Adams & Ors v In Roma Pty Ltd & Anor [2012] QSC 240

SUPREME COURT OF QUEENSLAND CITATION: Adams & Ors v In Roma Pty Ltd & Anor [2012] QSC 240 PARTIES: GRANT ANTHONY ADAMS & FREYA ANGELA O’SULLIVAN AS TRUSTEES FOR THE GAA DISCRETIONARY TRUST (plaintiffs) v IN ROMA PTY LTD ACN 111 769 861 (first defendant) and BERNARD GOEYTES (second defendant) FILE NO: 9114 of 2010 DIVISION: Trial Division PROCEEDING: Trial ORIGINATING COURT: Supreme Court of Queensland DELIVERED ON: 31 August 2012 DELIVERED AT: Brisbane HEARING DATE: WRITTEN SUBMISSIONS: 19, 20, 21 October 2011 1, 15, 20, 21 December 2011 JUDGE: Daubney J ORDER: 1. It is declared that the first defendant was and is bound by the provisions of the Deed of Fixed and Floating Charge (in the form of the charge forming part of Exhibit GJW-17 to the affidavit of Gregory John Whyte sworn 24 March 2011, save for the definition of “Deed of Guarantee” which is amended by deleting the reference to the “the Chargor” and adding the words “excluding the Chargor” after the word “parties” in the second line of the definition). 2. It is declared that the release of mortgage signed by the plaintiffs on 14 March 2007 and registered in the Titles Office on 16 May 2007 did not have the effect of releasing or discharging the first defendant from its obligations under the Deed of Fixed and Floating charge. 3. I will hear the parties with respect to any further or consequential orders as may be appropriate and as to costs. -- 1 of 36 -- 2 CATCHWORDS: DEEDS – DELIVERY – where plaintiffs agreed to lend money to borrowing entities – where loaned money was to assist borrowing entities to purchase property – where first defendant gave third party securities to plaintiffs in respect of the loan – where second defendant was director of first defendant – where securities took the form of a mortgage and a fixed and floating charge – where settlement occurred before the signed deed was delivered – whether the charge as signed by second defendant took effect as a Deed of Fixed and Floating Charge DEEDS – DISCHARGE OF DEED – where mortgage associated with the third party securities was subsequently released by plaintiffs – where plaintiffs submit that the intention was to release the mortgage security only – where defendants submit that the effect was to release the securities generally - whether the release of mortgage had the affect of releasing or discharging the first defendant from its obligations under the Deed of Fixed and Floating Charge Uniform Civil Procedure Rules 1999 (Qld), r 166(3), (4) & (5) Property Law Act 1974 (Qld), s 47 Land Title Act 1994 (Qld), s 11, 74, 81, 176 400 George Street (Qld) Pty Ltd v BG International Ltd [2010] QCA 245, distinguished Cape York Airlines Pty Ltd v QBE Insurance (Australia) Ltd [2009] 1 Qd r 116, cited Groongal Pastoral Company Limited (in liquidation) v Falkiner (1924) 34 CLR 157; [1924] HCA 54, followed Grundy v Ley [1984] 2 NSWLR 467, cited Provident Capital Ltd v Printy [2008] NSWCA 13, cited Queensland Premier Mines Ltd v French [2007] HCA 53; 82 ALJR 115, cited COUNSEL: A Duffy for the plaintiffs P Dunning SC and G Radcliff for the defendants SOLICITORS: Piper Alderman for the plaintiffs Robinson and Robinson for the defendants [1] In December 2006, the plaintiffs agreed to lend money to entities (“the borrowers”) associated with Mr Dean Farnham and Mr Ken Lewis to assist them in the purchase of the Warrego Hotel at Cunnamulla. The amount agreed to be advanced by the plaintiffs was $2,150,000. $2,000,000 was advanced when settlement of the purchase of the hotel occurred on 8 December 2006, and the borrowers drew down a further $150,000 on 15 January 2007. The advance was for a term of one year, to 7 December 2007. In April 2007, the plaintiffs agreed to lend a further $65,000 to the borrowers. In December 2007, the borrowers defaulted in repayment of the -- 2 of 36 -- 3 loan. The plaintiffs subsequently appointed receivers and managers to the borrowers, then terminated the appointment of the receivers and managers and appointed an agent to take over the Warrego Hotel on their behalf as mortgagees in possession. A company associated with the plaintiffs subsequently purchased the Warrego Hotel for $1,500,000. [2] The present proceeding arises because the first defendant (of which the second defendant was a director) gave the plaintiffs third party securities for the initial loan to the borrowers. In summary, the plaintiffs‟ case, as originally formulated, was that the first defendant had agreed to grant the plaintiffs, inter alia, a fixed and floating charge over the first defendant, that the first defendant had, in breach of its agreement with the plaintiffs, failed to grant this charge, and that the first defendant remained obliged to grant that charge to the plaintiffs. This founded a claim for specific performance of the agreement to provide the charge. An alternative case pleaded by the plaintiffs was to the effect that the first defendant represented to the plaintiffs that it would provide the executed charge for registration, that the representations were misleading and deceptive or likely to mislead or deceive, in contravention of s 52 of the Trade Practices Act 1974 (“TPA”), and that the plaintiffs suffered loss as a consequence of that conduct. The plaintiffs also alleged that the second defendant was liable as an accessory by virtue of being “knowingly concerned” in the contravening conduct. These allegations founded claims for damages and other relief under the TPA. As will appear, however, it is unnecessary to further explore this aspect of the plaintiffs‟ pleaded case. [3] After this proceeding was commenced, the plaintiffs found out that the first defendant had in fact executed the form of charge (and the necessary ASIC forms to procure registration of the charge), and that these documents had been provided to the defendants‟ then solicitors, but had not been passed on to the solicitors then acting for the plaintiffs. The plaintiffs‟ statement of claim was amended to incorporate these allegations, to contend that the executed charge had taken effect as a deed, to contend that the first defendant remained bound by that charge, and to seek declaratory relief and consequential orders to obtain and register the charge. [4] At trial, the defendants contended that resolution of this case came down to three issues:1 - whether, under the loan agreement executed by, inter alia, the plaintiffs and the first defendant in December 2006, there was a continuing obligation on the first defendant to provide the charge; - whether the charge, as signed by the second defendant, took effect as a deed; - whether there was an agreement in March 2007 that the first defendant‟s obligations to provide security was released. 1 See defendants‟ outline of submissions at paragraph 2. -- 3 of 36 -- 4 The Charge [5] I will refer later to the terms of the loan agreement, pursuant to which the plaintiffs advanced funds to the borrowers. It is as well to note here, however, that there was a dispute on the evidence as to the circumstances under which the first defendant came to be involved in this transaction. The parties contended, in effect, that resolution of this factual issue was necessary for the purposes of establishing the relevant factual background for the proper construction of the loan agreement. For reasons that will emerge later in this judgment, I do no think that this case turns on this factual issue at all, and it is strictly unnecessary for there to be a determination on it. I should, however, address this factual dispute for completeness. [6] For the purposes of this trial, the only witnesses called by the plaintiffs (apart from the plaintiffs‟ current solicitor, who gave some formal evidence about some documents he had inspected) were the plaintiffs, Mr Grant Adams and his daughter, Mrs Freya O‟Sullivan. The only witness called by the defendants was Mr John Caravousanos. Mr Caravousanos was the plaintiffs‟ solicitor in the subject transaction. As at 2006, he was a senior associate at the law firm then known as Ebsworth & Ebsworth. Mr Adams had previously used another solicitor of that firm, but that other solicitor was apparently unavailable to take instructions from Mr Adams and Mr Caravousanos handled the matter on the plaintiffs‟ behalf. [7] It was not in issue that Mr Farnham was the principal of a law firm called “Complete Legal Solutions”, and that this firm represented the borrowers in the transaction. It was also not in issue that Mullins Lawyers represented the interests of the present defendants in the transaction, and that the lawyers in that firm who represented the interests of the defendants in this transaction were Ms Newman and Mr Cvetkovic. [8] It was clear enough on the evidence before me that Mr Adams had the principal conduct of the transaction on behalf of the plaintiffs. His evidence was to the effect that, shortly after the plaintiffs had agreed to make the loan to the borrowers, he found out that Mr Lewis and Mr Farnham were also proposing to lease and operate another hotel, namely the Commonwealth Hotel in Roma. Mr Adams said that he was very unhappy that Mr Lewis and Mr Farnham and their companies would, in addition to the debt they would owe the plaintiffs in connection with the Warrego Hotel, be incurring additional debt in relation to the Commonwealth Hotel. Mr Adams said that he was concerned that the entire enterprise would not be viable to service the debts on the two hotels, and that he raised this concern with Mr Lewis, who told Mr Adams that he (Mr Lewis) had arranged for additional security from the first defendant. Mr Adams said that this additional security addressed his concerns. [9] The second defendant did not give evidence before me. Nor did Mr Lewis or Mr Farnham. Evidence of a contrary version of the circumstances under which the first defendant became involved in the current transaction came from Mr Caravousanos. He referred to a file note he had kept of a telephone discussion -- 4 of 36 -- 5 between him and Mr Farnham on 30 November 2006. Mr Caravousanos gave the following evidence: “From my file note because I don‟t have any independent recollection, it appears that we discussed generally that there had been a dispute between Farnham and Lewis and Mr Goeytes in respect to the purchase of the hotel, and that he was not longer taking any interest in the business, but there is a discussion here about him providing top-up of other securities by offering a mortgage over the Commonwealth Hotel at Roma which was to be collateral for two to three months until a refinance occurred.” [10] Mr Caravousanos had first been contacted by Mr Adams with respect to the transaction on 28 November 2006. Mr Caravousanos was adamant in his evidence that neither Mr Adams nor Mrs O‟Sullivan gave him instructions in relation to the inclusion of the first defendant in the transaction.2 Mr Adams‟ evidence was less than emphatic: “We can safely assume given it was an important matter to you that when you found out about the Farnham and Lewis acquiring or proposing to acquire the lease of the Commonwealth though that you raised it with Mr Caravousanos?