BETWEEN : WINDSLOW CORPORATION PTY LTD (In Liq) (ACN 096 537 549)

Contracts - Construction and interpretation of contracts - Definition of "secured money" - Interpretation of "all obligations" securities - Debt due to Bank assigned to third party - Whether Bank securities the subject of the assignment extend to debts payable to the third party - Determination as to the commercial purpose underlying the securities - Intention of the grantor of the securities - Finding that the securities were not intended to extend to debts payable to a third party

Australian Broadcasting Commission v Australasia Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99

Clark's Refrigerated Transport Pty Ltd (In Liq), Re; [1982] VicRp 100; [1982] VR 989

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337

Estoril Investments Pty Ltd v Westpac Banking Corporation (1993) 6 BPR 13146

Murphy, Re Bankrupt Estate of; Donnelly v Commonwealth Bank of Australia Ltd (1996) 140 ALR 46

Thomas v Silvia; sub nom Modular Design Group Pty Ltd v CDG (Canberra) Pty Ltd (1994) 35 NSWLR 96

Airservices Australia v Ferrier (Compass Airlines case) (1996) 185 CLR 483

Ayoub v Euphoric Pty Ltd [2004] NSWCA 457

Sutherland v Liquor Administration Board (1997) 139 FLR 206

1 HASLUCK J: The plaintiff, Windslow Corporation Pty Ltd (In Liq), has commenced proceedings by way of an originating summons in which it seeks an account under certain securities now held by the defendant, Olympic Holdings Pty Ltd. It was common ground at the hearing before me that the defendant does not oppose the taking of an account. However, both parties recognise that before an account can be taken a dispute has to be resolved as to the proper construction of the relevant documents.

2 Windslow relied principally upon the affidavit of Giovanni Maurizio Carrello sworn 13 April 2006. The deponent is the liquidator of Windslow, having been appointed as such by Court order on 14 June 2005. The defendant relied principally upon the affidavit of Peter Barry Bacich sworn 7 June 2006. Mr Bacich was actively involved as a director in the management of Windslow prior to the appointment of a liquidator. He is also the sole director and secretary of the defendant company, Olympic.

3 I note in passing that there is an underlying controversy between the parties as to the exact amount owing under the subject securities, which will have to be resolved in due course, but this does not stand in the way of a ruling as to the proper construction of the relevant documents.

4 Windslow was carrying on business as a property developer. There is evidence before me that it had ceased carrying on business as such by 19 April 2005, being a date close to 2 months prior to the appointment of the liquidator of the company. There is evidence before me also that in the course of its business Windslow borrowed funds from HSBC Bank Australia Ltd with such funds being secured initially by a mortgage dated 16 October 2002 in which HSBC Bank is specified as the mortgagee.

5 The mortgage incorporated Memorandum of Provisions 166, which contains various standard clauses, and was subsequently registered as Mortgage I307390. Clause 2.1 of the Memorandum of Provisions provided that the mortgagor was to pay the secured money to "the Bank" on the date fixed for payment of that amount under any written agreement or otherwise on demand in writing by the Bank. I will look at the definition of the term "secured money" in due course (for this lies at the heart of the present dispute), but I note in passing that the term includes reference to all amounts which are payable or owing by the mortgagor to the Bank "on any account whatsoever".

6 Funds advanced by the Bank to Windslow were secured also by fixed and floating charges granted by Windslow to the Bank dated 16 October and 6 December 2002, and by assignments of contract and bonds granted by the plaintiff to HSBC dated 16 October and 6 December 2002 also. It was common ground at the hearing before me that the definition of the term "secured money" in the two fixed and floating charges corresponds with the definition of that term in the subject mortgage and that the assignments of contract and bonds have no real bearing upon the issue of construction to be resolved. That is because the Assignment of Contracts and Bonds was limited to the assignment of certain rights under building contracts to which Windslow was a party.

7 For ease of reference, where the context so permits, I will refer to the various securities collectively as "the securities" (in the manner allowed for by the originating summons), but with my attention being focused initially upon the subject mortgage.

