land" (in s 78(1) of the LPA) such that the benefit of a restrictive covenant was taken to be capable of attaching to an interest in land as opposed to an estate in land. The phrase "relating to any land" was simply read as synonymous with "touches and concerns the land"; however, as mentioned, a condition precedent to even asking the question of whether the relevant restrictive covenant on land "touched and concerned the land" remained whether there were two estates in land (one benefitted, and one burdened, by the relevant covenant). 77 Whilst it does not appear that any substantive judicial consideration has been given to the ambit of the words "relating to any land" as they appear in s 78(1) of the PLA in the Victorian context, it can be assumed that the Victorian Parliament must have been cognisant of the relevant English authorities when it enacted s 78(1) of the PLA. It must follow, therefore, that the words "relating to any land" in s 78(1) of the PLA were intended to have the same meaning as those in the English provision (as explicated by the relevant English authorities). Those words are properly to be read as synonymous with the phrase "touches and concerns the land", rather than denoting any broader meaning. 78 In this context it is relevant to observe further that in Gumland Property Holdings Pty Limited v Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 234 CLR 237 at 264-265 [74], the High Court accepted the English test of "touches and concerns the land" as applicable in the context of restrictive covenants on land. Referring to the observations of Lord Oliver of Aylmerton in P & A Swift Investments v Combined English Stores Group Plc [1989] AC 632 at 642, the High Court set out the relevant matters for consideration on the question of whether a covenant touches and concerns the land as follows: "(1) the covenant benefits only the reversioner for time being, and if separated from the reversion ceases to be of benefit to the covenantee; (2) the covenant affects the nature, quality, mode of user or value of the land of the reversioner; (3) the covenant is not expressed to be personal (that is to say neither being given only to a specific reversioner nor in respect of the obligations only of a specific tenant); (4) the fact that a covenant is to pay a sum of money will not prevent it from touching and concerning the land so long as the three foregoing conditions are satisfied and the covenant is connected with something to be done on, to or in relation to the land." (Emphasis added.) See also McDonald's Australia Limited v Bendigo and Adelaide Bank Limited and Benalla Retail Investments Pty Ltd [2014] VSCA 209 at [74] (Hansen JA, with Garde AJA and Beach JA agreeing) and Specialist Diagnostic Services Pty Ltd v Healthscope Ltd (2012) 41 VR 1 at 35 [177] (Buchanan, Mandie and Osborn JJA). 79 Relevantly for present purposes, cl 5 of the Priority Deed states: 5. SUBORDINATION OF THIRD MORTGAGE 5.1 Subject to clause 5.2 below, [Mt Duneed] covenants and agrees with [Manda] that: (a) All of [Mt Duneed's] Securities shall be subordinated and payment deferred in all circumstances in favour of all moneys owing by the Debtors to [Manda] up to [Manda's] priority limit specified in Item 5 of the Schedule; (b) Notwithstanding any agreement between the Mortgagor and [Mt Duneed], the Subordinated Debt is not payable or repayable unless and until the First Mortgage Debt (up to [Manda's] priority limit) is repaid in full; and (c) Any amounts received by [Mt Duneed] to reduce the Subordinated Debt while the First Mortgage Debt is continuing shall be held by [Mt Duneed] upon trust for [Manda] and paid to [Manda] or at its direction. 5.2 [Mt Duneed] further agrees that it shall not: (a) Take any enforcement action under [Mt Duneed's] Securities while [Manda's] Securities remain in place; (b) Claim in the liquidation of a Debtor in competition with [Manda] whilst any moneys are owed by a Debtor to [Manda] under the First Mortgagee's Priority; or (c) Transfer, assign or otherwise deal with [Mt Duneed's] Securities without first causing any transferee, assignee, or other party obtaining an interest in the Securities to enter into a deed by which it undertakes to be bound by the provisions of this deed. 80 Runner submits that cll 5.1(a), 5.1(b) and 5.2(a) of the Priority Deed are covenants that touch and concern land, because they: (a) benefit only the first mortgagee for the time being and if the clauses are separated from the mortgage, they cease to be of benefit to the covenantee (the first mortgagee); (b) affect the nature, quality, or value of the first mortgagee's interest (the value of the first mortgagee's interest in the Land is enhanced, Runner says, by its ability to earn interest because the second mortgagee is unable to sell the Land, and the nature and quality of first mortgagee's interest in the Land is affected since the Land cannot be sold by the second mortgagee while the first mortgagee's mortgage remains in place); and (c) are not expressed to be personal, and therefore they satisfy the matters to be considered as set out by the High Court in Gumland, endorsing what Lord Oliver said in P & A Swift. 81 Insofar as s 78(1) of the PLA is concerned, Runner submits that the test for whether a covenant "touches and concerns" any "land" is not confined to a freehold interest and extends to an interest in land under a mortgage. Runner points to the fact that "land" in the PLA is defined in s 18 to include "land of any tenure … also a rent and other incorporeal hereditaments, and an easement, right, privilege, or benefit in, over, or derived from the land"; and in s 38 of the Interpretation Act is defined to include "any estate, interest, easement, servitude, privilege or right in or over land". Runner contends that covenants that can touch and concern land can benefit various interests in land, including a lessee's interest, a lessor's interest and a mortgagee's interest; referring in this regard to McDonald's at [74] citing Specialist Diagnostic Services at 35 [178]; P & A Swift at 642; and Gumland at 264-265 [74]. 82 Properly considered, cll 5.1(a), 5.1(b) and 5.2(c) of the Priority Deed do not "touch and concern" or "relate to" the Land as Runner contends. Once again, whether at common law or by reference to s 78(1) of the PLA, it is a condition precedent to asking whether a particular covenant is one which "touches or concerns" the relevant land or is one "relating to any land" that there is an estate in land of the covenantee, rather than an interest in that estate in land. As Mt Duneed submits, this requires that the covenantee has some estate in land to which the covenant can attach, and the covenantee's successor has the same estate. 83 It is only once that hurdle has been surmounted that one can ask the question whether the subject matter of the relevant covenant inherently affects, in a practical sense, the persons holding the relevant estates in land in their capacity as holders of those estates. If the answer to that question is yes, then there is a covenant which touches and concerns the Land. If the answer to that question is no, then the covenant in question is merely in personam. 84 In the present circumstances, Manda (the covenantee) did not have an estate in the Land. Its registered mortgage did not effect a transfer of any estate in the Land. All Manda had, by reason of its mortgage, was an interest in the Land in the nature of a statutory charge: see Partridge v McIntosh & Sons Ltd (1933) 49 CLR 453 at 466 (Dixon J). 85 Contrary to Runner's submission, the definition of "land" in s 18 of the PLA does not include a mere interest in land as a mortgagee. Although it is correct that the definition of land in s 38 of the Interpretation Act does extend to an interest in land as a mortgagee, it is plain that this definition only applies to legislation "unless the contrary intention appears". Here, s 78 of the PLA discloses a contrary intention. As Mt Duneed submits, s 18 of the PLA provides a stand-alone definition of land which incorporates some concepts concerning land from the Interpretation Act definition, but not others (such as an interest in land, for example). Further, and significantly, s 222 of the PLA adopts the definition of land to be found in the Interpretation Act for the purposes of Pt IV of the PLA. As Mt Duneed submits, such a course would be unnecessary if the definition of land in the Interpretation Act, in its terms, applied throughout the PLA. 86 Insofar as Runner relies on McDonald's, Gumland, and P & A Swift in support of a submission that a covenant can touch and concern various interests in land, including a lessee's and a lessor's interest, and a mortgagee's interest, these cases cannot be regarded as supporting that proposition. Each of these cases concerned whether a covenant ran with a lessor's (reversionary) estate. Here Manda had no estate in the Land, and nor at any relevant time did Runner. Accepting that a covenant could run with a reversionary estate at common law, in P & A Swift Lord Oliver (at 639-640) described the common law rule as being that the benefit of the covenant would run with the land if, but only if, the assignee had the legal estate in the land and the covenant was one which, with that prior condition having been satisfied, "touched and concerned" the land. 87 Accordingly, Runner is not entitled to the benefit of the Priority Deed by virtue of the operation of s 78(1) of the PLA.

Ground three: do cll 5.1(a), 5.1(b) and 5.2(a) of the Priority Deed transfer to Runner pursuant to s 45 of the TLA? 88 Section 45 of the TLA provides that: (1) A registered proprietor may transfer his estate or interest in land by an instrument in an appropriate approved form. (2) Upon the registration of the transfer the estate or interest of the proprietor as set out in such instrument or which he is entitled or able to transfer or dispose of under any power, with all rights powers and privileges thereto belonging or appertaining, shall pass to the transferee; and such transferee shall thereupon become the registered proprietor thereof. (Emphasis added.) 89 Runner pleads that cll 5.1(a), 5.1(b) and 5.2(a) of the Priority Deed comprise rights, powers or privileges belonging or appertaining to the first mortgagee within the meaning of s 45 of the TLA which, by operation of that section, passed to Runner upon the registration of the transfer of the First Mortgage to it. This allegation, however, is not substantially developed in Runner's written submissions. 90 I do not accept Runner's allegation as to the effect of s 45 of the TLA in the present circumstances. As Mt Duneed submits, it is not the rights powers or privileges belonging or appertaining to the first mortgagee which are relevant for the purposes of s 45 of the TLA and thus the subject of the transfer, but rather the rights powers or privileges belonging or appertaining to the first mortgage. The use of the words "thereto" confirm that the section is referring to the rights powers and privileges of the estate or interest being transferred, rather than the rights of the transferor itself: Measures v McFadyen (1910) 11 CLR 723 at 731 (Griffith CJ). 91 Regardless, Mt Duneed submits, and I accept, that cll 5.1(a), 5.1(b), and 5.2(a) of the Priority Deed are not rights powers or privileges belonging or appertaining to the first mortgage within the meaning of that provision. Section 45 of the TLA does not operate to transfer rights under covenants which arise through collateral dealings, other than under the terms of a registered estate or interest. I accept that the effect of s 45 is that a registered transfer of a mortgage carries with it only the rights, powers, privileges, debts, and sums of money affecting the mortgage transaction as between mortgagor and mortgagee, and that the section does not directly affect collateral dealings. 92 In Consolidated Trust Co Ltd v Naylor (1936) 55 CLR 423, Dixon and Evatt JJ rejected the proposition that the transferee of a mortgage was entitled, having regard to the analogous NSW provision, to take legal action against the guarantor of a mortgage debt (even though the mortgage instrument itself contained the guarantee). Their Honours said at 434-435: The statute is concerned with dealings in land and it is because a mortgage involves such a dealing that the statute prescribes how mortgages may be transferred and with what consequences. It is concerned with the mortgage transaction in its entirety as it affects the land, and, therefore, extends to the personal liability of the mortgagor for the mortgage debt because that liability is intimately connected with the rights of property arising out of the mortgage transaction. A surety's obligation stands in a different relation to the dealing. His liability is introduced by way of additional security. It is personal and, except as a result of subrogation, does not directly or indirectly affect the land. Rights of subrogation are not of a kind falling within the scope of the Real Property Act. A guarantee is thus collateral to the mortgage transaction, and the circumstance that the obligation is expressed in the mortgage instrument must be regarded as accidental to the mortgage transaction and not as characteristic of the dealing contemplated by the legislation. In relation to transfers of mortgage sections 51 and 52 should be understood as dealing only with rights, powers, privileges, debts and sums of money affecting the mortgage transaction as between mortgagor and mortgagee. 93 Also relevant is Queensland Premier Mines Pty Ltd v French (2007) 235 CLR 81 which was concerned with the equivalent section under the Land Title Act 1994 (Qld). Kiefel J (with other members of the High Court agreeing) said at 100-101: The words of the section are plain. Neither the historical reason for the provision nor its purpose, of effectuating a transfer of both the 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. 94 In addition, Kirby J observed at 90-91: Because the personal obligations that derive from the loan agreement are legally separate and distinct from the obligations arising, as such, "under the mortgage", they are not automatically transferred with the mortgage that is registrable. Unless included in the mortgage instrument itself, to be transferred they require separate and specific agreement by those who are parties to the loan agreement. 95 Having regard to Naylor and Queensland Premier Mines, and on the basis of a plain reading of s 45 of the TLA, I accept Mt Duneed's submission that cll 5.1(a), 5.1(b), and 5.2(a) of the Priority Deed do not generate rights, powers or privileges belonging or appertaining to the First Mortgage within the meaning of s 45 of the TLA. That section does not operate to transfer rights under covenants which arise through collateral dealings, other than under the terms of a registered estate or interest. I accept that the effect of s 45 is that a registered transfer of a mortgage carries with it only the rights, powers, privileges, debts, and sums of money affecting the mortgage transaction as between mortgagor and mortgagee, and that the section does not directly affect collateral dealings.

