11 Oonoonba Road Pty Ltd & Anor v ACP Properties (Townsville) Pty Ltd & Ors [2021] QCA 254 [2021] 48 QLR

SUPREME COURT OF QUEENSLAND CITATION: 11 Oonoonba Road Pty Ltd & Anor v ACP Properties (Townsville) Pty Ltd & Ors [2021] QCA 254 PARTIES: 11 OONOONBA ROAD PTY LTD ACN 615 776 148 (first appellant) TIMOTHY EDMONDS (second appellant) v ACP PROPERTIES (TOWNSVILLE) PTY LTD ACN 631 282 203 (first respondent) ACP PROPERTIES (QLD) PTY LTD ACN 606 370 870 (second respondent) STEPHEN GEORGE CAMPBELL (third respondent) FILE NO/S: Appeal No 2394 of 2021 DC No 2476 of 2019 DIVISION: Court of Appeal PROCEEDING: General Civil Appeal ORIGINATING COURT: District Court at Brisbane – [2021] QDC 10 (Barlow QC DCJ) DELIVERED ON: 26 November 2021 DELIVERED AT: Brisbane HEARING DATE: 8 June 2021 JUDGES: Sofronoff P and Morrison JA and Flanagan J ORDERS: 1. Appeal allowed. 2. Set aside the orders made on 4 March 2021. 3. The parties have leave to make submissions on the final form of orders to reflect these reasons, and as to costs, as follows: a. By the appellants, within 14 days of today, limited to five pages; and b. By the respondents, within 14 days following receipt of the appellants’ submissions, limited to five pages. CATCHWORDS: MORTGAGES – ESTATE, RIGHTS AND LIABILITIES OF MORTGAGOR AND MORTGAGEE – DISCHARGE OR -- 1 of 34 -- 2 RECONVEYANCE – ASSIGNMENT OR TRANSFER TO THIRD PARTY – where the first appellant and second respondent entered into an agreement to purchase and develop land – where the first appellant and second respondent owned the land as tenants in common in equal shares – where the second respondent loaned the first appellant $1,647,500 to enable it to pay one half of the purchase price and anticipated costs of completing works on the land – where the first appellant was not able to repay the loan when it became due – where the first appellant and second respondent were provided a finance facility of $1,600,000 under guarantee from each of the third respondent and the second appellant, and a registered mortgage over the land – where the second respondent executed a release of mortgage to allow the further mortgage to be registered – where the second respondent lodged a duplicate copy of the mortgage as a second mortgage without the first appellant’s consent – where the second respondent issued a notice of exercise of power of sale of the land – where the land was sold to the first respondent – where the contract for the sale of land from the second respondent to the first respondent was completed and the transfer registered – where the first and second respondent sought to recover the amount of the loans against the appellants under the loan agreement and guarantee – where the learned trial judge found that the second respondent’s mortgage could be lodged and re- registered notwithstanding that it had been released to enable the later mortgage to be registered as a first mortgage – where the learned trial judge found that the first respondent as assignee of the mortgage had acquiesced in the conduct of the second respondent taking the proceeds of the sale in discharge of the re-registered mortgage – whether the mortgage was registered unlawfully without the consent of the first appellant – whether the first respondent, as assignee of the NAB mortgage, had acquiesced in the conduct of the second respondent – whether the learned trial judge should have found that the debt was discharged by operation of s 88 of the Property Law Act 1974 (Qld) – whether the conveyance to the first respondent took effect as a foreclosure, thus releasing any obligation under the personal covenants in the registered mortgages pursuant to s 63(2) of the Land Title Act 1994 (Qld) Land Title Act 1994 (Qld), s 63, s 81 Property Law Act 1974 (Qld), s 88 Abalos v Australian Postal Commission (1990) 171 CLR 167; [1990] HCA 47, cited Adams & Ors v In Roma Pty Ltd [2012] QSC 240, cited Australia and New Zealand Banking Group Ltd v Evans [1992] 2 Qd R 230; [1991] QSC 303, cited Fox v Percy (2003) 214 CLR 118; [2003] HCA 22, cited Groongal Pastoral Co Ltd (In liq) v Falkiner (1924) 35 CLR 157; [1924] HCA 54, cited -- 2 of 34 -- 3 Industrial Acceptance Corporation Ltd v Tarulli [1974] WAR 125, cited Mercantile Credits Ltd v Australia and New Zealand Banking Group Ltd (1988) 48 SASR 407, cited Queensland Premier Mines Pty Ltd v French (2007) 235 CLR 81; [2007] HCA 53, cited Robinson Helicopter Company Inc v McDermott (2016) 90 ALJR 679; (2016) 331 ALR 550; [2016] HCA 22, cited COUNSEL: D Savage QC, with L Copley, for the appellants N H Ferrett QC for the respondents SOLICITORS: Mobbs & Marr Legal for the appellants Archibald & Brown Lawyers for the respondents [1] SOFRONOFF P: I agree with the reasons of Morrison JA and with the orders proposed. [2] MORRISON JA: The issues in this appeal involve companies controlled by two men who were once in business together. Mr Edmonds controlled the first appellant, 11 Oonoonba Pty Ltd (Oonoonba). Mr Campbell controlled the first and second respondents, ACP Properties (Townsville) Pty Ltd (ACPT) and ACP Properties (Qld) Pty Ltd (ACPQ). [3] On 23 December 2016 Oonoonba and ACPQ entered into an agreement to purchase and develop land in Townsville. On its purchase they owned the land as tenants in common in equal shares. [4] Pursuant to the agreement ACPQ lent Oonoonba $1,647,500 to enable Oonoonba to pay one half of the purchase price and anticipated costs of completing works on the land. Oonoonba mortgaged its interest in the land to ACPQ to secure the loan, which was to be repaid on or before 23 December 2017. The mortgage was registered on 3 April 2017.1 [5] Oonoonba was not able to repay the ACPQ loan on the due date. [6] In April 2018 the National Australia Bank (NAB) agreed to provide a finance facility to ACPQ and Oonoonba, in the sum of $1,600,000, repayable by 30 April 2019. As security for the loan, NAB required a guarantee from each of Mr Campbell and Mr Edmonds and a registered mortgage over the land. The guarantees and mortgage were provided.2 [7] To permit the registration of the NAB mortgage, on 12 June 2018 ACPQ executed a release of its mortgage. The NAB’s mortgage was registered on 14 June 2018. The ACPQ release was registered on 20 June 2018. [8] ACPQ was left with a signed mortgage from Oonoonba, but it was unregistered. The NAB mortgage was then the only mortgage registered on the title. [9] Mr Campbell’s next moves are at the heart of the appeal. 1 In these reasons I shall refer to this mortgage as “the ACPQ mortgage”. 2 In these reasons I shall refer to the mortgage granted to the NAB as “the NAB mortgage”. -- 3 of 34 -- 4 [10] On 23 August 2018, ACPQ lodged a duplicate copy of the ACPQ mortgage, which was registered that day as a second mortgage.3 An issue at the trial and on appeal was whether that was done with Oonoonba’s consent. [11] On 3 December 2018, ACPQ wrote to Oonoonba alleging that Oonoonba had breached the terms of the ACPQ loan, under both the development agreement and the re-registered ACPQ mortgage. ACPQ issued a notice of exercise of power of sale of the land, under the re-registered mortgage. [12] About eight weeks later, ACPT was incorporated on 29 January 2019. [13] On 9 May 2019, ACPQ and ACPT executed a contract under which ACPQ sold the land to ACPT. ACPQ did so as owner of its half share in the land, and as mortgagee (under the re-registered ACPQ mortgage) exercising its power of sale over Oonoonba’s half share. [14] On the same day ACPQ (acting in both capacities) signed a form of transfer of the land to ACPT. [15] On 15 May 2019, ACPT and NAB executed an agreement under which: (a) ACPT agreed to pay out the amount then outstanding under the NAB loan agreement, the NAB mortgage and the NAB guarantees; and (b) NAB agreed to assign all of NAB’s rights under those documents to ACPT. [16] On 15 May 2019, ACPT paid $555,077.96 to NAB and NAB assigned its mortgage, loan agreement and guarantees to ACPT. The assignment of the NAB mortgage was registered on the title on 22 May 2019. [17] On 24 May 2019, ACPT gave Oonoonba notice of the assignment. [18] On 31 May 2019, the contract for sale of the land from ACPQ to ACPT was completed, and the transfer was registered. [19] The net proceeds of the sale ($2,733,279.07) were paid solely to ACPQ. One half of the proceeds were paid to it as its share, as 50 per cent co-owner, of the proceeds of sale. The other half was paid to it in reduction of the amount owed to it by Oonoonba under the original ACPQ loan. Nothing was paid to ACPT in reduction of the NAB loan, even though ACPT was then registered as first mortgagee and ACPQ was registered as the second mortgagee. [20] Thus ACPT, the mortgagee of the land under the NAB mortgage, became the registered owner of that land. [21] ACPT and ACPQ contended that ACPT acquiesced in Oonoonba’s half share of the proceeds of sale being applied in that manner (thus giving ACPQ effective priority over ACPT notwithstanding the formal priorities under the registered mortgages). [22] On 14 June 2019, ACPT sent a demand to each of Oonoonba and Mr Edmonds. It demanded payment of $555,077.96, which ACPT asserted was due under the NAB loan. Its demand to Oonoonba was made under the NAB loan agreement and the NAB mortgage. Its demand to Mr Edmonds was made under the NAB guarantee. 3 In these reasons I shall refer to this as “the re-registered ACPQ mortgage”. -- 4 of 34 -- 5 [23] Apart from the application of the proceeds of sale toward the ACPQ loan, neither Oonoonba nor Mr Edmonds has repaid any of that loan or the NAB loan. The case at trial [24] ACPT sought to recover the amount of the NAB loan: (i) against Oonoonba under the NAB loan agreement; and (ii) against Mr Edmonds under the NAB guarantee. ACPQ sought to recover the unpaid balance of the ACPQ loan against Oonoonba. [25] At trial Oonoonba and Mr Edmonds denied liability and raised several issues: (a) when the land was transferred to ACPT, its ownership of the land was subject to the terms of the NAB mortgage, and therefore its payment to NAB of the amount outstanding under the NAB loan discharged that debt; (b) alternatively, the proceeds of the sale of the land to ACPT should have been first applied by ACPQ in payment of the debt owed to ACPT under the NAB loan, which would therefore have discharged their respective obligations under the NAB loan agreement, the NAB mortgage and the NAB guarantee; ACPT’s acquiescence in ACPQ applying the funds to the ACPQ loan was contrary to the terms of the guarantee and resulted in the discharge of Mr Edmonds’ obligations under it; and (c) the re-registered ACPQ mortgage was not properly registered and had no effect, so ACPQ was not entitled to sell the land and to apply Oonoonba’s share of the proceeds of sale toward payment of its debt; therefore, it holds those proceeds on trust for Oonoonba. Central findings at trial [26] The learned trial judge found that the ACPQ mortgage could be lodged again and re- registered, notwithstanding that it had been released to enable the NAB mortgage to be registered as a first mortgage.4 It followed that ACPQ was able to sell the land to ACPT as mortgagee in possession under the ACPQ mortgage. [27] His Honour also held that ACPT, as assignee of the NAB mortgage, had acquiesced in the conduct of ACPQ taking the proceeds of the sale in discharge of the re- registered ACPQ mortgage instead of the NAB mortgage.5 [28] The learned trial judge found that the transfer of land from ACPQ to ACPT: (i) had no effect until it was exchanged for payment of the consideration; and (ii) whilst it discharged the NAB mortgage that did not occur on the date of the execution of the instrument of transfer, but rather at the date of registration of the instrument. His Honour reasoned that the matter was the same as an ordinary conveyance of land between two independent parties where the documents for settlement, including an executed transfer, are often prepared and executed before settlement and are held in escrow by the solicitors for one of the parties pending completion.6 Issues on appeal [29] Oonoonba and Mr Edmonds challenge those findings, contending that: 4 Reasons below [62]-[75]. 