8 The affidavit of Mr Bacich contained an assertion that since early 2002 (that is, prior to creation of the securities) there had been a running account between Windslow and Olympic pursuant to which moneys had been advanced and repaid by set-off between the two companies. Reference was made to audited accounts of Windslow for the financial year ended 30 June 2002 which suggested that as at that date the amount owed to Olympic by Windslow pursuant to the running account amounted to $500,000. It was said that as at 18 April 2005 (after creation of the securities) the amount owed to Olympic pursuant to the running account was $587,734.87.

9 I pause to note that counsel for Windslow, as instructed by the liquidator, objected to the admissibility of this evidence. However, his stance was, for reasons that will become apparent, that there was no need to resolve the evidentiary issue at this stage, having regard to the manner in which the construction issue was to be argued. I acceded to this view. It will be sufficient for present purposes for me to assume (accepting what is said on behalf of Olympic simply for the sake of argument) but without purporting to rule upon the issue, that a running account between the two companies was in existence prior to creation of the securities, and at all material times amounts of about the size alleged were owed to Olympic before and after creation of the securities.

10 In the same vein, I will accept the figures contended for by counsel instructed by the liquidator of Windslow, for I am of the view that at this stage nothing turns upon such figures. However, the figures in question can be usefully employed as an aid to exposition and in order to illustrate in very general terms the financial implications of the matters in issue.

11 By a Deed of Assignment made on 19 April 2005 the Bank assigned the benefit of the securities to Olympic in consideration of the payment of $304,220.28, being the amount in respect of which Windslow was indebted to the Bank as at that date.

12 The Deed of Assignment was entered into between the Bank and Olympic only and did not purport to include Windslow as a party. Moreover, there was no provision for the Deed to be executed or approved by Windslow.

13 The Deed contained a recital to the effect that the Bank as assignor was entitled to the benefit "of the debt and the security". The term "debt" was defined as "the total amount of all principal, interest and other costs, charges and expenses in respect of which the Borrower is indebted to the Assignor on the effective date and which is secured by the security". The term "security" was defined to mean the documents listed in the schedule being the securities mentioned earlier. The recital noted that Olympic as assignee had agreed to purchase the assignor's interest in the debt and the security upon the terms and conditions set out in the Deed of Assignment.

14 By cl 2 of the Deed of Assignment Olympic was to pay the Bank the sum of $304,220.28 and the Bank as assignor was to assign and transfer its interest in the debt.

15 Importantly, for present purposes, cl 2(b)(ii) of the Deed was to the effect that upon receipt of the consideration, the Bank as assignor "agrees that each reference to the assignor, howsoever described, in the security will be construed as a reference to the assignee". Olympic was described as the assignee in the Deed of Assignment.

16 Provision was made also for notice in writing to be given to the "borrower"; that is, Windslow. By cl 4.1, Olympic as assignee covenanted to assume all the obligations of the Bank as assignor under the security and to be bound by the same. Clause 8.6 provided that if the Deed of Assignment was inconsistent with the security, the Deed "prevails to the extent of the inconsistencies".

17 Mr Carrello said in his affidavit that Olympic paid the sum of $304,220.28 to the HSBC Bank, being the consideration payable to the assignor under the Deed of Assignment. It is apparent from the Carrello affidavit that after the assignment Olympic adopted the stance that the securities secured not only the debt owed by Windslow to the Bank as at 19 April 2005, being a debt due thereafter to Olympic as assignee, but also moneys owed by Windslow to Olympic under and by virtue of the running account.

18 This stance was said to be justified by the view, upon one interpretation of the relevant documents, that the Bank was defined by the mortgage and floating charges to include an assignee such as Olympic and the securities extended to any moneys owing to the Bank (or assignee) "on any account whatsoever".

19 It seems that this stance led to amounts of money being paid by Windslow to Olympic well in excess of the debt of $304,220.28 specified in the Deed of Assignment. The amounts were paid in purported reduction of the overall amount allegedly due to Olympic comprised firstly of the debt specified in the Deed of Assignment and secondly of the amounts outstanding under the running account.

