Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 185 ALR 152 at [11] per Gleeson CJ, Gummow and Hayne JJ.
40 A contact is read in a way which will result in a sensible and businesslike meaning: Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109; Cohen & Co v Ockerby & Co Ltd (1917) 24 CLR 288 at 300 per Isaacs J; Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 at 437; Schenker & Co (Aust) Pty Ltd v Maplas Equipment and Services Pty Ltd [1990] VR 834 at 843-8. If a contract is open to two constructions it will receive that construction which will avoid consequences which are capricious, unreasonable, unjust or inconvenient; TCN Channel Nine Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130, at 146. A fundamental principle is "… that the intention of the parties is to be ascertained from the instrument as a whole and that this intention when ascertained will govern its construction": Fitzgerald v Masters (1956) 95 CLR 420 at 437 per McTiernan, Webb and Taylor JJ. In the course of construing an instrument as a whole in this fashion, the court can engage in "… the rejection of repugnant words, the transposition of words, and the supplying of omitted words": ibid.
41 Applying these priciples I do not accept the argument that there is no document which should properly be regarded as "annexure A" to the form of mortgage over the Asquith property given to Otta on 15 February 2001. If the argument of the second defendants in this respect were right, the entry into of the form of mortgage over the Asquith property on 15 February 2001 would be close to futile. (It would not be completely futile, because the mortgage would secure the amounts which the mortgagee paid on default by the mortgagor in observing covenants.) That is not a result that ought readily be arrived at. Rather, in my view, as a matter of construction the Otta Deed executed on 15 February 2001 is "annexure A" referred to in the mortgage. To the knowledge of both parties to the mortgage, the Otta Deed was handed to Mr Terei at the same time as the mortgage form, with both documents already executed by Entervin. Both the mortgage form, and the Deed, bear the same date. There is no other document which is a possible candidate for being "annexure A" to the RPA mortgage form. The Otta Deed and the mortgage form concerning Asquith are both, commercially, part of the same transaction, whereby Otta provided money for investment in the Silverwater development and, considering the documentation as a whole, it is fairly clear that Entervin and Otta intended that Otta would have an equitable mortgage over the Asquith property.
42 Once it is realised that the Otta Deed is "annexure A" to the RPA form of mortgage of the Asquith land, the construction of Clause 15 falls into place. In Clause 15, "this agreement" refers to not only the Otta Deed, but also to the mortgage to which that Deed is an annexure, and of which it is part.
43 So construed, the mortgage says, in substance, that Entervin mortgages the Asquith land, and covenants with Otta that it will pay the Principal of $100,000 plus 30% on that amount in 12 months or on completion of the project, whichever comes first. The document, so construed, confers on Otta an equitable interest in the Asquith land.
44 I would also accept that the Otta Deed is "annexure A" to the RPA form of mortgage of the Silverwater land. However, that view does not lead anywhere, so far as the problems presently before the court are concerned.
45 The second defendants submitted that Clause 15 of the Otta Deed ought be construed by inserting, in the second part of the clause, the words, "disregarded and that this agreement shall be" immediately before the word "exhaustive". I accept that that is an appropriate way of construing Clause 15. However, once the Otta Deed is accepted as being "annexure A" to the form of mortgage, adopting that construction of Clause 15 does not assist the second defendants.
46 The second defendants also submitted that Clause 15 denied Otta the opportunity of relying upon the mortgage document as a collateral agreement as the form of mortgage was inconsistent with Clause 15: Hoyts Pty Ltd v Spencer (1919) 27 CLR 133; Gates v The City Mutual Life Assurance Society Limited (1986) 160 CLR 1 at 11. Once the Otta Deed is accepted as being "annexure A" to the form of RPA mortgage of the Asquith land, it is no longer a separate agreement to the agreement contained in the form of mortgage. Thus, this argument also falls away.
Are the Rights of the Second Defendants Over the Asquith Land Defeasible?
47 Otta accepts that the express agreement in Clause 1.1(j) and 7F of the Deeds which the second defendants entered contained an express covenant to give an unregistered mortgage over the Asquith property, and therefore, at the time those deeds were entered, were effective to confer an equitable mortgage over the Asquith property. However, Otta argued, that mortgage has now come to an end.
48 Consideration of Clause 1.1(j), 6.3 and 7F of the Deeds entered by the second defendant makes clear that it was the contemplation of the parties that the mortgage given to the second defendants over the Asquith property would be an interim one, which would be replaced in due course, by a registered second mortgage to be given by Sunfix over the Silverwater property. Those Deeds proceed on the basis that the Silverwater property had not been obtained by Sunfix at the date the Deeds were entered.
49 A historical search of the title of the Silverwater land was tendered. It was tendered by the second defendants, on the explicit basis that it related only to their own case for payment out, and was not tendered against Otta. That search shows that it was only on 21 August 2001 that a transfer to a company connected with Mr Bradshaw of the Silverwater land was registered. The stamp duty on that transfer was paid on 26 July 2001, making it unlikely that settlement occurred any earlier than 26 July 2001. The transferee of the Silverwater land was Sunfix. (That Sunfix was the transferee was consistent with the documentation the second defendants entered, but contrary to the documentation which Otta entered, which contemplated that Entervin would be the transeree.)
50 Given the basis upon which this historical search was tendered, it is not open to me to take it into account in deciding whether the time during which Entervin agreed that the second defendants would have a mortgage over the Asquith property has now come to an end. The appropriate way of dealing with this argument, it seems to me, is to ignore that evidence arising from the historical search. That leaves the situation as being that Otta bears the onus of establishing that the event of defeasance, upon which the second defendants would cease to be entitled to a mortgage over the Asquith property, has occurred. Otta has not discharged that onus.