5 Reasons below [94]. 6 Reasons below [26]-[30]. -- 5 of 34 -- 6 (a) the ACPQ mortgage was re-registered unlawfully as Oonoonba had not consented; the evidence did not support the finding made; the trial judge ought to have found that there was no such agreement; as a consequence ACPQ had no power to sell as mortgagee in possession or to transfer the land to ACPT; (b) there was no evidence to support the finding that ACPT, as assignee of the NAB mortgage, had acquiesced in the conduct of ACPQ taking the proceeds of the sale in discharge of the re-registered ACPQ mortgage instead of the NAB mortgage; that had been alleged in the Reply but not the subject of any evidence; it was a matter for ACPQ and ACPT to prove and no evidence was led about it; (c) both findings involved a palpable misuse of the trial judge’s position as trial judge; (d) by receiving the “money” paid upon conveyance of the land to ACPT, by operation of s 88 of the Property Law Act 1974 (Qld) the sum received discharged or was required to discharge the actual sum due and owing under the NAB mortgage; (e) the learned trial judge found that the alteration of priorities between the NAB mortgage7 and the ACPQ re-registered second mortgage8 could be affected by agreement between or acquiescence by the first and second mortgagees; (f) where there are two mortgagees of the same property there may be situations unlike the present, where two independent mortgagees acting, not in a tortious combinations, but in their own self-interest, could agree to alter the priorities of the mortgages without the consent of the mortgagor; but not in this case; the securities held by the first mortgagee included the guarantees that were ultimately sued upon; the guarantors were entitled to have recourse to the security held by the first mortgagee if it elected to call upon the guarantee; payment of the guarantee sum entitles the guarantor by right of subrogation to the benefit of the first mortgage and thus to take in priority to the second mortgagee; (g) the effect of s 88 of the Property Law Act required the discharge of the liability to the first mortgagee; thus the learned trial judge should have found that the debt was discharged; and (h) in any event, by operation of s 63(2) of the Land Title Act 1994 (Qld) the conveyance to ACPT took effect as a foreclosure, thus releasing any obligation under the personal covenants in the registered mortgages; the purpose of s 63(2) is to give effect to the pre-existing legal effect of foreclosure so that if a mortgagee elects to take the security and not sell it, the transfer excludes other remedies such as recourse to the personal covenants; thus there was no longer any obligation and no payment was secured by the guarantee. Approach of the trial judge - unlawful registration of the ACPQ mortgage [30] The learned trial judge referred to the evidence concerning the ACPQ mortgage which had been released to make way for the NAB mortgage to be registered. Specifically, he adverted to Mr Campbell’s evidence:9 7 The first registered mortgage. 8 The wrongly registered second mortgage. 9 Reasons below [55]. -- 6 of 34 -- 7 “Importantly, Mr Campbell agreed that, at the time he executed the release as director of ACPQ, there was no agreement, between himself or ACPQ and Mr Edmonds or Oonoonba, that it be re-registered. Rather, in the coming months there were negotiations to have a second mortgage to ACPQ executed and registered over the property.” [31] His Honour then dealt with evidence that after the release of ACPQ’s mortgage, its solicitors subsequently considered how they could get into a position to register a new second mortgage, involving the preparation of a formal deed of forbearance and a fresh mortgage. Further, that evidence showed that Mr Campbell understood that Mr Edmonds did not agree to registration of a second mortgage.10 [32] However, his Honour recited the oral evidence of Mr Campbell, who said that on 23 August 2018 (the day the ACPQ mortgage was re-registered) Mr Edmonds had agreed to let the mortgage be re-registered.11 His Honour then referred to aspects of that evidence, noting that it had not been put in an affidavit in support of an earlier application for summary judgment, and it was not pleaded. His Honour then said:12 “Mr Campbell did not really respond to the assertion concerning the pleading but, as for the summary judgment affidavit, he said that he was advised to keep the affidavit simple, so he did not refer to everything that he might have. He also referred to some emails from Mr Edmonds to Mr Gaeta at Connolly Suthers later that morning, in which Mr Edmonds asked for the mortgage document and deed and the documents that Mr Campbell had done up to be sent to him. Mr Campbell said he considered the emails to be admissions that Mr Edmonds knew he had agreed to give ACPQ a second mortgage.” [33] The learned trial judge accepted that the pleaded case on behalf of ACPQ and ACPT did not refer to any agreement by Mr Edmonds that ACPQ could re-register the ACPQ mortgage.13 [34] Oonoonba and Mr Edmond’s pleadings alleged in paragraph 4(c) of the Defence: “xi. on or about 20 June 2018, [ACPQ] registered a release of mortgage to discharge the Initial Mortgage; ... xii. on or about 23 August 2018, [ACPQ] unlawfully registered a second mortgage against the Property without the knowledge or consent of [Oonoonba or Mr Edmonds] (the “Second Mortgage”);” [35] In paragraph 5 of their Reply, ACPQ and ACPT pleaded in response to those allegations: “As to subpar 4(c) of the Defence, [ACPQ and ACPT]: ... (n) deny the allegation in sub-paragraph (xi) because, although ACPQ registered such a document, it was 10 Reasons below [56]-[61]. 11 Reasons below [62]. 12 Reasons below [64]; internal references omitted. 13 Reasons below [65]. -- 7 of 34 -- 8 not with the intention, or pursuant to any common intention of ACPQ and Oonoonba to discharge the Initial Mortgage, the parties having agreed that ACPQ would be entitled to a second-ranking mortgage on the same terms as the Initial Mortgage (which agreement was later repudiated by Oonoonba); (o) deny the allegation in sub-paragraph (xii) because, although the Second Mortgage was registered, the registration was not unlawful because of the matters set out in sub-paragraph (n) immediately above.” [36] As to what was pleaded in the Reply, the learned trial judge found that reliance was not being placed upon an agreement made on 23 August 2018 (the day the re- registered ACPQ mortgage was lodged for registration as a second mortgage), but “on a prior agreement that the ACPQ mortgage would, after its release to enable the NAB mortgage to have priority, be replaced by a mortgage in the same terms, to be registered as the second mortgage on the title”. However, his Honour also found that “there was no evidence of any earlier agreement to that effect”.14 [37] Therefore, his Honour found that there was no evidence to support the only agreement pleaded in answer to the unlawful registration point. [38] The learned trial judge then referred to Mr Edmonds’ evidence that when Mr Campbell said he wanted a second mortgage, all that Mr Edmond’s said was that he would consider it.15 [39] His Honour found that there was a conversation on 23 August 2018 in which the topic of a second mortgage was raised. By that time the ACPQ mortgage had been released and a deed of forbearance had been discussed.16 His Honour dealt with the issue in this way:17 “[72] I do not consider that Mr Campbell’s failure to refer to this conversation in his affidavit in support of the application for summary judgment indicates that his evidence about it was a recent invention. It is notorious that such affidavits are drawn by lawyers, setting out only evidence that they consider supports summary judgment. As Mr Campbell said in his evidence, his lawyers advised that the evidence should be kept simple. It is often the case that applications for summary judgment rely on documents rather than potentially contentious evidence of conversations. I accept Mr Campbell’s explanation. [73] I consider that both Mr Campbell and Mr Edmonds were truthful witnesses and relayed their best recollections of the discussion that morning. Mr Edmonds does not recall any mention of the duplicate copy of the ACPQ mortgage, let alone agreeing that it could be registered, but I think it unlikely to have been of importance to him at the time, as he was aware that 14 Reasons below [66]. 15 Reasons below [67]. 16 Reasons below [69]. 17 Reasons below [72]-[73]. -- 8 of 34 -- 9 ACPQ had only released it in order to enable NAB to have a first registered mortgage to secure its loan and that the release was not intended to leave ACPQ unsecured for the loan due to it under the original arrangements between it and Oonoonba. He was focused on how to pay debts relating to the property and he was prepared to agree to Mr Campbell’s requirements so that Oonoonba could receive funds needed to pay outstanding invoices concerning the property. On the other hand, it was important to Mr Campbell that ACPQ urgently return to a position of having some security for its original debt while he negotiated a more formal forbearance agreement and a replacement mortgage to secure Oonoonba's obligations under that agreement. I accept Mr Campbell’s evidence of what was said during the conversation, including that Mr Edmonds agreed to Mr Campbell's request that the ACPQ mortgage be re- registered that morning.” Consideration – ground 1 – unlawful registration of the mortgage [40] The contention is that the evidence did not support his Honour’s finding that there was an agreement to permit the ACPQ mortgage to be re-registered. Specifically, it was contended that his Honour’s acceptance of Mr Campbell’s evidence fell into the category described in Fox v Percy18 as “glaringly improbable” or “contrary to compelling inferences”. Further, as was said in Abalos v Australian Postal Commission,19 the findings were such “that any advantage enjoyed by the trial judge by reason of having seen and heard the witnesses, could not be sufficient to explain or justify the trial judge’s conclusion”. [41] It is therefore necessary to examine the evidence carefully to consider that contention. The pleaded case [42] The pleaded case is set out above in paragraphs [34] and [35]. The learned trial judge correctly found that pleading to reveal that reliance was not being placed upon an agreement made on 23 August 2018 (the day the re-registered ACPQ mortgage was lodged), but: (i) on a “prior agreement”, and (ii) that agreement was that the ACPQ mortgage would, after its release to enable the NAB mortgage to have priority, be “replaced by a mortgage in the same terms”, and (iii) that agreement had been repudiated. [43] His Honour found that “there was no evidence of any earlier agreement to that effect”. I respectfully agree. Further, that finding was not challenged on the appeal and no such prior agreement was urged in argument before this Court. [44] There are several matters to note about what had been pleaded. First, what was being pleaded in the Reply was in answer to an allegation of unlawful registration. It must have been the case that the lawyers for ACPQ and ACPT carefully explored everything that might be said to answer such an allegation. Especially must that be so as Ms Reynolds, corporate counsel for ACPQ, was the person who actually lodged the mortgage. 18 (2003) 214 CLR 118; [2003] HCA 22, [29]. 