Ground four: does Manda hold the benefit of the Priority Deed on trust for Runner? 96 Runner contends that the court should infer that Manda had an intention that it would hold the benefit of the Priority Deed on trust for its successors in title or any assignees of its mortgage, including Runner. Runner says this intention should be inferred by reference to the language employed by the parties, in particular in cll 1.2(c), 4.2(c), 5.2(c) and 10.2, together with the nature of the transaction itself. That is, the entry into a deed which sought to regulate the priority of the parties' respective securities. Plainly, and as Mt Duneed submits, the burden lies on Runner to establish this trust: Winterton at 370-371 and McLellan at [9]. 97 To begin with, Runner submits that courts are less reluctant than they once were to hold that a trust exists in the absence of manifestation of a clear intention to create a trust: referring to Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 618-619 (Mason CJ and Dawson J), citing with approval Wilson v Darling Island Stevedoring & Lighterage Co Ltd (1956) 95 CLR 43 at 67 (Fullagar J); and Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 121 (Mason CJ and Wilson J) and 147 (Deane J). 98 However, it is important to recall that in Bahr v Nicolay, the court was concerned with a contract whereby a benefit had been promised to a third party. This is in notable contradistinction to the Priority Deed. It should also be observed that in Bahr v Nicolay the court did not depart from the observation of Du Parcq LJ in In re Schebsman; Official Receiver v Cargo Superintendents (London) Ltd [1944] Ch 83 at 104, where his Lordship emphasised the importance of not inferring an intention to create a trust unless such an intention is clearly to be ascertained from the language used by the parties and the circumstances of the case. 99 It should also be noted that the judgments of Mason CJ and Wilson J, Deane J, and Dawson J in Trident are each subtly different when it comes to the question of establishing that a contractual promisee holds a promise on trust for a third party; Brennan J, Toohey J, and Gaudron J (in each of their individual judgments) say nothing which supports Runner's argument in this respect. 100 Mason CJ and Wilson J observed as follows at 121: [T]he courts will recognize the existence of a trust when it appears from the language of the parties, construed in its context, including the matrix of circumstances, that the parties so intended. We are speaking of express trusts, the existence of which depends on intention. In divining intention from the language which the parties have employed the courts may look to the nature of the transaction and the circumstances, including commercial necessity, in order to infer or impute intention: see Eslea Holdings Ltd v Butt. 101 The approach of Mason CJ and Wilson J ostensibly looks to the common intention of the parties as expressed in the contract. However, on the same page their Honours made the following qualification: Lest it be overlooked, we should mention that the creation of a third party trust rests on ascertaining the intention of the promisee, rather than on the intention of the contracting parties. 102 It may thus be said that the focus of Mason CJ and Wilson J is on the promisee and whether that party has demonstrated an intention to create a trust in favour of the relevant third party. That is to be determined, on this approach, by looking to the terms of the contract and seeing whether they expressly declare a trust or, alternatively, whether (taking into account the nature of the transaction and the circumstances) any such intention can be inferred or imputed. 103 By contrast, Deane J said at 147: In the context of such a contractual promise, the requisite intention should be inferred if it appears that it was the intention of the promisee that the third party should himself be entitled to insist upon performance of the promise and receipt of the benefit and if trust is, in the circumstances, the appropriate legal mechanism for giving effect to that intention. A fortiori, equity's requirement of an intention to create a trust will be at least prima facie satisfied if the terms of the contract expressly or impliedly manifest that intention as the joint intention of both promisor and promisee. 104 The approach taken by Deane J, therefore, might be said to differ slightly from that of Mason CJ and Wilson J in that it seems to require the satisfaction of an additional matter - that is, that a trust is the appropriate legal mechanism for giving effect to the promisee's intention that the benefit of a contractual promise should go to a third party. Like the approaches of Mason CJ and Wilson J, Deane J's approach requires that one look to the promisee and ask whether there is, clearly expressed, an intention on his or her behalf that the third party should have the benefit of the relevant promise. Then one asks whether a trust is the appropriate legal mechanism to give effect to that intention. If both of these conditions are satisfied then the court may infer the requisite intention (on the promisee's behalf) to create a trust (of the relevant promise in favour of the third party). 105 However, a second axis of difference between Deane J on the one hand and Mason CJ and Wilson J on the other is that on Deane J's analysis the intention to create a trust in favour of a third party may be derived either from the terms of the contract itself (whether expressly or by way of reasonable inference) or by a mechanism entirely external to the contract: "[t]he requisite intention to create a trust of a contractual promise to benefit a third party can, however, be formed and carried into effect (either by the contract itself or some other act)" (at 147); and "[a]n intention to create a trust of the benefit of a contractual promise can be evidenced and/or carried into effect by the contract itself or by action of the promisee aliunde" (at 148). Such an idea - that the requisite intention may be demonstrated wholly outside of the contract creating the relevant chose in action - would seem logically to follow from acceptance of the proposition that a chose in action is a subset of property within the wider set of property which may form the subject matter of a trust: see Lord Strathcona Steamship Co Ltd v Dominion Coal Co Ltd [1926] AC 108 at 123 (Lord Shaw); and Heydon JD, Heydon on Contract (Thomson Reuters, 2019) p 506. 106 The primary mechanism for determining whether there is the requisite intention to create a trust of a promise is to look purely to the contractual words themselves, "construed in context" (Deane J at 148), and to see whether those words disclose that requisite intention. However, looking purely to the words of the contract (in context) is not the only way that the requisite intention may be demonstrated. Such intention may also be apparent (whether expressly or by inference) from words and/or acts of the promisee entirely external to the relevant contract. Put another way, there is room for an argument that the requisite intention may be demonstrated purely by acts and/or words which are not part of the contract which generated the promise(s) which are said to form the relevant trust property. The approach of Mason CJ and Wilson J does not, in terms, contemplate intention being demonstrated without, at the least, that intention being anchored in the contract construed in its context. It is unclear whether their Honours intended to limit the means of demonstrating the intention to create a trust of this sort to reliance upon the contractual words (construed in context) or whether they did not feel that it was necessary to consider other mechanisms by which such intention might be demonstrated because no such other mechanisms were relevant on the facts in Trident. 107 The analysis of Dawson J puts the focus squarely on the promisee. This is clear from the fact that his Honour accepted that the relevant intention might be found by looking to the promisee alone and seeing whether he or she had expressly indicated an intention to create a trust or whether such an intention could be divined by drawing reasonable inferences. His Honour accepted this in the context of considering the effect of the relevant contract in the eventuality that sufficient intention to create a trust in favour of a third party could not be found on the facts, observing at 157 that: Even if an intention on the part of the promisee to hold his right under the contract upon trust cannot be discerned, either as a matter of express provision or as a matter of reasonable inference, a contract for the benefit of a third person is not entirely ineffective. 108 Unlike Deane J, Dawson J's approach does not seem to require (once an intention from the promisee to create a trust has been discerned) the satisfaction of the additional matter - that it also be demonstrated that a trust is the appropriate legal mechanism for achieving the result of a third party being able to enforce the benefit of the relevant promise(s) by suing the promisee. Further, Dawson J's approach is limited in terms such that the establishment of the requisite intention must be demonstrated by the words of the contract itself: the intention must be from an "express provision [in the contract] or as a matter of reasonable inference [from the contract] (at 157)". Accordingly, Dawson J's approach does not contemplate that such intention might be demonstrated purely by reference to words and/or actions of the promisee which do not form part of the words of the contract itself. As with Mason CJ and Wilson J, it is not clear whether his Honour intended to limit the means of demonstrating the intention to create a trust of this kind to reliance upon the contractual words (construed in context); or whether his Honour did not consider it necessary to contemplate other mechanisms by which such intention might be demonstrated because no other mechanisms were relevant on the facts in Trident. 109 Broadly speaking then, it might be said that the approaches of Mason CJ and Wilson J, and Dawson J, are substantially the same (save that the former approach in terms permits the court to impute an intention to create a trust in favour of a third party to the promisee, whereas Dawson J's approach is limited to the court drawing inferences at the margin). 110 Deane J, by contrast, although following Dawson J in limiting the divining of intention to the drawing of inferences, differs in terms of expressly permitting the requisite intention to create a trust to be demonstrated without any reference to the relevant contract and by requiring that a trust is the appropriate legal mechanism for the third party to take the benefit of the relevant contractual promise. 111 Having regard to the approach adopted by Mason CJ and Wilson J it is appropriate in the present case to at least look to the words of the contract, construed in all the relevant and permissible circumstances, to see if they express an intention that Runner should take the benefit of the relevant contractual promises made to Manda as promisee, or whether such an intention can be inferred or imputed. 112 This approach must also have regard to the requirement for satisfaction of a clear intention to create a trust, which has been repeatedly emphasised by the High Court: see Korda v Australian Executor Trustees (SA) Limited (2015) 255 CLR 62 at 124 [208] (Keane J) and Services Board v Gillespie-Jones (2013) 249 CLR 493 at 525 [116] (Bell, Gageler and Keane JJ). 113 In all the circumstances I do not accept that the language of the Priority Deed, even understood in the context of what that deed sought to achieve, properly enables the drawing of an inference that Manda would hold the covenants that were for its benefit on trust for its successors in title or any assignees of its mortgage. 114 First, there is nothing in the express terms of the Priority Deed to manifest such an intention. Rather, to the contrary, cl 14(b) expressly provides that Manda entered into the Priority Deed "only in its capacity as trustee of the First Mortgagee's Trust [as therein defined] and in no other capacity". This language cannot support the existence of a trust: see the observations of Black J in the face of similar language in In the matter of Australian Property Custodian Holdings Limited (in liquidation) (receivers and managers appointed) (as responsible entity of the Prime Retirement Aged Care Property Trust) [2012] NSWSC 679 at [26]. 115 Nor can it sensibly be maintained that cll 1.2(c), 4.2(c), 5.2(c) and 10.2 of the Priority Deed manifest any intention by the parties that Manda would hold the covenants which were for its benefit on trust for its successors in title and any assignee of its mortgage. Insofar as cll 4.2(c), 5.2(c) and 10.2 are concerned, as Mt Duneed submits these clauses do no more than recognise that the mortgages could be assigned. They say nothing about whether it was intended that Manda would hold the benefit of the Priority Deed on trust for a future assignee, whether a trust would be an appropriate mechanism to give effect to this intention, whether a trust is required to give efficacy to the Priority Deed, or as a matter of commercial necessity. 116 Insofar as cl 1.2(c) is concerned, I accept Mt Duneed's submission that it does no more than contemplate that the benefit of the Priority Deed can be assigned. This sounds against any inference or imputation of an intention to create a trust because a trust would be unnecessary in the event of an assignment. 117 Secondly, I accept, having regard to the language used by the parties, construed in its context and in the circumstances, that it cannot be inferred or imputed that Manda intended to hold the benefit of the Priority Deed on trust for its successors in title or assigns, including Runner. Plainly the Priority Deed was not entered into for the benefit of a third party, let alone Runner which, as Mt Duneed submits, had not yet come into existence. 118 Thirdly, and as Mt Duneed also submits, a trust is not required to give business efficacy to the Priority Deed, nor is it required as a matter of commercial necessity. In this regard it is notable that there was a legal mechanism available for a future holder of the First Mortgage to be entitled to insist upon the benefit of the Priority Deed: the assignment by Manda of its rights under the Priority Deed to any assignee of the First Mortgage. As has been seen, however, this was something Manda refused to do. 119 It is not apparent that the approach of Dawson J in Trident would produce any different result. 120 Insofar as Deane J's approach is concerned, it should be noted that Runner's submissions were confined to the argument that the language employed by the parties in the Priority Deed, coupled with the nature of the transaction means that the court should be prepared to infer an intention that Manda would hold the covenants that were for its benefit on trust for its successors in title or any assignees of its mortgage. It may thus be concluded that Deane J's suggestion that intention to create a trust may be demonstrated strictly by reference to words and/or acts of the promisee wholly outside of the relevant contract is not relevant in the circumstances of this case. 121 For the sake of completeness, however, it should be said that even had Runner argued that intention was established by this alternative route I would have found that such an argument failed. No evidence (being evidence purely outside of the language of the contract construed in context) has been led to suggest any intention on Manda's part for it to hold any of the promises (of which it was the promisee under the Priority Deed) on trust for any of its successors in title or for any of its assignees of its mortgage. Runner's strongest argument in favour of the demonstration of the requisite intention was founded upon the Priority Deed's words, construed in context. With the failure of that argument then, a fortiori, any argument based on the alternative route just canvassed also fails.

