Young v Queensland Trustees Ltd

• 28 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

4116/01 VALDA JOSEPHINE GLEESON v. LAURENCE BERNARD GLEESON JUDGMENT 1 HIS HONOUR: The plaintiff claims judgment for possession and other remedies relating to "Laguna", a rural property at Lostock via Gresford, New South Wales. Laguna is the land in five contiguous lots held under five Crown grants and certificates of title and is said to contain about 1000 acres. The land is hilly terrain, with some afforestation, generally suitable for cattle grazing. It has no electricity supply, no permanent water supply, and no dwelling or other accommodation for persons or significant improvements. The only use of the land of which evidence speaks is grazing and agisting cattle. The plaintiff received the land as a gift from her father. When he died in March 1972 she also received a gift under his will of a further lot containing about a half acre suitable for housing. She transferred Laguna to the defendant, who is one of her three sons, by a Memorandum of Transfer dated 10 September 1980 and registered on 28 November 1980. According to its terms the transfer was effected for consideration of $45,500 and that sum had been paid. At the same time she also took a mortgage, which was registered S667697 also on 28 November 1980, and the mortgage according to its terms secured to her a principal sum of $24,000 together with interest. Her principal claims in the proceedings are claims for possession based on the mortgage, and a claim for judgment for an amount calculated as the principal and the interest due under the mortgage. She also claims an interest in the land on equitable principles with which I will deal later, and a number of ancillary orders. 2 The proceedings were defended in the name of the defendant by Mrs Valma June Gleeson who is or formerly was the defendant's wife and was appointed by him to be attorney under power to defend the proceedings by a power of attorney made on 30 April 2001, which he was required to give to her by interim orders of the Family Court of Australia made on 2 April 2001 in proceedings between them. The plaintiff was not a party to the proceedings in the Family Court. The same interim order restrained the defendant from doing anything to obstruct Mrs Valma June Gleeson in defending the proceedings in his name, and from taking some other steps which might have been adverse to the defence. The defendant did not give any evidence, nor was his absence as a witness explained. In the Amended Statement of Defence, which was verified by Mrs Valma June Gleeson and not by the defendant himself, the defendant put in issue by non-admission a number of significant allegations in the Statement of Claim, which fall to be determined wholly on evidence tendered by the plaintiff. The Amended Statement of Defence also relied on bars to the plaintiff's causes of action under the Limitation Act 1969 ss27, 36, 42, 43 and 47, and on laches, acquiescence and delay, which if made out are available as defences against the plaintiff's claims for equitable relief. 3 The covenants in the mortgage relating to payment are found in the schedule and are in these terms: FOR THE CONSIDERATION AFORESAID the mortgagor hereby (a) Irrevocably appoints the mortgagee the attorney of the mortgagor immediately on or at any time after any breach or default by the mortgagor to exercise in the name of the mortgagor all rights, powers and remedies of the mortgagee expressed or implied herein and to receive any moneys payable to the mortgagor in respect of the mortgaged land whether in respect of the insurance compensation or otherwise and to do all things required to be done by the mortgagor and to execute all documents and to do all things necessary in regard to such matters. (b) covenants with the mortgagee as follows: Firstly - The mortgagor will pay to the mortgagee the principal sum, or so much thereof as shall remain unpaid, on the 30th day of June 1985 Secondly - The mortgagor will pay interest on the principal sum or on so much thereof as for the time being shall remain unpaid, and upon any judgment or order in which this or the preceding covenant may become merged, at the rate of eleven (11%) per centum per annum as follows, namely - By equal monthly payments on the 30th day of each and every month in each and every year until the principal sum shall be fully paid and satisfied, the first of such payments computed from the 30th day of June 1980, to be made on the 1st day of July next: Provided always, and it is hereby agreed and declared, that if the mortgagor shall on every day on which interest is hereinbefore made payable under this security, or within fourteen days after each of such days respectively, pay to the mortgagee interest on the principal sum or on so much thereof as shall for the time being remain unpaid at the rate of eleven (11%) per centum per annum, and shall also duly observe and perform all and every the covenants on the mortgagor's part herein contained or implied, then the mortgagee shall accept interest on the said principal sum or on so much thereof as shall for the time being remain unpaid at the rate of ten (10%) per centum per annum in lieu of eleven (11%) per centum per annum for every for which such interest shall be paid to the mortgagee within such fourteen days as aforesaid. Thirdly - The mortgagor will observe the provisions set forth in the Memorandum filed in the Registrar General's Office as number Q860000, which provisions are deemed to be incorporated herein. Fourthly - repayments of principal and interest will be monthly instalments of Two Hundred Dollars ($200.00). 4 The provisions in Memorandum Q860000 are found in Exhibit B. I set out provisions of cll 5 and 6, to which parties particularly referred, and I have given emphasis to the passages which parties relied on. 5. In addition to all costs and expenses which the mortgagor may be liable at law or in equity to pay in respect of this security, or otherwise in relation thereto, the mortgagor will upon demand pay all costs and expenses, including costs as between solicitor and client, incurred by the mortgagee in consequence or on account of any default on the part of the mortgagor hereunder or incurred by the mortgagee for the preservation of or in any manner in reference to this security, a ll of which costs and expenses shall from the time of payment or expenditure thereof respectively until repaid to the mortgagee by the mortgagor be deemed principal moneys covered by this security , and shall carry interest at such higher rate as may be shown in the schedule to the mortgage. 6. Upon default being made in payment at the respective times and in the manner shown in the mortgage of the principal sum or any part thereof, or of the interest thereon or any part thereof, or upon default being made in the observance or performance of any of the covenants contained herein or in the mortgage or implied therein by the Real Property Act, 1900, or the Conveyancing Act, 1919, the mortgagee shall (notwithstanding any omission, neglect or waiver of the right to exercise all or any of such powers on any former occasion) be at liberty to exercise all or any of the powers of a mortgagee under the said Acts immediately upon or at any time after default as hereinbefore mentioned, subject however to compliance with any requirements of the said Acts in respect of the exercise of such powers. If at any time default shall be made in the due payment of the interest on any of the days when the same respectively shall become payable or within the time thereafter mentioned in the schedule to the mortgage, or, if the power of sale given to the mortgage under either of the said Acts shall become exercisable, then the principal sum shall immediately become due and the mortgagor will thereafter pay the same on demand. 5 The affidavit and oral evidence of the plaintiff herself was not challenged by cross-examination. She said to the effect that in 1980 she came to a decision to sell Laguna and build a house on her half acre block. She was then grazing and agisting cattle on Laguna. She told her three sons including the defendant about her decision to sell Laguna. She then says 9. The defendant approached me and said "Well, Mum, I would like to buy "Laguna" because I have always loved it". I did not say anything to the defendant. However, it was my view that he would not be able to purchase the property because he was a student at the time and had very little income. 6 She says that at a later time: 10. The defendant and I discussed him purchasing 'Laguna'. From my observations he was keen to purchase the property. He said to me words to the effect "Mother, I cannot pay for it but I still want the place". He did not ask me to give it to him. Even if he had so requested I would not have given it to him as a gift or otherwise. I said to the defendant words to the effect "You have to work and earn and pay for the land. I am just not going to give it to you. I am very firm that you have to earn it rather than just have it given to you." Her evidence also says 11. I said to the defendant words to the effect "The place is worth about $45,500. You can have it at that price but you will have to give me a mortgage if you cannot afford to pay me for it." The defendant said to me words to the effect "I can give you $6,000 now and I will give you the rest later on." Not long before the defendant said to me as he wanted the property it had been valued at approximately $45,000. I decided on the amount of the mortgage of $24,000 because there was no agent involved and there would be no commission. 12. The defendant and I had further discussions in relation to him purchasing Laguna. I said to him words to the effect "You will have to give me a mortgage for the rest of the purchase price. I want the mortgage for protection just in case you do not pay me all the money". The defendant agreed. 7 After identifying the transfer and the mortgage the plaintiff's evidence went on: 15. In and around September 1980 when I had discussions with the defendant about purchasing the property, I said to him words to the effect "I will give you the money to buy "Laguna" on one condition that only your name is to go onto the title. I do not want Valma's name on the title. If you split up with Valma, she is not to have any share in it. This property has been in my family for a long time. My father gave it to me and I do not want it going out of the family." The defendant agreed. 16. I also said to the defendant words to the effect "I will lend you the rest of the money to buy the place but you have to repay me. I will not just give 'Laguna' to you." The defendant agreed. 8 While I do not find the reference clear, my understanding is that the reference in para.16 of her affidavit to "the rest of the money" is a reference to $15,500 of the total purchase price of $45,500 which is not accounted for either by the payment of $6,000 which the defendant made on settlement or by the mortgage principal of $24,000. 9 The plaintiff's affidavit continued (at para 18), to say: Following the execution of the mortgage the defendant made some monthly mortgage repayments to me. In or about mid 1981 I travelled overseas for about six months.