19 (1990) 171 CLR 167, 178. -- 9 of 34 -- 10 [45] Secondly, in context the reference to a “prior agreement” could only mean prior in time to 23 August 2018. Thirdly, that the mortgage was to be replaced “by a mortgage in the same terms” could only mean that it was a different document, though containing the same terms. [46] Fourthly, the pleading alleged that the prior agreement was repudiated by Oonoonba. Nothing was pleaded to suggest that another agreement was reached. Nothing was pleaded to suggest that the lodgement of the mortgage was the product of any consensus whatever between the Oonoonba side and the ACPQ side. To the contrary, the pleading eschewed any such suggestion. The evidence of ACPQ and the contemporaneous documents [47] Mr Campbell agreed that at the time he executed the release of the ACPQ mortgage, to permit the NAB mortgage to be registered, there was no agreement, between himself or ACPQ and Mr Edmonds or Oonoonba, that the mortgage could be re- registered. To the contrary, his evidence was that there were fruitless negotiations to have a new second mortgage lodged and registered. [48] On 12 June 2018, Mr Campbell emailed Connolly Suthers:20 “I would still like a second mortgage attached to the property to reflect my interests. Is the release still best way to handle and then re-do or is there another way?” [49] Later, on 12 June 2018, ACPQ’s corporate counsel, Ms Reynolds, emailed Ms Douglas of Connolly Suthers.21 Relevantly she said: “Stephen Campbell has asked me to contact you regarding the Release of Mortgage. We understand the release is required by the NAB as they require a first registered mortgage for the new facilities. However as Tim Edmonds is in default we would like to keep the mortgage in place as a second registered mortgage. Could you please advise on the best way of doing this. For example is it possible to do this without the Release such as some other type of Mortgagee Consent document giving the NAB priority or do we need to Release and then lodge a second mortgage. If it is the second option will we need a mortgagee consent from NAB.” [50] On 13 June 2018, Ms Reynolds emailed a NAB Manager (Greg Wheeler) and copied it to Mr Campbell.22 She relevantly asked: “Does the NAB agree that the existing mortgage can continue as a second mortgage over the property? Do you know the best way of effecting this – for example is there a Mortgagee’s Consent we can give you that grants you priority or do we need a Release and then re-register the second mortgage. If this is 20 AB 364. 21 AB 367-368, 370. 22 AB 367-368. -- 10 of 34 -- 11 the case will we need a mortgagee’s consent from you for the registration of the current mortgage as a second mortgage?” [51] On 13 June 2018, the NAB Manager replied to both by email:23 “Yes the existing mortgage can continue over the property as a second mortgage. The easiest way to effect this will be to release the existing mortgage and lodge a new mortgage over the title. You will not require a mortgagee’s consent in order to do this.” [52] Two things can be noted about the exchange to this point. First, Ms Reynolds raised the question whether the existing ACPQ mortgage could be used. Secondly, the NAB told Mr Campbell and Ms Reynolds that it could be, but only with the mortgagee’s (NAB’s) consent; and, if they wished to avoid the necessity of getting the mortgagee’s consent then they should use a new mortgage. [53] Later the same day Ms Reynolds emailed Mr Campbell, saying:24 “Spoke to Greg from NAB and Brad Skinner. Although there is a mechanism to give NAB priority - too hard for Greg. Brad says no problem Releasing then registering another mortgage. I gave him instructions to do up new mortgage and get Tim to sign. I said you would probably want to know this had been done before giving the NAB the Release. I understand from our conversation that you have already given bank the Release. Should be all good - you will just need to follow up with Townsville lawyers that the second mortgage gets signed and registered.” [54] The Brad Skinner mentioned was a solicitor at Connolly Suthers. [55] Four matters can be noted about that exchange. First, Ms Reynolds understood the NAB to have said that using the existing ACPQ mortgage was “too hard”. Secondly, therefore she had instructed Connolly Suthers to draft a new mortgage. Thirdly, at that point there was no question of using the old mortgage, which the NAB had advised would require their formal consent as mortgagee. Fourthly, the release of the ACPQ mortgage had already occurred. [56] Ms Douglas responded to Ms Reynold’s email of 12 June 2018 (see paragraph [49] above) on 21 June 2018,25 attaching a form of mortgage and relevantly saying: “There was been considerable change in the manner in which mortgages are to be completed and registered over the title to the land since completion of the last mortgage in late 2016. The Form 20 Schedule is similar to the previous mortgage terms utilized and agreed upon in 2016. .... You will see that that the sum 23 AB 367. 24 AB 369. 25 AB 376. -- 11 of 34 -- 12 secured is no longer $1,647,500 and refers to all money owing by the Mortgagor to the Mortgagee from time to time pursuant to the terms of the Property Agreement. We understand that NAB have approved the registration of a new mortgage second in priority to their NAB mortgage. ... Can you please let us know if you require any amendments to the terms of the attached documents. Once the terms are finalized we can issue final versions of the documents for signing by the parties. The new mortgage documents can then be registered at Titles Office.” [57] On 22 June 2018, Ms Reynolds sent the draft documents to Mr Campbell.26 [58] Mr Campbell then sought and received confirmation from the NAB manager that ACPQ could register a second mortgage subject to NAB’s priority for the limits then in place.27 Ms Reynolds then asked Ms Douglas to ensure that a second mortgage document complied with NAB’s requirements.28 [59] Then, ACPQ, mainly by Ms Reynolds, liaised with Connolly Suthers and gave instructions for the preparation of a formal Deed of Forbearance and a fresh mortgage.29 [60] There is no evidence to show that a final form of such a deed was prepared, nor that any draft was sent to or discussed with Mr Edmonds. What is evident is that the subject matter of preparation of another mortgage was raised between Mr Gaeta of Connolly Suthers and Mr Edmonds at a conference on 9 August 2018.30 Mr Gaeta’s note of the conference said: “You said “you are not paying for anything on what we are doing” and “do not prepare the mortgage”. l said that there is cleary (sic) a dispute here. You asked me to send you everything done so far. I said I cannot as we act for ACP Properties. You said that is not correct and we act for both of you. That was not my understanding. We cannot act for both parties in a matter of this nature. You asked what was prepared and I said I have prepared docs but finalising based on clients instructions.” [61] The “clients instructions” were from Ms Reynolds on 9 August 2018.31 Plainly Connolly Suthers did not give Mr Edmonds a copy of the draft documents. [62] On 15 August, Ms Reynolds gave new instructions to Mr Gaeta of Connolly Suthers:32 “- send me a copy of the Deed of Forbearance and second mortgage (as is - not need for further drafting); 26 AB 375. 27 AB 374-375. 28 AB 374. 29 AB 378-380. The draft Deed is at AB 385. 30 AB 396. 31 AB 398-400. 32 AB 406. -- 12 of 34 -- 13 - Prepare a transfer and form 24 of Edmonds interest in the Property to Campbell; - Provide a summary of the steps for the claim to be made for the Debt and the enforcement of the Security (e.g. appointment of a receiver) if the Debt is unpaid I understand you cannot act in relation to enforcing the Security and the appointment of a receiver. Could you please recommend a receiver/liquidator in Townsville.” [63] Mr Gaeta told Ms Reynolds in response:33 “As discussed, if an agreement cannot be concluded between you and Edmonds for a transfer of half the interest in the property, then if the property is to be sold and an agreement cannot be reached on in relation to this sale, a receiver may be appointed under the terms of your mortgage. This will be complicated and costly, particularly due to the mortgage now being an unregistered mortgage and second in priority to the NAB mortgage. Another and perhaps less complicated manner to move forward (assuming the dispute cannot be resolved), is to apply to the Court to have a statutory trustee appointed for the sale of the property. The statutory trustee could be the same person as that which would otherwise would have been appointed as the receiver. This would remove the issues with the unregistered mortgage and also in relation to the NAB first mortgage. However, to provide extensive advice on this issue is somewhat more complicated and best given with the receiver and/or statutory trustee if/when that is required. As stated, we believe it is certainly in the interest of both parties that an agreement be concluded in relation to one of the parties selling their interest in the property to the other party or the overall sale of the property.” [64] Several things can be noted from that exchange. First, ACPQ was no longer preparing a new mortgage and deed of forbearance. Secondly, ACPQ was preparing to appoint a receiver if agreement could not be reached with Mr Edmonds. Thirdly, Mr Gaeta did not recommend that course as it was complicated and costly. Fourthly, the alternative course, appointment of a statutory trustee, was equally complicated. [65] On 22 August 2018, Mr Campbell replied to Mr Gaeta’s email of 20 August 2018: see paragraph [63] above. He copied it to Ms Reynolds and Mr Edmonds:34 “Thank you for your email and suggestion as to dispute resolution. Please be advised Pen’s down. I have reflected overnight on this journey with Tim. I started this journey to help a friend. I come with clean hands and feel that it is ridiculous that monies be spent on dispute resolution or court to enforce my right under this deed to a mortgage registration. The mortgage registration was agreed in Deed to protect my security and was only released to allow further securities to take precedence in order to raise funds to finish the project as a result of Tim’s default. It was agreed to be reinstated. 33 AB 405. 34 AB 410. -- 13 of 34 -- 14 … I advised Tim last night that I wished to exit the project. He was offered the site at $3.5m + GST if applicable plus the additional costs spent from the NAB account to date. Further incoming costs unpaid are to Tim’s account should he wish to exercise his option to purchase. The $3.5m is supported by the NAB bank valuation prior to additional funds being spent. I appreciate that he has 14 days to advise but I am sure he should understand whether he has the capacity to complete said purchase and as a result I have requested a response by COB today. If not the case I would like to divest the said site and suggested an agent Jason Barret (Elders) will manage given Tim is conflicted.” [66] The reference in that email to having advised Mr Edmonds “last night” was a reference to an email just after midnight on 22 August 2018.35 In that email Mr Campbell told Mr Edmonds that he “no longer wish to retain any interest in this site”, estimated that it “owes me $3.5m”, and asked Mr Edmonds if he wished to purchase the land. [67] The response to that email came at 3.48 pm on 22 August 2018.36 Mr Edmonds emailed Mr Campbell to advise that he was “happy to dispose of the property”. The balance of the email concerned questions about the agent to be appointed for the sale and other matters to do with costs. [68] At 4.30 pm on 22 August 2018 Mr Campbell responded by email to Mr Edmonds.37 He advised that the agent would be in contact about fees, commented on a balance sheet which had been sent, and then said: “For further monies I am told by Brendan that you have refused to register my mortgage interest after it was agreed that NAB would take priority and I would be replaced as second registered mortgage. If that is not in place then on basis of your on going breach no further funds are agreed. I suggest if further funds required then security be reinstated as was agreed.” [69] Mr Edmonds responded four minutes later saying:38 “Please advise what you propose in relation to Pa fire”. [70] Mr Campbell’s response was thirteen minutes later:39 “Is your problem now as you have refused to register the mortgage. As far as I am concerned you have been paid the money.” [71] At 5.17 pm on 22 August 2018 Mr Edmonds emailed Mr Wheeler of NAB,40 asking for the current balance of the NAB facility because “I do not have access to this: wuld (sic) like to view irt (sic) as have no idea what its balance is.” 35 AB 413. 