A further ground: s 56(1) of the PLA? 122 As has been mentioned, Runner may also be taken to have advanced an argument that s 56(1) of the PLA provides a basis for its contention that it is entitled to the benefit of the Priority Deed. 123 Section 56(1) of the PLA is in the following terms: Persons not named as parties may take interest in land etc (1) A person may take an immediate or other interest in land or other property, or the benefit of any condition, right of entry, covenant or agreement over or respecting land or other property, although he is not named as a party to the conveyance or other instrument. 124 In order properly to understand this provision it is necessary to mention the distinction between deeds poll and deeds inter partes. Speaking broadly, a deed poll involves one party expressing its intention to do a particular thing or things; or more than one party expressing their common intention; and a deed inter partes, is one which is made between two or more persons and in which the parties to the deed exchange undertakings or promises with one another: Tipperary Developments Pty Ltd v Western Australia [2009] WASCA 126; (2009) 38 WAR 488 at 542 [250] (McLure JA, with Wheeler and Newnes JJA agreeing); Seddon N, Seddon on Deeds (2nd ed, The Federation Press, 2022) pp 18-20. 125 It is generally accepted at common law that a document which is a deed poll is capable of being enforced by a third party to the deed, provided that the deed is executed in that third party's favour and that third party is sufficiently identified in the deed: Chelsea and Waltham Green Building Society v Armstrong [1951] 1 Ch 853 at 857-858; Tipperary Developments at 542-543 [253]; Netglory Pty Ltd v Caratti [2013] WASC 364 at [79] (Edelman J), citing Jones v Bartlett [2000] HCA 56; (2000) 205 CLR 166 at 206 [141] (Gummow and Hayne JJ); and Re Wily as Liquidator of Anglican Insurance Ltd [2009] NSWSC 696 at [7] (Barrett J). 126 Equally, it is generally accepted that a document which is a deed inter partes is only enforceable by the parties to the deed: Chesterfield and Midland Silkstone Colliery Co (Ltd) v Hawkins (1865) 3 H & C 677 at 692 (Martin B); Harmer v Armstrong [1934] 1 Ch 65 at 86; Accordent Pty Ltd and Portellos v Bresimark Nominees Pty Ltd [2008] SASC 196 at [66]-[67] (Doyle CJ, Duggan and Anderson JJ concurring). 127 For present purposes it is clear that the Priority Deed is in the nature of a deed inter partes. At a high level, it involved an exchange of promises and undertakings between the mortgagees (as they were at the time of the execution of the Priority Deed), PE Capital as mortgagor, and Mr Barnes as guarantor, vis-à-vis the regulation of the priorities and subordination of the competing mortgages and related matters; and the deed is expressed to be between a limited set of parties as follows: THIS PRIORITY/SUBORDINATION AGREEMENT is made … BETWEEN: The person(s) named in Item 1 of The Schedule as the First Mortgagee "First Mortgagee" [Manda] The person(s) named in Item 2 of the Schedule as the Second Mortgagee "Second Mortgagee" [Mr Barnes] The person(s) named in Item 2A of the Schedule as the Third Mortgagee "Third Mortgagee" [Mt Duneed] The person(s) named in Item 3 of the Schedule as the Mortgagor "Mortgagor" [PE Capital] The person(s) named in Item 3A of the Schedule as the Guarantor "Guarantor" … [Mr Barnes] 128 The Schedule to the Priority Deed named Manda, Mr Barnes, Mt Duneed, and PE Capital as the parties to the deed. 129 It is beyond argument that the combination of this expression of the Priority Deed as being between a limited set of parties, and the fact that the parties exchanged (via the Priority Deed) a series of undertakings and promises inter se, makes it a deed inter partes. 130 Returning to s 56(1) of the PLA, Runner accepts that at common law only a party to a deed inter partes may enforce the covenants contained within it. However, Runner submits that the common law position has been altered by statute, in Victoria by s 56(1) of the PLA, and that this is based on s 56(1) of the LPA. Runner refers to Beswick v Beswick [1968] AC 58 at 106, where Lord Upjohn observed that s 56(1) of the LPA "was only intended to sweep away the old common law rule that in an indenture inter partes the covenantee must be named as a party to the indenture to take the benefit of an immediate grant of the benefit of that covenant". 131 Runner makes no other reference to s 56(1) of the PLA in its submissions, whether written or oral. In its written submissions, after the observations just mentioned, Runner proceeds directly to advance the four bases on which it maintains it should have the benefit of the Priority Deed. The significance of s 56(1) of the PLA is thus not altogether clear from Runner's submissions, s 56(1) not being a condition precedent to the enforceability of the Priority Deed on the basis of any of the grounds Runner has advanced. Nonetheless, in final address senior counsel for Runner submitted, briefly, that Runner is a person that has the benefit of the covenants in the Priority Deed and is thus entitled, according to the law of deeds, to sue on the Priority Deed for the benefit of those covenants. 132 It may be that Runner's reference to s 56(1) of the PLA is made as part of an argument that even if (as I have concluded above) Runner is not a party named in the Priority Deed by way of the definition of "person" in cl 1.2(c), nonetheless, s 56(1) permits Runner to enforce the Priority Deed "although [it] is not named as a party to the conveyance". However, as I will explain, I would not accept such a submission either. 133 It is correct that s 56(1) of the PLA has its antecedence in s 56(1) of the LPA, which latter section reads: A person may take an immediate or other interest in land or other property, or the benefit of any condition, right of entry, covenant or agreement over or respecting land or other property, although he may not be named as a party to the conveyance or other instrument. 134 The only difference in wording between s 56(1) of the PLA and s 56(1) of the LPA is that the former uses the word "is" in place of the word "may" in the final clause of the provision. 135 In Jones v Bartlett, Gummow and Hayne JJ considered s 11(1) of the Property Law Act 1969 (WA) (the WA Act) and s 56(1) of the LPA. Section 11(1) of the WA Act is in terms identical to s 56(1) of the PLA. Their Honours said at 141-142: The terms of s 11(1) indicate its ancestry in s 56(1) of the Law of Property Act 1925 (UK) and its limited field of operation. In Trident, Dawson J referred to the unsuccessful attempts in England to use s 56(1) to overcome the doctrine of contractual privity. In Beswick v Beswick, the House of Lords decided that s 56 had replaced s 5 of the Real Property Act 1845 (UK). This had amended what Lord Upjohn described as "some very ancient law relating to indentures inter partes". His Lordship continued: "The rule was that a grantee or covenantee, though named as such in an indenture under seal expressed to be made inter partes, could not take an immediate interest as a grantee nor the benefit of a covenant as covenantee unless named as a party to the indenture." (Original emphasis.) The rule applied even if the grantee or covenantee had executed the deed. However, the rule had never applied to a deed poll; such a deed could always be sued upon by any person with whom the covenant therein was made. In Beswick, Lord Upjohn concluded: "Section 56, like its predecessors, was only intended to sweep away the old common law rule that in an indenture inter partes the covenantee must be named as a party to the indenture to take the benefit of an immediate grant or the benefit of the covenant; it intended no more." The text of s 56(1), like that of s 11(1), is not limited to an operation upon instruments which are deeds. However, in England, the received view is that "the true aim" of s 56(1) is "not to allow a third party to sue on a contract merely because it is made for his benefit; the contract must purport to be made with him". This construction of a 56(1) was accepted, after a full review of the authorities by Neuberger J in Amsprop Trading Ltd v Harris Distribution Ltd [[1997] 1 WLR 1025]. (Emphasis added.) 136 The applicability of the English reading of s 56(1) of the LPA to s 11(1) of the WA Act seems to have been endorsed by Gummow and Hayne JJ in Jones v Bartlett. On this basis there is no reason why, given that s 56(1) of the PLA is in the same terms as s 11(1) of the WA Act, that s 56(1) of the PLA should not be read in the same way that their Honours understood s 11(1) of the WA Act: that is, by reference to s 56(1) of the LPA. 137 What then is the effect of s 56(1) of the PLA for present purposes? Even though it is explained by Gummow and Hayne JJ in Jones v Bartlett, it may be desirable to say something more about it here because (unlike s 11(1) of the WA Act) the section does not appear to have received substantive judicial consideration and because it has been observed (in the context of s 56(1) of the LPA) that "determination of the exact scope of this provision is a matter of considerable difficulty": Chitty on Contracts, General Principles (34th ed, Sweet & Maxwell, 2021) p 69. 138 The effect of s 56(1) of the LPA is such that even though a person may not be one of the parties between whom a particular deed inter partes was made, a promise or undertaking made within that deed might be expressed to have been made with that person. The person with whom the relevant promise or undertaking was made, even though that person is not a party to the deed, is able to enforce that promise or undertaking via the mechanism of s 56(1). 139 To borrow an example from Smith RJ, Introduction to Land Law (2nd ed, Pearson Education Limited, 2010) at 259: LPA section 56 permits such third parties to claim as long as the covenant purports to be with them. Suppose Richard purchases land from Sufiya and enters into a restrictive covenant with her. Section 56 will operate if the covenant provides: 'I promise Theresa, Sufiya's neighbour, that I will comply with the covenant': Theresa can claim on the covenant. What does not suffice is a promise from Sufiya for the benefit of her neighbour. 140 For the same reasons as those given with respect to ground one advanced by Runner as to why it is entitled to enforce the benefit of the Priority Deed, I do not consider that there is sufficient expression of intention in the Priority Deed that Mt Duneed can be taken to have covenanted with Runner as an assignee of, or a successor in title to, Manda's mortgage. Any covenant made with Runner as a "person" in accordance with cl 1.2(c) could only have been made if Runner was an assignee of, or successor in title to, the benefit of the Priority Deed. As I have concluded, Manda never assigned the benefit of the Priority Deed to Mr Barnes; nor was Mr Barnes a successor in title to the benefit of the Priority Deed. Accordingly, the assignment of the First Mortgage from Mr Barnes to Runner did not have the effect of making Runner an assignee of, or a successor in title to, the Priority Deed. 141 Any argument made by Runner on this basis in reliance on s 56(1) of the PLA must, therefore, fail also.

Conclusion: Runner cannot rely on the Priority Deed 142 I have determined that the claims advanced by Runner and Jasper fail, in effect on the threshold issue. They have not established that Runner holds the benefit of cl 5.2 of the Priority Deed vis-à-vis Mt Duneed and, therefore, that Runner is able to enforce whatever benefit that clause might provide against Mt Duneed. 143 The remainder of the case advanced by Runner and Jasper, to the effect that Mt Duneed was not entitled to issue the Notice of Default, impugning the validity of that notice and thus the Contract of Sale, and whether there is any basis for Runner and Jasper to be granted the discretionary relief they seek, is in terms contingent upon Runner having established an entitlement to the benefit of the Priority Deed. Therefore the balance of the case advanced by Runner and Jasper must logically fail. The establishment of Runner's entitlement to the benefit of the Priority Deed was a necessary (albeit insufficient) condition precedent to the grant of the relief sought by Runner and Jasper against Mt Duneed on their own pleadings. 144 Nonetheless, there is utility in dealing briefly with the additional parts of the case advanced by Runner and Jasper for the sake of completeness. As will become clear, Runner and Jasper would have failed in relation to these other matters also, even had Runner been found to have had the benefit of the Priority Deed. I turn now to these further aspects of the case advanced by Runner and Jasper.

THE FURTHER MATTERS WHICH RUNNER AND JASPER WOULD HAVE NEEDED TO ESTABLISH TO BE ENTITLED TO THE RELIEF THEY SOUGHT

Does the scope of the Priority Deed impose a contractual obligation upon Mt Duneed not to issue a Notice of Default under s 76 of the TLA? 145 Even if Runner had been entitled to the benefit of the Priority Deed, on whatever basis, I would nonetheless have concluded that the Priority Deed, properly construed, does not operate to prevent Mt Duneed from exercising its power to issue a notice under s 76 of the TLA. 146 In this regard it will be recalled that cl 5.1(b) of the Priority Deed provides that, subject to cl 5.2, Mt Duneed covenants and agrees with (on Runner's case) Runner, that notwithstanding any agreement between the mortgagor and Mt Duneed, the Subordinated Debt (as defined) is not payable or repayable unless and until the First Mortgage Debt (up to the first mortgagee's priority limit) is repaid in full. Clause 5.2(a) of the Priority Deed provides that Mt Duneed agrees further that it shall not take any enforcement action under its mortgage while (on Runner's case) Runner's mortgage remains in place. 147 Runner submits that cl 5.1(b) effects priority and subordination in Runner's favour as against Mt Duneed. Subject to some uncertainty about the proper construction, in context, of the words "repaid in full", it may readily be accepted that this would be the correct reading of cl 5.1(b) if Runner were to have been entitled to the benefit of the Priority Deed. 148 Predicated on its entitlement to the benefit of the Priority Deed, Runner makes two arguments on the basis of these clauses. 149 The first proceeds by reference to the words "enforcement action" in cl 5.2(b) and Mt Duneed's issuing of the Notice of Default. Runner submits that the issue of this notice was purported rather than actual, because to issue such a notice would be to take "enforcement action" in relation to the Second Mortgage, that being a course which Mt Duneed had covenanted not to take in cl 5.2(b) of the Priority Deed. Runner contends that the Priority Deed prohibits Mt Duneed from taking any enforcement action, such as exercising its power of sale or bringing Runner before the court, in consequence of which the Notice of Default and the Contract of Sale are invalid and/or void. 150 However, I do not accept that the words "enforcement action", objectively construed in the context of the Priority Deed - the purpose of which was to define the relevant subordination and priority in the context of the mortgages - could have been intended by the parties to operate as a contractual bar to Mt Duneed operating to prevent it from issuing the Notice of Default pursuant to s 76 of the TLA. My reasons for this conclusion are as follows. 151 First, there is authority (which I accept) regarding the interaction between ss 76 and 77 of the TLA to the effect that the form of a notice of default pursuant to s 76 should convey that "the mortgagee is taking a step which may result in the exercise of the statutory power of sale under the TLA and that, if the mortgagor wishes to prevent this course being taken, then action needs to be taken to attend to compliance with the notice" (emphasis added): Whild v GE Mortgage Solutions Pty Ltd [2012] VSC 212 at [56] (Croft J). 152 Thus, because the form of a notice of default under s 76 is to convey that the mortgagee is beginning to take steps which may (absent the mortgagor's compliance) result in enforcement of the debt (via the power of sale in s 77(1)), the function of a default notice under s 76, is to act as a warning to the mortgagor that the debt may be enforced. Such a warning is distinct from the formal process of enforcement of the debt and, therefore, cannot be said to be contemplated by the words "enforcement action" employed in cl 5.2(a) of the Priority Deed. 153 Secondly, the relevant parties to the Priority Deed - Manda, Mt Duneed, and Mr Barnes - may be accepted (as senior counsel for Runner an Jasper repeatedly contended) to be sophisticated and commercially-minded persons, well-versed in real estate development and related transactions. Possessing these attributes, and assuming commercial common-sense, I consider that the words "enforcement action", as employed in cl 5.2(a) of the Priority Deed, were intended to reflect this distinction between preparatory steps taken as part of the process which might lead to enforcement of any of the relevant mortgage debts, and concrete action being taken formally to call in the relevant debt. The words "enforcement action", it may therefore be accepted, were intended to capture (inter alia) an exercise of the power of sale pursuant to s 77(1); but they should not be regarded as capturing the issuing of a s 76 Default Notice. 154 It may have been open to Runner, on the basis of cl 5.2(a) of the Priority Deed, to contend that Mt Duneed should have been restrained from exercising any s 77(1) power of sale on the basis of the Whild distinction; but Runner did not seek relief in these terms. 155 Runner's second argument, put in the alternative, is that the Notice of Default was invalid by reason of the operation of cl 5.1(b) of the Priority Deed. Runner says that, as at December 2021, the debt under the First Mortgage had not been repaid in full and, therefore, the debt due to Mt Duneed was "not payable or repayable"; and thus that the Notice of Default was invalid in that it sought to make the debt to Mt Duneed repayable at a time prohibited by cl 5.1(b). 156 This argument should also be rejected. I do not consider that the effect of the Notice of Default was to make the debt "payable or repayable" to Mt Duneed. Construing the contractual words objectively, and in their context, I am not satisfied that the parties intended that the issuing of a s 76 notice would make the debt to Mt Duneed "payable or repayable" within the meaning of those words within cl 5.1(b) of the Priority Deed. Once again, this conclusion relies upon the distinction between a s 76 notice and the s 77(1) power of sale drawn by Croft J in Whild: that is, that the issue of a s 76 notice is merely a preparatory step on the way to taking enforcement action (in the form of exercising the s 77(1) power of sale), the taking of which action causes the debt to become "payable or repayable" within the meaning of cl 5.1(b) of the Priority Deed. 157 Perhaps it may have been open to Runner, on the basis of cl 5.1(b) of the Priority Deed, to contend that Mt Duneed should have been restrained from exercising any s 77(1) power of sale on the basis of the Whild distinction; but Runner did not seek relief in these terms.