-- I would have, yes. And you would have told him your concerns about how it was adding risk to the transaction?-- Yes. And you told him of the need to obtain additional security as a result?-- Yes. And you recollect that happening; it was important enough that you remember it?-- Well, I don‟t recollect but I – parts of that I obviously would, yeah. No, I don‟t want to know what‟s obvious?-- Yeah. I just want you to tell me what you do and do not recollect; do you recollect saying it to him or not?-- I recollect that when I spoke to Lewis and Farnham about the – those people taking the lease of the Commonwealth that I was very unhappy about it and they said they had arranged extra security. I would have then passed that discussion on to Mr Caravousanos.” [11] It is necessary to set out some more detailed history of this transaction. On 28 November 2006, at about 12.30 pm, Mr Adams had his initial telephone conversation with Mr Caravousanos. At that time, Mr Adams told Mr Caravousanos that the GAA Discretionary Trust would be providing finance to Mr Farnham and Mr Lewis to assist in the purchase of the Warrego Hotel, and instructed Ebsworth & Ebsworth to act for the plaintiffs generally in relation to the loan. 2 See, for example, his evidence at 2-42 ll 18-22. -- 5 of 36 -- 6 [12] At 3.16 pm on 28 November 2006, Mr Farnham sent an email to Mr Caravousanos with further relevant information in relation to the loan. In this email, Mr Farnham said: “I have been asked by Grant Adams to forward you information to enable you to prepare security documentation for an advance Grant is making for the purchase of the Warrego Hotel, Cunnamulla.” That email made a reference to the second defendant, albeit in the context of advising that the second defendant was “no longer involved in the purchase of this business and will not be executing any documentation”. [13] As noted above, Mr Adams says that it was after he had agreed to make the loan to Mr Lewis and Mr Farnham that he found out that they were also taking the lease of the Commonwealth Hotel and that, as a consequence of him expressing concern, Mr Lewis said that he would arrange for additional security from the first defendant. [14] On 30 November 2006, Mr Adams met with Mr Caravousanos and another solicitor of Ebsworth & Ebsworth. This conference occurred at 2 pm. Mr Caravousanos‟ diary note of that meeting includes a notation that “Goeytes not signing”, with the observation “OK” next to it. [15] At about 2.40 pm on 30 November 2006 (obviously, after the conference with Mr Adams) Mr Farnham and Mr Caravousanos had a telephone conversation. Mr Caravousanos‟ diary note records that he was told by Mr Farnham about a dispute between Mr Goeytes, Mr Farnham and Mr Lewis, that Mr Farnham repeated that Mr Goeytes will have no interest in the business, and that Mr Farnham advised that Mr Goeytes will provide a top-up of other securities relating to the Commonwealth Hotel at Roma. The note records that this was to be a collateral mortgage for two – three months. [16] On 30 November and 1 December 2006 there were further emails between Mr Farnham and Mr Caravousanos concerning documentation for the transaction. On 4 December 2006 at 3.13 pm Mr Farnham sent Mr Caravousanos an email with further information relating to additional security being provided by the first defendant. This email relevantly stated: “Further to my phone conversation last week the additional mortgage I was referring to is the property of the Commonwealth Hotel Roma Could you please prepare an additional mortgage for registration with your client as the mortgagee? The details are:- In Roma Pty Ltd ACN 111 769 851 Lots 1 & 2 on RP 4435 County Waldergrave, Parish Roma Title Ref‟s 16470095 & 16987098 -- 6 of 36 -- 7 It is to be stamped collateral to the other mortgages on the Warrego Hotel Cunnamulla Can you also prepare a fixed and floating Charge over In Roma Pty Ltd ACN 111 769 851 It is proposed that the Real Property Mortgage will ultimately be transferred to another lender to preserve the stamp duty.” [17] On 5 December 2006, at 12.58 pm, Ms Newman sent Mr Caravousanos an email which said: “I have been advised that you are acting on behalf of Grant Adams and his daughter, the mezzanine funders to Inn Security Pty Ltd atf the Murdoch Property Trust and Farnham Investments Pty Ltd atf the Farnham Family Trust in relatin to the acquisition of the Warrego Hotel. We act on behalf of In Roma Pty Ltd the registered owner of the Commonwealth Hotel, Roma, who will be giving a mortgage over the freehold land as security for your clients. Would you please advise when I can expect to receive copies of the security documents and whether you require any further information.” [18] Mr Caravousanos responded at 6.46 pm, saying to Ms Newman that her clients will be providing third party security. Mr Caravousanos asked: “Is your client or its directors providing any other type of security such as a guarantee or fixed and floating charge?” [19] On 6 December 2006, there were a number of emails between the various legal representatives, clearly with a view to finalising the loan and security documentation to enable the transaction to complete. At 9.46 am on 6 December 2006, Mr Farnham sent Mr Caravousanos an email in which he said: “Thank you for copying me in on the emails from Mullins – Jane Newman I think that the intention of the mortgage has not been fully conveyed to her – I have been dealing with Andrew Cvetkovic over the issue The intention of the mortgage has nothing to do with this finance transaction to purchase the Warrego Hotel Cunnamulla – it is to ensure that their client Mr Bernard Goeytes (and or his entity) has no way of not honouring an agreement he has reached with us to provide equity to fund the purchase of the Commonwealth Hotel Roma and refinance the Warrego Hotel Cunnamulla, as previously advised. Unless the proposed mortgage achieves this then it unlikely that there will any settlement on the Warrego this week” [20] Later that morning, at 11.51 am, Mr Farnham sent Mr Caravousanos a further email (in the context of emails which were passing backwards and forwards between the -- 7 of 36 -- 8 legal representatives concerning whether there was to be a limit on the security to be provided by the first defendant). Mr Farnham‟s email at 11.51 am (which was copied to Mr Cvetkovic) said: “No it is not The Mortgage is unlimited at this point in time If you recall from our phone conversation the mortgage is not to support this particular advance over the Warrego Hotel Cunnamulla It is being put in place to ensure that the dispute settlement arrangements between Mullins Client and Ken Lewis and myself are put in place to prohibit Mullins‟ client from having a „change of heart‟ after this transaction is settled. His change of heart is the reason we find our selves in this transaction as it is now structured. I have copied this email to Andrew Cvetkovic of Mullins so that he can convey the same message to who ever is drafting the mortgage.” [21] At 8.31 pm on 6 December 2006, Mr Caravousano sent an email to Mr Farnham (copied to, inter alia, Mr Lewis and Mrs O‟Sullivan). Attached to this email were drafts of a number of documents, including the loan agreement. In this email, Mr Caravousanos sought clarification on the securities being provided by a number of entities. Relevantly, he said: “In Roma is an additional security provider but not a guarantor. Is this correct?” [22] Mr Farnham responded with an email to Mr Caravousanos at 8.42 pm on 6 December 2006, saying, relevantly: “In Roma Pty Ltd is merely providing additional security only – therefore will only execute mortgage – I presume you recite the security in the Loan Agreement.” [23] At 8.59 pm on 6 December 2006, Mr Caravousanos sent an email to Mr Farnham which attached a number of documents relating to the loan agreement, and which were said to be subject to final instructions from Mr Adams and Mrs O‟Sullivan. These documents included a deed of fixed and floating charge for the first defendant. [24] Mr Farnham replied with an email at 9.13 pm on 6 December 2006 (copied to Mr Lewis and Mr Cvetkovic), in which he relevantly said: “One Mechanical Issue – you have combined In Roma Pty Ltd as part of the Deed of Loan and Authority and Undertaking. As I have previously advised it is not possible to have these documents