36 AB 412. 37 AB 411-412. 38 AB 411. 39 AB 411. 40 AB 454. -- 14 of 34 -- 15 [72] That was the state of communications as at the end of the day on 22 August 2018. Several matters can be noted about the exchange. First, Mr Campbell was asserting that it had been previously agreed that the ACPQ mortgage would be reinstated. However, beyond those assertions there is no evidence to suggest there was such an agreement, as the learned trial judge found. Secondly, Mr Campbell was urging the disposal of the land by a conventional sale process, and at a price which would recover “all costs inclusive of NAB and costs of sale”.41 Mr Campbell was not embracing the suggestion of a receivership or statutory trustees for sale, nor a mortgagee sale. Thirdly, Mr Edmonds had agreed that the property be sold. Fourthly, there is no suggestion that Mr Edmonds was prepared to permit the ACPQ mortgage to be re- registered. Fifthly, the only basis upon which it was proposed that the ACPQ mortgage might be reinstated was if further funds were required to progress the development of the land.42 [73] Things progressed the following day on 23 August 2018. When considering the following events it must be borne in mind that this was the day that Mr Campbell said he received the oral agreement of Mr Edmonds to relodge the ACPQ mortgage. [74] It must also be noted that the documentary exchanges that day were only between Mr Edmonds and Mr Gaeta of Connolly Suthers. [75] At 10.37 am on 23 August 2018 Mr Edmonds emailed Mr Gaeta saying:43 “Re mortgage doc and deed can you please send.” [76] Mr Gaeta responded at 10.46 am:44 “Attached is the Agreement to Purchase and Develop Property dated 23 December 2016. I do not hold a cop (sic) of the signed mortgage, but will have Brad / Jessica locate this and email it to you.” [77] Two minutes later at 10.48 am Mr Edmonds emailed Mr Gaeta,45 asking: “Was there a second mortgage done up?” [78] A minute later Mr Edmonds emailed Mr Gaeta again,46 asking “what about doc steve had done up?”. [79] At 10.56 am Mr Gaeta responded:47 “As you know, we received instructions from A.C.P. Properties Pty Ltd in relation to preparation of a new mortgage and to document a default. It became clear that this was not a simple matter of documenting an agreement concluded between the parties in relation to a default and under the securities but rather, was a dispute between the parties. We are no longer acting in this matter. 41 AB 413. 42 Email on 22 August 2018 at 4.30 pm AB 411. 43 AB 430. 44 AB 429. 45 AB 431. 46 AB 429. 47 AB 431. -- 15 of 34 -- 16 I am not permitted under Queensland Law Society rules to divulge aspects of our file with A.C.P. Properties Pty Ltd or to forward you a copy of any document prepared on behalf of A.C.P. Properties Pty Ltd.” [80] At 11.39 am Mr Gaeta emailed Mr Edmonds and attached the signed mortgage.48 In context this could only have been a copy of the original ACPQ mortgage. [81] At 11.54 am Mr Edmonds responded to Mr Gaeta.49 He said: “thanks if i was to provide a second mortgage to steve would it be similar to this? Would it require a quantum on it? ie 1600000 million. I think it is fair he has one just need to understand the implicaitons (sic) does it need to be accompanied by a deed as per the original one?” [82] The most important thing to note about the exchange above on 23 August 2018 is that ACPQ’s original mortgage was relodged at 9.36 am that morning. Its lodgement therefore preceded all of the above emails on 23 August 2018. That factor is very significant when one considers, as I will refer to shortly, the fact that Mr Campbell’s evidence was that he caused the mortgage to be lodged only after he received the oral agreement of Mr Edmonds to do so. [83] Several other things are evident from that exchange. First, Mr Edmonds did not have a copy of the documents prepared by Connolly Suthers. Secondly, none of those documents were prepared on instructions from him. Thirdly, Mr Edmonds did not know if the documents drawn up included a second mortgage. Fourthly, whilst Mr Edmonds was prepared to consider providing a second mortgage to ACPQ, he had not agreed to do so and wished to know “the implications” before he did so. [84] On 23 August 2018 at 2.52 pm Mr Edmonds emailed Mr Campbell.50 Mr Edmonds said he “appreciated this morning’s conversation” and then went on to make a number of points. The relevant contents of the email were as follows: “I understand your initial motivation to be involved in the project “To help me as a friend” and your perspective on the issues you have brought to my attention. I am disappointed that I allowed this to get to a stage it has. It was never my intent I would not intentionally do anything to disadvantage you or the J/V. I have every intent of providing you a second mortgage to protect your interests. I have contacted Brendon by email to request the docs he was working on. I have been advised by email “As you instructed him only you can instruct him to forward me the docs.” Can you do that. 48 AB 434. 49 AB 434. 50 AB 437. -- 16 of 34 -- 17 In regard to the 2nd mortgage Do we need to confirm it is not a breach of our first mortgage with NAB to have a secofd (sic) mortgage. I assume we just need theri (sic) permission. Is it appropriate to get a priority deed from NAB for our existing facility? In regard to quantum your exposure is say $3.5mill my interest is 30 % not sure how this is documented outside of our emails and is reflected on the mortgage or even if it needs to be .or do we amend the initial agreement. In regard to my breach I assumed that the rearrangement of equity and interest rate remedied the situation. “I didn’t read your email fully “I would like to think you can consider this as a remedy and provide me with clarification around what we discussed in regard to holding costs being accrued until the income from the property is sufficient or sold. Otherwise it is an ongoing issue with a breach. Anyways ,if you can have Brendan forward the docs I will go over them with the intention of signing the mortgage Moving forward I appreciate it if you and your father are done with this. I will work in any capacity to get the property to a saleable condition as fast as practical.in particular [a]round certification, finalizing a lease on old oyster bar and tidying up the Simply Tops lease and getting that in order ,keeping you completely in the loop. …” [85] The significant feature about that email is that it is wholly inconsistent with any suggestion that Mr Edmonds had earlier that day given consent to the re-lodgement of the ACPQ mortgage. Whilst the email expresses a willingness to give a second mortgage (“I have every intent of providing you a second mortgage to protect your interests”), the email raises questions about the efficacy of doing so, including getting a copy of the draft mortgage, ensuring it is not a breach of the existing first mortgage to the NAB, dealing with priority questions and dealing with breach questions. [86] Mr Campbell responded to that email on 24 August 2018, at 4.43 pm.51 He did so by adding “quick comments” to the original email. The relevant responses are set out below in a format which contains Mr Edmonds’ original text followed by Mr Campbell’s response in brackets and highlighted: I have been advised by email “As you instructed him only you can instruct him to forward me the docs.” Can you do that. [I will only sort 2nd mortgage out first.] In regard to the 2nd mortgage 51 AB 456-458. -- 17 of 34 -- 18 Do we need to confirm it is not a breach of our first mortgage with NAB to have a secofd (sic) mortgage. I assume we just need theri (sic) permission. Is it appropriate to get a priority deed from NAB for our existing facility? [I have asked NAB for consent when released the first one to give them priority and they are all good.] In regard to quantum your exposure is say $3.5mill my interest is 30 % not sure how this is documented outside of our emails and is reflected on the mortgage or even if it needs to be .or do we amend the initial agreement. [I think the simplest way is we do not change the equity portion. Once the second mortgage is registered we simply fix the deed to say you receive 30% of the profit upon sale.] … Moving forward I appreciate it if you and your father are done with this. I will work in any capacity to get the property to a saleable condition as fast as practical.in particular [a]round certification, finalizing a lease on old oyster bar and tidying up the Simply Tops lease and getting that in order ,keeping you completely in the loop. [Let’s get the details sorted as per above and get on the same page. I believe much of this arose due to non compliance with what we had agreed under the Deed. For various reasons as we have discussed. I think learning are both ways so let’s explore where at, sort and where can go. I have view we are all on the train and not yet at the end. We both having differing strengths which are or at least should be complementary. Perhaps more eye balling is needed from my end to ensure comfort and assistance is more timely in order to prevent this situation.]” [87] There are a number of significant matters to note about that response. First, it was the day following when the ACPQ mortgage had been relodged. As will be seen shortly, Mr Campbell said in evidence that he had personally instructed that to occur. Secondly, Mr Campbell’s response to the request that he instruct the documents to be forwarded to Mr Edmonds, namely “I will only sort 2 nd mortgage out first”, is wholly inconsistent with there having been an oral agreement already that the original ACPQ mortgage be relodged. Indeed, the response might be viewed as disingenuous given that he had instructed ACPQ’s mortgage to be lodged again the day before. Thirdly, the suggestion that Mr Campbell had obtained the NAB’s consent when the ACPQ mortgage was first released is wholly inconsistent with the responses of the NAB on 13 June 2018 (see paragraph [51] above in which the NAB advised how to go about securing a second mortgage that avoided the question of consent. [88] Mr Campbell provided a further response several days later, on 27 August 2018.52 The email concerned the subject “2nd Registered Mortgage” and said: “I spoke with Anne [Reynolds] and she said Brendan [Gaeta] did not prepare one as they were focusing on the Deed the (sic) he suggested. 52 AB 459-460. -- 18 of 34 -- 19 I have attached the details around the funds advanced from my side under the loan prior to the NAB facility coming into place on the 4th May 2018. I suggest you request Brendan to prepare the mortgage referencing the amount due as at today which is accruing at a compound rate of 9.36%.” [89] That response, and the suggestion that Mr Edmonds get Conolly Suthers to “prepare the mortgage”, that being a second registered mortgage, is wholly inconsistent with the suggestion that there had been a prior oral agreement to permit the original ACPQ mortgage be reregistered. [90] With that being the sequence of correspondence, one can turn to the evidence given at the trial. In Mr Campbell’s evidence in chief he referred to the email from Mr Edmonds at 23 August 2018, 2.52 pm (see paragraph [84] above). He was asked whether he remembered having a conversation with Mr Edmonds. His response included referring to a meeting with his own father the evening before during which Mr Campbell’s father had insisted that if Mr Edmonds “continues to further mess us around” then a liquidator should be put in and “get rid of him”.53 [91] Mr Campbell said that his telephone records showed that the conversation was at about 8.42 am on 23 August. He was then asked to say what he could recall of the conversation, and he responded:54 “And can you tell us what you recollect of that convection (sic), what you said and what Mr Edmond said to you?