If the Priority Deed had operated to curtail Mount Duneed's ability to issue the s 76 notice, was the issue of the notice invalid thereby rendering the exercise of the s 77 power of sale and the Contract of Sale invalid? 158 Assuming, contrary to the conclusion I have reached, that the scope of the words "enforcement action" in cl 5.2(a) of the Priority Deed does impose an obligation on Mt Duneed not to issue the Notice of Default, Runner submits that Mt Duneed did thus not obtain a power of sale under s 77(1) of the TLA and, therefore, that the Contract of Sale with Mr Koch (the execution of which is contingent upon Mt Duneed possessing that power of sale) is void (had it has been settled) or that the settlement of the contract should be restrained (had it not been settled). 159 Even if I had come to the conclusion that the words "enforcement action" in cl 5.2(a) of the Priority Deed did extend to the issuing of a notice of default, I doubt that cl 5.2(b) could be regarded as having the effect of invalidating such a notice, once it had been issued. 160 Where a statutory process for the issuing of a notice has been followed and is not the subject of objection prior to its issuing, it is difficult to see how private law rights generated contractually could invalidate that notice. That is not to say that parties may not contract away their statutory rights: see, most recently, Price v Spoor [2021] HCA 20; (2021) 270 CLR 450 at 486 (Steward J). However, I doubt that a notice of this kind in question can be rendered null and void (or voidable) after the fact of its issue. The appropriate remedy for issuing such a notice (assuming it to be in breach of a contractual obligation) is more logically to be found within the suite of ordinary contractual remedies available to the party which has suffered the breach. 161 In the present circumstances, Runner does not advance the existence of a contractual remedy. It is unnecessary to say anything further about whether or not the breach of private law obligations can invalidate a (purported) exercise of a statutory power (as opposed to restraining an anticipated exercise of such a power). Ultimately the question is not dispositive of the dispute between Runner and Mt Duneed, and it was not the subject of detailed submissions by either party.

Would Runner and Jasper have been entitled to discretionary relief had they otherwise made out their case? 162 It will be recalled that Runner and Jasper sought declaratory and injunctive relief in support of their case that Mt Duneed could not sell the Land. 163 It having been determined that Runner is not entitled to enforce the benefit of the Priority Deed, that the scope of the Priority Deed did not impose an obligation on Mt Duneed not to issue a notice of default under s 76 of the TLA, and that a breach of a contractual obligation not to issue a notice of default under s 76 would not have invalidated the exercise of the s 77 power of sale, the occasion does not arise to grant any of the relief sought by Runner and Jasper. 164 Nonetheless, even if I had come to a contrary view in relation to these matters, I would not have exercised the discretion to grant injunctive relief restraining the completion of the Contract of Sale or otherwise interfering with Mt Duneed's rights to exercise the power of sale. 165 Without descending into the minutiae of the submissions advanced by Mt Duneed on the subject of whether Runner should be granted injunctive relief, the reasons for why such relief should not be granted are as follows. 166 First, I do not consider that in circumstances where Runner conceded that it did not wish to exercise its own power of sale in relation to the Land, it would be appropriate to maintain this position and to have an injunction preventing the sale of the Land by Mt Duneed to Mr Koch (or, for that matter, to any other party). To grant such relief would be, in effect, to set at naught the interest that Mt Duneed has in the Land by way of the Second Mortgage. Mt Duneed's equity in the Land would be eroded as Runner continued to capitalise interest on its mortgage against the Land. 167 In addition, such a result would occur in a situation where, were Mt Duneed to have had the relief it sought, the sale of the Land to Mr Koch would have resulted in repayment of the principal, interest, and costs owing to Runner under the First Mortgage in their entirety. 168 Further, granting Runner the injunctive relief it sought would have resulted in Mt Duneed's interests being sacrificed. This, in my view, cannot be correct as a matter of principle. As Beach J observed in Jacobson v National Australia Bank (unreported, Supreme Court of Victoria, 15 April 1994) at 3: In my opinion, it is strongly arguable that the only duty a first mortgagee owes to a second mortgagee is a duty to protect the second mortgagee's financial interest in the property. 169 Putting aside the question of whether other obligations may rest upon a first mortgagee vis-à-vis any puisne mortgagees, I respectfully agree with Beach J that, at the least, it is strongly arguable that a first mortgagee is bound by a duty not to sacrifice the financial interests of any puisne mortgagee and even if this is not a duty recognised at law, it is certainly a discretionary consideration which, on the facts of this case, would have weighed heavily against the grant of such relief had it been necessary to determine whether to exercise the discretion to grant injunctive relief. 170 Secondly, for the same reasons, I do not consider that the relief Runner seeks against Mt Duneed reflects a good faith position in relation to the bargain which the Priority Deed represents, even assuming that Runner were to have been entitled to the benefit of the Priority Deed. 171 Interpreted objectively and in the commercial context, I consider that the essential intention of the relevant provisions of the Priority Deed was to ensure that the first mortgagee (as defined by the Deed) would be paid out in full in priority to the puisne mortgagees. To grant an injunction in either of the terms sought by Runner would be to undermine that very purpose - it would prevent Runner's full repayment (under the First Mortgage because the Land would not be sold); and permit Mt Duneed's interest in the Land to be reduced, effectively, to nil. 172 I accept Mt Duneed's submissions that for Runner to seek injunctive relief to enforce cl 5.2(a) in the circumstances of this proceeding, is in contravention of its implied contractual obligation of good faith essayed by Allsop CJ, Besanko, and Middleton JJ in Paciocco v Australia and New Zealand Banking Group Ltd [2015] FCAFC 50; (2015) 236 FCR 199 at 273 [288] in the following terms: The usual content of the obligation of good faith … is an obligation to act honestly and with a fidelity to the bargain entered or the substance of the contractual benefit bargained for; and an obligation to act reasonably and with fair dealing having regard to the interests of the parties (which will, inevitably, at times conflict) and to the provisions, aims and purposes of the contract, objectively ascertained. 173 My finding that Runner's prayer for injunctive relief would have been a breach of the implied contractual obligation of good faith provides a further reason which would have militated strongly against the grant of that discretionary relief to Runner, had it been necessary to determine whether to grant that relief. 174 Thirdly, to grant equitable relief to Runner would be indirectly to undermine the equitable principle "once a mortgage, always a mortgage": Seton v Slade (1802) 7 Ves 265 at 273 (Lord Eldon LC). That maxim captures, amongst other things, the proposition that a mortgagee's interest in a mortgage is limited to securing repayment of the funds which are due under the mortgage at any given moment. As Plumer V-C said in Quarrel v Beckford (1816) 1 Madd 269 at 278; 56 ER 100 at 103: What is a mortgage? Everybody knows, it consists of two things; it is a personal contract for a debt, secured by an estate, and, in equity, the estate is no more than a pledge or security for the debt; the debt is the principal-the estate is the accident. 175 If it is accepted that the essential nature of a mortgagee's interest in the mortgage is repayment at any given moment of the principal debt and any contingent interest, it follows that it would be at least counterintuitive to grant injunctive relief the effect of which would be to prevent the realisation of precisely the interest which Runner has in the First Mortgage. That is, full repayment of the secured debt owing under that mortgage. This is another reason why it would not have been appropriate for Runner to have been granted the relief it sought, even if its arguments in relation to the Priority Deed had been accepted. 176 Fourthly, it is also the case that any injunction, were one to have been granted, would have had a detrimental effect on Mt Duneed which is disproportionate to the beneficial effect it would have upon Runner, in terms of securing Runner's expectation interest under the Priority Deed (had Runner been so entitled). As I have said, my conclusion is that the purpose of the relevant clauses of the Priority Deed, construed objectively and in a commercial context, was to ensure that the first mortgagee would be paid out in full in priority to the puisne mortgagees. The purpose was not to permit the first mortgagee to have an absolute veto upon the exercise of any power of sale of the Land by either of the puisne mortgagees especially in circumstances where any such exercise would result in the first mortgagee being repaid, in full, for the principal debt, together with interest and costs. 177 The expectation interest of the First Mortgagee under the Priority Deed was that it would be paid out in full (at any given moment) relative to the puisne mortgagees. With this in mind it is difficult to see how Runner's expectation interest under the Priority Deed (assuming that it were to have one) would not have been harmed by the proposed sale to Mr Koch. Even if some harm were able to have been identified, it is not clear why damages (whether compensatory or nominal) would have been an adequate remedy for any breach by Mt Duneed: Evans Marshall & Co Ltd v Bertola SA [1973] 1 WLR 349 at 379 (Sachs LJ). 178 Weighing the fact that completion of the proposed sale of the Land to Mr Koch would lead to Runner's satisfaction vis-à-vis the mortgage in full against the fact that a grant of any of the injunctive relief sought by Runner would, in effect, cause Mt Duneed's interest in the Land to be consumed in its entirety by Runner continuing to capitalise its interest, it would plainly have been just, in all the circumstances, to confine Runner to a remedy in damages, should it have been necessary to decide this point. As Lord Hoffmann noted in Co-operative Insurance v Argyll Stores Ltd [1997] UKHL 17; [1998] AC 1 at 15, albeit in the context of specific enforcement of a covenant to carry on business for a specific term, the fact that a grant of discretionary relief may cause injustice by allowing a plaintiff to enrich himself at the defendant's expense is a factor which mitigates against the grant of such relief. 179 For these reasons I would not have exercised the discretion to grant the injunctive relief sought by Runner and Jasper, had it been necessary to consider, as a dispositive issue, whether to exercise that discretion.

MT DUNEED'S CROSS CLAIM 180 Having disposed of the case advanced by Runner, I turn to Mt Duneed's notice of cross claim dated 9 December 2021 in its unamended form. By that cross claim, Mt Duneed sought the following relief: 1. An order, including pursuant to section 116A of the Transfer of Land Act 1958 (Vic), requiring [Runner] to deliver up control of the electronic certificate of title, and do all other things necessary, to: a. permit settlement of the Contract of Sale; and b. subject to compliance with Special Condition 1(c) of the Contract of Sale, free the land from all liability on account of the First Mortgage (including providing any necessary discharge). 2. An order, including pursuant to section 50 of the Property Law Act 1958 (Vic), that the proceeds of sale payable under the Contract of Sale, over and above the sum of $3,038,960.57, be paid into Court pending a taking of accounts. 3. Orders for a taking of accounts. 4. Such further or other orders as the Court considers appropriate. 5. Costs on an indemnity basis. 181 At all material times an Event of Default (as defined in the Manda Loan Agreement) has subsisted, in that the mortgagor has failed to pay any secured money (as therein defined) in the manner provided for by the Manda Loan Agreement, including interest: cl 11.2(a). Despite this, it was common ground that at no time since Runner became the assignee and transferee of the First Mortgage has Runner exercised, or purported to exercise, any enforcement powers (including its power of sale) under the First Mortgage and, or alternatively, under s 77 of the TLA. Further, Runner's plainly stated position in this litigation has been that it has no present intention of exercising any such powers, and that it is under no obligation or duty to do so (see, in particular, paragraph [12] of Runner's defence to Mt Duneed's cross claim). 182 It will be recalled that in the face of Runner's stated position, on 3 December 2021 Mt Duneed served (or as Runner would have it, purported to serve), on the mortgagor and other interested persons a Notice of Default demanding repayment of the amount then secured by the Second Mortgage, being $4,420,122.78. The Notice of Default advised that if the amount owing was not paid within seven business days after deemed service of the notice, Mt Duneed would exercise its power of sale over the Land pursuant to s 77 of the TLA. Mt Duneed exercised, or as Runner would have it, purported to exercise, its power of sale under s 77 of the TLA by entering into the Contract of Sale. 183 Notwithstanding Runner's admission on the pleadings that settlement of the Contract of Sale would have caused the entirety of the First Mortgage Debt to be repaid in full (as finally determined on a taking of accounts), Runner had refused to deliver up control of the electronic certificate of title for the Land and do all things necessary to permit settlement of the Contract of Sale. As has been canvassed extensively above, relying on rights which it has asserted under the terms of the Priority Deed, Runner has refused to permit repayment in full of the First Mortgage Debt. It is on this basis that Mt Duneed sought the relief in its notice of cross claim.

The rights of Runner and Mt Duneed under their respective mortgages

The power of sale under s 77 of the TLA 184 Clearly enough, for Torrens system land a statutory power of sale is conferred by s 77 of the TLA. Section 77(1) is in the following terms: If within one month after the service of such notice or demand or such other period as is fixed in such mortgage or charge the mortgagor grantor or other persons do not comply with the notice or demand the mortgagee or annuitant may, in good faith and having regard to the interests of the mortgagor grantor or other persons, sell or concur with any other person in selling the mortgaged or charged land or any part thereof, together or in lots, by public auction or by private contract, at one or several times, and for a sum payable in one amount or by instalments, subject to such terms and conditions as the mortgagee or annuitant thinks fit, with power to vary any contract for sale and to buy in at any auction or to rescind any contract for sale and to resell without being answerable for any loss occasioned thereby and with power to make such roads streets and passages and grant and reserve such easements as the circumstances of the case require and the mortgagee or annuitant thinks fit, and may make and sign such transfers and do such acts and things as are necessary for effectuating any such sale. (Emphasis added.) 185 That power is exercisable where there has been default in payment or performance or observance of a covenant under the mortgage, service on the mortgagor of a notice to pay the money or perform or observe the covenant, and a default that continues for a period of one month (or other period expressly provided by the mortgage) after service of the notice: s 76(1) of the TLA. Absent a default, no power of sale can arise. The only condition for the exercise of the s 77 power of sale which has been in dispute between Runner and Mt Duneed is the validity of the service of the notice by Mt Duneed. There appears to be no dispute that there has been a continuing default by the mortgagor for relevant purposes.