She gives an account of events in which after that, the defendant made no mortgage repayments. She had conversations with him on several occasions; sometimes he assured her that he would make payments in the future and at a later point he took to telling her that he did not have money. About 1993 she gave him the half acre block of land at Lostock because he wanted to build a house on it; however he did not do so, and later sold the half acre lot and bought a house in Allynbrook. 10 The plaintiff's affidavit then states: 24. In 1993 the defendant had a motor cycle accident. Shortly after he came out of hospital I said to him "I want to have a family meeting." My other two sons, James and Chris, and the defendant came to my home. I said to the defendant "I want some payment for the Top place." The defendant said to me "Well I will pay all your power bills, your phone bills and for your cleaning lady. That will be in lieu of the interest that has been running on the mortgage. I know I have not paid for the property. It really belongs to you. Although it is in my name it is not my property. It really belongs to you." I said to the defendant "If you pay my phone and power bills and for my cleaning lady that will be about $2,000.00 a year". My sons, James and Chris, and I were sitting around the dining table in my home when the defendant and I had this conversation. 25. There were times the exact dates of which I cannot now recall when the defendant was at my home with my other two sons. On occasions my sons, James and Chris, and I discussed the defendant's position in relation to 'Laguna'. The defendant's wife was never present at any discussions relating to 'Laguna' or other meetings when family business was discussed. I have never discussed any of my personal or family business with or in the presence of the defendant's wife. 26. Since 1993/1994 the defendant has paid all my power and phone bills. Sometimes he pays for them on his credit card. He has also paid for the cleaning lady. 11 The plaintiff then says that in July 1999 she spoke to the defendant about not having paid for the property. I said to him "I will need to do something about it." He said to me "I cannot pay you for it. It is your property. I have not paid for it." The plaintiff also says: 28. In or about 1995 the defendant said to me he had separated from his wife. I said to him "Well then the Top place (I have always called 'Laguna' the Top place) has to come back to me because that is the condition on which I gave it to you". He agreed and said to me "I know it is really your property because I have not paid you for it". 12 Mr Christopher Edward Gleeson, who is also a son of the plaintiff, gave evidence on affidavit corroborating that at a family meeting, which must have taken place in 1980, there was discussion about the defendant buying Laguna in which the defendant said to the effect: "I want to buy Laguna but I cannot pay for it" and the plaintiff said to the effect "I am not just going to give it to you. You will have to pay for it. If you cannot afford it you will have to give me a mortgage." There is mention of the defendant paying the plaintiff $6,000 for the deposit for the purchase. At a later point the defendant told him to the effect: "Mum has taken a mortgage over the Top block because I could not pay her all the money for it. I have to pay her so much a month" and "Mum does not want Valma's name on the title. She said she does not want the place going out of her family because her father gave it to her." Mr Christopher Gleeson also speaks in evidence of several somewhat inconclusive statements made to him by the defendant about the purchase, including one in or about 1993 in which the defendant said "I need money. I want to sell Station Creek paddock but Mum won't forgive me the mortgage for the Top place. I know I haven't paid her for it and that it doesn't really belong to me. I wish I could sell part of the top place."