---I basically said we’re over it. Well, the conversation started with ‘We’re over it. We’ll be looking to appoint a liquidator, and you don’t even have the decency to secure our original position’. And he’s gone, ‘I’ll give you whatever you want, whatever you guys want. I’ve always told you, you know’, as you can see through emails, ‘Yes, Steve, yes, Steve”, all right’. So, ‘I’ll give you whatever you want’. I said, ‘Well, before this conversation goes any further I want my position that we had under the first deed to be reinstated, I hold a copy of an original copy of that mortgage, and I want to register it’. ‘You can do that. What else do you want’. So I had the phone – I’m on the phone--- Sorry, just taking it though there. You say you had the original deed still from the mortgage. What did he say in response to you?---Yes. All right. Sorry, continue, please?---I was on the phone. I walked into Anne’s office. I had the phone by my side. I said, ‘Original deed’. He could have heard it. I didn’t have it up. I didn’t put it on my mute, ‘Please go register it’, right. And I got back to my conversation. Anne and I had discussed that as part of the conversation with my father the night before. And you know, she went and registered it. It’s on the record.” [92] In cross-examination Mr Campbell agreed that he had not mentioned that discussion in any document that had been filed in the proceedings or sent to the solicitors for 53 AB 678 lines 21-23. 54 AB 678 line 34 to AB 679 line 6. -- 19 of 34 -- 20 Oonoonba.55 He was also asked why, in the face of allegations that the mortgage had been improperly registered, he did not respond with a reference to the alleged agreement.56 Mr Campbell’s answer was that he left it to his lawyers to respond. [93] He was also asked to explain why, having sworn a lengthy affidavit in support of an application for summary judgment, there was no mention about the alleged agreement to re-register the mortgage.57 His response was: “My advice at the time was to – this was a … summary judgment for debt, so it was kept very simple”.58 He added by way of the same explanation that “… as I previously advised, that was the advice of my lawyers at the time they drafted the affidavit. According to their advice, I signed them accordingly.”59 [94] Mr Campbell was also cross-examined about why there was urgency to re-register ACPQ’s mortgage on 23 August. He replied that the urgency was “instruction from my father”, namely “If he doesn’t put us in the position that we deserved to be put in, then you will put him into liquidation”.60 Mr Campbell also agreed that in the days following 23 August 2018 nothing was said to Mr Edmonds to tell him that the ACPQ mortgage had been re-registered.61 [95] Mr Edmonds gave evidence about the conversation on the morning of 23 August 2018. His evidence in chief was as follows:62 “And … can you recall that conversation?---Look, it was mainly around his father and … their exposure. He – I can recall, yeah, he was fairly anxious to protect his – his dad’s interests, and my recollection was that if something went wrong with the property or with me, … that would expose him. He wasn’t poor. He had a lot of money, but its still a significant amount of money. And was anything else discussed?---No. Sorry. Yes. He – he wanted a second mortgage to cover his father’s – or his – their position. This was said to you in the conversation, was it?---That he wanted a second mortgage? Yeah. Yeah, he did want one. Yeah. So he asked for one … asked for a second mortgage?---Yep. And what was your response?---I said I’d consider it. Did you say anything else?---No.” [96] In cross-examination Mr Edmonds denied that the conversation was to the effect of Mr Campbell’s version.63 [97] In my view, the contention that the learned trial judge erred in accepting Mr Campbell’s evidence on this point, should be accepted. There are a number of reasons for that conclusion. 55 AB 692 lines 36-42. 56 AB 693-695. 57 AB 695. 58 AB 695 line 31. 59 AB 696 line 47 to AB 697 line 2. 60 AB 698 lines 37-39. 61 AB 698-699. 62 AB 748 line 40 to AB 749 line 10. 63 AB 807 lines 4-11; AB 816 lines 14-27. -- 20 of 34 -- 21 [98] First, although his Honour went through some of the correspondence which is reviewed above, there seems to have been no analysis as to whether that correspondence supported the probability of the conversation occurring as Mr Campbell had it, or not. As examined above, the contemporaneous correspondence does not support the proposition that there was an agreement by Mr Edmonds on 23 August 2018 to permit the ACPQ mortgage to be re-registered. To the contrary, much of the correspondence is wholly inconsistent with that proposition. The failure to properly grapple with what was signified by the correspondence compromises the finding which was made. [99] Secondly, whilst his Honour referred to the fact that the pleadings did not reflect any such agreement, that does not seem to have been factored in when considering what finding to make. Further, it was not a case where the pleadings were silent on the matter. The Reply positively pleaded a different agreement from that which Mr Campbell asserted for the first time in his evidence in chief. In such circumstances, it was, in my respectful view, insufficient to simply observe that there was no evidence of the earlier agreement. The disparity was such as to cast considerable doubt on the oral evidence suggesting a different agreement. [100] Thirdly, there was no suggestion of such an agreement in Mr Campbell’s affidavit which was produced in support of his application for summary judgment. As the pleadings stood at that time Oonoonba pleaded the fact that ACPQ registered the second mortgage without the knowledge or consent of Oonoonba or Mr Edwards.64 That was pleaded as a reason why repayment of the original loan could not be made.65 It was also pleaded that the registration without knowledge or consent was a breach of the original development agreement and the cause of any breach on the part of Oonoonba or Mr Edmonds, raising an estoppel against reliance on such a breach.66 Further, it was also pleaded that the re-registered ACPQ mortgage was the source of the power of sale being exercised, and led to the unlawful application of Oonoonba’s interest in the sale proceeds.67 [101] Given that those matters were positively pleaded one might have expected that the affidavit in support of a summary judgment application would have deposed, if it were true, to the fact that Mr Edmonds had agreed to the re-registration of the ACPQ mortgage. That would have been a complete answer to that part of the Defence which is outlined above. Therefore, the omission to refer to it was a matter of some significance. Mr Campbell’s explanation was that his lawyers had told him to keep the affidavit simple. In the face of the pleading as it stood, that is a most unlikely line of advice, and if it were true should have been supported by some evidence from Mr Campbell’s lawyers. There was none. [102] Fourthly, as can be seen from the course of correspondence before and after 23 August 2018, Ms Reynolds (corporate counsel for ACPQ) was heavily involved in consideration of the steps to be taken if a second mortgage was to be registered in favour of ACPQ. Further, according to Mr Campbell it was Ms Reynolds who was instructed by him to relodge the ACPQ mortgage. His evidence was that the instruction was given while he was on the phone to Mr Edmonds on the morning of 64 Paragraph 4(c)(xii) of the Defence, AB 47. 65 Paragraph 4(c)(xv)(B) of the Defence, AB 48. 66 Paragraph 4(d) of the Defence, AB 48-49. 67 Paragraph 26(b) of the Defence, AB 56. -- 21 of 34 -- 22 23 August 2018. Evidence otherwise established that the mortgage was lodged that morning at 9.36 am. It was lodged by Ms Reynolds. In my view, it therefore follows that Ms Reynolds could be expected to have a deal of relevant evidence to give concerning the conversation and agreement which Mr Campbell raised for the first time in his evidence. One would certainly have expected her to give what evidence she could, given that the allegation was that the lodgement and reregistration was unlawful because it occurred without consent. In those circumstances, that she did not give evidence should have given rise to a doubt about acceptance of Mr Campbell’s evidence. The learned trial judge explained it away by saying that he was not invited to draw an adverse inference by reason of the absence of Ms Reynolds as a witness.68 However, even if one did not reach the inference that her evidence would not have been helpful to ACPQ and ACPT, the fact remained that Mr Campbell’s evidence was not supported by evidence from those involved in the very transaction for which he contended. [103] Contrary to the submissions of ACPQ and ACPT,69 Ms Reynolds was part of relevant conversations with Mr Campbell. According to Mr Campbell’s evidence he had a discussion with his father on the evening of 22 December in which his father said that if Mr Edmonds did not execute a deed of forbearance the father wanted a liquidator put in.70 Mr Campbell said that Ms Reynolds was part of that conversation, and she participated with Mr Campbell in discussing (on 22 August 2018) reregistration of the original ACPQ mortgage.71 Ms Reynolds was therefore a central participant in critical conversations. The fact that Oonoonba might have subpoenaed her but then decided not to call her does not, in my view, relieve ACPQ and ACPT from the fact that Ms Reynolds was their corporate lawyer, involved in critical conversations relevant to Mr Campbell’s new evidence that he had an oral agreement with Mr Edmonds made on the morning of 23 August 2018, yet no effort was made to have her give evidence. [104] Fifthly, as mentioned above, the correspondence between Mr Campbell and Mr Edmonds late on 23 August 2018 and in the following days is, at best, wholly inconsistent with the existence of the oral agreement to which Mr Campbell referred. I say at best because, on one view, Mr Campbell’s conversations about the preparation of a new second mortgage, whether the NAB had given consent to the registration of a second mortgage, and adjustment of other documents and figures, could be seen as disingenuous if it were true that he had reached an agreement that morning permitting the very thing that he was then purporting to discuss. This aspect of the case is one not examined by the learned primary judge. [105] Sixthly, not only are the contemporaneous documents wholly inconsistent with the existence of the oral agreement which Mr Campbell deposed to, but there is another matter of equal importance. That is, that Ms Reynolds, a lawyer, was directly involved at the time the oral agreement was said to have been made, in the course of which she was instructed to re-register ACPQ’s original mortgage. Given the correspondence between Ms Reynolds and the NAB as to the question of whether NAB’s consent was required, and NAB’s explanation to her that the only basis upon which consent would not be required would be if they used a new mortgage, one 68 Reasons below [70]. 69 Respondent’s outline, para 18. 70 AB 678 lines 20-23. 