Mt Duneed's submissions 186 Mt Duneed's position has been that it has been entitled to the relief it seeks pursuant to the straightforward application of statute and equitable principle. It says that it has done no more than exercise its contractual and statutory power of sale under s 77 of the TLA, in a way which will discharge Runner's loan in full and thereby make its own second ranking claim beneficial or available. Mt Duneed submits that Runner ought to have accepted repayment and discharge of its mortgage in accordance with equitable principle, including as augmented by s 50 of the PLA, and that it is not open to Runner to prevent repayment of its debt so that it can, in effect, appropriate the value of the equity of redemption and thereby the value of the Second Mortgage (which is already insufficient to secure repayment of the second mortgage debt) by capitalising interest to the loan account secured by its mortgage. 187 Relying on Pearce v Morris (1869-1870) LR 5 Ch App 227 at 229-230 (Lord Hatherley LC) and Hunter v Macklew (1846) 67 ER 902 at [242] (Sir James Wigram), Mt Duneed has contended that upon full repayment of the First Mortgage Debt by any person with an interest in the mortgaged property or under a liability to pay the mortgage debt, Runner is contemporaneously obliged to discharge its securities. This has been put on the basis that, consistently with Quarrel at 103 (Plumer V-C) and Smith v Green (1844) 1 Coll 555 at 563; 63 ER 541 at 544-545 (Knight-Bruce LJ), a mortgage is no more than a pledge or security for the payment of a debt. Therefore, so Mt Duneed has contended, the only legitimate interest of a mortgagee is to be repaid what is secured by its mortgage and its powers may be directed to that purpose only and not for the contrary purpose of thwarting repayment of the debt: Quennell v Maltby [1979] 1 All ER 568 at 571 (Lord Denning MR), 571-572 (Bridge LJ) and 572 (Templeman LJ) and Downsview Nominees Ltd v First City Corporation Ltd [1993] AC 295 at 317. As their Lordships observed in Downsview Nominees, at 317: A mortgagee owes a general duty to subsequent incumbrancers and to the mortgagor to use his powers for the sole purpose of securing repayment of the moneys owing under his mortgage and a duty to act in good faith. (Emphasis added.) See also Yarrangah Pty Ltd v National Australia Bank Ltd [1999] NSWSC 97 at [17] (Young J); and, to similar effect, Jacobson at 3. 188 Given that Runner would have been repaid in full, Mt Duneed has submitted that the court should not be concerned as to whether repayment is sourced from a refinancing or from the proceeds of sale because in equity the result (repayment and discharge of the security) is the same. Any distinction, in the eyes of equity, is said to be a distinction without a difference because the obligation to discharge arises from payment of what is due and not from the means of payment: Graham v Seal (1918) 88 LJ Ch 31 at 35 (Swinfen Eady MR); Cousins ED and Ross S, The Law of Mortgages (1st ed, Sweet & Maxwell, 1989) p 317; Santley v Wilde (1899) 2 Ch 474 at 474 - 475); Noakes v Rice [1902] AC 24 at 30 and 33. 189 Relying on Manser v Dix (1857) 8 De GM & G 703; 44 ER 561 at 565 (Knight, Bruce and Turner LJJ), Mt Duneed has submitted that a puisne mortgagee may exercise its power of sale without the consent of a superior mortgagee and repay at settlement out of the proceeds of sale. Section 50 of the PLA, deriving from s 5 of the Conveyancing and Law of Property Act 1881 (UK) (the 1881 Act), is said to augment the equitable power by authorising a court to make orders and declarations against a mortgagee who refuses repayment and discharge even where its debt is not due: see Re Wilberforce's Trusts [1915] 1 Ch 94 at 101-102 (Sargant J). Mt Duneed notes that in this proceeding Runner, through its counsel, has accepted that it is open to Mt Duneed to redeem up; an admission which is said to be fatal to Runner's argument because redeeming up is what Mt Duneed seeks to do by way of Special Condition 1(c) of the Contract of Sale. 190 In relation to redeeming up, Mt Duneed refers to Tyler ELG, Young PW and Croft CE, Fisher & Lightwood's Law of Mortgage (3rd Australian ed.), LexisNexis Butterworths, 2014, where the learned authors say as follows: 20.10 Where there are successive mortgages, the first mortgagee can exercise his power of sale without the concurrence of the subsequent mortgagees (although he will have to account to them for any surplus of the proceeds of sale: see 20.45). In practice a first mortgagee will often give a second mortgagee an opportunity of taking a transfer of the first mortgage. A second or subsequent mortgagee may sell subject to the first or prior mortgages: Manser v Dix (1857) 8 De GM & G 703; 44 ER 561. Alternatively, he may sell free of prior mortgages by arranging for them to be discharged out of the proceeds of sale, but the concurrence of the prior mortgagees will be required to achieve this and where necessary - for example in the case of a missing mortgagee - an application to the court may be necessary ... (Emphasis added.) Insofar as an application to the court is concerned, Mt Duneed refers to the subsequent consideration of this subject in Fisher & Lightwood, where the following statement is made: 32.77 The General Law Land legislation in most jurisdictions provides that where land subject to any encumbrance, whether immediately payable or not, is sold, by the court or out of court, the court may, on the application of any party to the sale, direct or allow payment into court of such amount as, when invested in government securities, is sufficient by means of the dividends thereof, to keep down or otherwise provide for that charge, together with any additional sum to meet further costs, expenses and interest or any other contingency: NSW Act s 66; Victorian Act s 50; South Australian Act s 27; Tasmanian Act s 4. The provisions apply to Torrens system land: NSW Act s66(5); Victorian Act - by non-exclusion. Thereupon the court may declare the land freed from the encumbrance and make any order for conveyance, or vesting order, proper for giving effect to the sale, and give directions for the retention and investment of the money in court and for the payment or application of the income thereof: NSW Act s 66(2); Victorian Act s 50(2); and see Re Uplands [1948] WN (Eng) 165. The court may declare all other land, if any, affected by the encumbrance (besides the land sold) to be freed from the encumbrance: Victorian Act s 50(3); and see Re Wilberforce [1915] 1 Ch 94; Lidco Investments Ltd v Hale (1971) 219 Estates Gazette 669. (Emphasis added.) 191 The position so analysed is said by Mt Duneed to be reflected in Halsbury's (1st ed, Butterworth & Co, 1912) vol 21 in the following terms: [454] Where there are successive mortgages, the first mortgagee can exercise his power of sale without the concurrence of the subsequent mortgagees, but he must account to them for the surplus sale moneys. If the second mortgagee exercises his power of sale, he can sell subject to the first mortgage [citing Manser v Dix; or he can sell free from it, either with the consent of the first mortgagee, who will be paid off out of the purchase- money, and will concur in the conveyance to the purchaser, or under the statutory power [citing the Conveyancing and Law of Property Act, 1881 (44 & 45 Vict. c. 41), s.5(1)]. In the latter case application must be made to the court to allow payment into court of the amount of the mortgage debt and any interest due thereon, and of such additional amount as the court considers will be sufficient to meet the contingency of any further costs, expenses and interest [citing Conveyancing and Law of Property Act, 1881 (44 & 45 Vict. c. 41), s.5(1)]. Thereupon the court may declare the land to be freed from the mortgage, and make any order for conveyance or vesting proper for giving effect to the sale [citing Conveyancing and Law of Property Act, 1881 (44 & 45 Vict. c. 41), s.5(2); see Dickin v Dickin (1882), 30 W. R. 887]. (Emphasis added.) 192 On this basis Mt Duneed has submitted that s 50 of the PLA also empowers the court to grant the relief it seeks, and that s 116A(1A) of the TLA provides a further source of power for the court to order Runner to deliver up the certificate of title at settlement of the Contract of Sale, there being no doubt that Mt Duneed is an "interested person" for the purposes of s 116A(1A): see Fincore v Webb [2020] VSC 831 at [20]-[31] (Derham AsJ). 193 Consistently with this theme and the orders it has sought Mt Duneed refers to Equus Financial Services Ltd v RMBL Investments Pty Ltd (1996) 22 ACSR 744, where Bryson J granted an application allowing the plaintiffs to redeem mortgages held by the defendant. His Honour allowed the securities to be discharged and transferred to the first plaintiff (as a subsequent mortgagee), prior to a taking of accounts being completed. At 747-748 his Honour said: In my view it has been established that the court has power by an interlocutory order to require the mortgagee to give up the security while the accounts have not been settled, the amount payable to the mortgagee has not been ascertained and there is still a difficult course to follow before these things happen. It should be clear before the court does so that reasonable protection is available and that a fund of money sufficient to pay any amount likely to be found to be due is under the control of the court. What the court is asked to do is to require an unwilling mortgagee to accept a sort of security, namely a fund of money, different to the security which it has bargained for and wishes to have, and while the court does have that power, it should only do so where it is satisfied that the interests of justice require an interlocutory order to that effect. (Emphasis added.) 194 By this same reasoning Mt Duneed has contended that it is entitled to orders allowing it to settle the Contract of Sale and requiring Runner to deliver up control of the electronic certificate of title (effectively giving up its security), prior to taking of accounts. Had this occurred Runner would immediately have been paid the sum of $3,038,960.57 (the sum it paid to purchase the First Mortgage Debt as it was on 13 April 2021) and there would have been a sum paid into court sufficient to cover any further amount likely to be found to be due to Runner. This, Mt Duneed submitted, would have provided sufficient security to Runner, such that there would be no risk that it would not be made whole as first mortgagee. 195 The only point of distinction between Equus and the present case was said by Mt Duneed to be that because here the Land would have been sold, the court also has the power to make orders under s 50 of the PLA. It might also be noted that Equus concerned a relationship between a mortgagor and a mortgagee, but that distinction is immaterial to the analysis. 196 Mt Duneed also submitted, citing Palk v Mortgage Services Funding plc [1993] 2 WLR 415 at 422-423 (Sir Donald Nicholls V-C, with whom Butler-Sloss LJ and Sir Michael Kerr agreed), that in the application of equitable principle a court will order a sale in appropriate circumstances and deprive a mortgagee of its security and its right to determine when its security is realised where it is just to do so, even in the absence of any allegation of a breach of the mortgagee's duty or bad faith.

The submissions of Runner and Jasper 197 The position of Runner and Jasper, by contrast, was that Mt Duneed could not have the relief it sought for two principal reasons. First, it is said that by seeking to sell the Land Mt Duneed was acting in contravention of the Priority Deed. As has been canvassed above, however, Runner does not have the benefit of the Priority Deed and even if Runner had been entitled to the benefit of the Priority Deed I would not have granted the relief sought restraining Mt Duneed from completing the sale of the Land for the reasons I have identified. The second reason Runner and Jasper contended that Mt Duneed could not have the relief it sought was that none of the statutory provisions on which Mt Duneed relied, nor any of the equitable or general law principles it called in aid of its position, could found the relief it sought against Runner. 198 In this regard Runner and Jasper advanced a series of propositions. The first is that under the general law a subsequent mortgagee (unlike a mortgagor) does not have an absolute right to redeem. Also citing Fisher & Lightwood at [20.10], Runner and Jasper submitted that a subsequent mortgagee can sell the Land the subject of the mortgage, but must do so either subject to the first mortgage (which it says is confirmed by Manser v Dix); with the consent of the first mortgagee (who will need to arrange the discharge of its mortgage); or by court order. 199 Insofar as s 50 of the PLA is concerned, Runner and Jasper asserted that it is uncertain whether this section applies to Torrens title land, and that even if it does, before the court can order that the incumbrance be removed, there must be payment into court of the amount of the mortgage debt and further amounts for costs, expenses and interest. Runner and Jasper observed, obviously enough, that this has not occurred [114]; albeit that Mt Duneed's prayer for relief plainly contemplated that Runner's mortgage would be discharged and that the balance of the sale price would be paid into court pending a taking of accounts. 200 Runner and Jasper next advanced a series of propositions the substance of which was that as the first mortgagee it had a "wide freedom" to keep its mortgage in place and take no action to enforce it, and sell at a time of its choosing provided it acts in good faith. Reference was made to several authorities in support of these propositions including, on the mortgagee's entitlement to act in its own best interests provided the power of sale is exercised honestly and for the purposes of the power, Barns v Queensland National Bank Ltd (1906) 3 CLR 925 at 943 (Griffith CJ); Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676 at 680 (Griffith CJ), 694 (Barton J) and 700 (Isaacs J); Forsyth v Blundell (1973) 129 CLR 477 at 493 and 496 (Walsh J); and Australia and New Zealand Banking Group v Bangadilly Pastoral Co Pty Ltd (1978) 139 CLR 195 at 201 (Jacobs J). 201 On the subject of a mortgagee's entitlement to sell at a time convenient to itself and not in the interests of minimising the amount of the prospective liability of the mortgagor's debtors and guarantors, Runner and Jasper also cited an array of authorities, in particular China and South Sea Bank Ltd v Tan Soon Gin (Alias George Tan) [1990] 1 AC 536 at 545 (Lord Templeman); Westpac Banking Corporation Ltd v Kingsland (1991) 26 NSWLR 700 at 705A, 706C and 709C (Cole J); State Bank of Victoria v Parry and Others (1989) 7 ACLC 226 at 229 (Malcolm CJ); Commonwealth Bank of Australia v Lee (1966) 22 ACSR 574 at 578 (Wheeler J); and Henry Roach (Petroleum) Pty Ltd v Credit House (Vic) Pty Ltd [1976] VR 309 at 313 (Lush J). 202 Runner and Jasper contended also that the right of a subsequent mortgagee to redeem could only be exercised adversely by bringing the mortgagor before the court for the purpose of completing a remedy by foreclosure. It was said that Smith v Green, a case relied upon by Mt Duneed and where the first mortgagee refused to accept tender of the payment, was such a case. Runner and Jasper submitted in effect that Mt Duneed's inability or refusal to tender payment, proposing only that Runner's mortgage be paid out at settlement of the sale contract, operates as a bar to redemption. 203 Runner and Jasper also submitted that Mt Duneed's contention that a puisne mortgagee can exercise a power of sale without the consent of superior mortgagees, relying on Manser v Dix, is not correct. Runner and Jasper would distinguish Manser v Dix on the basis that the case did not involve the redemption of a mortgage or sale by a mortgagee, but rather a trust to sell property that was subject to a mortgage. It was submitted that Manser v Dix is authority for nothing more than that a second or subsequent mortgagee may sell subject to the first or prior mortgages, and certainly not for the proposition that the trustees could have sold the land and redeemed at settlement; or for the proposition that payment from the proceeds of sale is equivalent to the tender of the moneys secured by Runner's mortgage. 204 It was also an element of the case advanced by Runner and Jasper under the general law that subsequent mortgagees can covenant out of their rights and in so doing limit their rights to foreclosure. In such circumstances, Runner and Jasper submitted, they cannot seek to circumvent the covenant by redeeming the mortgage held by a prior mortgagee. This, it was said, is the effect that the prohibition on enforcement action in the Priority Deed has on Mt Duneed's ability to exercise its power of sale and bring Runner, as the prior mortgagee, before the court. Obviously enough, however, the argument that Mt Duneed has precluded itself from pursuing the remedy it seeks by operation of the Priority Deed falls with the failure of Runner and Jasper's case on the Priority Deed and on Runner's failure to establish the existence of a trust by the relevant promises under the Priority Deed. 205 Insofar as Torrens land is concerned, Runner and Jasper submitted that neither Gunn v Commonwealth Bank of Australia [1922] Tas LR 26 (Nicholls CJ, with Crisp and Ewing JJ agreeing) nor Equus support Mt Duneed's position. Gunn was said not to involve a redemption and Equus involved redemption by a mortgagor, not a mortgagee, and in circumstances where there had been a payment into court. Runner noted that in Equus (at 746-747), Bryson J cites Lord McNaughton's opinion in Bank of New South Wales v O'Connor (1889) 14 App Cas 273 (particularly at 283) on the need for a proper tender of the amount claimed by the mortgagee; however his Lordship's observations are made in a different context, namely the proper price to be obtained by a party exercising a power of sale as a condition precedent to the valid exercise of that power of sale. 206 Finally, it was Runner and Jasper's position that it is a condition of the exercise of the power of sale by Mt Duneed as a puisne mortgagee under s 77(1) of the TLA that Mt Duneed "takes reasonable precautions to obtain a proper price" for the property being sold and that Mt Duneed has not done so. This was said to flow from the fact that s 77(1) expressly provides that a person exercising the power of sale must act "in good faith and having regard to the interests of the mortgagor".