signed by Bernard Goeytes and returned to you prior to settlement. -- 8 of 36 -- 9 As the mortgage being given by In Roma is for our benefit really and not you client it was our intention for Ken Lewis to drive to Roma and have the document signed by Bernard and for him to hold it and deliver to you when he returned from Cunnamulla next week. Therefore I suggest that this be done as counterpart – except for the mortgage by In Roma which will be signed by him only and again delivered next week. In fact given the hour tonight I do not see that I can be done any other way Obviously all documents to be signed by Ken and myself will have to be signed by us tomorrow morning and delivered to you tomorrow. Could you please confirm that the documents required to be signed by Bernard only require his signature only. Are their any other directors etc to sign? I am currently having all of the documents signed The documents to be signed by Inn Roma and Bernard Goeytes are being delivered by Ken Lewis who is leaving soon to go to Cunnamulla but will go via Roma He will hold those documents once signed and bring them back with him early next week I will deliver the signed documents to you later today” [25] Shortly thereafter, Mr Caravousanos sent an email to Mr Farnham confirming the relevant signatories for the first defendant and saying: “I have no issue with the loan agreement and Authority being signed in counterpart by In Roma.” [26] At 10.02 am on 7 December 2006 Mr Farnham sent Mr Caravousanos an email stating that Mr Farnham was “currently having all of the documents signed”. Mr Farnham advised Mr Caravousanos that the documents to be signed by the defendants were being delivered by Mr Lewis, who was leaving soon to go to Cunnamulla but would go via Roma. Mr Farnham said: “[Lewis] will hold those documents once signed and bring them back with him early next week.” [27] On 7 December 2006, at 11 am, Mr Caravousanos sent an email to Ms Newman (copied to, inter alia, Mr Farnham and Mrs O‟Sullivan) attaching copies of, relevantly, the loan agreement and the fixed and floating charge for execution by the first defendant. Mr Caravousanos‟ email referred to some minor amendments to the documentation, and stated: “As discussed, we will accept an undertaking that the above signed original documents are to be returned to us next week. Can you fax the signed pages from the documents tomorrow. We understand Ken Lewis is taking the documents out to Roma today. -- 9 of 36 -- 10 The loan agreement and authority to complete can be signed in counterpart. We will forward a Form 309 shortly.” [28] Later in the day on 7 December 2006, there was correspondence between Mr Caravousanos and Mr Farnham in the course of which Mr Farnham provided Mr Caravousanos with the documentation executed by the borrowers relating to the transaction. [29] Early in the morning on 8 December 2006, there was an email exchange between Mr Caravousanos and Ms Newman with respect to handwritten amendments to be made to the fixed and floating charge to be given by the first defendant. In an email to Ms Newman, Mr Caravousanos confirmed that a handwritten change would be sufficient. [30] At 9.06 am on 8 December 2006, Mr Farnham sent Mr Caravousanos an email saying: “We have already had Bernard [the second defendant] sign the deed of loan and fixed and floating charge. I note that there is to be a handwritten note change. I think we will proceed with what we have together with the mortgage that you are sending over – we will now get that signed by Bernard and hold it as security and return to you early next. Ken is currently in Roma and about to leave to Cunnamulla for settlement so this is our last chance to have any documents signed by Bernard.” [31] At 10.48 am on 8 December 2006, Mr Caravousanos sent an email to Ms Newman (copied to Mr Farnham) in which Mr Caravousanos said that he understood that the documents had now been signed by Ms Newman‟s client, and asked for Ms Newman‟s confirmation. [32] It would also appear that shortly after sending that email, Mr Caravousanos had a telephone discussion with Mrs O‟Sullivan. (The relevant diary note is dated 7 December 2006, but both Mrs O‟Sullivan and Mr Caravousanos accepted in evidence that the relevant conversation occurred on the day of settlement, 8 December 2006.) Mr Caravousanos‟ diary note records him advising that all documents had been signed, and specifically “mortgages & charges signed”, that he had accepted undertakings on other documents, and that it “will be okay to settle today”. [33] On 8 December 2006 at 12.15 pm, Mr Caravousanos sent an email to Mr Farnham (copied to, inter alia, Mrs O‟Sullivan) in which he confirmed the documents which would be required at settlement. Mr Caravousanos said that he required, amongst other things, “an undertaking that ... the mortgages and other documents for In Roma will be provided upon Ken Lewis‟ return next week”. He also asked for confirmation that the In Roma documents had been signed, and asked whether Mr Lewis could send through faxed pages from those documents. -- 10 of 36 -- 11 [34] At 12.32 pm on 8 December 2006, Mr Farnham sent Mr Caravousanos an email in which he relevantly said: “(b) I apologise for the omission in missing the fixed and floating charge for Farnham Investments. I undertake to provide the signed Fixed and Floating Charge for Inn Security next week as soon as Ken Lewis returns from Cunnamulla and also to provide the other signed documents by Inn Roma Pty Ltd (c) Ken has confirmed to me by phone that Bernard has signed them – He is currently on road between Charleville and Cunnamulla which is about a 3 hour drive so I do not think he is going to be in Cunnamulla prior to 3.00pm so will not be able to fax them through until he arrives in Cunnamulla.” [35] All of this activity notwithstanding, there is no doubt on the evidence before me that the fixed and floating charge was executed by the second defendant on behalf of the first defendant. On 8 December 2006, Mr Cvetkovic forwarded to the second defendant the email which Mr Caravousanos had sent Ms Newman at 11 am on 7 December 2006 attaching the security documentation which needed to be executed by the first defendant. In his covering email on 8 December 2006, Mr Cvetkovic advised the second defendant to print off three copies of the attached documents, fax the signed pages back to Mr Cvetkovic, and put the original signed documents into an express post envelope and return them to Mullins Lawyers. [36] On 8 December 2006, at 3.11 pm, the second defendant sent Mr Cvetkovic a facsimile enclosing, amongst other things, the following: - the execution page of the real property mortgage signed by the directors of the first defendant - the signing page of the deed of charge over the first defendant in favour of the plaintiffs, signed by the second defendant on behalf of the first defendant - the loan agreement, signed by the second defendant on behalf of the first defendant - an ASIC Form 309 “Notification of Details of a Charge” signed by the second defendant as director of the first defendant and dated 8 December 2006, giving notice of a charge given by the first defendant in favour of the plaintiffs - an ASIC Form 350 (Certification of Compliance with Stamp Duties Law) signed by the second defendant on behalf of the first defendant and dated 8 December 2006, certifying compliance with stamp duty law in relation to a charge created in favour of the plaintiffs. [37] The evidence does not reveal what time on 8 December 2006 the transaction settled, but there is no doubt that settlement did occur on that day and $2,000,000 was advanced for the benefit of the borrowers. [38] On 11 December 2006, at 9.28 am, Mr Cvetkovic of Mullins Lawyers sent Mr Caravousanos an email stating: -- 11 of 36 -- 12 “We confirm that our client has signed the documents you forwarded to us regarding the Commonwealth Mortgage including the amended page of the fixed & floating charge and the forms 309 & 350. We shall provide originals to you once they have been received from our client by express post.” [39] On 14 December 2006, Mr Farnham wrote to Mr Caravousanos enclosing, amongst other things, the loan agreement (in triplicate) executed by the first defendant, an authority to complete executed by the first defendant and the real property mortgage over the Commonwealth Hotel executed by the first defendant. This letter continued: “Please note the mortgage has been executed by In Roma Pty Ltd and delivered to us on Friday. We were advised by In Roma‟s solicitors that they have obtained their own executed copy and that they would be forwarding you a copy of that. We have since been advised by the director of In Roma Pty Ltd that he does not intend to execute another copy for his solicitors and that we must rely on the mortgage enclosed. This is the reason we obtained execution of that mortgage at the time.” [40] On 18 December 2006, Mr Caravousanos wrote to Mrs O‟Sullivan in the following terms: “We enclose: 1. Loan Agreement (6 copies); 2. Deed of Guarantee & Indemnity (3 copies); 3. Priority Agreement; 4. Deed of Fixed and Floating Charge from Farnham Investments (3 copies); 5. Deed of Fixed and Floating Charge from Inn Security Pty Ltd (3 copies); 6. Deed of Fixed and Floating Charge from Thirsty Camel Hotel, Cunnamulla Pty Ltd (3 copies). Can you please have Grant and yourself sign where indicated. Please note that your signatures must be witnessed. The witness does not have to be qualified. Once the documentation is signed can you please return as soon as possible so that we may attend to stamping and registration. We confirm that on 8 December 2006, the sum of $20,833.34 was deposited into the nominated NAB account of the GAA Discretionary Trust. Also in