20 Mr Carrello said at par 32 of his affidavit that in his belief Olympic had received not less than $629,129 from the realisation of Windslow's assets, when the secured debt was only $304,992 as at 19 April 2005 (a difference of $324,137).

21 Mr Carrello's evidence as to this aspect of the matter was not contradicted by the opposing affidavit sworn by Mr Bacich. It is apparent from par 15 of Mr Bacich's affidavit (as I indicated earlier) that Olympic does not oppose the liquidator's application for an account; further, it is not necessary for me for present purposes to determine whether a running account of a kind contended for by Olympic was in existence at all material times and whether the amounts said to have been outstanding were in fact paid. It appears to be common ground between the parties that substantial amounts over and above the debt specified by the Deed of Assignment were paid to Olympic.

22 Olympic seeks to argue that an account between the parties should be taken on the basis that the securities secure the repayment of pre-existing debts and debts incurred after the assignment under and by virtue of a running account between the two parties. It is immediately obvious, without purporting to resolve the issue, that if amounts due under the running account (other than the debt specified in the Deed of Assignment) are not secured then the liquidator will be in a position to contend that the unsecured funds are to be treated as being available to meet the expenses of the winding up and for the benefit of other creditors.

23 This brings me to the terms of the security. It will be convenient to focus upon the terms of the registered mortgage and the Memorandum of Provisions which forms part of the mortgage.

24 By cl 1.1 of the Memorandum of Provisions the term "Bank" means the person or persons specified as the Bank in the mortgage and includes, without limitation, the person or persons specified as the mortgagee in the mortgage.

25 Clause 1.1 of the mortgage provides that a reference to "this mortgage" is a reference to the mortgage constituted by the mortgage form, the Memorandum and each of the annexures. It is apparent from the Schedule that Windslow is specified as the mortgagor and HSBC Bank is specified as the mortgagee. Thus, the liquidator of Windslow contends that the term "Bank" is limited to HSBC Bank as the person specified as the mortgagee in the mortgage document.

26 However, Olympic seeks to emphasise the use of the word "person" in the definition of "Bank". Clause 1.2(f) of the Memorandum provides that unless the contrary intention appears the word "person" in the mortgage includes an individual, a firm, a body corporate, an unincorporated association or an authority, and references to any person include the person's executors, administrators, successors, substitutes (including, without limitation, persons taking by novation) and "assigns".

27 Olympic therefore contends that because a reference to any person includes that person's assigns it must follow that if the term "Bank" is defined to include the "person" specified as the mortgagee in the mortgage any reference to the "Bank" embraces not only the particular bank specified as the mortgagee in the mortgage document but the assigns of that bank, being in this case Olympic as an assignee of the Bank under and by virtue of the subject Deed of Assignment.

28 It is against this background that one turns to the provision concerning payment mentioned earlier. Clause 2.1 of the Memorandum of Provisions reads as follows:

"2.1 The Mortgagor must pay the Secured Money to the Bank without set-off or counterclaim and without deductions for any tax or other governmental charges:

(a) on the date fixed for payment of that amount under any written agreement between them; or

(b) if no date for payment is so fixed, on demand in writing by the Bank.

Payment of part of the Secured Money shall not affect the Mortgagor's liability for the remainder."

29 It then becomes necessary to turn to the crucial provision, being the definition of "secured money", which appears in cl 1.1 of the Memorandum and reads as follows:

""Secured Money" means all amounts which at any time for any reason or circumstances in connection with any agreement or arrangement between the Mortgagor and the Bank or any transaction entered into or undertaken by the Bank at the request (express or implied) of the Mortgagor, and whether at law, in equity, under statute or otherwise (and whether or not of a type within the contemplation of the parties at the date of this mortgage):

(a) are payable, are owing but not currently payable, are contingently owing, or remain unpaid by the Mortgagor to the Bank on any account whatsoever; or

(b) have been advanced or paid by the Bank:

(i) at the express or implied request of the Mortgagor; or

(ii) on behalf of the Mortgagor; or

(c) have been advanced or paid by the Bank or which the Bank is liable to pay by reason of any act or omission of the Mortgagor; or

(d) are reasonably foreseeable as likely, after that time, to fall within any of paragraphs (a), (b) or (c) above,

but does not include an amount which is payable under a covenant or stipulation which is void under section 261 of the Income Tax Assessment Act 1936 (Cwlth).