The reference to the Station Creek Paddock is to the half acre lot and the reference to the Top place is a reference to Laguna. He also said that on many occasions since 1980 the defendant has said to him to the following effect: "The Top place is not really mine because I haven't paid for it" and has spoken of Laguna in terms such as "Mum's property" and not in terms of it being his own property. 13 Mr Christopher Gleeson also said 10. In or about 1994 I attended a family meeting at my mother's home. The defendant was there as was my brother, James. At the meeting I heard my mother say to the defendant words to the effect "I want you to pay some of the money you owe for the Top place. What are you going to do about it?" I heard the defendant say "I will pay all your electricity and phone bills and for your cleaner. That will be in payment for the interest I know I owe you". 14 Paragraph 10 corroborates, in a general way, the evidence given by the plaintiff in para 24 of her affidavit, except that she gives the date of the meeting as being in 1993 at a family meeting arranged shortly after the defendant came out of hospital after a motorcycle accident, whereas Mr Christopher Gleeson says that the family meeting occurred in or about 1994. There is of course no precision in the evidence of either about the date of the event. The plaintiff also refers to the defendant having paid her power and phone bills "Since 1993/1994" in para 26 of her affidavit. Neither witness was cross-examined on this subject or on any subject. The defendant did not give evidence, either about the date of the event or about any other subject, and did not deny making payments as alleged in the plaintiff's evidence. No evidence was given explaining the absence of evidence from the defendant on the subject. The circumstances in which the defence of the litigation is being conducted by an attorney whom he has been compelled by the Family Court to appoint do not constitute an explanation for his absence as a witness. In the circumstances an approach to finding the facts can be made in the understanding that he is not in a position to give any evidence which would tend to show that the facts are more favourable to his case than is to be understood from the evidence tendered by the plaintiff, and his absence as a witness can be taken into account when considering whether inferences of fact available on the plaintiff's evidence should be drawn, although his absence cannot of itself be the basis on which any inference can be drawn. 15 In oral evidence the plaintiff said to the effect that her reason for waiting from 1993 until 2000 to do something about collecting money under the mortgage was that she took some action in 1997 or 1998, when her son asked her to give him time to pay the money, but he did not in fact make payments. As his work was not continuous she decided to give him a chance so she went along with him and his non-payment, even though she needed the money. 16 The plaintiff's claim and the issues have two dimensions, one relating to rights arising under the registered documents and under subsequent conduct in relation to them according to the general law, and the other to claims based on equitable principles. 17 The claim for equitable relief is set out in paras 6 to 31 of the Amended Statement of Claim. The pleading is diffuse and the grounds of suit are not clearly indicated. In para 22 an allegation which is made which appears to be important for at least some part of the claim for equitable relief: 22. In or about September 1980 the plaintiff and the defendant agreed orally that the balance of the price of the land was to be a gift to the defendant by the plaintiff but that such gift was to be conditional upon the defendant paying to the plaintiff principal and interest secured by the mortgage. PARTICULARS The oral agreement consists of conversations between the plaintiff and the defendant in or about September 1980. The substance of the conversation was that the plaintiff stated to the defendant that she would not ask him to pay the balance of the price of the land if he paid the principal and interest secured by the mortgage. The defendant agreed. 18 It should be understood that what is referred to in para 22 as "the balance of the price of the land" is the sum of $15,500 part of the purchase price of $45,500. The arrangements for payment of $15,500, if there were any, are not explained on the face of the mortgage, which secures a principal of $24,000, and should be taken with undisputed evidence which establishes that a part payment of $6,000 was made. The evidence includes no clear explanation of any arrangement about payment or discharge of $15,500, and no clear basis for understanding how the figure of $24,000 was struck as the amount to be secured. In submissions it was put to me that the evidence of the plaintiff which I have recited above and most particularly para 16 of her affidavit should lead to a finding that there was an arrangement in the terms alleged in para 22. In my view the evidence is not sufficiently clear to lead to that finding, or to any finding establishing what the parties did or intended to do with the unsecured balance of $15,500. 19 Where through some arrangement or omission purchase money is left unpaid after a conveyance it is sometimes, perhaps usually correct to conclude that an obligation to pay the unpaid balance continues to exist in equity and that the unpaid vendor has a lien over the property for the unpaid balance. It is, in principle, necessary to base any equitable right on the proved or presumed intention of the parties, and unless some conclusion can fairly be reached that the parties intended or must have intended that the balance of purchase money should be paid at some time in the future, the law prevails, the receipt clause in the memorandum of transfer has effect and the obligation to pay the purchase money has merged in the transfer. 20 I have regard to the close familial relationship of the parties, the generally indefinite nature of their arrangements, the absence of any written record of any arrangement about what was to happen to $15,500 of the purchase price and the terms of the mortgage itself, which secures payment of $24,000 and no more and does so in a formal way. I also have regard to the fact that the plaintiff has not, in my understanding, offered a clear proof of any arrangement relating to $15,500; that amount is not mentioned anywhere in her evidence. My finding, guided by probability, is that the transaction was conducted and completed on the basis that the mortgage obligation to pay $24,000 on interest was regarded by both parties as all the further performance of the obligation to pay purchase money which the parties intended to be actually carried out. 21 It was contended on behalf of the plaintiff that in the absence of any other explanation the conclusion should be drawn that there is a resulting trust in favour of the plaintiff of the beneficial ownership of the property in the proportion borne by $15,500 to $45,500. In view of the conversations given by the plaintiff particularly in paras 15 and 16 of her affidavit, and the references in those conversations to giving and to lending the money and the property to the defendant, which references are not at all internally consistent, I do not think it would be a correct conclusion of fact that the plaintiff or that both parties intended that some part of the beneficial interest would remain with her. There would be a resulting trust if she had contributed $15,500 to the purchase money and the intentions of the parties as to beneficial ownership were not otherwise explained. Not enough is known about why $15,500 was not paid or secured to justify the interpretation that she contributed it towards the purchase money. Although nothing can be clearly known it is on the whole most likely that she treated $24,000 as enough and let the rest go. It would in my view be an impossibly strained interpretation of the events to conclude that she contributed $15,500 to the purchase money. It cannot be said that it is established that she intended to make a gift of it: she just let it go unpaid and unsecured. If it were a gift it would not give rise to a resulting trust. 22 There was some discussion in the course of argument about whether the presumption of advancement by a parent to a son should be made and should outweigh the presumption of a resulting trust based on contribution to purchase money. Probably there is no presumption of advancement where the unpaid transferor is the mother of the transferee. The facts do not truly raise consideration of either presumption. It appears to me to be very improbable that, if it was intended by the plaintiff or by both parties that the plaintiff should have some continuing interest in the property in addition to her mortgage interest, the intended mortgage interest would be recorded in a careful way but the other interest would simply not be referred to in writing at all. 23 In my finding there was no such oral agreement as alleged in para 22. The plaintiff did not after settlement of the property retain any beneficial interest in or lien over Laguna other than her interest under the registered mortgage. 24 In para 23 it is alleged to the effect that "… the plaintiff and the defendant agreed orally that should the defendant not pay to the plaintiff the monies secured by the mortgage and the relationship between the defendant and his partner terminated, then the defendant would return the land to the plaintiff." There is no evidence that any such agreement was made. In particular para 15 of the plaintiff's affidavit is not evidence of any such agreement; that paragraph does not refer to the defendant returning the land to the plaintiff. If there had been such an arrangement the effectiveness of the condition for defeasance of the fee simple would be doubtful. However that does not need further examination. 25 Paragraph 29 of the Amended Statement of Claim alleges "By reason of the matters aforesaid the land belongs to the plaintiff and the defendant beneficially as to one tenth to the defendant and nine tenths to the plaintiff." In my view there is no basis for any such conclusion, or for the conclusion asserted in para 30 that it would be unconscionable for the defendant to rely on the transfer to claim an estate in fee simple in the land. I conclude that the plaintiff is not entitled to any of the equitable remedies claimed. 26 In the circumstances it is not necessary to dispose of the defences of laches acquiescence and delay raised by para 4 of the Amended Statement of Defence. Notwithstanding the long interval of time I find it difficult to see that conduct or inaction of the plaintiff has in any way worsened or affected the defendant's position with respect to the land. However that may be, disposition of these issues is not required. 27 The claim pleaded in the first paragraphs of the Amended Statement of Claim is not based on equitable principles. The Amended Statement of Claim alleges that the defendant is the registered proprietor of the land, alleges the mortgage and refers to the terms of the mortgage including the covenant to pay the principal sum or so much thereof shall remain unpaid on 30 June 1985 and the covenants to pay interest. These allegations are admitted. It is then alleged (ASC para 5) that the plaintiff advanced $24,000 and the defendant subsequently refused or neglected to make payment on or about the due date; this is not admitted but is clearly established. 28 It is then alleged in para 6: 6. In 1993 the defendant acknowledged to the plaintiff that he was indebted to the plaintiff in respect of the payment of principal and interest secured by the mortgage.