accordance with your instructions, we have written to Complete Legal Solutions, advising them of the repayment amount and your nominated account. Please note that there are other documents that are to be signed but that we can sign them on your behalf. The loan agreement is in 6 copies because In Roma Pty Ltd has signed the agreement in counterpart.” -- 12 of 36 -- 13 [41] As previously noted, on 15 January 2007 the plaintiffs advanced the further $150,000 to the borrowers pursuant to the loan agreement. [42] It was not in issue before me that: (a) the documents which Mr Cvetkovic had received by fax from the second defendant were not passed on to Mr Caravousanos; and (b) Mr Caravousanos did not, at any time after the settlement, receive either an original or a copy of the fixed and floating charge by the first defendant in favour of the plaintiffs. [43] Returning, then, to the question of the reason for the first defendant agreeing to give third party securities in this transaction, the above recitation makes it clear that there is no contemporaneous evidence to support Mr Adams‟ version that the first defendant‟s securities were procured as a consequence of Mr Adams expressing concern about the viability of the borrowers‟ servicing commitments on both the Warrego Hotel and the Commonwealth Hotel. His oral evidence on this point was diffident. To the extent that he said that he “would have then passed that discussion on to Mr Caravousanos”, there is no record by Mr Caravousanos of such instructions being received. On the contrary, the contemporaneous records point inexorably to the conclusion that Mr Caravousanos received information about the inclusion of the first defendant in the transaction from Mr Farnham, and not from Mr Adams. Mr Caravousanos has a diary note recording his phone discussion with Mr Farnham on 30 November 2006 (referred to in paragraph [15] above). Mr Farnham‟s next communication was the email on 4 December 2006 (referred to in paragraph [16] above), starting with the words, “Further to my phone conversation last week ...”. Mr Farnham‟s subsequent emails on 6 December, at 9.46 am, 11.51 am and 9.13 pm, are also only consistent with the version originally recounted in Mr Caravousanos‟ evidence. [44] It is, I suppose, possible that Mr Adams had the concerns he expressed and that he discussed the concerns with Mr Lewis. But I am quite satisfied, on the evidence, that Mr Adams did not raise these concerns with his then solicitor, Mr Caravousanos, nor did he give instructions that third party security was to be obtained from the first defendant to address those concerns. [45] In relation to the obligation of the first defendant to provide the fixed and floating charge, the parties also joined issue over the proper construction of the loan agreement. The first defendant admitted on the pleadings that the first defendant had entered into the loan agreement. The first defendant, however, resisted the notion that it was subject to an ongoing obligation under the loan agreement to provide the fixed and floating charge. Again, for reasons I will explain shortly, it is probably strictly unnecessary to determine this point but it is at least desirable that I express my views should that become relevant for other purposes. -- 13 of 36 -- 14 [46] The loan agreement is undated, but it was common ground before me that it had been executed by the parties (at least in counterpart) prior to settlement occurring on 8 December 2006. The parties to the Loan Agreement were: - the plaintiffs as “Lender”; - Corporate entities associated with Mr Lewis and Mr Farnham as “Borrowers” and also in their individual capacity as “Guarantors”; - The first defendant as “Additional Security Provider”, and - Mr Farnham and Mr Lewis as “Guarantor”. [47] The recitals to the Loan Agreement provided as follows: “A. The Borrower has requested the Lender to provide the financial Facility to the Borrower. B. To secure the Facility, the Borrower has agreed to provide the Securities and In Roma Pty Ltd has agreed to provide the Additional Securities. C. In consideration of the Lender entering into this Agreement with the Borrower the Guarantor agrees to provide the Guarantees. D. The parties wish to enter into this Agreement to record the arrangements between them.” [48] In cl 1.1 of the loan agreement, the term “Additional Securities” was defined to mean “each and all of the following securities, documents and instruments specified in the Schedule provided by the Additional Security Provider”. [49] By reference to the definitions in cl 1.1 and the Schedule to the loan agreement, it was provided that: - the “Advance Date” was 8 December 2006; - the “Principal Sum” was an initial advance of $2,000,000 on the Advance Date with a further $150,000 further advance when the funds were available from the lender; - the term of the loan agreement was 12 months, and the repayment date was the expiration of the term. [50] Clause 2 of the loan agreement provided: “2.1 Facility Subject to the Borrower complying with the Conditions Precedent, the Lender, relying on the representations and warranties made by the Borrower set out in this Agreement, must make available to the -- 14 of 36 -- 15 borrower the Facility and will advance the Principal Sum in accordance with the terms of this Agreement. 2.2 Authorised Purpose The Borrower must use the proceeds of the Principal Sum for the Authorised Purpose and for no other purpose. 2.3 Security Each Security and Additional Security and Guarantee shall secure the Debt now or at any time secured or payable to the Lender under any of the Transaction Documents and/or any of the Securities and/or Additional Securities.” [51] In the Schedule, it was provided under the heading “Additional Securities” as follows: “· The Additional Security Provider to provide: (i) A first registered mortgage over the freehold of the property situated at 75 Wyndham St, Roma, described as Lots 1 & 2 on RP 4434 Country Waldergrave, Parish of Roma, Title References 16470095 and 16987098; and (ii) A first registered fixed and floating charge over IN ROMA PTY LTD ACN 111 769 861” [52] Clause 11 of the loan agreement provided: “The Borrower agrees with the Lender that to secure or collaterally secure performance of the Borrower‟s Obligations under this Agreement, the Borrower must cause and procure the granting of each Security and Additional Security.” [53] The defendants argued that the loan agreement itself contained no obligation on the first defendant to provide the fixed and floating charge, and that the only obligation in the loan agreement was on the borrowers to procure that the “Additional Security” (including, obviously, the fixed and floating charge) be granted. [54] True it is that cl 11.1 casts such an obligation on the borrowers under the agreement. But that obligation is in no way inconsistent with the independent agreement referred to in Recital B, being an agreement by the first defendant to provide the Additional Securities. Issues may arise when there is an inconsistency between matters stated in a recital and the provisions of the operative part of an agreement. It has long been settled law3 that: - if the recitals are clear and the operative part of an agreement is ambiguous, the recitals cover the construction of the agreement; 3 See Lewison “The Interpretation of Contracts” (Sweet & Maxwell 2007) at 398-399, and the authorities referred to therein. -- 15 of 36 -- 16 - if the recitals are ambiguous and the operative part is clear, the operative part prevails in the construction of the agreement; - if the recitals and operative part are clear, but they are inconsistent with each other, the operative part is to be preferred. [55] In the case of the present agreement, however, there is no such inconsistency. The obligation cast on the borrowers to procure the granting of the additional securities is completely consistent with an independent obligation on the part of the first defendant pursuant to the agreement referred to in Recital B. [56] It is not, however, necessary for this aspect of the case to be decided either by reference to the disputed facts concerning the genesis of the giving of the charge or to the terms of the Loan Agreement. Both on the pleadings and on the evidence, I am satisfied that on 8 December 2006 the first defendant executed a deed of fixed and floating charge in favour of the plaintiffs, and the first defendant thereupon became bound by that charge. [57] Dealing first with the pleadings, it is salutary to recall the terms of the Uniform Civil Procedure Rules (“UCPR”) r 166(3), (4) and (5): “(3) A party may plead a nonadmission only if – (a) the party has made inquiries to find out whether the allegation is true or untrue; and (b) the inquiries for an allegation are reasonable having regard to the time limited for filing and serving the defence or other pleading in which the denial or nonadmission of the allegation is contained; and (c) the party remains uncertain as to the truth or falsity of the allegation. (4) A party‟s denial or nonadmission of an allegation of fact must be accompanied by a direct explanation for the party‟s belief that the allegation is untrue or can not be admitted. (5) If a party‟s denial or nonadmission of an allegation does not comply with subrule (4), the party is taken to have admitted the allegation.” [58] In Cape York Airlines Pty Ltd v QBE Insurance (Australia) Ltd,4 I essayed the rules relating to the pleading of denials and non-admissions under the UCPR, and noted at [19]: “[19] Rule 166(3) by its terms limits the circumstances in which a party may plead a non-admission. Rule 166(4) requires, as a matter of form, that a non-admission of an allegation of fact „be accompanied by a direct explanation for