This definition applies irrespective of the capacity of the Mortgagor or the Bank, whether the Mortgagor or Bank is liable as principal debtor or surety or otherwise, whether the Mortgagor is liable alone, or jointly, or jointly and severally with another person, whether the Bank is the original obligee or an assignee of the Secured Money and whether or not the assignment took place before or after the delivery of this mortgage or the Mortgagor consented to or was aware of the assignment or the assigned obligation was secured."

30 I note in passing that the second paragraph of the passage in cl 1.1 concerning secured money arguably does not form part of the definition but can be characterised as a discrete assertion as to the circumstances in which the definition of secured money applies. For ease of reference, I will henceforth refer to this as the "second paragraph of the definition of secured money".

31 I must look also at cl 32 of the Memorandum concerning assignment which reads as follows:

"The Mortgagor may not assign or otherwise dispose of or deal with its rights under this mortgage. The Bank at any time may do any of those things as the Bank sees fit. The Bank may disclose to a potential assignee or any other person who is considering entering into contractual relations with the Bank in connection with this mortgage all information about the Mortgagor, any related document and any party to any Security Documents and the transactions contemplated thereby as the Bank considers appropriate."

32 Counsel for Olympic submitted that the mortgage clearly allows for the assignment of the Bank's rights under the mortgage, being essentially the right to receive payment of any amounts owing to the Bank "on any account whatsoever". Further, as at 19 April 2005 when the Deed of Assignment was executed, each reference in the key provisions to "the Bank", or to "HSBC" to "the Mortgagee" in the Memorandum of Provisions embraced and could be regarded as a reference to any assignee of the Bank's rights (including amounts payable on any account whatsoever), because cl 1.2(f) of the interpretation provisions of the Memorandum states that, unless the contrary intention appears, a reference to any person includes that person's assigns.

33 It was submitted further that, in the manner allowed for by the mortgage, the Bank's rights were assigned to Olympic by the Deed of Assignment. Importantly, for present purposes, cl 2(b)(ii) of Deed of Assignment provided expressly that each reference to the assignor (in this case HSBC Bank) in the mortgage is to be construed as a reference to the assignee (Olympic).

34 Put shortly, it was said on behalf of Olympic that it is clear from the construction of and the language used in the mortgage, the Memorandum and the Deed of Assignment that the intention of HSBC and Windslow in entering into the mortgage was that any reference to the "Bank" or the "mortgagee" extended to an assignee of the Bank, and thus to any moneys owed to the Bank and/or its assignee on any account whatsoever. This, in the circumstances of the present case, would extend to moneys owed by Windslow to Olympic pursuant to the running account.

35 This interpretation was said to be reinforced by the width of the definition of "secured money" which allowed for moneys payable by the mortgagor as a result of "any transaction entered into or undertaken by the Bank at the request (express or implied) of the mortgagor and whether such amounts were payable at law or otherwise" and "whether or not of a type within the contemplation of the parties at the date of this mortgage" so long as the moneys were payable "on any account whatsoever".

36 Counsel for the liquidator of Windslow submitted that the terms of the mortgage and both charges made it clear that the repayment of any debt incurred by Windslow to Olympic prior to the assignment or claimed to have been incurred thereafter was not secured. In other words, there was no scope for interpreting the term "the Bank" as defined in the document to mean "any assignee of the Bank", nor did the mortgage or the Memorandum contain any indication that it was the intention of the parties, at the time the mortgage was executed, that the term "the Bank" was intended to have the expanded meaning contended for. The amounts secured by the mortgage were therefore limited to those amounts advanced by HSBC pursuant to the agreement made between the Bank and Windslow.

37 It followed, on Windslow's case, that there was no basis on which it could be reasonably contended that the amount which was secured by the securities exceeded the sum specified in the Deed of Assignment (that is $304,220.28), being the sum paid by Olympic to HSBC when the Deed was executed by the parties.