(a) The defendant stated to the plaintiff he had not paid the plaintiff for the land and was indebted to the plaintiff. This is not admitted. 29 In paras 7 and 8 it is alleged: 7. Between 1993 and 2001 the defendant paid monies to the plaintiff in respect of the monies secured by the mortgage.

8. Between 1993 and 2001 the defendant made payments in respect of the plaintiff's right or title to the mortgage.

(a) The defendant paid for and on behalf of the plaintiff electricity accounts, telephone accounts and cleaning charges in lieu of payments of monies secured by the mortgage. These allegations are not admitted. 30 Paragraph 9 alleged service of a notice under s.57(2)(b) of the Real Property Act; this was not admitted. Submissions were made attacking the effectiveness of the notice. However the notice is a condition of exercise of power of sale, not of recovery of possession, and the service of the notice and its effectiveness are false issues. 31 Paragraph 10 alleges that the defendant has not paid the plaintiff the monies referred to in the notice.

This was not admitted. 32 Paragraphs 14 and 15, which were not admitted, alleged an entitlement to interest at 11% per annum and that the principal and interest amounted to $145,605.55 at 2 June 2001. These allegations are not admitted. 33 Claims based on the mortgage are claim 1 for judgment for possession, claim 2 for leave to issue writ of possession, and claim 3 for judgment for the amount of principal and interest and costs in accordance with the mortgage. 34 Apart from statements of non-admission the matter raised by the defence in answer to the claim is (3) The actions on the causes of actions pleaded in the Amended Statement of Claim are not maintainable and are barred by Sections 27, 36, 42, 43 and 47 of the Limitation Act 1969. 35 Provisions limiting times for actions to recover land are found in s.27 and in s.42 of the Limitation Act 1969. According to their terms subs.42(1)(b) covers some of the subject matter of an action on a cause of action to recover land with which subs.27(2) deals but in my view, when both provisions are taken together, it should be understood that para 42(1)(b) is the provision which has effect on the subject with which it deals, that is an action on a cause of action to recover possession of mortgaged property from the mortgagor, and subs.27(2) does not. Claim 1 in the Amended Statement of Claim (which states more fully a claim which appeared in the Statement of Claim when first issued on 28 September 2000) is to that effect; an action to recover possession of mortgaged property from the mortgagor. 36 The mortgage, which was granted in accordance with the provisions of the Real Property Act 1900 and not in accordance with the general law, is in my view a mortgage within the ordinary meaning of that word as used in the Limitation Act 1969, no less so because of the inclusions and exclusions in the definition of "mortgage" in subs.11(1). On its face subs.42(1), read in isolation, appears to create a bar to the recovery of possession of mortgaged property after a limitation period of 12 years; subs.42(1) is in these terms: 42. Action for principal, possession or foreclosure (1) An action on a cause of action: (a) to recover principal money secured by mortgage, (b) to recover possession of mortgaged property from a mortgagor, or (c) to foreclose the equity of redemption of mortgaged property,

is not maintainable by a mortgagee under the mortgage if brought after the expiration of a limitation period of twelve years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims.

However this provision must be taken with s.40 which is in the following term:

40. Mortgage under Real Property Act 1900 This Act applies to an action on a cause of action founded on a mortgage registered under the Real Property Act 1900 to recover from any person any debt damages or other money payable under the mortgage, but otherwise, except to the extent that this Act is taken into consideration for the purposes of a possessory application under Part 6A of that Act, this Act does not affect the right title or remedies under a mortgage so registered of a registered proprietor under that Act of the mortgage or of the mortgaged land. 37 The exception for registered mortgages created by s.40 should be seen as ancillary to the strong protection given to registered interests against adverse claims, including time-based adverse claims, by s.42 and (in 1969 when the Limitation Act was enacted) by s.45 of the Real Property Act 1900. The protection formerly given by s.45 is now given by s.45C, which is part of the scheme of provisions relating to Possessory Title enacted in 1979 and contains a qualification dealing with Possessory Title. 38 The reference in s.40 to a possessory application is not in point, and the effect of s.40 is that the Limitation Act applies to claim 3 in the Amended Statement of Claim which claims judgment for principal and interest, but does not affect claims, and to which relate to possession and to remedies under the Real Property Act 1900. A registered mortgage may itself create a contractual entitlement of the mortgagee to possession against the mortgagor, to which the general provisions of the Limitation Act 1969 would apply, but such a mortgagee is also entitled to remedies conferred by the Real Property Act 1900 itself, and those remedies are not affected by the Limitation Act. Those remedies include the right conferred by s.60(c) of the Real Property Act to bring proceedings for possession of the land, and other rights including under s.58 power to sell the land and apply the proceeds to expenses and moneys owing as well as to other matters; see subs(3), and obtaining a foreclosure order by the Registrar General under s.61 and s.62. On the other hand the plaintiff's claims to recover principal and interest are claims to recover debt, damages or other money payable under a mortgage to which the opening words of s.40 provide that the Limitation Act applies; and so the provisions of s.42(1)(a) relating to a limitation period of 12 years for the recovery of principal under a mortgage and s.43 relating to a limitation period of six years to recover interest under a mortgage both apply to the plaintiff's claims in these proceedings. 39 Section 63, supplemented by s.66, provides for the extinction of causes of action for debt, damages or other money on the expiration of limitation periods fixed elsewhere in the Act, but these provisions do not, having regard to the last phrases of s.40, affect statutory remedies under the mortgage, including the power to sell the mortgaged property and apply the proceeds in payment of the debt and interest. The result is that after the expiration of the limitation periods fixed by ss 42 and 43 an action for debt is not available to the mortgagee, and the mortgagee cannot obtain a judgment or other judicial remedies for the principal and interest, but on the other hand the mortgagee can continue to exercise rights specifically conferred by the Real Property Act on a mortgagee, without limitation as to time. The ultimate bar at 30 years provided for by s.51 is again a bar on an action, and does not operate to bar remedies available to the mortgagee under the Real Property Act without judicial process. 40 The mortgage provided for repayment of the principal sum on 30 June 1985 and after that date s.60 of the Real Property Act conferred on the plaintiff a right to bring proceedings for possession of the land. The first covenant in the schedule is a covenant to pay the principal on 30 June 1985; an action brought for recovery of the principal is subject to a limitation period of 12 years prescribed by subs.42(1) and is barred after 12 years, that is after 30 June 1997. An action for recovery of interest was available to the plaintiff on each occasion when a payment of interest became due under the second covenant on the 30th of each month. The provisions and operation of subs.43(1) of the Limitation Act should be read with some care: 43. Action for interest (1) An action on a cause of action to recover interest secured by a mortgage is not maintainable by a mortgagee under the mortgage if brought after the expiration of: (a) a limitation period of six years running from the only or later of such of the following dates as are applicable: (i) the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims, and (ii) where a mortgagee under a prior mortgage is, on the date mentioned in subparagraph (i), in possession of all or any of the property comprised in the mortgage securing the interest, and after that date discontinues his or her possession---the date of discontinuance, or (b) the limitation period fixed by or under this Act for an action between the same parties on a cause of action to recover the principal money bearing the interest, whichever limitation period first expires. 41 To illustrate the effect of these provisions, the first payment of $220 of interest was to be made on 1 July 1980; as it was not sued for on or before 1 July 1986, that instalment became statute barred and could not be recovered. The second instalment fell due on 30 July 1980 and became statute barred when not sued for by 30 July 1986; and so forth for the instalments falling due on the 30th of each month thereafter. The limitation period fixed by subs.42(1)(b) for the principal expired on 30 June 1997, and the effect of para 43(1)(b) with the last five words of that subsection is that all claims for interest became statute barred after 30 June 1997, even interest which had fallen due in the near past or on 30 June 1997 itself. Once principal is barred, all interest is also barred. 42 Defendant's counsel contended to the effect that once six years from the first accrual date of interest had passed, that is after 1 July 1986, all claims for interest were barred and interest falling due after that day was not recoverable. In my view this contention did not have any sound basis and, at all times until the principal is barred, interest falling due during the previous six years but unpaid can be recovered. 