the party‟s belief that the allegation ... can not be admitted‟. A failure to give this direct explanation results in the party being deemed to have admitted the fact – r 165(2). The party who pleads a non-admission remains under an ongoing obligation to make reasonable inquiries and, if possible, amend the pleading to admit or deny the allegation – r 166(6). And, 4 [2009] 1 Qd R 116. -- 16 of 36 -- 17 as noted above, r 165(2) significantly limits a party‟s ability to give evidence on a fact which it had not admitted.” [59] Further, at [22] I said: [22] This distinction between a denial and a non-admission under the UCPR also has an impact on the interpretation of r 166(4). The reference in that rule to a party giving a direct explanation for believing that an allegation is untrue cannot relate to a non- admission because, by definition, a non-admission is only made when one is uncertain as to the fact‟s truth or falsity. Similarly, a non-admission can only be pleaded when a party is uncertain as to the truth or falsity of the allegation of fact being responded to and, if the truth of the fact is subsequently ascertained, it must be admitted. Accordingly, in my view, the elements of r 166(4) ought be read disjunctively as follows: - a party‟s denial of an allegation of fact must be accompanied by a direct explanation for the party‟s belief that the allegation is untrue, and - a party‟s non-admission of an allegation of fact must be accompanied by a direct explanation for the party‟s belief that the allegation can not be admitted.” [60] Later in the judgment, I expanded on the requirement that a party give a “direct explanation” – see [27] – [31]. [61] In the present case, the following relevant allegations were made in the further amended statement of claim: “6A. The Plaintiffs, by their solicitors, Ebsworth & Ebsworth, forwarded the Charge document and related documents to the First Defendants‟ solicitors, Mullins Lawyers, by email on 7 December 2006 at 11:00am. 6B. Mullins Lawyers forwarded the Charge document and related documents to the Second Defendant to execute on behalf of the first Defendant by email on 8 December 2006 at or about 1:44pm. 6C. On 8 December 2006, the First Defendant, by its director and duly authorised agent the Second Defendant, executed the Charge. Particulars 6C.1 The Second Defendant signed the signature page of the Charge as a director and authorised person of and on behalf of the First Defendant; and 6C.2 The Second Defendant initialled a handwritten amendment to page 3 of the Charge; and 6C.3 The Second Defendant signed an ASIC Form 309 in relation to the Charge on behalf of the First Defendant; and -- 17 of 36 -- 18 6C.4 The Second Defendant signed an ASIC Form 350 in relation to the Charge on behalf of the First Defendant; 6D. On 8 December 2006 at or about 3:11pm, the Second Defendant sent copies of the documents referred to in sub-paragraphs 6C.1, 6C.2, 6C.3 and 6C.4 to Mullins Lawyers by facsimile. 6D. The Charge was a Deed which was signed, sealed and delivered by the First Defendant upon its execution by the First Defendant on 8 December 2006, whereupon the First Defendant was bound by its terms. 6E. The following were express terms of the Charge: 6E.1 by clause 3.4, that the Charge was to be a first ranking charge; 6E.2 by clause 3.4, that the First Defendant was required not to create or permit any encumbrance over the First Defendant‟s assets without the prior written consent of the Plaintiffs; 6E.3 by clause 13.17, that in the event the Charge was not registered within any time period allowed or it cannot be registered, the First Defendant would, on demand, execute and procure the registration of a security substantially the same as the Charge in a form and substance satisfactory to the Plaintiffs.” [62] The defendants‟ pleading to those paragraphs was contained in paragraph 7A of the further amended defence: “7A. The Defendants do not admit the allegations of fact contained in paragraph 6A, 6B, 6C, both numbered paragraphs 6D, and paragraph 6E and paragraph 7B of the Further Amended Statement of Claim and with respect to the allegations contained in paragraph 6A, 6B, 6C, both numbered paragraphs 6D and paragraph 6E, the Defendants say that if this Honourable Court finds that the First Defendant granted a charge to the Plaintiffs as alleged, then the Defendants say that the Plaintiffs released the First Defendant form the charge as alleged in paragraph 6 hereof.” [63] To the extent that this purported to be a non-admission of those matters alleged by the plaintiffs in paragraphs 6A – 6E of the further amended statement of claim, paragraph 7A of the further amended defence failed completely. It contained no explanation at all for the non-admission, let alone the required “direct explanation” for the defendants‟ belief that the allegations could not admitted. Accordingly, by reason of the operation of r 166(5), the defendants are taken to have admitted each of those allegations in the statement of claim. [64] This is not a point of pleading pedantry. Counsel for the plaintiff made it clear when opening the case that he would be relying on these deemed admissions. No attempt was made by the defendants then, or at any time during the trial, to amend paragraph 7A of the further amended defence. In final submissions, counsel for the -- 18 of 36 -- 19 defendants sought to deflect attention away from the difficulties they faced by reason of the pleading in paragraph 7A by pointing, for example, to the fact that the construction point concerning the loan agreement was raised in another part of the defence and by contending that if there was “any infelicity in the pleadings, the progenitor of that [was] in fact the statement of claim”. None of these diversionary tactics, however, supplied any answer to the fundamental difficulty they faced by reason of the deemed admission of the allegations contained in paragraphs 6A – 6E of the further amended statement of claim. [65] Further, and in any event, it was clear on the evidence that the charge was actually executed by the first defendant on 8 December 2006. The document, which had been drafted by Mr Caravousanos and sent to the defendants‟ solicitors on 7 December 2006, was patently in the form of a deed and was entitled “Deed of Fixed and Floating Charge”. Importantly, immediately before the attestation clause executed by the first defendant were the words “EXECUTED AS A DEED”. [66] Counsel for the defendants did not, in their final submissions, cavil with the propositions that the charge was in the form of a deed and that it had been properly executed by the first defendant. The point sought to be relied on was that there had been no delivery, and that the first defendant was consequently not bound. [67] In 400 George Street (Qld) Pty Ltd v B G International Ltd,5 Muir JA (with whom Fraser JA and Mullins J agreed) referred to the definition of a deed in 12 Halbury’s Laws of England (4th ed, para 1301), in which it is relevantly stated that: “To be executed by a party as his deed, the instrument must be ... delivered as his act and deed. ... Delivery by a party is constituted by any words or conduct expressly or impliedly acknowledging that he intends to be bound immediately and unconditionally by the provisions of the deed.” [68] Muir JA also quoted the following extract from Odgers’ Construction of Deeds and Statutes: “Any act of the party which shows that he intends to deliver the deed as an instrument binding on him is enough [to constitute delivery]. He must make it his deed and recognise it as presently binding on him. ... Delivery is nonetheless complete and effective because the grantor retains the deed in his own possession, so that it was early recognised that the deed need not be actually delivered to the other party to the deed.” [69] The law in Queensland concerning the delivery of deeds is confirmed by s 47 of the Property Law Act 1974 in the following terms: “47 Delivery of deeds (1) After the commencement of this Act, execution of an instrument – (a) in the form of a deed; or 5 [2010] QCA 245. -- 19 of 36 -- 20 (b) in the form provided in section 45 or 46; shall not of itself import delivery, nor shall delivery be presumed from the fact of such execution only, unless it appears that execution of the document was intended to constitute delivery of the document. (2) Subject to subsection (1), delivery may be inferred from any fact or circumstance, including words or conduct, indicative of delivery. (3) In this section – delivery means the intention to be legally bound either immediately or subject to fulfilment of a condition.” [70] In 400 George Street, Muir JA said at [52]: “It is clear from s 47(1) of the Property Law Act that execution of an instrument in the form of a deed will not, necessarily, import delivery. For the execution of a document to import delivery it must appear that execution was intended to constitute delivery. Both under the section and the common law, the intention of the executing party is the critical matter.” [71] On the facts before him, Muir JA considered that there was no reason to suppose that the execution of the instrument in that case by one party, intending that it have contractual effect only when all other parties were bound by it, resulted in the party being bound because the instrument took the form of a deed. His Honour said that it then followed that the instrument, although executed by the party with the intention that it become of contractual force and take effect as a deed when the other parties were bound by it, was never delivered. He said that the “basis on which the parties dealt was that no legal obligations would arise under any instruments executed by them until all were bound”. [72] The facts under