38 It will be useful now to look at the relevant legal principles and certain decided cases bearing upon the matters in issue.

39 The general rule concerning privity of contract is that only parties to a contract have rights or liabilities under it, or, putting it another way, only a party to a contract (that is, the person to whom or by whom a promise is made) can be made subject to the obligations thereby created. Any attempt to impose obligations on a person who has not participated in a transaction, nor has benefited from the consideration, will be unsuccessful: Cheshire & Fifoot's Law of Contract (8th Aust ed) par 7.12.

40 When these rules are applied to the present case it is clear that HSBC Bank and Windslow were parties to the contractual relationship between them established by the mortgage and the floating charges, and will therefore be bound by the liabilities created by the securities.

41 However, Windslow was not a party to the Deed of Assignment. It follows from the rule concerning privity of contract that any attempt by the Bank and Olympic in the course of that transaction to impose additional liabilities upon Windslow by seeking to revise the meaning of certain terms in the mortgage will be of no effect in law.

42 Accordingly, I am of the view that cl 2(b)(ii) of the Deed of Assignment, whereby the parties to that document purport to provide that each reference to the Bank in the securities will be construed as a reference to Olympic as the assignee, has no effect with respect to the matter in dispute and is of no assistance to me in resolving the difference of opinion as to how the securities should be interpreted. I must look simply at the provisions of the mortgage and the floating charges.

43 The primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. The whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parties, and the words of every clause must, if possible, be construed so as to render them more harmonious one with another. If the words used are ambiguous the Court must give effect to them, notwithstanding that the result may appear unreasonable, and notwithstanding that it may be suspected that the parties intended something different. The Court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust: Australian Broadcasting Commission v Australasia Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 at 109.

44 Where the parties have recorded the terms of their contract in a document, the so-called parol evidence rule excludes the use of evidence of extrinsic terms which subtract from, add to, vary or contradict the language of a written instrument. However, in certain circumstances extrinsic evidence is admissible if the text in dispute is ambiguous. In such a case, to the extent to which prior negotiations tend to establish objective background facts known to both parties in the subject matter of the contract, they are admissible for that purpose. However, insofar as they consist of statements and actions of the parties which are reflective of actual intentions and expectations they are not receivable because such statements and actions reveal only the terms of the contract which the parties may have intended or hoped to make. Any such statements of intention or expectation are superseded by, and merged in, the contract itself: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 per Mason J at 352.

45 In Clark's Refrigerated Transport Pty Ltd (In Liq), Re; [1982] VicRp 100; [1982] VR 989 the parent company of the claimant finance company assigned to the latter certain liabilities of a borrower to the parent company amounting to approximately $162,000. The finance company, holding the subject mortgage as assignee, then claimed in the ensuing winding up of the borrower, to be secured not only in relation to a sum of $200,000 lent by it but also in respect of the assigned liability. It was held that the sum secured by the subject mortgage did not extend to the assigned debts and liabilities.

"In the first place, considering the matter generally and without regard to the detailed provisions of the particular instruments herein questioned, I cannot help thinking that when a person gives an 'all obligations' mortgage or debenture he does not ordinarily contemplate that the property the subject of the security will secure not only his present and future obligations to the mortgagee or debenture holder but also any debt or liability of his which may be assigned by a third person to the secured creditor. It does seem strange that a man may lock up his counting-house and go home for the night, in the comfortable knowledge that his only secured creditor is his banker, to whom he owes a trifling sum secured by the usual boundless bank instrument, and unlock the door in the morning to find that, by virtue of assignments of the large but unsecured debts owed by him to his fellow merchants, and indeed to the butcher, the baker and the candlestick maker, all his unsecured debts have gone to feed his banker's insatiable security, so that every one of his debts is now secured."

47 His Honour in that case went on to consider the question of whether or not it is permissible to approach an issue of the kind he had touched upon with a predisposition towards the view that the grantor of an "all obligations" mortgage does not contemplate that assigned debts and liabilities may be used to swell the moneys secured. He recognised that, ultimately, the situation in a particular case must be governed by the relevant documents.