43 Defendant's counsel also contended to the effect that principal money fell due earlier than 30 June 1985, and hence that the 12 years' bar provided for by subs.42(1) came into effect earlier than 30 June 1993. As I understood the contention, it was that when there was a default in paying interest, which first occurred on 1 July 1980, the principal also became payable, which would produce the result that the principal became barred after 1 July 1992. The basis for this contention is found in the last sentence of cl 6 of Memorandum Q860000; it was contended that the effect of the default in due payment of interest was, following the last words of cl.11, "… the principal sum shall immediately become due and the mortgagor will thereafter pay the same on demand." In the written submissions it was said "15. But the crucial element in the mortgage is cl 6, the default provision. In particular, it is clear that default of interest payments rendered the principal sum due on demand. (It is noted that at general law an amount payable on demand does not require the making of a demand to perfect it, ie one may sue without making formal demand)." In my view the submission did not state the law correctly with respect to the need for an effective demand. 44 A surprising amount of judicial consideration and learning have been given to the significance of references, in contracts for loan or otherwise for the payment of money, to payment on demand in two contexts. One is the identification of the events constituting a cause of action which must have occurred before proceedings for recovery of the debt are commenced, and discerning whether demand must be articulated before the proceedings are commenced or may be taken to be involved in commencing the proceedings. The other is the identification of the accrual date of a cause of action in the context of statutes of limitation. Generally, a simple contract of loan which does not provide for the time of repayment is understood to create an obligation to repay immediately, and reference in the contract to repayment on request or on demand does not alter this. However in more complex contracts references to a demand for payment are usually construed as meaning what they say, so that the need for a demand has substance. In Young v. Queensland Trustees Ltd (1956) 99 CLR 560 at 566 the High Court (Dixon CJ McTiernan and Taylor JJ) said "A loan of money payable on request creates an immediate debt." Their Honours illustrated this by reference to cases dealing with a promissory note payable on demand, and with the workings of the old system of pleading. 45 The case law was extensively considered by Fullagar J in Ogilvie v. Adams [1981] VR 1041 whose conclusion (at page 1049) was: There is a long-settled rule of construction that, where there is a present debt between the parties to a contract to repay money, and the only terms as to repayment of the debt are to be spelled out of a promise to repay on demand, or out of a statement that the money is to be repaid or repayable on demand (or on request), an instantaneous cause of action, upon the very creation of the contract, arises in the lender. Whether one calls it a rule of law or not does not seem to me to matter. The only reason why I have chosen the expression "rule of construction" is because other words or terms may appear in the contract which may be in the circumstances sufficient to show an intention that the cause of action is not to arise until some actual demand or some form of demand is made or until some period after demand has elapsed: see for example Murphy v Lawrence, [1960] NZLR 772. But it is equally correct to say that, where such "other words" or terms do not appear, it is settled law that a loan (for example) which is simply described as being repayable on demand or on request or at call creates a cause of action in the lender enabling him to recover the money instantaneously upon the loan being made, and without any demand being made at all. What the critical words mean, generally, is a rule of construction, and therefore presumptive only; what the words mean in a written document recording the terms of a loan, when standing alone, is a clear rule of law. 46 It will be seen that in his Honour's view the construction was to be applied where the only terms as to repayment of the debt are to be spelt out of the promise to repay on demand. Fullagar J was of the view that the meaning of the words in a written document recording the terms of the loan when standing alone was a clear rule of law; with respect, it may be doubted whether the rule is a rule of law, as the need to construe the instant document according to its terms can never be escaped. There is a further extensive examination of case law in DFC New Zealand Ltd v. McKenzie [1993] 2 NZLR 576 (Tipping J). 47 In Romain v. Scuba TV Limited [1997] QB 887 Evans LJ with the concurrence of Waite LJ and Sir John May said at 895: "The general rule that when the clause provides for a demand to be made then the cause of action arises only when the demand is made is well established: In Re J Brown's Estate; Brown v. Brown [1893] 2 Ch 300." Clause 6 is a clause of the kind to which his Lordship referred; that is, it provides for a demand to be made; and this is clearly so notwithstanding the shadow of ambiguity between the words in cl.6 "then the principal sum shall immediately become due" and the following words "and the mortgagor will thereafter pay the same on demand." The general rule stated by Evans LJ appropriately attributes significance to the reference to a demand, which the parties would hardly take trouble to use if it were not intended to have effect. Evans LJ's references to In re J. Brown's Estate and to the rule as a general rule are of some importance, illustrated by the judgment of Chitty J in In re J. Brown's Estate; Brown v. Brown [1893] 2 Ch 300 at 304 and 305. As his Lordship's judgment shows, the words "on demand" in a promissory note do not fall within the general rule as time ran from the date of the promissory note. Chitty J said: Now, for those interested in the testator's estate it is said that the meaning of the words "on demand" is the same as that which has been attributed to them in promissory notes and the like. The law is quite settled that, with regard to a promissory note payable on demand, no demand is necessary before bringing an action; and indeed the Statute of Limitations begins to run from the making of the note.