Mt Duneed possesses and has validly exercised the power of sale under s 77 of the TLA 207 I have formed the view that Mt Duneed would have been entitled to the relief that it sought on the present iteration of its cross claim, substantially on the basis that it submits, and that the submissions of Runner and Jasper to the contrary should be rejected. 208 The starting point is to record that, as Mt Duneed submits, the First Mortgage is a pledge for repayment only, and that upon repayment in full (as Mt Duneed has proposed), a mortgagee must discharge as a matter of law. There is nothing in the terms of ss 76 and 77 of the TLA to suggest that a subsequent mortgagee must defer to the first mortgagee in the exercise of the power of sale in the event of default in payment of the principal sums secured by the mortgages, and no reason of principle why this should be so. 209 Whatever may be the correct view about the effect of Manser v Dix insofar as the rights of a puisne mortgagee to exercise a power of sale without the consent of superior mortgagees is concerned, and whether payment from the proceeds of sale is equivalent to the tender of the moneys secured by a higher ranked mortgagee, the modern position as it applies to the circumstances of this case was stated succinctly and in my respectful view correctly by the Privy Council in Kaolim Private v United Overseas Land Ltd [1983] 1 WLR 472 at 476 (Lord Diplock, Lord Keith of Kinkel, Lord Roskill, Lord Brightman and Sir John Megaw). 210 Kaolim was an appeal from the Court of Appeal of the Republic of Singapore. A mortgagor had purchased property and had then mortgaged that property to a bank as a security for its loan. By the time the bank (as mortgagee) wished to sell the property, a statutory property taxation debt had accrued to the Comptroller of Taxation. The debt was deemed, according to the relevant Singaporean legislation, to be "the first charge on the property concerned". 211 In analysing the relationship between the bank and the Comptroller, Lord Brightman, delivering the unanimous advice of the Board, equated the position of the bank with the position of a second mortgagee. His Lordship said as follows at 476: At the time of the offer for sale by the bank, there was in existence a prior charge to secure the arrears of property tax. Therefore, when the bank came to sell, it was in substance selling as second mortgagee. 212 Lord Brightman then analysed the rights of a second mortgagee (vis-à-vis a first mortgagee) when exercising its power of sale. The opinion of the Board is in broad terms and of general applicability (that is to say, applicable to generally-worded powers of sale as they exist in statute or in contract; as well as to broad powers of sale exercised on an equitable basis). His Lordship said also at 476: The right of a second mortgagee is to sell the mortgaged property, which subject to incumbrances is the mortgagor's property, at the best price reasonably obtainable. The second mortgagee so selling has a choice. He can sell the mortgaged property free from the first charge. In this case the purchase price will reflect the full value of the unencumbered land. When therefore the purchaser pays the purchase money to the second mortgagee, the second mortgagee must discharge the first charge so that the purchaser is granted what the vendor has contracted to convey, namely an unencumbered estate. Normally the first mortgage will be discharged in advance of the receipt of the purchase money, or out of the purchase money before the net amount is paid to the mortgagor [if there is such a net amount]. Alternatively, the second mortgagee can sell the property subject to the first mortgage. In this case the purchase price will reflect only the value of the equity of redemption. When therefore the purchaser pays the purchase money to the second mortgagee, the second mortgagee will pay off his own debt and hand the entire balance to the mortgagor. The purchaser cannot require the second mortgagee or the mortgagor to pay to him the sum needed to discharge the first charge. Otherwise the purchaser will be granted more than he has contracted to buy which is only an unencumbered estate. (Emphasis added.) 213 The Board's view makes it plain that equitable principle will uphold a subsequent mortgagee's right to sell the mortgaged property and discharge the prior incumbrance, thereby making its own subsequent claim beneficial or available. Runner is obliged to accept repayment and the discharge of its mortgage on this basis, and its submission that the relevant equitable or general law principles do not assist Mt Duneed should be rejected. Such a result is plainly just, and accords with commercial common sense. 214 Further, Runner's submission that Mt Duneed requires its concurrence to sell, even in circumstances where Runner's entire debt will be repaid, is not correct. As Mt Duneed submits, Runner has a duty to protect Mt Duneed's financial interest in the property: Downsview Nominees at 317; Jacobson at 3. Runner cannot sit on its mortgage and take no action to enforce it and at the same time prevent Mt Duneed from enforcing its mortgage. I accept Mt Duneed's submission that none of the cases cited by Runner in support of its right to exercise its power of sale as it wishes can have any application in circumstances where its stated reason for refusing to exercise that power is to enhance its ability to earn interest at Mt Duneed's expense in breach of its equitable duty to protect Mt Duneed's interest in the Land as second mortgagee. Indeed, it is noteworthy that, as Mt Duneed submits, none of the authorities referred to by Runner in support of its submission that it is entitled to sell at a time convenient to itself concerns a mortgagee acting to prevent the sale of mortgaged property where it would be repaid in full. 215 However, Mt Duneed's contention that the decision of the English Court of Appeal in Palk ordering a sale and depriving a mortgagee of its security where it is just to do so supports its position requires more careful consideration. In Palk, Mr Palk had obtained a loan from a bank (the first mortgagee). Security for that loan was a house owned by Mr Palk and his wife, subject to a deed of mortgage. Arrears began to accrue under the mortgage and Mr Palk decided that he wished to sell the house. He found a purchaser who was prepared to buy at a price which was some £77,000 less than the amount required to discharge, in full, the debt owed to the first mortgagee. 216 Mr and Mrs Palk sought to have the court exercise its discretion under s 91(2) of the LPA to order the sale. Section 91(2) is to the effect that the court may, on the request of any person interested either in the mortgage money or the right of redemption, direct a sale of the mortgaged property on the terms the court sees fit. The house was subject to two further puisne mortgages, but those mortgagees agreed to the course urged by the Palks. 217 In the interim, the first mortgagee had obtained an order for possession of the property (stayed until the Palks' proceeding was determined) and wished to rent it out for a period of time and then to sell it when the market improved. This course was of little assistance to the Palks as the rental income would most likely have been outstripped by the compounding interest on the mortgage. 218 The primary judge dismissed the Palks' application on the basis that the court may only order a sale (against the wishes of the mortgagee) where the property is to be sold for an amount which fully discharges the debt to the mortgagee (or if security is provided for any shortfall). Mr Palk was bankrupted in the process and Mrs Palk appealed. 219 The Court of Appeal allowed the appeal and ordered a sale pursuant to s 91(2) of the LPA. Sir Donald Nicholls V-C (with whom Butler-Sloss LJ and Sir Michael Kerr agreed) concluded that the discretion in s 91(2) "is not hedged about with preconditions" and that "this is a case in which a sale should be directed even though there will be a deficiency [in terms of purchase price meeting the debt and that it is] just and equitable to order a sale because otherwise unfairness and injustice will follow" (at 422). Four factors contributed to this conclusion as to injustice, namely: (i) the income shortfall between any rental income and the compounding of interest under the mortgage; (ii) that the only hope of recoupment of that shortfall lay in the chance of a significant rise in house prices; (iii) that the likelihood of Mrs Palk suffering seriously increased loss made the bank's plan oppressive to her; and (iv) that directing a sale would not prevent the bank from speculating on the housing market - the bank could buy the house and then determine whether to sell it immediately, or to wait for an increase in value. 220 Relying on the similarity between Runner's plan (which involves not exercising its power of sale and allowing the capitalisation of the interest under the first mortgage to diminish Mt Duneed's equity in the Land under the second mortgage), the fact that the sale of the Land will lead to repayment of Runner in full, and that the court in Palk was prepared to exercise its discretion to order a sale even when that sale would not lead to full repayment of the first mortgagee, Mt Duneed submits that it is not precluded from exercising its power of sale under s 77(1). 221 There is, however, some doubt as to the correctness of Palk. In Cheltenham and Gloucester plc v Krausz [1997] 1 WLR 1558, a mortgagee sought to enter into possession after the mortgagor fell into arrears and a warrant was issued to that effect. In the interim, the mortgagor purported to sell the property to a charitable trust for an amount which was well below the value of the debt to the mortgagee, and the mortgagor sought an order of the court pursuant to s 91(2) of the LPA that the property be sold to the trust. The primary judge granted the order for sale. On appeal to the Court of Appeal, Phillips LJ (with whom Millett and Buter-Sloss LJJ agreed) observed that the court's conclusion in Palk that the limits of the s 91(2) discretion permitted the court to order the sale of property by a mortgagor (against the wishes of the mortgagee) where the sale would not fully discharge the debt to the mortgagee (and also where the mortgagor proffered no security to account for the shortfall) was subject to serious doubt (see at 1567). Accordingly, the court allowed the mortgagee's appeal. 222 Whatever be the correct position, it may fairly be said that Palk and Krausz do, nonetheless, support the argument made by Mt Duneed that it should be able to exercise its power of sale under s 77(1) without the need first to tender the funds necessary to discharge the debt to Runner (which, instead, may be tendered from the proceeds of sale). Palk and Krausz both accepted that the long-standing practice of courts of equity is to exercise the discretion to order the sale of property subject to a mortgage by a mortgagor where the proceeds of that sale would be at least sufficient to discharge the debt owing to the mortgagee: see Palk at 418-420; and Krausz at 1562. 223 Further, Phillips LJ in Krausz observed (at 1562) that this practice was partially grounded in the fact that a mortgagor has a better incentive to achieve a better sale price than the mortgagee: In cases before Palk's case, where the proceeds of sale were likely to exceed the mortgage debt, the court was prepared to entrust the sale to the mortgagor on the basis that the mortgagor had a keener interest than the mortgagee in obtaining the best price. 224 With the above in mind it may be observed that the position of a puisne mortgagee wishing to sell a property against the wishes of a superior mortgagee is analogous to the relationship between a mortgagor wishing to sell against the wishes of a mortgagee. 225 I accept that the practice of courts of equity is to exercise the discretion to order the sale of property by a mortgagor where the sale would be sufficient to discharge in full the debt to the mortgagee. That practice logically supports the view that where a second mortgagee possesses a statutory power of sale, that power should not be restricted so as only to be exercisable where the funds necessary to discharge in full the debt to the first mortgagee are tendered in advance of the sale. This is provided, of course, that the sale in question is sufficient to discharge the debt or where any shortfall between the sale price and the debt is secured by some other security provided by the second mortgagee. To construe s 77(1) in the way that Runner and Jasper contend (that is, as imposing a requirement to tender payment to the first mortgagee in advance of the sale rather than from the proceeds of sale) would be inconsistent with the practice as outlined in Palk and Krausz, and with longstanding equitable principle. 226 The fact that a second mortgagee may have a "keener interest" in obtaining a better sale price than does the first mortgagee supports the conclusion that a second mortgagee may exercise its power of sale under s 77(1) of the TLA and pay out the first mortgagee from the proceeds of sale, provided that the first mortgagee is paid out in full or that some other security is provided for any shortfall. 227 In the same way it is not open to Runner to insist that repayment be sourced from a refinancing rather than from the proceeds of sale because in equity both produce the same result - discharge of the first mortgage and redemption. As Mt Duneed submits, Runner's obligation to discharge arises from the payment of what is due, not the means of payment. Mt Duneed cites Graham v Seal, Santley v Wilde and Noakes v Rice in this respect. These cases are all consistent with the Privy Council's analysis in Kaolim. As their Lordships observed in Kaolim, the first mortgage will be discharged in advance of the receipt of the purchase money, "or out of the purchase money before the net amount is paid to the mortgagor". The submissions of Runner and Jasper provide no answer to this point. 228 Turning then to Mt Duneed's reliance on s 50 of the PLA, contrary to the submissions of and Runner and Jasper, I accept that in the circumstances of the present case this section would have empowered the court to grant the relief sought by Mt Duneed. Section 50 is in the following terms: Discharge of incumbrances by the Court on sales or exchanges (1) Where land subject to any incumbrance, whether immediately realizable or payable or not, is sold or exchanged by the Court, or out of court, the Court may, if it thinks fit, on the application of any party to the sale or exchange, direct or allow payment into court of such sum as is hereinafter mentioned, that is to say - (a) in the case of an annual sum charged on the land, or of a capital sum charged on a determinable interest in the land, the sum to be paid into court shall be of such amount as, when invested in Government securities, the Court considers will be sufficient, by means of the dividends thereof, to keep down or otherwise provide for that charge; and (b) in any other case of capital money charged on the land, the sum to be paid into court shall be of an amount sufficient to meet the incumbrance and any interest due thereon - but in either case there shall also be paid into court such additional amount as the Court considers will be sufficient to meet the contingency of further costs, expenses and interest, and any other contingency, except depreciation of investments, not exceeding one-tenth part of the original amount to be paid in, unless the Court for special reason thinks fit to require a larger additional amount. 229 It is not correct to suggest, as Runner and Jasper did, that this provision may not apply to Torrens land. As Mt Duneed submitted, s 50 is not contained in Div 3 of Pt II of the PLA and thereby excluded by operation of s 86. 230 Nor can it be accepted, as Runner and Jasper contended, that s 50 requires payment into court of the amount of the mortgage debt and further amounts for costs, expenses and interest before the court can order that the incumbrance be removed. I accept Mt Duneed's submission that to so interpret the section would be inconsistent with its plain words and its express purpose. It would also be inconsistent with equitable practice as outlined in Palk and Krausz to which I have referred above. Section 50 is concerned with the sale or exchange of land subject to any incumbrance. It cannot properly be regarded as requiring payment into court prior to its operation. As Mt Duneed submitted, such a requirement would serve to defeat its operation, preventing a mortgagor who has sold and wishes to bring a recalcitrant mortgagee to settlement from resort to the section for that purpose. 231 Further, and as has been observed, s 50 of the PLA is the Victorian enactment of s 5 of the 1881 Act. The purpose of s 5 of the 1881 Act was, in substance, to allow for land to be conveyed to a purchaser so that the purchaser takes the land free from incumbrances. As much is clear from Sargant J's observations in Re Wilberforce's Trusts [1915] 1 Ch 94 at 102: Prima facie, the object of the whole of s.5 is not to disturb any vested or other rights more than is necessary, but to enable a sale to be effected and the property to be transferred to the purchaser notwithstanding there may be on the land a liability for payment of a future sum which would, but for the provisions of the section, clearly have prevented the sale of the land free from incumbrance. Of course, a purchaser might think fit to take the land subject to the incumbrance, but the purchase of land subject to an incumbrance is not usually a desirable investment, and the object of the section was to enable the land to be conveyed to the purchaser so that he might get a full and complete title to it. 232 There is no reason to suppose that the Victorian Parliament, when enacting s 50 of the PLA, would not have intended for it to operate in the same way as s 5 of the 1881 Act. Runner's submission that before the court can order that an incumbrance on property be removed, pursuant to s 50 of the PLA, there must be payment into court of the mortgage debt and further amounts for costs, expenses, and interest, must thus be rejected. To read s 50 in such a way would be to undermine the central purpose of the section, which is to enable, with ease, conveyance to a purchaser of property free from incumbrances. It cannot be the case that s 50 was intended to operate so that a first mortgagee could, by insisting on payment into court prior to the sale (rather than from the proceeds of sale) stymie the transfer of property to a purchaser free from incumbrances. This reading of s 50 of the PLA is consistent with the approach adopted by Bryson J in Equus: see at 747-748. 233 I also accept Mt Duneed's submission that the court has the power, pursuant to s 116 of the TLA, to order the delivery up of the certificate of title to the Land at settlement of the Contract of Sale. Mt Duneed submitted that the relevant power of the court is to be found in s 116A(1A) of the TLA, which is as follows: An interested person may apply to the court by summons … for an order directing another person to produce a certificate of title of document for the reasons stated in the application. 234 On the basis of Fincore, in which an order was made against a registered proprietor at the suit of an equitable mortgagee (as an "interested person", see at [31]), I accept that Mt Duneed, as a registered mortgagee would have been an "interested person" for the purposes of s 116A(1A). 235 It may be observed, however, that s 116A(1A) does not in terms grant the power to the court to order the production of the certificate of title, as Mt Duneed submitted. That section is about which parties may apply to the court for such an order of production. The court's power to order production is to be found in s 116A(3)(a) of the TLA, which is relevantly in the following terms: (3) The court … may- (a) order the person to produce the document upon such terms or conditions as the court … thinks fit … 236 I accept therefore that s 116A(3) of the TLA gives the court the power to order the relief sought by Mt Duneed. For the reasons that it would be inconsistent with a second mortgagee's rights as expounded in Kaolim and the equitable practice described in Palk and Krausz, I do not consider that the court's power under s 116A(3) is limited such that it may only order delivery up of the certificate of title where a second mortgagee itself has tendered payment to the first mortgagee prior to the sale, rather than from the proceeds of sale. 237 Any concern that the first mortgagee may lose protection as a result of an order being made under s 116A(3) of the TLA for delivery up of the certificate of title and an order under s 50 of the PLA for the relevant incumbrances on the Land to be removed could be accommodated. There could have been an order that the Land shall be deemed to be discharged from all liability on account of the first mortgage immediately, and conditional, upon the following two events occurring: (a) the amount of $3,038,960.57 being paid to Runner; and (d) the remainder of the sale price being paid into court pending a taking of accounts. 238 This would have protected Runner's interests by ensuring that its incumbrance continues to operate upon the Land until such a time as it is both paid out the price it paid to purchase the first mortgage and is given security (in the form of the amount paid into court) for any additional amount it may be owed. 239 The practical effect would have been that settlement (under the Contract of Sale and pursuant to Special Condition 1(c) thereof), removal of the first mortgagee's incumbrance, and the moment when both conditions specified in 237 above were satisfied, would have been simultaneous. 240 There is no need, therefore, to engage substantively with the submissions of Runner and Jasper that Equus stands for the principle that a court should not make an interlocutory order to require a mortgagee to give up his security (being the incumbrance on the property) where there is no reasonable protection available to the first mortgagee for funds owed under the mortgage to the first mortgagee. This is because orders could have been made providing reasonable protection to the first mortgagee. 241 Turning, finally, to Runner and Jasper's submission that Mt Duneed has failed to obtain a proper price for the Land, this point should be rejected also. There is of course no doubt that a duty to obtain a proper price is owed by a puisne mortgagee who wishes to exercise the s 77(1) power of sale: see, for example, MBF Investments Pty Ltd v Nolan [2011] VSCA 114 at [86] (Neave, Redlich and Weinberg JJA) where the court acknowledged the mortgagee's duty to take reasonable steps to obtain the best price, and their Honours noted, at [65], that the words of s 77(1) must be interpreted against the background of the equitable principles which control the exercise of the mortgagee's power of sale. 242 The relevant case law refers variously to the obligation to obtain the "best price" and "a proper price". However, the nature of the duty to take reasonable steps with respect to securing a particular price is not to be interpreted as if it requires that, necessarily, the absolute best price must be secured by a mortgagee wishing to sell in exercise of the power in s 77(1). The particular circumstances of a given case will be determinative of the extent of the range of price(s) which will be acceptable in accordance with the duty. In some cases, that range may extend beyond the best price reasonably obtainable to a number of permissible reasonably obtainable prices. In Kravchenko v The Rock Building Society (2009) 26 VR 400 at 404 (speaking in the context of a mortgagee's duty to a mortgagor when exercising the s 77(1) power), Buchanan JA said as follows: [A]s the mortgagee is entitled to prefer his own interests while taking reasonable care to protect the interests of others, in certain circumstances it may be that a mortgagor will be justified in accepting a price that is less than the best price that could reasonably be obtained, but is a price that can be described as proper. In this area of law, as in the law generally, context is everything: R v Secretary of State for the Home Department, Ex Parte Daly [2001] UKHL 26; 2 AC 532 at [28] (Lord Steyn). 243 In my assessment the present case is one where a proper price, for the purposes of the duty to obtain a proper price, is not confined strictly to the best price which might be reasonably obtainable. There are a number of matters which compel this conclusion. 244 The first, and most obvious, is that the price for the sale of the Land as agreed in the Contract of Sale is significantly higher than the market value of the Land as determined by the valuation prepared by Preston Row Paterson (PRP) on 16 September 2021. PRP valued the Land at $5,220,000 and I accept that that valuation was indicative of the objective market value of the Land at the time of PRP's valuation. 245 Relative to that valuation, the price under the Contract of Sale represents an approximately 42 per cent increase. The price under the Contract of Sale was offered approximately three months after PRP's valuation, and although no evidence was led as to any market fluctuations over that three month period, I am prepared to assume that market conditions did not account for an increase of this magnitude in the value of the property in that period. On the basis of this assumption it is clear that the price under the Contract of Sale represented a price significantly above the market value of the Land. 246 A further matter is that the duty to obtain a proper price is partially conditioned by the equitable principles controlling a mortgagee's power of sale: see Nolan, at [65]. As Mt Duneed has submitted, "once a mortgage, always a mortgage". In other words, a mortgagee's interest in a mortgage is limited to securing repayment of the funds which are due under the mortgage at any given time; no more and no less. Here it is of critical relevance that the performance of the Contract of Sale would have led to repayment in full of the debt owed to Runner under the first mortgage (as finally determined on a taking of accounts), a fact conceded in paragraph [10] of Runner's cross claim. 247 The confluence of the equitable principle that a mortgagee's interest is limited to repayment in full of the debt due to it under the relevant mortgage and the fact that Runner (as the relevant mortgagee) would have been repaid in full upon settlement of the Contract of Sale, militates in favour of a conclusion that in this case there may be a number of proper prices (along a continuum) which might reasonably be obtained and at which Mt Duneed might have sold. 248 The third point to note is that it is uncontroversial that the other relevant interested parties in the Land - being Jasper as third mortgagee, and PE Capital as mortgagor (and PE Capital's liquidators) - would not have received any funds from any sale of the Land. Jasper admits as much in its written submissions at [9]; and the liquidators agree with the sale of the Land to Mr Koch. 249 In light of the insufficiency of any sale to provide payment to any party beyond Mt Duneed, Mt Duneed is the only party with an incentive to achieve the highest possible price (beyond the value of the debt to Runner under the first mortgage). This fact provides an additional reason for concluding that in the circumstances of this case there may have been a number of proper prices at which Mt Duneed might have sold the Land in exercise of the power in s 77(1) of the TLA. Logically, the range of proper prices in this case begins at the minimum price which would be sufficient to discharge the First Mortgage Debt to Runner in full. Given, however, the uncertainty as to the precise amount due to Runner (which would have needed to be determined by a taking of accounts after the sale of the Land), a party in Mt Duneed's position should be able to satisfy the court that there is no reasonable suspicion that the sale price in question would leave any senior mortgagee in a position in which it was not repaid in full. I am satisfied that the sale price of $7,400,000 in the Contract of Sale with Mr Koch would have left no such reasonable suspicion. 250 Having determined that this case is one in which there may have been a range of proper prices at which Mt Duneed might have sold the Land in exercise of its s 77(1) power, it is necessary to determine whether Mt Duneed had selected a price within that range. That second task is one which, at least on the facts of this case, overlaps significantly with the task of determining the range at which the subject of the duty to obtain a proper price. The reasons I have proffered above in support of my conclusion that there may be a range of proper prices are also reasons which support my conclusion that Mt Duneed selected a price within the permissible range. 251 In all the circumstances I consider that Mt Duneed did not need to make any further reasonable inquiries to obtain a proper price. Whilst it is possible that a higher price might have been obtained if, as Runner and Jasper submitted, Mt Duneed had run an advertising or marketing campaign, such a hypothetical higher price would have been subject to additional advertising or marketing fees which would have eaten into (and perhaps outstripped) any gross difference between the price under the Contract of Sale and any higher possible price. The marginal utility of an advertising or marketing campaign was, in my assessment, likely to have been low. 252 Further, it is to be emphasised that the price under the Contract of Sale was significantly above the market value of the Land. In these circumstances it was reasonable for Mt Duneed to accept that price without making any further inquiries. 253 I would have concluded therefore that Mt Duneed had discharged its duty to take reasonable steps to obtain a proper price pursuant to s 77(1) of the TLA. 254 However, even if I am incorrect in concluding that Mt Duneed had discharged its duty to obtain a proper price, I would not have concluded that any possible breach of that duty would have been a sufficient basis to restrain the sale of the Land. Speaking about the general law duty of a mortgagee to a mortgagor when exercising a power of sale in Ultimate Property Group Pty Ltd v Lord (2004) 60 NSWLR 646 at [40], Young CJ in Eq observed: it is a fundamental principle in the textbooks that mere inadequacy in the price obtained and the value will not normally be of itself sufficient for a mortgagor to upset a purported sale. 255 I accept that the situation is analogous as between puisne mortgagee and senior mortgagee. Given that Runner would have been paid out in full as a result of the performance of the Contract of Sale, that Jasper has no prospect of being repaid any of the debt due to it under the third mortgage, that the liquidators consented to the sale to Mr Koch, and that there do not appear to be any other relevant factors which would have weighed in favour of restraint of Mt Duneed's exercise of the power in s 77(1), I consider that this is the sort of case in which mere breach of the duty to obtain a proper price would have been insufficient to upset the sale. 256 Further, I do not consider that the Victorian Parliament could have intended that a putative exercise of the mortgagee power of sale pursuant to s 77(1), when that section is construed against the equitable principles regarding a mortgagee's power of sale at general law, would be invalid as a result of non-compliance with the duty to obtain a proper price as a condition of the exercise of power. To put this another way, I consider that Parliament's purpose in enacting the duty to obtain a proper price was to protect the interests of other parties interested in the property the subject of a particular mortgagee's putative exercise of its s 77(1) power of sale. With that purpose in mind, Parliament cannot have intended that breach of that duty should invalidate an exercise of the power in s 77(1) in circumstances where a first mortgagee is to be paid out in full from the proceeds of the relevant sale and any puisne mortgagee (relative to the mortgagee exercising the power) has no prospect of being repaid. Those are the relevant facts here. 257 For these reasons I would not have restrained Mt Duneed's exercise of the power of sale pursuant to s 77(1) even if I had concluded that Mt Duneed had breached its duty to obtain a proper price. The apparent circumstances of Runner's sale of the Land to South Reeve for the sum of $4,820,000 only serve to fortify this conclusion.