consideration in 400 George Street were quite different from the circumstances of the present case. The background to that appeal was summarised by Muir JA in the opening paragraphs of his judgment: “[1] MUIR J: Introduction The first and second appellants were the registered owners of land in Brisbane on which an office building was to be constructed. The third and fourth appellants agreed with the first and second appellants to construct the building and during construction were responsible for introducing potential tenants. The respondent was one such tenant. It was interested in leasing a number of floors in the building. [2] After negotiations, in which the parties were represented by large commercial firms of solicitors, the solicitors for the appellants sent a document entitled „Agreement for Lease‟ (the Instrument) and a document entitled „Lease‟ to the solicitors for the respondent for execution. The documents were executed on behalf of the respondent and returned by the respondent‟s solicitors to the appellants‟ solicitors on 15 October 2008 in the expectation that the appellants would execute them promptly. One of the appellants delayed in executing the documents. On 27 November 2008 the solicitors for -- 20 of 36 -- 21 the respondent wrote to the solicitors for the appellants stating that there was no binding and concluded agreement between the parties and advising of the respondent‟s instructions to „formally withdraw its offer to lease the Premises ...”. [3] The appellants maintained that the respondent was contractually bound and commenced proceedings in the Supreme Court claiming, amongst other relief, a declaration that the appellants and the respondent had entered into a binding contract on the terms of the Instrument and a declaration that the lease was a deed, binding on the parties. [4] On 16 March 2010, the primary judge dismissed the appellants‟ claim. The appellants appealed against that decision. The principal issues for determination on the appeal are: (a) Whether the Instrument is a deed; (b) If the Instrument is a deed, was it delivered when forwarded to the appellants‟ solicitors on 15 October 2008 so that it then bound the respondent or was the deed to become binding on the respondent, only when the other parties to it became bound.” [73] The parties in that case had commenced negotiations in April 2008. Importantly, a letter of offer, which had been accepted with some amendments by the prospective tenants, contained the following cl 37: “No legally binding agreement is made by this offer. All documentation is subject to a mutually agreed legal document by both parties.” [74] This was relevant to his Honour‟s findings on whether the documents executed by the prospective tenants in October 2008 were “delivered”. Muir JA said: “[53] In my view, cl 37 of the April 2008 letter, when construed with cl 38, signified an understanding that the parties would not be bound until such time as their bargain was recorded in a formal document agreed by all parties. No doubt that was the intention at the date of the letter but the point of the clauses was to state the basis on which the parties would conduct their negotiations. That makes the primary judge‟s finding, in effect, that nothing had happened to change this basis, of particular significance. The finding was not shown to be wrong. [54] The Instrument and the Lease were not the „mutually agreed legal document‟ referred to in cl 37. „Mutually agreed‟ means just that. The words are not referable to an instrument binding on one party but not on the others. As the primary judge explained, the forwarding of the documents by the appellants‟ solicitors to the respondent‟s solicitors for execution by the respondent did not constitute an offer by the appellants which was accepted by the return of the documents executed by the respondent. As the primary judge held, there was no evidence that the solicitors for the appellants had authority to contract on the appellants‟ behalf. [55] Arrangements such as that recorded in the April 2008 letter are commonly referred to as „subject to contract‟. Under such an -- 21 of 36 -- 22 arrangement, the negotiating parties are not bound until their agreement is recorded in an instrument or instruments to which all parties are bound.” [75] In the present case, there was no condition or stipulation between the parties to the effect that the chargor would only become bound upon execution of the document by the chargee. It is, however, quite clear that all of the parties to this transaction intended that settlement should be effected on 8 December 2006 on the basis that each party was immediately bound by the provisions of the documents that each had executed prior to settlement. So much is clear not merely from the “mechanical” arrangements which were put in place for the parties in remote areas to sign documents, confirm the fact of signature, and then forward the hard copies of signed documents after settlement had occurred, but specifically in the case of the defendants by the fact that it was not only the deed of charge which was executed by the first defendant but also the ASIC forms necessary to be lodged in order to obtain registration of that charge. These were all sent by the second defendant to his solicitor by fax before settlement. It is also to be recalled that the defendants‟ then solicitor emailed Mr Caravousanos, albeit on the Monday after the Friday on which settlement had occurred, confirming that all documents, including the fixed and floating charge with the amended page, had been signed. [76] These matters, in the context of the timing of the settlement of the advance, lead me to infer that the first defendant intended to be legally bound by the charge when it was executed by it on 8 December 2006, and that the deed of charge was “delivered”. [77] I have already noted that the second defendant, who executed the charge on behalf of the first defendant, did not give evidence. Clearly he could have given evidence if there were circumstances which pointed to there being no intention to be bound by the signing of the charge in the form of a deed, instructing his solicitors to advise that it had been signed, and permitting settlement to proceed in circumstances where it was not intended for the deed of charge to be legally binding. The fact that the second defendant did not give evidence on these matters leads to the clear inference that any evidence from him would not have assisted the defendants‟ case. [78] Accordingly, I am satisfied that the first defendant became bound by the deed of fixed and floating charge when it was executed on 8 December 2006. [79] In view of my conclusions with respect to the deed of charge, it is not necessary for me to consider the TPA claims by the plaintiffs. I should record that the plaintiffs submitted that such consideration was not necessary and, consistently with that, the defendants made no submissions on that aspect of the plaintiffs‟ pleaded case. Was the charge released? -- 22 of 36 -- 23 [80] Having found that the first defendant was bound by the deed of charge, the next question is whether the plaintiffs released the first defendant from its obligations under that charge. [81] Counsel for the defendants advanced two arguments in support of the proposition that the charge had been released: (a) That there was an agreement in March 2007 between the plaintiffs and the first defendant that the charge would be released; and (b) That the release by the plaintiffs of the real property mortgage which the first defendant had granted in favour of the plaintiffs operated as a release of the deed of charge. [82] The first argument advanced by the defendants clearly involved a basal contention that there was an agreement to release the charge made between the plaintiffs and the first defendant. In their written submissions, counsel for the defendants cast that question in the following terms: “It is common ground in the litigation that on or about 13 March 2007 a consensus was reached between Mr Adams and Mrs O‟Sullivan on the one hand and In Roma on the other hand that affected the rights under the Loan Agreement. That was what saw the registration of the instrument of discharge of mortgage. The question that arises is was the agreement then reached one that was an agreement by Mr Adams and Mrs O‟Sullivan on the one hand and In Roma on the other hand that, for whatever reason, In Roma would have no further obligation under the Loan Agreement nor it be obliged to persist with any security.” [83] For reasons which will be explained shortly, there was, in fact, no such “common ground” in this litigation. Indeed, the initial hurdle for the defendants in seeking to advance this argument in submissions is that the defendants at no time pleaded such an agreement. An assertion that the charge had been released was raised in the further amended defence, but not in the context of an allegation that there had been an agreement between the plaintiffs and the first defendant for such a release. So, for example, the following allegations are made in paragraph 6 of the further amended defence: “(h) If the charge over the First Defendant had been registered, it would have been released on or around 13 March 2007 in accordance with the Plaintiffs‟ instructions to their solicitors; (i) On 13 March 2007 the Plaintiffs, gave instructions to Mr Caravousanos to take steps necessary to effect a release of the bill of mortgage and at that time Mr Adams instructed Mr Caravousanos that he understood that the remaining primary security was sufficient to cover the loan; (j) Further, by letter dated 29 November 2007, the Plaintiffs agent their solicitor confirmed to the borrowers that the collateral security by the first defendant for the loan agreement had been released. (k) In any event, the release of the bill of mortgage on its true and proper construction constituted: -- 23 of 36 -- 24 (i) a release of the bill of mortgage; and (ii) a full and final discharge of all and/or any indebtedness of the First Defendant pursuant to the loan agreement, the mortgage and the alleged charge; and (iii) a release of the alleged charge.” [84] Later in the further amended defence, the defendants made allegations concerning negotiations to vary the loan agreement in November 2007, referring to a letter from the plaintiffs‟ solicitors dated 29 November 2007 to the borrowers in which it was relevantly said: “Earlier this year, our clients released their security over the Commonwealth Hotel at Roma that was given as collateral security by In Roma for the loan to your companies ...”