51 There is a question of construction about whether, in Clause 7F, the expression "until the completion of the purchase of the property referred to in Item 2 Schedule 1 (the Development)" refers to the time when Sunfix literally completes its purchase of the Silverwater property (ie, upon exchange of the appropriate documents and cheques between solicitors), or whether on the proper construction of Clause 7F the mortgage over the Asquith property is to continue until Sunfix grants the second defendants "a registered joint second mortgage over the said development". On the approach I take to the question of the defeasibility of the second defendants' interest in the Asquith property, it is not necessary to consider that question of construction - whatever the answer to the question of construction might be, Otta has not proved that that time has arrived. I conclude that each of the Deeds executed by the second defendants on 23 March 2001 confers an equitable mortgage over the Asquith property.
Is the Right of Otta Under the Otta Deed a Mere Equity?
52 The argument that the Otta Deed conferred a mere equity arose in argument in the context where the second defendants were contending that the mortgage over the Asquith property given to Otta, secured nothing. It was to the effect that, even if from the context in which the Otta Deed and the form of mortgage over the Asquith property were handed over, one might imply an agreement that the mortgage was intended to secure the obligations on the part of Entervin contained in the Otta Deed, that obligation was merely one arising from implication, and was not one which arose from a covenant in writing. The argument accepted that Otta had paid the $100,000, and hence had a claim to specific performance of that implied agreement, by virtue of the doctrine of part performance. However, if a litigant needs to invoke the doctrine of part performance to be able to enforce, in equity, an agreement to give an equitable mortgage, that agreement to give an equitable mortgage amounts to a mere equity, not an equitable interest: Double Bay Newspapers Pty Ltd v AW Holdings Pty Ltd (1997) 42 NSWLR 409 at 425.
53 That argument is, in my view, overcome if one accepts, as I do, that the obligation on Entervin to pay the $130,000 is not merely to be implied into the mortgage, but is expressly contained in it, in writing, by virtue of the Otta Deed being construed to be "annexure A" to the RPA form of mortgage.
Postponing Conduct on the Part of the Second Defendants?
54 In light of the reasoning so far, this argument will not affect the outcome of this case. However I should record it. Otta submitted that, even if Otta had a mere equity, the second defendants had engaged in postponing conduct, which ought result in their equitable interest (it being assumed for the purpose of the argument that they had an equitable interest) being postponed. Otta submitted that the postponing conduct arose from Clause 7F of the Deeds of the second defendant, in that the second defendants had been given, on 23 March 2001, the form of RPA mortgage executed by Sunfix over the Silverwater property. It was submitted that this was the "registered joint second mortgage" referred to in Clause 7F, and that by failing to register it when Sunfix acquired the Silverwater property the second defendants had engaged in postponing conduct.
55 An essential part of this argument is that Sunfix has become the registered proprietor of the Silverwater property. For reasons similar to those given in paragraphs 50 and 51 above I conclude that Otta bears the onus of proving that Sunfix became the registered proprietor of the Silverwater property, and that it has not discharged that onus. That is sufficient to dispose of the argument.
56 There are further questions of construction. One of them is whether the RPA mortgage over the Silverwater property given to the second defendants on 23 March 2001 was indeed the "joint second mortgage" referred to in Clause 7F of the second defendants' Deed of 23 March 2001. In the circumstances where Clause 7F contemplates that the second defendants' unregistered second mortgage over the Asquith property will come to an end at either (depending on which is the correct construction) the actual completion of the purchase of the Silverwater property, or the granting by Sunfix of a registered "joint second mortgage" over the Silverwater property, Otta needs to establish that the form of mortgage over the Silverwater property is indeed that "joint second mortgage" before this argument can succeed. If the correct answer to this question of construction is that the second defendants' mortgage over the Asquith property ceases when the purchase of the Silverwater property has been completed (in the sense in which conveyancers use that expression) I have difficulty in seeing how the subsequent failure of the second defendants to register a joint second mortgage over Silverwater could be postponing conduct - their interest would have come to an end before they had the opportunity to engage in that allegedly postponing conduct. However, if the correct construction of Clause 7F were that the unregistered second mortgage over Asquith came to an end upon registration of the "joint second mortgage" over Silverwater, and if the correct construction of Clause 7F were that the mortgage given to the second defendants over the Silverwater property on 23 March 2001 was that "joint second mortgage", then a difficult question of principle arises. It concerns whether failure of the second defendants to register the mortgage, even if the Silverwater property had been acquired by Sunfix, could as a matter of principle amount to conduct which postponed the interest of the second defendants in the Asquith property. Counsel were not able to show me any cases where conduct of the holder of an equitable interest could result in that equitable interest being postponed to an earlier mere equity. Given that the resolution of that question of principle will not alter the outcome of this case, I do not propose to go into it.
Result
57 No argument was put by the second defendant submitting that, if Otta had priority, its priority did not extend to the whole of the moneys now in court. I hold that Otta has an equitable interest over the Asquith property, which has priority to the equitable interest of the second defendants in the Asquith property. Otta is entitled to the payment out of the moneys in court.
58 The parties have not addressed me concerning costs. I propose to make an order for costs, on the assumption that the only relevant principle in making that order is that costs should follow the event. I recognise that this is an assumption I have adopted without argument. If either party wishes to submit that any other result should obtain, concerning costs, that party should make arrangements for the matter to be re-listed, upon not less than three days notice to the other party, before me within 28 days from the date of handing down these reasons for judgment. On that occasion I will consider any evidence and arguments which might be put forward concerning costs. To enable this process to be gone through, I propose to direct that the orders not be entered for 28 days from the date of handing down of these reasons.
Orders