His Honour held that the option to renew did not mark out the extent of the term created by the lease, but rather was merely an agreement to grant a new lease which was contingent upon the exercise of the option and, according to its terms, the observance of the covenants of the lease.
19 The extent to which a registered mortgage gave to the mortgagee an indefeasible interest in property was considered in PT Ltd & Anor v Maradona Pty Ltd & Ors (1992) 25 NSWLR 643 where Giles J (as his Honour then was) said at 679:
"That which is attained by registration is, in the words of s 42 [of the Real Property Act 1900 (NSW)], an estate or interest in the land. Registration does not validate all the terms and conditions of the instrument which is registered. It validates those which delimit or qualify the estate or interest or are otherwise necessary to assure that estate or interest to the registered proprietor." (Emphasis added)
20 In that case a guarantee was held to be void because of the lack of capacity of the purported guarantor. As it was not apparent on the face of the registered mortgage what the extent of the estate or interest of the mortgagee was, it was necessary to have reference to other documents that were not registered. Giles J held that whilst the mortgagee had an indefeasible title conferred by the mortgage, as the guarantee did not create any obligation on the part of the guarantor, the mortgage in fact secured nothing.
21 In Small v Tomassetti (2001) 12 BPR 22,253; [2001] NSWSC 1112 Campbell J (as his Honour then was) observed at [9]:
"Notwithstanding that registration confers indefeasibility on a mortgagee, there is still a question 'indefeasibility for what?'"
22 At [12], his Honour observed that PT Ltd v Maradona Pty Ltd illustrates that it is necessary to look at the terms of the particular mortgage subject of the litigation to determine the scope of the estate or interest in the land in respect of which indefeasibility was claimed by the registration of that mortgage: see also Printy v Provident Capital Ltd (2007) NSW ConvR 56-180; [2007] NSWSC 287 per Studdert J, especially at [14]; Chandra v Perpetual Trustees Victoria Ltd & Ors [2007] NSWSC 694.
23 In Perpetual Trustees Victoria Limited & Anor v Tsai, Young CJ in Eq was dealing with an appeal from a Master who had entered summary judgment for a mortgagee against a mortgagor. In the course of determining whether summary judgment should have been entered, his Honour reviewed the authorities dealing with the effect of a forged mortgage. His Honour at [13] referred first to the undoubted principle that by virtue of s 42 of the Real Property Act 1900 (NSW) a forged mortgage, when registered without fraud on the part of the mortgagee, conferred an indefeasible title on the mortgagee in respect of the interest in land described in the mortgage.
24 His Honour then dealt with the question of the extent of that indefeasibility, adopting the question posed by Campbell J in Small v Tomassetti: "indefeasibility for what?" Young CJ in Eq pointed out that the answer to that question depended upon the wording of the covenants in the particular mortgage. He said that under the "old fashioned form of mortgage" there was a statement of the sum that had been lent and an acknowledgment that the moneys had been so lent. Thus, when those matters were stated in the body of the mortgage document, the production of the mortgage document itself constituted prima facie evidence of the existence of the debt. However, where there was no statement of the amount lent in the mortgage, proof of the indebtedness and that the indebtedness was secured by the mortgage had to be established in some other way.
25 Senior counsel for Permanent Custodians conceded that, having regard to the above principles, the "Mortgage Debt" referred to in cls 6(a) and (b) did not operate to secure to it an indefeasible title over Sabah Yazgi's interest in the property. It submitted, however, that it had an indefeasible title in respect of the whole of the mortgage debt as against the whole of the property, including Sabah Yazgi's interest, by virtue of the definition of "Mortgage Debt" contained within the memorandum. (This submission did not (and was not intended) to engage with the operation of cls 6(c) and (d)).
26 The argument so advanced was simply this: the effect of the definition of "Mortgage Debt" in the memorandum was that the mortgage secured any moneys presently owing, or owing in the future, or contingently owing by the mortgagors, either jointly or severally, under the mortgage or any "Secured Agreement". The loan contract was, as already explained, a "Secured Agreement". It followed on this argument that the "Mortgage Debt" that was secured by the mortgage included Yasin Yazgi's several liability under the loan contract, so that the "Mortgage Debt" extended to the whole of the amount of the loan. It was then said that the mortgage secured Yasin Yazgi's indebtedness over the whole of the property.
27 The correctness of this submission depends upon the meaning of the phrase "means and includes" in cl 6 (emphasis added). It was submitted that the word "includes" extended the meaning of "Mortgage Debt" in cl 6 beyond the terms specified, relevantly, in cls 6(a) and (b), so as to incorporate indebtedness that fell within the meaning of "Mortgage Debt" in the memorandum.
28 Counsel for Sabah Yazgi contended that there were two answers to this argument. First, she submitted that the word "includes" did not enlarge the category of debts that were encompassed by the phrase "Mortgage Debt" in cl 6. Secondly, she submitted that, in any event, the definition of "Mortgage Debt" in the memorandum was inconsistent with the definition of "Mortgage Debt" in cls 6(a) and (b), so that, pursuant to cl 3 of the schedule to the mortgage, the terms of the schedule prevailed.