It was suggested by Mr. Farwell in his argument, that the class of cases, to which I am now alluding, were all referable to the law merchant, and a passage from Mr. Justice Blackburn's judgment in the case of Brighty v. Norton 32 L.J. (Q.B.) 40, was relied on for that purpose. But in the report of the same case in 3 Best and Smith (Page 305), the passage is omitted. I am not satisfied that the distinction attempted to be made between the law merchant and the general law with regard to the meaning of the words "pay on demand" can be supported. Lord Wensleydale (then Baron Parke ), in the well-known case of Norton v. Ellam 2 M. & W. 461 does not draw that distinction. He says (at 464): "I entertain no doubt at all on this point" - that is about the Statute of Limitations running from the date of the note. "It is the same as the case of money lent payable upon request, with interest, where no demand is necessary before bringing the action." That is a general pro-position and not one based upon the law merchant; and, without going through the whole of the cases to which I have referred in the course of the argument, it is plain that a distinction has been taken and maintained in law, the result of which is, that where there is a present debt and a promise to pay on demand, the demand is not considered to be a condition precedent to the bringing of the action. But it is otherwise on a promise to pay a collateral sum on request, for then the request ought to be made before action brought. I think the distinction which I have mentioned, is sufficiently pointed out in Saunders ' argument in Birks v. Trippet 1 Wms. Saund. 32, which was accepted by the whole of the Court, the Judges having been apparently somewhat impatient at the learned counsel labouring his argument to the extent he did.