. Reference was also made to an email from the plaintiffs‟ solicitors to Mr Lewis on 10 January 2008 in which it was stated: “That‟s correct Ken. In Roma have been released and will not be part of the extension document.” [85] Paragraph 8B of the further amended defence then pleads: “8B. In the premises, the Defendants say that: (a) The fixed and floating charge, if created, was discharged, and accordingly, no equitable charge was created, or if created, was released; (b) As a consequence of the Plaintiff‟s conduct, set forth in paragraph 8B hereof, the Plaintiffs have released the First Defendant from all equitable rights that it may have had; (c) The plaintiffs are estopped from alleging any entitlement to an equitable charge; (d) The plaintiffs have waived all or any entitlement to an equitable charge over the property of the First Defendant.” [86] What is conspicuously absent from these allegations in the further amended defence is the assertion sought to be argued in final submissions that there was an agreement between the plaintiffs and the first defendant “that, for whatever reason, [the first defendant] would have no further obligation under the loan agreement nor it be obliged to persist with any security”. [87] In his reply submissions, counsel for the plaintiffs objected to the defendants relying on this argument. Counsel for the plaintiffs pointed out that the first reference to such an agreement occurred in the course of final oral submissions by counsel for the defendants, and that the response by counsel for the plaintiffs in his final oral submissions was to emphasise that no such agreement has been pleaded. In his written submissions, counsel for the plaintiffs said: -- 24 of 36 -- 25 “[7] There is no reference in any of the correspondence to an agreement. There was no suggestion that anyone on behalf of the defendants, including the defendants‟ solicitors, even spoke about the matter with anyone on behalf of the plaintiffs. No witness was called to say that there was an agreement. Mr Caravasanos did not say there was any agreement. [8] No agreement was pleaded at any time, despite the defendants having had ample opportunity to do so. [9] The evidence was that Mr Lewis had requested that the plaintiffs release the mortgage over the Commonwealth Hotel. The defendants do not allege that either Lewis or Farnham was their agent. They did not call either of them to give evidence to say any such thing. [10] There is no evidence of the defendants having given any consideration for the asserted agreement. There is rather a deafening silence from the defendants. The fact that an inference should be drawn against the defendants is emphasised in one of the cases cited by the defendants, Winks v WA Heck & Sons Pty Ltd. [11] For the defendants to now be permitted to run a case based upon an alleged enforceable agreement to release the charge would work a serious injustice upon the plaintiffs.” [88] Again, this is not a nitpicking point. The plaintiffs went to trial to deal with the case which had been advertised by the further amended defence. Nowhere was it alleged that there was an agreement such as that contended for by counsel for the defendants in their final submissions. Had such an allegation formed part of the defendant‟s pleaded case, that is clearly a matter on which the plaintiffs could, and certainly would, have adduced evidence. The defendants should not, in my view, be entitled to argue this point for the first time in their final submissions. [89] But in any event, there is no proper evidentiary basis for concluding that such an agreement was made between the plaintiffs and the defendants. [90] In his statement of evidence in chief, Mr Adams said: “88.8 I refer to subparagraphs 6(h) and (i) of the Defence. These allegations are not true. In early 2007, Lewis contacted me and advised me that the Borrowers were refinancing the Warrego Hotel and the Commonwealth Hotel and asked me to agree to release the mortgage over the Commonwealth Hotel. 88.9 I agreed to release the mortgage after seeking legal advice that it was appropriate to do so. I did not instruct Caravousanos that I understood that the remaining primary security was sufficient to cover the Loan as alleged in subparagraph 6(i). Rather, I was advised by Caravousanos that it was ok to release the mortgage because the remaining security was sufficient to cover the Loan. 88.10 When Lewis spoke to me about releasing the Commonwealth Hotel mortgage, he did not ask me to release the Charge. We never discussed it. -- 25 of 36 -- 26 88.11 I cannot recall saying anything in relation to releasing the Charge during the conversation I had with Caravousanos on 13 March 2007. I do not believe I would have turned my mind to it. 88.12 I did not receive any communication from my solicitors in relation to the Charge being released or discharged and I did not receive any documents for the Plaintiffs to sign that might be relevant to a release or discharge of the Charge. 88.13 The Defendants have never asked me about the possibility of the Plaintiffs releasing the Charge or indeed had any communication with me of any nature about the charge, except in relation to this litigation. 88.14 I have never told the Defendants that the Plaintiffs have released the Charge, nor have I ever instructed my solicitors to do so.” [91] Under cross-examination, Mr Adams was pressed on numerous occasions with the proposition that he had agreed to release all of the first defendant‟s securities. He consistently denied this, asserting that he had only agreed to the release of the mortgage. It is sufficient to refer to the following passages of cross-examination: “Now, it‟s the case, isn‟t it, that the loan settles on 8 December 2006?-- Yes. And, effectively, three months later you release the security in relation to -----?-- Yes. ----- In Roma?-- They would release the first mortgage. What happened is this: Lewis contacts you in relation to the matter?-- Would have, yes. And says that they want to release Mr Goeytes‟ securities over – that are held by you?-- He asked me to release the first mortgage. And you agreed to that?-- Yes. Now, in fact, what he asked you was to release In Roma‟s securities. He didn‟t talk about the first mortgages, he talked about the security that In Roma had given?-- No, he asked first mortgage. So did you ask him why it was important to have the first mortgage released but not the fixed and floating charge?-- No. Now, that happens on or shortly before 13 March 2007?-- That happened? Yes, that is you have this discussion with Lewis?-- With Lewis – had that discussion Lewis is that what you ----- Yes?-- Yes, some. Now, on 13 March 2007 you telephone Mr Caravousanos to say that you and your daughter agreed to release the security provided by In Roma?-- No. She would have spoke to Caravousanos, herself, surely. -- 26 of 36 -- 27 So you say you didn‟t speak to Caravousanos?-- I – it‟s a long time ago. I can‟t honestly recall.” ... “Come March of 2007 the fact is you spoke to Lewis, Lewis asks you to release the securities, whatever they might be in relation to In Roma, and you‟re willing to release them?-- I released the mortgage. And I suggest to you that you ring Caravousanos and you say to Caravousanos, „The parties have agreed the In Roma securities are to be released‟?-- Untrue. You didn‟t deliver it –f ix the first mortgage, but rather your instructions were, in effect, whatever security interest you had were be released?-- No, release the mortgage; asked them to release the mortgage.” [92] Mr Adams was challenged on this evidence, including by questioning as to why, if he had a charge over the first defendant at the time the borrowers defaulted, he did not exercise his rights under the charge to appoint a receiver and manager over the first defendant. He agreed that this did not occur to him6 and said that he left it to his solicitor to advise him. I do not regard this as evasive evidence by Mr Adams. It was clear from the evidence that Mr Caravousanos knew, from March 2007, that the charge over the first defendant had not been registered. Whatever may have been Mr Caravousanos‟ part in not having that charge registered (as to which I will not speculate), it is not surprising that, knowing at least that the charge had not been registered, the question of subsequently enforcing that charge may not have been to the forefront of Mr Caravousanos‟ mind when subsequently advising Mr Adams on the remedies available upon default by the borrowers. [93] Mr Caravousanos‟ evidence was to the effect that on 13 March 2007 he had a phone call with Mr Adams in which Mr Adams instructed him to effect releases of the securities given by the first defendant. Mr Caravousanos referred to a diary note he kept of that discussion. After refreshing his memory by looking at the diary note, Mr Caravousanos‟ evidence was: “Okay. So have a look at the file note and then tell me what you can remember about the phone call?