48 In Thomas v Silvia; sub nom Modular Design Group Pty Ltd v CDG (Canberra) Pty Ltd (1994) 35 NSWLR 96 guarantees of and equitable mortgages given to a bank to secure various debts were assigned by the Bank. The documents contained "all obligations" clauses securing "all moneys now or hereafter to become owing or payable to the Bank by the Mortgagor". The mortgages included terms extending the definition of bank to include any of its assigns. The mortgagors owed other moneys to the assigns, but were not involved in the assignment beyond receiving notice of it.

49 Santow J held, following Estoril Investments Pty Ltd v Westpac Banking Corporation (1993) 6 BPR 13146, that "all obligations" securities should be interpreted with a predisposition towards the view that the grantor of the security does not contemplate assigned debts and liabilities being used to swell the money thereby secured. That predisposition may be rebuttable where the language is sufficiently clear and the equity of redemption is not directly clogged.

50 His Honour held that in the circumstances of the case to permit the charge, without the chargor's consent, to cover the assignee's pre-assigned indebtedness, or indebtedness arising post-assignment from a pre-assignment contingent liability on the assignee's part, merely by reason of an extended definition of bank and a generally drawn "all obligations" clause, was to impede the mortgagor in exercising its equity of redemption and constituted a clog upon the equity of redemption. It was also unfair or unconscionable for the assignee, as mortgagee, thereby to obtain such a collateral advantage.

51 It is immediately obvious that the Modular Design Group case (supra) is very close to the circumstances of the present case. However, counsel for Olympic sought to distinguish that case from the present case upon the basis that in the present case the language used was sufficiently clear to establish that the Bank and Windslow, by defining the term "secured money" broadly, and by allowing for transactions entered into with a third party by way of assignment, had made provision for liabilities due to the Bank to be swelled by any additional liabilities due to the third party.

52 It was said also that Santow J's reasoning was inconsistent with other and later decisions which indicated that the relevant provisions should not be interpreted with a predisposition of the kind adverted to by the court in the Modular Design Group case (supra).

53 In Murphy, Re Bankrupt Estate of; Donnelly v Commonwealth Bank of Australia Ltd (1996) 140 ALR 46 M and her husband had executed a mortgage in favour of the Commonwealth Bank of Australia containing a clause that the mortgagor would pay to the bank all moneys now or hereafter to become owing or payable to the bank. Some years later M stole money from the bank and was subsequently bankrupted. The bank claimed to be secured, not only in respect of moneys owing to it pursuant to ordinary loan transactions, but also the sum misappropriated.

54 Hill J held that the "all moneys" clause should not be read down merely because it was to be found in a document prepared by a bank. Instead, the clause should be construed having regard to the context in which the mortgage came to be executed and by reference to the commercial purpose it was intended to serve. But otherwise the intention of the parties was to be ascertained from the language which they used. He held that the bank's mortgage extended on its proper construction to secure to the bank amounts which M became obliged to repay as a result of the misappropriation.

55 His Honour looked at various previously decided cases including the Modular Design Group case (supra) in the course of concluding that the essential task of construction was to give effect to the intention of the parties as reflected in the language used. He went on to make these observations at 54:

"I proceed then upon the following principles which, I think are accepted law in New South Wales.

1. There is no principle of law that an all moneys clause should be read down merely because it is to be found in a document prepared by a bank. In particular there is no contra proferentem rule to be adopted; cf Hall v Westpac Banking Corp (1987) 4 BPR 9578.

2. A bank mortgage is traditionally drawn to cover a multitude of possible situations and intended to secure the bank as effectively as possible. The question is whether the situation falls within the contemplation of the clause as written.

3. Particularly, notions of fairness, justice or reasonableness are matters relevant to questions which might arise under the Contracts Review Act, or in equity where unconscionability is suggested. They are not notions as such relevant to the question of construction.

4. An all moneys clause is to be construed having regard to the context in which the mortgage came to be executed and by reference to the commercial purpose it was intended to serve. But otherwise the intention of the parties is to be ascertained from the language which they have used."