Runner and Jasper's argument that there may be no utility in granting relief to Mt Duneed 258 The final point advanced by Runner and Jasper in opposition to the relief sought by Mt Duneed is that as the party seeking relief Mt Duneed needed to satisfy the court that there would be utility in granting relief, and that Mt Duneed could not do so. Thus it was said by Runner and Jasper that Mt Duneed should not have the relief that it seeks. They maintained that it was insufficient for Mt Duneed to point to the Contract of Sale as a basis for its claim that the Land would have been sold on a particular date, and that Mt Duneed should have led evidence to prove that Mr Koch still wishes to complete the Contract of Sale and has sufficient financial capacity to proceed to settlement. 259 Leaving to one side Runner's apparent recent sale of the Land, I do not accept the submissions of Runner and Jasper in this respect. First of all it was clear that there was a Contract of Sale which was extant and enforceable as between Mt Duneed and Mr Koch. The document speaks for itself. There is no basis to look behind the contract and enquire whether Mr Koch's financial position would have been sufficient to discharge his obligations under it. We are not here concerned with a claim for breach of contract where the plaintiff must show that he or she was ready and willing to perform his or her side of the bargain: see Hensley v Reschke (1914) 18 CLR 452 at 463-464 (Barton J) and 473 (Isaacs and Rich JJ); Foran v Wight (1989) 168 CLR 385 at 451 (Dawson J). The situation is entirely different. 260 Secondly, even if it were the case that Mr Koch had not been able to complete the Contract of Sale, I would still have been prepared to grant relief to Mt Duneed which would have enabled it to sell the Land. There would have been every reason to do so, and Runner's interests would have remained protected. As I have noted above, any orders which were to be made on Mt Duneed's application could have been such that removal of Runner's mortgage from the register (pursuant to s 50 of the PLA) would have been contingent upon Runner receiving payment of $3,038,960.57, and payment of the remainder of the proceeds of sale into court so that a taking of accounts could have occurred. Should either, or both, of these conditions not been satisfied then, subject to the making of any further order, Runner's mortgage would have remained on the register. Runner's interests would thus have been sufficiently protected. 261 Thirdly, and even if I am wrong to conclude that it was not necessary for Mt Duneed to lead affirmative evidence to demonstrate that Mr Koch has the financial capacity to complete the purchase of the Land, it was not open to Runner and Jasper to raise this point during oral submissions on the first day of the trial. Runner made no reference to this issue in its pleading, and indeed at paragraph [17] of its defence to Mt Duneed's cross claim Runner admitted that settlement of the Contract of Sale would cause the entirety of the First Mortgage Debt to be repaid (as finally determined by a taking of accounts). It follows from the fact that Runner pleaded that completion of the Contract of Sale would lead to full repayment of the First Mortgage Debt that Runner was proceeding on the basis that Mr Koch had the capacity to so complete. Similarly, at paragraph [10] of its cross claim Runner pleaded that unless restrained, Mt Duneed and Mr Koch intended to complete the Contract of Sale. Once again, the possibility of non-completion was not contemplated by Runner on its pleading. For Runner to have been able to raise this point it would have needed to do so explicitly: r 16.05(2) of the Federal Court Rules 2011 (Cth). 262 Runner and Jasper's submission that Mt Duneed should not have been granted the relief which it sought on the basis that Mt Duneed has not established that Mr Koch had the financial capacity to complete the Contract of Sale and thus that relief would be inutile must fail for these reasons.