71 AB 679 lines 4-5. -- 22 of 34 -- 23 would naturally expect there to be some record by Ms Reynolds as to what she was instructed to do, and the basis for it. There is nothing from her of that kind. This is not an example where existing documents are inconsistent with the conversation, but rather the absence of documents one might expect to exist. This is another aspect which did not seem to attract the attention of the learned trial judge. [106] Seventhly, the learned trial judge explained in one paragraph of the reasons that he accepted the evidence of Mr Campbell as to the conversation alleged.72 However, his Honour did not grapple with the difficulties mentioned above, but rather focused on why Mr Edmonds might not have recalled the mention of the duplicate copy of the ACPQ mortgage. This was rationalised on the basis that it was “unlikely to have been of importance to him at the time, as he was aware that ACPQ had only released it in order to enable NAB to have a first registered mortgage to secure its loan and that the release was not intended to leave ACPQ unsecured”. However, that approach ignored the contemporaneous documents and in particular the exchanges in which Mr Edmonds was involved. In any event, that approach focuses only on one side of the evidence concerning the conversation, and not on the person who was giving evidence that such a conversation took place, namely Mr Campbell. By approaching the matter in that way, the learned trial judge has effectively bypassed the hurdles that confronted acceptance of Mr Campbell’s evidence in itself and moved to discounting the competing version. [107] Mr Ferrett QC, for ACPQ and ACPT, contended that the correspondence leading up to 23 August 2018 was largely concerned with negotiations towards returning ACPQ to the position where it had a mortgage supporting its position. Thus, it was submitted that the correspondence did not concern the duplicate mortgage and therefore did not undermine Mr Campbell’s evidence. However, in my view, that submission does not grapple with the fact that nothing in that correspondence hinted that there was any agreement or understanding that the original ACPQ mortgage might be reregistered. To the contrary, the NAB had indicated there were problems with consent if that were the case, recommending the process of preparing a new mortgage. Further, that correspondence demonstrated that there was no support for what had actually been pleaded, namely an agreement prior to 23 August 2018. Finally, the submission does not truly grapple with the fact that what was said in the correspondence tended heavily against the likelihood of Mr Edmonds reaching an agreement as Mr Campbell contended. And the same might be said of the correspondence subsequent to 23 August 2018, in which the contended oral agreement was not mentioned as though it had never happened. [108] The fact that there was discussion about a new draft mortgage, coupled with a deed of forbearance, suggests strongly that that was the sole focus of the parties’ consideration. That is more consistent with the evidence of Mr Edmonds to the effect that he was prepared to grant a second mortgage, but had not actually agreed to do so, and certainly did not agree to the reregistration of the original ACPQ mortgage. [109] There was no urgency in terms of having a second mortgage registered. True it is that Mr Campbell’s father was placing some pressure on Mr Campbell, but Mr Campbell’s father was not in control of ACPQ or ACPT. Further, there is no rational basis to suggest that ACPQ was negotiating towards a dual position, namely having the benefit of both the original and a new draft mortgage registered in 72 Reasons below [73]. -- 23 of 34 -- 24 sequence. The correspondence plainly points to the sole objective up until the alleged conversation on the morning of 23 August 2018, of drafting a new mortgage on different terms from the original. That is also reflected in the state of the pleading, which did not allege an agreement in the terms of Mr Campbell’s oral evidence. Seen in its proper context, the correspondence leading up to 23 August 2018 was wholly inconsistent with the oral agreement propounded for the first time in Mr Campbell’s evidence in chief. [110] In Robinson Helicopter Company Inc v McDermott73 the High Court held that an appellate court “should not interfere with a judge’s findings of fact unless they are demonstrated to be wrong by ‘incontrovertible facts or uncontested testimony’, or they are ‘glaringly improbably’ or ‘contrary to compelling inferences’”. In my view, the combination of factors referred to above warrant the conclusion that the findings by the learned trial judge as to the oral agreement to reregister the ACPQ mortgage were demonstratively wrong because they were glaringly improbable and contrary to compelling inferences to be drawn from the contemporaneous documents, the failure to plead such a case, the failure to advert to such a case in the summary judgment application and the fact that the evidence of that agreement was given first at trial and not reflected in any document prior to that. [111] For these reasons, the evidence from Mr Campbell that there was an oral agreement on the morning of 23 August 2018 should have been rejected and it should have been found that the ACPQ mortgage was re-registered without the consent of Oonoonba and therefore unlawfully. Alternative basis for finding reregistration was lawful [112] The learned trial judge considered that even if there had been no agreement by Mr Edmonds to the re-registration of the ACPQ mortgage, nonetheless ACPQ was entitled to reregister its mortgage pursuant to clause 5.5 of the development agreement.74 [113] The appellant’s attack those findings as being incorrect. The respondents do not seek to support them. [114] In any event, in my view, the findings are mistaken. [115] Clause 5.5 of the development agreement provided:75 “To secure payment of the Loan Amount and interest payable on the Loan Amount Edmonds has agreed with Campbell that Edmonds will execute and deliver the Mortgage to Campbell on Completion of the Contract which is to be registered as a first mortgage over the interest of Edmonds in the Property.” [116] The difficulty with the learned trial judge’s approach is that clause 5.5 contained an agreement under which the ACPQ mortgage was to be registered as a first mortgage over Oonoonba’s interest in the land. That occurred and the mortgage remained in place until further finance was sought from the NAB, at which time the mortgage was released. 73 (2016) 331 ALR 550 at 558-559; internal citations omitted. 74 Reasons below [74]-[75]. 75 AB 183. -- 24 of 34 -- 25 [117] Clause 5.5 makes no provision whatever to deal with the situation where that mortgage has been released and another mortgage from a different entity sits on the title of Oonoonba’s interest as a first registered mortgage. Clause 5.5 does not have some sort of ambulatory operation turning the obligation to give a first mortgage into some sort of obligation to give a second mortgage. [118] The learned trial judge reasoned that because the release was only to allow the NAB mortgage to be registered as the first mortgage, that did not release Oonoonba from its obligation under clause 5.5 to give security to ACPQ. There is, in my respectful view, no warrant for that conclusion. The development agreement contained clause 5.5 which obliged the granting of the ACPQ mortgage as a first registered mortgage over Oonoonba’s share. It made no other provision. Nor did any other clause of the development agreement. Circumstances changed and that mortgage was released in order to allow a different financier to take a first registered mortgage. Simply put, the parties did not make alternative provision for ACPQ. There was no amendment to the development agreement, and in the changed circumstances clause 5.5 no longer had operation because it could not result in the ACPQ mortgage being a first registered mortgage. [119] No doubt these difficulties were part of the reason why ACPQ and ACPT did not seek to sustain those findings. [120] Moreover, relief on that basis was not the subject of a pleaded case, nor submissions at the trial. In that case it is not surprising that those findings were not sought to be upheld. Consequences of the unlawful registration [121] ACPQ unlawfully registered its mortgage on 23 August 2018. It did not have the consent of the mortgagor (Oonoonba, through its director Mr Edmonds). Registration was necessary in order for ACPQ to exercise the statutory power of sale afforded to it as mortgagee, under the Property Law Act 1974.76 Because registration was obtained unlawfully the exercise of the power of sale was also unlawful. [122] Upon the sale of the land by ACPQ, none of the proceeds were paid to ACPT, which was the first registered mortgagee by virtue of it having taken an assignment of the NAB mortgage. Thus, the mechanism under s 88 of the Property Law Act, designed to ensure that the priorities as between mortgagees were preserved in the application of sale proceeds, was bypassed. As first mortgagee ACPT should have received the sale proceeds first in discharge of the NAB loan (which had been assigned to it), and only after that was discharged could any sale proceeds be diverted elsewhere. [123] One point agitated below, and on appeal, was that ACPQ and ACPT had pleaded that ACPT acquiesced in ACPQ’s receipt of the sale proceeds, but no evidence had been led to prove that there was such an acquiescence. ACPT contended at the trial, and on appeal, that acquiescence could be inferred simply from the fact that each of ACPT and ACPQ had the same controlling mind. As it was put on appeal:77 “It is difficult to see how ACPT’s failure to insist on its priority might differently be characterised.” 76 It was a mortgagee under an instrument which was required to be registered under the Land Title Act 1994 (Qld), s 72 and s 78. 77 Respondent’s submissions, para 22. -- 25 of 34 -- 26 [124] By way of reply to that submission, it was contended that “acquiescence” was something other than merely having a joint purpose.78 Relying on ANZ v Evans,79 it was contended that an application of funds other than as required by s 88(1) of the Property Law Act “requires two independent mortgagees to abide on other division in an arm’s length bargain”.80 [125] Were it necessary to decide the issue of acquiescence, in my view the finding by the learned trial judge was correct, but for a reason not articulated in the reasons below or on appeal. It is simply this: as registered first mortgagee ACPT was entitled to insist on the discharge of its debt first, applying the mechanism in s 88 of the Property Law Act. It was plainly aware that a sale of the property had been effected, as Mr Campbell was the controlling mind of both ACPQ and ACPT. Questions of priority as between the first mortgage and any second mortgage had been live issues under consideration by Mr Campbell and his lawyers in the lead up to 23 August 2018. That being so, ACPT permitted the entirety of the proceeds to be paid to ACPQ, with nothing to extinguish any part of its own debt. The compelling inference from those facts is that ACPT agreed to the distribution of funds in a priority other than that signified by the registration of the mortgages. [126] However, it does not seem to me necessary to reach a final conclusion on that issue. That is because the priorities reflected in the mechanism of s 88 of the Property Law Act may be altered by agreement between two mortgagees, even if one of them is not registered.81 However, the alteration of the priorities must be “lawfully achieved” in order to have effect.82 In the present case any agreement to alter the priorities, or even acquiescence in the alteration of the priorities at the behest of ACPQ, was not “lawfully achieved” because it stemmed from the unlawful registration of ACPQ’s mortgage. [127] The position is explained in ANZ v Evans, where de Jersey J (as he then was) adopted what was said by King CJ in Mercantile Credits Ltd v Australia and New Zealand Banking Group Ltd.83 With reference to the South Australian version of s 88 of the Property Law Act, King CJ said: “I do not think that the language of that section is apt to create a priority which would not otherwise exist. Its broad effect is to provide that the moneys are to be applied in payment of the mortgages according to the priorities established by law, the balance being paid to the mortgagor. Its purpose is not to establish priorities but to provide the machinery for giving effect to the priorities otherwise legally established.” [128] In ANZ v Evans de Jersey J said:84 “I agree with King C.J.’s description of the provision as one intended ‘to provide the machinery for giving effect to the priorities otherwise 78 Citing Australia and New Zealand Banking Group Limited v Evans [1992] 2 Qd R 230, Hotel Terrigal (in liq) Pty Ltd v Latec Investments Ltd (No 2) [1969] 1 NSWR 676. 