56 Let me now return to the circumstances of the present case.

57 I am of the view, having regard to the decided cases, that I should follow the approach outlined by Hill J in Murphy's case (supra) and proceed upon the basis that the intention of the parties is to be ascertained from the language which they have used. I am therefore obliged to look closely at the definition of the term "secured money" in the subject mortgage and at the meaning of related terms referred to in cl 1.1 of the Memorandum of Provisions.

58 At a first glance, the definition of "secured money", when considered in conjunction with the obligation to pay established by cl 2.1 of the Memorandum, certainly suggests that the moneys sought to be secured are moneys advanced by the Bank to the borrower, and that the commercial purpose intended to be served is to secure moneys advanced by the Bank to the borrower, not to secure moneys which are owed or might be owed by the borrower (in this case Windslow) to third party creditors.

59 There are various indications that the term "secured money" is defined broadly with a view to ensuring that the Bank is covered in all possible situations which could arise, whether arising out of a conventional lending situation or otherwise. At first blush, the subject matter of the transaction appears to be essentially the securing of moneys belonging to the Bank which are advanced by the Bank to the borrower.

60 I recognise in theoretical terms that it may be a matter of indifference to a bank as to whether it is repaid by the borrower, or paid out by some other means. It could therefore be of advantage to a bank to create a marketable security of sorts which is capable of assignment to third parties with the capacity to pay out a debt due to the bank, and which has features that might be attractive to an assignee (such as provision for the assignee's debt to be added to the bank debt). However, there are few signs in the present instrument that the document was intended to serve this purpose.

61 To my mind, it is significant in that respect that the crucial definition provision speaks of "any transaction entered into or undertaken by the Bank at the request (express or implied) of the mortgagor". The words "at the request" of the mortgagor suggest that the commercial purpose which the document was intended to serve was the provision of funds to a customer of the Bank in response to the customer's request with arrangements being made for any advances made by the Bank to be secured. Further, the words "on any account whatsoever" appear in the context of provision for payment "by the mortgagor to the Bank". This, again, suggests that what is being spoken of is a payment in respect of moneys advanced by the Bank on any account maintained by the borrower with the Bank.

62 I do not consider that the term "the Bank" when considered in the context of the definition of the term "secured money" can be construed to include "any assignee of the Bank". This is not provided for expressly. It is true that the term "person" is said to embrace any assigns, but that is only where a contrary intention is not shown. I am of the view that, as to the issue before me, a contrary intention has been shown because the term "Bank" is defined essentially to mean the person specified in the mortgage, namely, HSBC Bank. This is one of many instances where it is clear that the term "person" cannot be used in substitution for a specific reference to the Bank.

63 It is against this background that one comes to cl 32 of the Memorandum of Provisions concerning assignments. One has to construe that clause in order to arrive at an understanding of what exactly was assigned to Olympic under and by virtue of the Deed of Assignment. Clause 32 allows the Bank at any time as the Bank sees fit to assign or otherwise dispose of or deal with "its rights under this mortgage". It follows from earlier discussion that, in my view, the Bank's rights under the mortgage are confined to securing moneys advanced by the Bank to the borrower which are payable or will become payable to the Bank on any of its accounts. The securities, the subject of the assignment, do not extend to debts payable to a third party such as a debt of the kind contended for in the present case which is said to be due by Windslow to Olympic under and by virtue of arrangements for a running account.

64 In my view, the amounts secured by the mortgage are therefore limited to those amounts advanced by HSBC Bank in connection with the agreement reflected in the mortgage and the floating charges entered into between HSBC and the plaintiff. There is no basis for expanding the definitions of either "the Bank" or "secured money" so as to include pre-existing or other debts owed by Windslow to Olympic as an assignee of the mortgage, or so as to include debts claimed to have been incurred after the Deed of Assignment was executed.

65 The securities assigned to Olympic by the subject Deed of Assignment secure only the debt of $304,220.28 as specified in the Deed of Assignment or other funds advanced by HSBC Bank to Windslow pursuant to the securities. I will hear from the parties as to the form of the orders and directions required to carry this ruling into effect and to progress the taking of an account.