His Lordship's address to the facts of the case before him began "It is a question, then, of the construction of the instrument …". 48 In Lloyds Bank Ltd v. Margolis [1954] 1 WLR 644 Upjohn J considered In re Brown's Estate and took the view that, in documents in the relationship between banker and customer, references to demand mean what they say; see 648-649. (His Lordship was not considering a case relating to a promissory note; indeed those cases makes some sharp distinctions, as a promissory note payable "on demand" does not require an actual demand, whereas a promissory payable "on sight" requires actual production of the promissory note.) 49 In my view it is only in very simple cases where reference to a demand can be taken to be nominal that a reference to a demand as part of the mechanism to precipitate payability should be understood to have any less than its literal meaning. In this case the mortgage contains an entirely clear specification of the date for repayment of principal, and a supplementary provision creates an obligation to repay the principal on demand if some intervening events happened. In my opinion literal weight must be given to the reference to the demand, as it is very unlikely that the parties intended that a complete change of their arrangements for repayment of the principal, perhaps precipitating repayability by some years, could take place without clear indication by the mortgagee and a clear opportunity for the mortgagor to comply. 50 In the present case, on the construction of the mortgage with the incorporated provisions of Memorandum Q860000 it is in my opinion clear that the meaning of the mortgage is that there was a promise to repay the principal on 30 June 1985, and if there was a default in interest earlier the mortgagee could make a demand, in which case the principal would immediately be due and the mortgagor promised to pay it, but the mortgagee could omit to act or decide not to act in that way, in which case the principal did not become payable until 30 June 1985. Subject to the claim of confirmation, in my view recovery of the principal by bringing an action became barred on and after 1 July 1997. 51 It was the plaintiff's case that the claim to recover the principal was not then barred because the cause of action was confirmed. This contention was raised in the Amended Statement of Claim; it could have been left to a Reply (and no Reply was filed) but it was reasonable to raise the issue earlier as it was a fair certainty that the plaintiff would be required to establish a confirmation. Confirmation is dealt with by s.54 of the Limitation Act. In this case there has been no confirmation by acknowledgment in writing. This limits the provisions of s.54 which require consideration. The provisions now relevant are as follows: 54. Confirmation

(1) Where, after a limitation period fixed by or under this Act for a cause of action commences to run but before the expiration of the limitation period, a person against whom (either solely or with other persons) the cause of action lies confirms the cause of action, the time during which the limitation period runs before the date of the confirmation does not count in the reckoning of the limitation period for an action on the cause of action by a person having the benefit of the confirmation against a person bound by the confirmation.

(2) For the purposes of this section: (a) a person confirms a cause of action if, but only if, the person: (i) [acknowledgement], to a person having (either solely or with other persons) the cause of action, the right or title of the person to whom the acknowledgment is made, or (ii) makes, to a person having (either solely or with other persons) the cause of action, a payment in respect of the right or title of the person to whom the payment is made, (b) a confirmation of a cause of action to recover interest on principal money operates also as a confirmation of a cause of action to recover the principal money, and (c) a confirmation of a cause of action to recover income falling due at any time operates also as a confirmation of a cause of action to recover income falling due at a later time on the same account.

(3) Where a person has (either solely or with other persons) a cause of action to foreclose the equity of redemption of mortgaged property or to recover possession of mortgaged property, a payment to the person of principal or interest secured by the mortgage or a payment to the person otherwise in respect of the person's right or title to the mortgage is a confirmation by the payer of the cause of action. … (5) For the purposes of this section a person has the benefit of a confirmation if, but only if, the confirmation is made to the person or to a person through whom the person claims. … 52 The acknowledgment put forward was said to be found in the arrangements made in and after 1993 and in payment of moneys in accordance with those arrangements, referred to in passages in the affidavits of the plaintiff and of Mr Christopher Gleeson which I set out above. Although the exact date of the events cannot be established it is clear that they took place well before 1 July 1997. Upon the plaintiff's account in para 24 of her affidavit, which I accept subject to the difficulty of establishing the exact date, the defendant said that he would make payments for power bills, phone bills and the cleaning lady in lieu of the interest that had been running on the mortgage; and the plaintiff then stated an arrangement under which the defendant was to pay her power bills, phone bills and cleaning lady which would amount to about $2000 per year. The expressions used by the defendant specifically referred the payments to interest. The defendant continued to make the payments, and was still doing so as on 11 February 2002 when she made her affidavit. The substance of the events was that he made the payments to the electricity authority, telephone company and the cleaning lady at the direction of the plaintiff, and it is clear from the terms of the arrangements that the payments were made in respect of the plaintiff's right or title under the mortgage. 53 I conclude that the events including the payments have operated as confirmation of the causes of action which then existed to recover interest, and also, having regard to subs.54(2)(b), as a confirmation of the cause of action to recover the principal money. Each payment in the continuing series has had the effect of confirming the cause of action to recover the principal, and each has had the practical effect of extending the limitation period of 12 years for the principal. Accordingly, there is in my view no time bar against recovery of the principal. On the other hand the arrangement for the defendant to make the payments has had the effect that he has, since the arrangement was made about 1993 or 1994, made payments approximately equal to the interest payments falling due under the mortgage, being payments which under the parties' arrangement had the effect of discharging the obligations to pay interest. Although the proofs are not exact in my view it should be concluded that, at the time when the proceedings were commenced in September 2000, all interest which had accrued due during the six years before filing the Statement of Claim had been discharged in that way, while all interest which accrued at earlier times again had become barred under s.43(1) with the elapse of at least six years since it fell due and was acknowledged. The result is that the plaintiff is entitled to judgment for the principal of $24,000, but not for any sum for interest. 54 Orders:

(1) Give judgment for the plaintiff for the possession of the property known as "Laguna", Boonailla Road, Lostock via Gresford, New South Wales being the whole of the land in Crown Grants Volume 13497 Folio 127 and Volume 13598 Folio 161, Land Grants Volume 5274 Folio 237 and Volume 7103 Folio 214 and Certificate of Title Volume 12316 Folio 67.

(2) Give to the plaintiff leave to issue writ of possession.

(3) Give to the plaintiff judgment for $24,000 together with interest at the rate of 11% per annum from 28 September 2000 to the date of judgment.

(4) Order that the defendant pay the plaintiff's costs of the proceedings assessed on the indemnity basis.

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