79 [1992] 2 Qd R 230. 80 Reply, para 10. 81 ANZ v Evans. 82 ANZ v Evans at 233, adopting Mercantile Credits Ltd v Australia and New Zealand Banking Group Ltd (1988) 48 SASR 407 at 410, per King CJ. 83 (1988) 48 SASR 407, at 410. 84 ANZ v Evans at 233; emphasis in original text. -- 26 of 34 -- 27 legally established’. I would read the reference to ‘the mortgage’ in s. 88(1)(b) as meaning the mortgage first in priority. The reference in (c) to ‘subsequent mortgages’ clearly assumes that the mortgage earlier referred to is the one with the dominant priority. I do not consider that the priority to which the section relates is the priority prima facie established by the order of registration, but the true priority, however lawfully achieved.” [129] That approach has been adopted since.85 [130] ACPT’s agreement to allow ACPQ to take all the sale proceeds was predicated upon the known unlawful registration of the ACPQ mortgage, and the known unlawful sale by ACPQ as mortgagee in possession. The priorities thus followed were not lawfully achieved. [131] It follows, therefore, that the sale proceeds should have been applied in reduction of the mortgage held by ACPT (the assigned NAB mortgage), and not disbursed entirely to ACPQ. What follows? [132] As determined above, the registration of the ACPQ mortgage on 23 August 2018 was unlawful because there was no consent by the mortgagor. The consequence is that the exercise of power of sale was unlawful as well, the registration of the mortgage having been procured by an unlawful act. However, the sale proceeded and was settled and title to the property conveyed to ACPT. Absent fraud that cannot be reversed. There was no contention that fraud was involved or that the registration of title in ACPT’s name should be reversed. [133] The agreement between ACPQ and ACPT (to vary the priorities that would otherwise apply, ACPT occupying the position of first registered mortgagee by reason of the assignment from the NAB, and ACPQ being unlawfully registered as second mortgagee) was the product of the unlawful registration of the ACPQ mortgage. That was not an alteration to the priority that was “lawfully achieved” and therefore the mechanism in s 88 of the Property Law Act applies. [134] That being the case the NAB loan (assigned to ACPT) should have been paid out of the gross proceeds of sale of the property. Then the net proceeds should have been split 50:50 as between Oonoonba and ACPQ. Then, of course, the ACPQ loan would have to be met. [135] The application of that approach seems to result in a calculation similar to that set out below. In the absence of anything more accurate these figures are taken from the submissions for Oonoonba at the trial.86 Those figures were advanced with some diffidence, in part because they do not include matters such as interest that would have accrued,87 and it was suggested that if there was a finding that the proceeds of sale were wrongly applied then the parties should be given a chance to agree the correct figures.88 85 Residential Housing Corporation v Esber and Ors (2011) 80 NSWLR 69; [2011] NSWCA 25, at [63]-[64]. 86 AB 109, paragraph 39(b). 87 They also do not seem to include any transactional costs or costs associated with the discharge of the assigned NAB mortgage. 88 Trial transcript, AB 855 lines 18-40. Nothing was said for ACPQ or ACPT in the trial submissions to contradict that aspect. -- 27 of 34 -- 28 Sale price $2,733,279.07 Less NAB debt $553,577.20 Net proceeds of sale $2,179,701.87 Half interest in net proceeds $1,089,850.94 Less ACPQ loan $566,966.21 Balance $522,884.72 [136] As is evident from what was said above, the consequence of applying the gross proceeds of sale in a way not affected by the unlawful re-registration of the ACPQ mortgage, is that the indebtedness to the original NAB loan (as assigned to ACPT) would be extinguished. That has the added consequence that Mr Edmonds’ liability on the guarantee given to support the NAB loan would also be extinguished. That was the basis upon which the claim was brought against him.89 [137] In any event, though it is not necessary to reach a final conclusion, there is reason to consider that the wrongful application of the sale funds had the effect of discharging Mr Edmonds’ guarantee.90 [138] The judgment against him must be set aside. [139] It also follows from what should have been the correct application of the gross proceeds that after the ACPQ loan was paid out a balance still remained owing to Oonoonba. [140] The precise calculation of those sums is a matter which cannot be determined on the current material. The parties should be given an opportunity to agree, and if they cannot to make further submissions on that outcome. [141] In any event, the judgment against Oonoonba must be set aside. Transfer to ACPT – impact of s 63(2) of the Land Title Act [142] The contention advanced below by Oonoonba and Mr Edmonds was that when the transfer of the land to ACPT occurred, it attracted the operation of s 63(2) of the Land Title Act. In essence, it is contended that the transfer to ACPT who was at the same time the mortgagee of that land, effected a foreclosure with the consequence that the personal covenants under the mortgage were released and Mr Edmonds could not be pursued on his guarantee. [143] In order to deal with this contention one needs to review both s 62 and s 63 of the Land Title Act, which relevantly provide: “62 Effect of registration of transfer (1) On registration of an instrument of transfer for a lot or an interest in a lot, all the rights, powers, privileges and liabilities of the transferor in relation to the lot vest in the transferee. 89 Para 14(a), 19(b) and 20 of the Amended Statement of Claim, AB 38-43. 90 O’Day v Commercial Bank of Australia Ltd (1933) 50 CLR 200; [1933] HCA 37, at 223-224; Hutchens v Deauville Investments Pty Ltd (1986) 68 ALR 367; [1986] HCA 85, [13]. -- 28 of 34 -- 29 (2) Without limiting subsection (1), the registered transferee of a registered mortgage is bound by and liable under the mortgage to the same extent as the original mortgagee. (3) Without limiting subsection (1), the registered transferee of a registered lease is bound by and liable under the lease to the same extent as the original lessee. (4) In this section— rights, in relation to a mortgage or lease, includes the right to sue on the terms of the mortgage or lease and to recover a debt or enforce a liability under the mortgage or lease. 63 Dealing with mortgaged lot (1) If a lot, or an interest in a lot, subject to a registered mortgage is transferred, the transferee is liable— (a) to comply with the terms of the mortgage and the terms implied by an Act; and (b) to indemnify the transferor against liability under the mortgage and under this or another Act. (2) If a mortgagee of a lot becomes the registered owner of the lot, the registrar must register the mortgagee as registered owner released from the mortgage. (3) The registrar must act under subsection (2) unless the mortgagee asks the registrar not to act under the subsection.” [144] The contention advanced was that the purpose of s 63 was to give effect to the pre- existing legal effect of foreclosure, so that if a mortgagee elected to take the security and not sell it, the transfer prohibits other remedies such as recourse to the personal covenants. Thus, ACPT was the mortgagee of the land when it received the transfer of title to the land, with the consequence that it was registered as registered owner “released from the mortgage” (meaning the ACPT mortgage which had been assigned from the NAB). [145] The opposing contention was that s 63 has a different operation. Rather than imply a covenant to abide by a previous mortgage, it imposed obligations to comply with the terms of the mortgage and to indemnify the transferor. Section 63(2) deals with the situation of a mortgagee becoming the owner separately and without imposing the conditions implied on any other transferee. Thus it was said there was no warrant in the words of the section to extend it to a foreclosure in the way suggested. Consideration [146] Section 63 of the Land Title Act may be traced to s 68 of the Real Property Act 1861 (Qld). In its state prior to repeal by the Land Title Act, s 68 of the Real Property Act provided: “68. ‘Transferee of land subject to mortgage to indemnify a transferor. In every instrument transferring an estate or interest in land under the provisions of this Act subject to a bill of mortgage -- 29 of 34 -- 30 there shall be implied the following covenant by the transferee of such estate or interest that is to say That he will pay the interest or annuity secured by such bill of mortgage after the rate and at the times therein mentioned and will indemnify and keep harmless the transferor from and against the principal sum secured by such bill of mortgage and from and against all liability in respect of any of the covenants therein contained or by this Act or by the Property Law Act 1974 declared to be implied on the part of the transferor.’” [147] As can be seen, as things stood under s 68 of the Real Property Act there was a difficulty if the transferee was the mortgagee. Section 68 operated to imply into the transfer document itself various covenants that would have the mortgagee as transferee pay itself the secured interest or annuity. [148] The change to ss 62 and 63 in the Land Title Act split the provisions in s 68 of the Real Property Act into parts. [149] Section 62 dealt with the effect generally of registration of the transfer of a lot. It dealt with two types of transferees. First, in s 62(1), a transferee of the lot itself, or an interest in the lot. As to such a transferee, s 62(1) provided that “all the rights (including the right to sue on the terms of the mortgage and to recover a debt or enforce a liability under the mortgage), powers, privileges and liabilities of the transferor in relation to the lot vested in the transferee”.91 [150] Then, s 62(2) dealt with a specific subset of such transferees. Recognising that a registered mortgage created an interest in a lot,92 albeit as a statutory charge, it dealt with the case where the transfer was of an existing registered mortgage. In that case, the transferee of a registered mortgage was “bound by and liable under the mortgage to the same extent as the original mortgagee”. [151] In Queensland Premier Mines Pty Ltd v French93 the High Court held that s 62 only transfers rights and liabilities that arise under the mortgage, and does not extend to a right to recover money due under a loan agreement that underlies the mortgage: “[55] A reading of the section provides no support for Marminta's contentions. The primary concern of the Act, as reflected in s 62(1), is to convey the rights of the transferor in relation to their interest in “the lot”, which is defined to mean land. In the case of a mortgage that interest arises from the instrument of mortgage. Sub-section (4) should be read with sub-s (1), since it is intended to further define the “rights” there referred to. It may then be inferred that it is concerned with rights arising from the instrument which creates the interest in land the subject of statutory transfer. The instrument of mortgage is the source of 91 Reading in the definition of “rights” in s 63(4): Watson v Scott [2015] QCA 267; [2016] 2 Qd R 484, at [50]-[51]. 