Runner's entitlement to INTEREST 263 During the trial Runner provided the court with a "statement of debt" reflecting what it maintained was due and owing on the First Mortgage Debt at the relevant times, being: (a) $3,764,117.93 owing as at 20 December 2021 (the settlement date under the Contract of Sale); and (b) $4,583,096.58 owing as at 27 September 2022 (the first day of trial). This represents a difference of $818,978.65 in accumulated interest over the period, accruing at a rate of 19.5 per cent per annum and compounding on a monthly basis. It may be observed that had Runner prevailed on its cross claim the amount due and owing on the First Mortgage Debt would now be in excess of $5 million. 264 Mt Duneed's position is that had it not been for Runner's conduct, the Contract of Sale would have settled on 20 December 2021, that being the stipulated settlement date, and Runner's mortgage debt would have been repaid in full at that time. As the value of the Land was already insufficient to pay out Mt Duneed's mortgage, and Runner's effective veto of the settlement of the Contract of Sale allowed Runner to continue to capitalise interest on its own mortgage debt, Mt Duneed contends that Runner should not be entitled to any interest on its mortgage debt from 20 December 2021. Runner was put on notice of this risk by the then docket judge on 17 December 2021. Mt Duneed accordingly sought an order that, on a taking of accounts, Runner be disentitled to interest from 20 December 2021. 265 In support of its position Mt Duneed relied on Thornton v Court (1854) 43 ER 115 at 118-119 (Knight Bruce LJ ) for the principle that where there is a debt which would have been satisfied but for a mortgagee's wrongful or inequitable conduct, the mortgagee will be allowed no interest during such time as the debt has thereby remained unsatisfied. See also Devon Nominees Ltd v Hampstead Holdings Ltd [1981] 1 NZLR 477 at 485 (McMullin J, delivering the judgment of the unanimous court) where his Honour observed that "to allow the plaintiff interest would have allowed him to profit from his own wrong". 266 Mt Duneed submitted that because Runner has wrongfully and inequitably sought to defeat repayment of the mortgage for its own profit, it should be disqualified from any entitlement to interest during such time as the debt has thereby remained unsatisfied. It was said that it would be unjust for the court to allow Runner to profit from its own wrongdoing by making Mt Duneed "pay" the capitalised interest from 20 December 2021. 267 Although Runner and Jasper did not address the issue of interest in their submissions directly, they did question whether Mr Koch would have been able to settle the Contract of Sale on 20 December 2021. For the reasons given above, however, I have rejected their submissions on this point. 268 Speaking in the analogous context of the relationship between a mortgagee and mortgagor, I accept that it is the usual position that, where a mortgagor wishes to pay out the mortgagee and redeem the property and the mortgagee resists that course, the mortgagee becomes disentitled to interest upon satisfaction of the two following conditions: (i) that the mortgagor provides a proper tender of the funds necessary to discharge its debt to the mortgagee; and (ii) that the mortgagor holds the amount in question available despite it having been refused by the mortgagee: Devon Nominees at 484; Bishop v Church (1751) 2 Ves Sen 371; 28 ER 238 at 239; Gyles v Hall (1726) 2 P Wms 378; 24 ER 774 at 774. 269 There are, however, exceptions to the usual position just described. They generally involve circumstances in which the mortgagee, through its own failure to produce documents of title, prevents a mortgagor (willing to tender funds to discharge the debt) from tendering the relevant funds: Lord Midleton v Eliot (1847) 15 Sim 531 at 726-727; 60 ER 725; James v Rumsey [1879] 11 Ch D 398 at 402-404. See, also, Devon Nominees at 484-486 for a useful summary of the usual position and its exceptions, with McMullin J explaining at 485 that the exceptional cases like Lord Midelton and James v Rumsey turned on a willingness of the mortgagor to pay the amount owing and that, in that context: To have allowed the mortgagee subsequently to set up a lack of tender by the mortgagor so as to continue his liability for interest would have enabled the mortgagee to take advantage of his inability to perform his part of the settlement namely to hand over the title deeds 270 It may be observed, however, that these cases involved the accrual of interest under a contractual obligation as between parties related as mortgagor and mortgagee. That is a different position to the present case, in which the effect of the interest accrual pursuant to the first mortgage affects Mt Duneed not directly via a contractual obligation but, rather, impacts upon Mt Duneed's equity in the Land as the interest accumulated under the First Mortgage continues to grow. 271 There are, however, clearly established equitable obligations which regulate the relationship as between mortgagees of the same property, even if there is, in fact, no contractual basis for their obligations inter se. The observation of Beach J in Jacobson that it is strongly arguable that the only duty a first mortgagee owes to a second mortgagee is a duty to protect the second mortgagee's financial interest in the property is relevant in this regard. As has been emphasised, a mortgagee's interest in a mortgage is limited to securing repayment (at any given moment) of the funds which are due under the mortgage, subject to whatever contractual entitlement to interest may exist. 272 In the present case the effect of Runner opposing the sale to Mr Koch (if it is assumed that the interest continued to accrue pursuant to the First Mortgage) has been that Mt Duneed's equity in the property has been reducing (because of the priority of Runner's mortgage) for the entire period that Runner has opposed the completion of the Contract of Sale. I have determined that there was no legal or equitable basis for Runner to take this position. 273 In these circumstances, and because it was Runner which prevented the completion of the Contract of Sale, it would have been unjust for Mt Duneed to be required to bear the burden of Runner's interest throughout that period, diminishing Mt Duneed's equity until such time as the court determined that the sale to Mr Koch (or some other party) should proceed. Mt Duneed has not been responsible for the delay of the performance of the Contract of Sale; responsibility lies with Runner. 274 Beyond that injustice, it is of course the case that the Contract of Sale, had it been performed, would have caused Runner to be repaid in full. This would have satisfied its only interest in the First Mortgage. Accepting that a first mortgagee has an equitable duty not to sacrifice the financial interests of puisne mortgagees, by opposing the performance of the Contract of Sale in a situation where its accrual of interest has significantly diminished Mt Duneed's equity in the Land Runner has breached that duty. Equity would not permit such a result and, accordingly, would restrain a first mortgagee who opposes a legally permissible sale of a property subject to multiple mortgages from claiming interest from the date at which the relevant puisne mortgagee would have been able tender the funds in question. 275 Insofar as Runner has said "there must be an actual tender" of the relevant funds (in the sense of an attempt to tender the funds) and that the mortgagor must, upon refusal of that tender, keep the funds available, and that Mt Duneed did not have the funds to tender at any time, and that this creates an impediment to Mt Duneed's claim that the interest under the First Mortgage stopped accruing at some time around 20 December 2021, I would make the following observations. 276 First, the line of cases which include Devon Nominees, Bishop, and Gyles involves the relationship between mortgagee and mortgagor, which relationship is conditioned by the mortgage contract. No such contractual relationship exists as between Runner and Mt Duneed. 277 Secondly, and critically, to hold that Mt Duneed must have actually had the funds to pay out Runner's mortgage in full in order for Runner's interest accrual to be paused would be contrary to the principle that a second mortgagee is entitled to sell the mortgaged land free of the first mortgage and buy the first mortgagee out from the proceeds of sale, as outlined in Kaolim. Such a finding would also be contrary to the approach to s 77(1) of the TLA which I have taken above in light of the principle expressed in Kaolim. Section 77(1) permits a second mortgagee to sell a property and pay out the first mortgage from the proceeds of sale. It would be inconsistent with that statutory power of sale for an equitable rule (especially one regulating the relationship between a mortgagee and a mortgagor) - that a mortgagor must actually have funds to make a tender for that tender to disentitle the mortgagee to further accrual of interest under the mortgage - to condition an analogous scenario as between a first mortgagee and a second mortgagee. 278 Having regard to my conclusion that there was an extant Contract of Sale between Mt Duneed and Mr Koch as at 20 December 2021 I accept that Runner would have had its mortgage debt repaid in full as of that date, and ought not be entitled to accumulate interest from that date.

The liquidators' claims and the claims against the liquidators 279 The liquidators expressly acknowledged in their written submissions and orally that their claims (and defences to Runner's claims against them) are conditional upon Mt Duneed being restrained from completing the Contract of Sale with Mr Koch. Given that the liquidators' substantive application in the proceeding has been entirely contingent upon the court restraining the completion of the Contract of Sale, and having regard to the circumstances which have apparently unfolded, it will be necessary to hear from the liquidators as to the status of their applications. In circumstances where Mt Duneed and Mr Koch would have been permitted to proceed with the Contract of Sale if Runner had not sold the Land, it has been unnecessary to give further consideration to the liquidators' applications.

orders 280 As has been indicated, the cross claim brought by Runner and Jasper will be dismissed. I will hear the liquidators as to their position more generally in light of these reasons for judgment. Having regard to Mt Duneed's interlocutory application of 26 June 2023 to re-open its case and amend its cross claim in the face of the alleged sale of the Land by Runner, I will hear the parties on that application and the future conduct of the proceeding, as well as on the question of the costs of the matters litigated to date. I certify that the preceding two hundred and eighty (280) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McEvoy.

SCHEDULE OF PARTIES VID 585 of 2021 Respondents Fourth respondent: ORATANGO PTY LTD (ACN 646 517 615) Respondents by second cross claim Fourth cross respondent by second cross claim: GIDEON ISAAC RATHNER AND MATTHEW BRIAN SWEENY IN THEIR CAPACITY AS JOINT AND SEVERAL LIQUIDATORS OF PE CAPITAL NOMINEES PTY LTD (IN LIQUIDATION) (ACN 615 298 201) Fifth cross respondent by second cross claim: MANDA CAPITAL HOLDINGS PTY LTD (ACN 168 795 088)