29 The meaning of the phrase "means and includes" was considered by Gummow J (as his Honour then was) in Hepples v Federal Commissioner of Taxation (1990) 22 FCR 1 at 21 in the following terms:
"As a general proposition, the use of the expression 'means and includes' indicates an exhaustive explanation of the meaning which for the purposes of the statute must be attached to the term the subject of the definition, and conveys both the idea of enlargement and exclusion: Dilworth v Commissioner of Stamps [1899] AC 99 at 105-6; YZ Finance Co Pty Ltd v Cummings (1964) 109 CLR 395 at 398-9, 401-2, 405."
30 His Honour added that in a given context the use of the word "includes" may not extend the ordinary meaning of the defined term so much as to specify that particular matters will fall within the definition that might otherwise have been in doubt: see Lillyman v Pinkerton (No 2) (1982) 71 FLR 135 at 138.
31 I am of the opinion that the effect and operation of the phrase "means and includes" in cl 6 is that the clause provides that the items specified in cls 6(a)-(d) are the items that constitute the "Mortgage Debt" for the purposes of the mortgage. The items specified in (a) and (b), that is, the moneys owing under the loan contract and interest thereon would, as a matter of normal parlance, fall within the ordinary meaning of "Mortgage Debt". However, cls 6(c) and (d) include other items, such as costs involved in the recovery process. Whilst the matters included in 6(c) and (d) are typically recoverable under a mortgage, I am of the opinion that they would not ordinarily fall within the meaning of "Mortgage Debt" unless that was specifically stated, as it is in cl 6. The effect and operation of the word "includes" is to enlarge the concept of "Mortgage Debt" as ordinarily understood so as to bring within its operation not only the matters specified in cls 6(a) and (b), which typically answer the description of "Mortgage Debt", but also cls 6(c) and (d), which do not.
32 However, even if the phrase "means and includes" in the schedule, properly construed, incorporates the meaning of "Mortgage Debt" as contained within the memorandum, the question still arises as to whether the term "Mortgage Debt" in the memorandum is inconsistent with cl 6, so that, pursuant to cl 3, the terms of the schedule prevail. It is thus necessary to return to the meaning of "Mortgage Debt" in cl 6(a) of the schedule and the definition in the memorandum.
33 The "Mortgage Debt" referred to in the schedule was a joint borrowing by Yasin Yazgi and Sabah Yazgi under the loan contract. The interest on that debt would likewise give rise to a joint indebtedness. By contrast, the "Mortgage Debt" specified in the memorandum refers both to a joint and several borrowing, either under the mortgage, or under any "Secured Agreement". It was common ground that there were no moneys owed by Sabah Yazgi under cls 6(a) and (b) of the mortgage. As there is no specification within the mortgage document of any amount owed under the mortgage, it is necessary to refer to the memorandum to ascertain what indebtedness is secured: see Perpetual Trustees Victoria Limited & Anor v Tsai.
34 Under the memorandum, "Mortgage Debt" included moneys owing, jointly or separately, under any "Secured Agreement". The only "Secured Agreement" in this case is the loan contract. Senior counsel for Permanent Custodians submitted that in accordance with the terms of the memorandum, there was a joint and separate liability of Yasin Yazgi and Sabah Yazgi under the loan contract. (I pause only to observe that the reference to "separate liability" is a modern uptake of the traditional concept of "several liability".)
35 However, as under the terms of the schedule the liability of the parties under the loan contract was joint, a borrowing under the same loan contract which is said to be joint and several by virtue of the terms of the memorandum, must give rise to an inconsistency. Senior counsel for Permanent Custodians submitted that the inconsistency did not operate because cl 3 of the schedule was intended to operate upon the specific terms of the clauses in the respective documents, whereas the analysis just undertaken had the effect of looking to the outcome or the operation of the individual clauses. In my opinion, that distinction is a false one - the terms of the respective clauses give rise to their respective operations - but, in any event, once it is apparent that the "Secured Agreement" referred to in the definition of "Mortgage Debt" in the memorandum is the loan contract, the inconsistency is apparent on the face of the documents.
36 It follows that the Orders made by Harrison AsJ, insofar as they related to Sabah Yazgi's interest in the property, should be set aside.
37 In its oral argument on the appeal Permanent Custodians submitted that regardless of whether the term "Mortgage Debt" in the schedule had the same width of meaning as that term had in the memorandum, the "Mortgage Debt" in the schedule also included the items specified in cls 6(c) and (d) and that any moneys that fell within the reach of those clauses was secured by Sabah Yazgi's interest in the property. Senior counsel for Permanent Custodians informed the Court that it claimed that it had incurred costs and other expenses in an amount of approximately $270,000 that fell within the ambit of those clauses. There was no evidence as to the nature of the expenditure or how that amount was calculated. Permanent Custodians conceded that this claim had not been made at trial. It was seemingly withdrawn by senior counsel for Permanent Custodians in oral argument on the appeal and was expressly withdrawn at a further mention of this matter on 5 September 2007.