92 “Interest” is defined in s 36 of the Acts Interpretation Act 1954 (Qld) as “a legal or equitable estate in the land”. The definition is very wide: Sorrento Medical Service Pty Ltd v Chief Executive, Department of Main Roads [2007] QCA 73, Mijo Developments Pty Ltd v Royal Agnes Waters Pty Ltd [2007] NSWSC 199. 93 (2007) 235 CLR 81; [2007] HCA 53 at [55]-[56] and [60]; internal citations omitted. -- 30 of 34 -- 31 that interest and of the rights to sue for and recover moneys owing under it. The latter is confirmed by the words “under the mortgage” in sub-s (4). The word “under”, with respect to an obligation “under this lease”, has been held to refer to an obligation created by, in accordance with, pursuant to, or under the authority of the lease. Likewise the words “under a contract” in a statute may direct attention to the source of the obligation in question; and a decision “under an enactment” to the statute to which the decision sought to be reviewed owes, in an immediate sense, its existence. The two rights, to sue for and to recover a debt, arise from the same source. The words of the section provide no warrant for a construction which extends it to the right to recovery of a debt merely collaterally secured by the mortgage. [56] The words of the section are plain. Neither the historical reason for the provision nor its purpose, of effectuating a transfer of both the security interest and the right to moneys arising from the mortgage transaction, supports a construction which extends the section to obligations arising otherwise than under the terms of the mortgage. It is no part of the purpose and function of a statute such as the Land Title Act to rewrite the bargain between transferor and transferee. ... [60] The simple facts are that the debt sought to be recovered by Mr French arose under the loan agreements, not under the mortgages. Mr French was the assignee of the right to recover the moneys owing under the loan agreements; Marminta was not an assignee from him. He retained the right to sue for and recover those moneys from QPM and the Beckinsales. Section 62 of the Land Title Act did not operate to vest those rights in Marminta.” [152] Section 63 then dealt with considerations applicable only to mortgaged land. In simplified terms, s 63(1) provided that a transferee of mortgaged land was liable to: (i) comply with the terms of the mortgage; and (ii) indemnify the transferor against liability under the mortgage. Thus it more closely reflected the provisions of s 68 of the Real Property Act. [153] The introduction of s 63(2) brought in a new consideration, applicable only where the transferee of mortgaged land was the existing mortgagee itself. As first enacted s 63(2) read: “If a lot is transferred to a mortgagee of the lot, the Registrar must register the mortgagee as registered owner released from the mortgage.” [154] There is no assistance that one can gain from extrinsic material relating to s 63(2) as first introduced, such as a report from the Queensland Law Reform Commission, or from anything said in the second reading speech or explanatory memorandum. -- 31 of 34 -- 32 [155] Self-evidently the new section was to deal with a particular situation, namely where “a lot is transferred to a mortgagee of the lot”. In that case the provision required the Registrar to register the mortgagee as registered owner “released from the mortgage”. The mortgagee/transferee could avoid that outcome by requesting the Registrar not to release the mortgage: s 63(3). [156] The only change made to s 63(2) came in 2014 when the opening words of s 63(2) were amended to: “If a mortgagee of a lot becomes the registered owner of the lot …”.94 The purpose in the change in wording was to clarify s 63(2) and ensure that it applied in all circumstances where a registered mortgagee becomes the registered owner of a lot.95 Nothing turns on that. [157] There are some matters one might note from the wording of s 63(2) as it stood when ACPT became registered proprietor of the land. [158] First, the wording of s 63(2) refers only to the position of the mortgagee once it becomes registered owner. In that circumstance the Registrar must register the mortgagee as registered owner “released from the mortgage”. On its face there is nothing surprising in that, because there would be an effective unity of title. The entity that is the mortgagee has subsequently become the registered owner so that the mortgage would be from the one entity to itself. [159] Secondly, the obligation on the Registrar under s 63(2) is one which can be altered by the mortgagee, even though it becomes registered proprietor. In s 63(3) the obligation to act by registering the mortgagee as registered owner released from the mortgage can be altered, if the mortgagee “asks the Registrar not to act under the subsection”. The evident intention of s 63(3) was to reflect the general law prior to statutes such as the Land Title Act. At general law the position was that once the equity of redemption was transferred to the mortgagee, that effected a discharge of the mortgage. However, where there was a sufficient intention expressed to keep the mortgage alive it was not extinguished.96 In that sense s 63(3) provides that a mortgagee might signify a sufficient intention to keep the mortgage alive. Whether, in that circumstance, the Registrar is then obliged not to act, or still has a discretion to do so, need not be presently examined. [160] The fact that the mortgagee can prevent the mortgage from being released, in my view, suggests that s 63(2) has an operation wider than the mortgagee itself. If it applied only to the mortgagee’s interest then there would be no point having the ability under s 63(3) to keep the mortgage alive. [161] Thirdly, the mortgage the subject of the release in s 63(3) is plainly the mortgage under which the transferee is mortgagee. Here that is the assigned NAB mortgage, i.e. that held by ACPT. [162] Fourthly, s 63(2) uses the phrase “released from the mortgage” with respect to the mortgagee. One must turn to what those words mean. Upon registration of a release of mortgage the lot or interest in released to the extent shown in the instrument of release. Section 81(3) of the Land Title Act provides for a lot to be released from the mortgage to the extent stated in the instrument, upon registration. The extent of the release has been the subject of authority. 94 Land and Other Legislation Amendment Act 2014 (Qld). 95 Explanatory Note to the Land and Other Legislation Amendment Bill 2014, page 29. 96 Adams v Angell (1877) 5 Ch D 634. -- 32 of 34 -- 33 [163] In Groongal Pastoral Co Ltd (in liq) v Falkiner97 the High Court considered a discharge in the words in “full satisfaction and discharge of the within obligation”. It was held that operated as a complete discharge of the land and personal covenants:98 “The discharge is an instrument duly registered and bears the stamp of the Registrar-General’s seal, and, therefore, in law, has the effect of a deed, and, without expressing any opinion as to whether it is in fact a deed duly executed and delivered, it operates by its terms to discharge the respondent from his personal obligation, as well as to release his land from the encumbrance. A discharge differently worded would not necessarily have that effect.” [164] The effect of different wording was considered in Industrial Acceptance Corporation Ltd v Tarulli99 where the release was stated as “The mortgagee hereby discharges the land above described from the whole of the principal interest or other money secured by the above Mortgage”. It was held that only the land was released from the mortgage. [165] The standard Form 3 release of mortgage states that “The Mortgagee releases the mortgage as a charge on the land described in item 2”. That form of words arguably to the same effect as those considered in Industrial Acceptance Corp Ltd v Tarulli. So much was considered to be the case in Adams & Ors v In Roma Pty Ltd,100 which involved a consideration of whether the Form 3 release under the Land Title Act released the mortgagor from personal covenants under the mortgage and a separate fixed and floating charge. Daubney J considered that having regard to s 74 of the Land Title Act, the Form 3 provided for the release of the mortgage as “a charge on the land”, and did not release the mortgagor from the personal covenants under the mortgage. [166] Fifthly, under s 63(2) the only words to achieve a release of a mortgage come in the phrase “released from the mortgage”. However, s 63(3) is directed at what the Registrar must do unless told not to by the mortgagee. That is, the Registrar must “register the mortgagee”. What follows qualifies the phrase “register the mortgagee”. It is that the mortgagee is to be the “registered owner released from the mortgage”. In my view, that is directed at releasing the mortgage only to the extent that it applies to the mortgagee. There is therefore a basis to conclude that the release under s 63(2) does not go so far as to discharge personal covenants under the mortgage. [167] The foregoing considerations suggest that s 63(3) does not have the effect of releasing the personal covenants under the mortgage. [168] Ultimately, however, in light of the findings made above in respect of the unlawful sale of the land, and the impact of that upon the payout of the NAB loan, it is unnecessary to reach a final view on this aspect of the case. [169] In any event, even if release of the mortgage under s 63(2) served to discharge the personal covenants under the mortgage, that would not necessarily avail Oonoonba and Mr Edmonds, each of whose liability ultimately arose under the NAB loan (in the case of Oonoonba), and under the guarantee given to secure the loan facility (in the case of Mr Edmonds). 97 (1924) 35 CLR 157. 98 Groongal Pastoral Co Ltd at 165. 99 [1974] WAR 125. 100 [2012] QSC 240. -- 33 of 34 -- 34 Conclusion [170] The appeal must be allowed but the form of the final orders may well require input from the parties in terms of the calculations derived from the sale of the land and the appropriate orders. Therefore, I propose the following orders: 1. Appeal allowed. 2. Set aside the orders made on 4 March 2021. 3. The parties have leave to make submissions on the final form of orders to reflect these reasons, and as to costs, as follows: a. By the appellants, within 14 days of today, limited to five pages; and b. By the respondents, within 14 days following receipt of the appellants’ submissions, limited to five pages. [171] FLANAGAN J: I agree with Morrison JA’s conclusion that the evidence does not support a finding that Oonoonba consented to the ACPQ mortgage being re-registered. I further agree with his Honour’s conclusion that ACPQ was not otherwise entitled to re-register its mortgage pursuant to cl 5.5 of the development agreement. [172] In light of these conclusions, and as observed by Morrison JA, it is unnecessary for this Court to decide the appellants’ contention that the transfer of the land to ACPT and the operation of s 63(2) of the Land Title Act effected a foreclosure, with the consequence that the personal covenants under the assigned mortgage were released and Mr Edmonds could not be pursued on his guarantee. [173] I agree with the orders proposed by Morrison JA. -- 34 of 34 --