-- In summary, there was a discussion between myself and Mr Adams about releasing the securities for IN ROMA. That included the mortgage and the charge. MR DUNNING: All right. And what, as best you can recollect, did he tell you?-- My understanding was that it was to be the whole lot, the Roma Hotel----- MR DUFFY: Well, that wasn‟t the question. HIS HONOUR: What were you told?-- To prepare the releases for the Roma Hotel.” 6 Transcript 1-48.58. -- 27 of 36 -- 28 [94] Under cross-examination, his evidence was: “All right. Now, Mr Carvousanos, I suggest to you that in relation to the question of release of the charge Mr Adams instructed you that the Commonwealth Hotel was to be the subject of some re-financing by the borrowers of IN ROMA?-- Yes. Yes. And that therefore he had agreed to give a release of the real estate mortgage over the Commonwealth Hotel?-- My recollection of the conversation was that we discussed the Commonwealth Hotel generally and the release of the securities.” “Well, in any event, I suggest to you, and you I think already disagreed with this, but I‟ll suggest it to you again for clarity, that in fact Mr Adams only ever instructed you to effect a released of the real estate mortgage over the Commonwealth Hotel?-- No, I‟d disagree with that.” [95] In any event, shortly after that discussion, Mr Caravousanos, at 9.52 am on 13 July 2007, sent Mr Farnham the following email: “I just received a call from Grant that the In Roma mortgage and charge is to be released. Can you please confirm urgently so I can prepare the releases asap.” [96] At 9.59 am on 13 July 2007, Mr Farnham sent Mr Caravousanos an email saying: “We have finally put in place the finance to complete the purchase of the Commonwealth Hotel This will not involve a refinance of the Warrego Hotel as yet. Ken Lewis has spoken to Grant and he has agreed to release the security over the Commonwealth Hotel At this point in time we have been advised rather suddenly that there is going to be an attempt to settle this transaction this Friday 16 March. Therefore a release of mortgage over that property will be required then. I am instructed no monies are to be paid for this release. Grant has advised Ken Lewis that if an release is emailed to Freya‟s email address he can arrange urgent execution and return to you.” [97] Mr Caravousanos responded immediately to Mr Farnham with an email which said: “Thanks Dean Just to confirm – This is the release for Commonwealth Hotel Roma owned by In Roma Pty Ltd. Are we also releasing the ASIC charge? I assume so?” [98] There is no record or evidence of a further response from Mr Farnham. What next occurred was that Mr Caravousanos prepared a release of mortgage, and sent that to the plaintiffs for execution. In evidence, Mr Caravousanos said that he had started to prepare an ASIC Form 312, which was the form to be lodged on the release of a charge, but then did an ASIC search of the first defendant. Mr Caravousanos said: -- 28 of 36 -- 29 “I undertook a company search for IN ROMA, and the charge for IN ROMA wasn‟t on there so I – I looked at that and I decided not to do it. I just decided to release the securities that were registered, which was the mortgage.” (emphasis added) [99] The release of the mortgage was subsequently signed and registered. [100] A couple of matters arise out of this evidence. [101] The first is that, whilst Mr Caravousanos‟ initial email to Mr Farnham (at 9.52 am) was consistent with his version of the instructions received from Mr Adams, this email was immediately followed by: (a) an email from Mr Farnham which referred not to releases of securities generally, but to Mr Adams having “agreed to release the security over the Commonwealth Hotel” and, consistently with that, a statement that “a release of mortgage over that property will be required”; (b) the response email from Mr Caravousanos which asked Mr Farnham whether the ASIC charge was to be released, with Mr Caravousano saying “I assume so”. [102] This statement from Mr Farnham, which referred only to the mortgage, followed by Mr Caravousanos‟ statement of assumption, casts doubt on the certainty Mr Caravousanos expressed in his evidence as to the extent of the instructions he had received from Mr Adams. [103] Secondly, and crucially, none of this is evidence of an agreement between the plaintiffs and the first defendant. At its highest, it is evidence of the security-holder acceding to a request by the principal debtor that the security-holder release some or all of the securities held from a third party. But it is not evidence of an agreement between the security-holder and the third party for the release of the securities. [104] If the sort of agreement for which the defendants argued in their final submissions truly formed part of the case they sought to advance at trial, one would have expected evidence on the existence of such an agreement to have been led from the second defendant and, perhaps, Mr Farnham or Mr Lewis. The fact that none of those persons gave evidence about the existence of such an agreement leads me to infer that none of those persons could have given evidence to assist the defendants‟ case. [105] Accordingly, the defendants‟ first argument in support of the notion that the charge was released fails. [106] The defendants‟ further argument (which had been pleaded) was that the execution and registration of the release of the mortgage which the first defendant had granted over the Commonwealth Hotel property operated also to release the first defendant of its obligations under the deed of charge. The release of mortgage was registered, -- 29 of 36 -- 30 and therefore operated as a deed – s 176, Land Title Act 1994 (“LTA”). It was signed by the plaintiffs as mortgagees, as permitted by s 11(2) of the LTA. It was submitted for the defendants that “by the terms of the deed, [the plaintiffs] have released the debt”. [107] Counsel for the plaintiffs submitted that the release of the mortgage did not constitute a release of the charge or any of the obligations created by it, and referred at some length to various provisions of the charge itself to make good that proposition. [108] Section 81 of the LTA, to which the defendants also referred, provides: “81 Releasing a mortgage (1) On lodgement of an instrument releasing a mortgage, the registrar may register the release to the extent shown in the instrument of release. (2) The instrument of release may release the debt or liability secured for – (a) all or part of the mortgage; or (b) 1 or more of the mortgagors. (3) On registration of the instrument of release, the mortgage is discharged, and the lot is released form the mortgage, to the extent shown in the instrument of release.” [109] The mortgage which had been registered over the Commonwealth Hotel property described, on its face, the “debt or liability secured” in the following terms: “Description of debt or liability secured The debt secured by this mortgage is all moneys advanced and any other financial accommodation or amount owing provided or to be provided by the Mortgagee to the Mortgagor or Borrower as Secured Money referred to in the attached Schedule under the Loan Agreement or under any other agreement which the Mortgagor agrees in writing is also secured by this Mortgage.” [110] The charging clause on the face of the mortgage provided: “Covenant/Execution The Mortgagor covenants with the Mortgagee in terms of the attached schedule and charges the estate or interest described in item 1 with the repayment/payment to the Mortgagee of all sums of money referred to in item 5.” [111] In the terms contained in the schedule attached to the mortgage, the term “Borrower” was defined to mean (cl 1.1) the borrower in the loan agreement (i.e. the corporate parties associated with Mr Farnham and Mr Dean). “Secured Money” was defined to mean: -- 30 of 36 -- 31 “... all moneys and damages which now or in the future are owing (actually or contingently) by the Borrower to the Mortgagee for any reason and, without limitation, includes money and damages payable: (a) by the Mortgagor or Borrower under the Loan Agreement ...” [112] By cl 3.1 of the mortgage schedule, the first defendant covenanted to pay the Secured Money to the plaintiffs: “Place, Manner and Time of Payment The Mortgagor … shall pay the Secured Money to the Mortgagee in accordance with any agreement which obliges the Mortgagor to pay them and in the absence of agreement: (a) upon demand at any time and place and in the manner reasonably required by the Mortgagee; and (b) in immediately available funds and without set-off, counter claims, conditions or, unless required by law, deductions or withholdings.” [113] Under the deed of charge, the first defendant, by cl 2, charged “all the Secured Property to [the plaintiffs] as security for payment of the Amount Owing”. [114] The term “Secured Property” was defined in cl 1.1 of the deed of charge as follows: “Secured Property means all right, estate, title and interest of the Chargor in any asset, undertaking and property of any kind, whether present or future, real or personal, tangible or intangible and wherever located, including without limitation all capital and share premiums of the Chargor (whether called or uncalled, paid or unpaid).” [115] The term “Amount Owing” in the deed of charge was defined, in cl 1.1, to include “all amounts which [the first defendant] owes or is required to pay to [the plaintiffs], for any reason, at any time and from time to time, including without limitation under any Collateral Security ...”. “Collateral Security” was defined to include the mortgage over the Commonwealth Hotel. [116] Against that background, the defendants‟ argument was therefore to the effect that the registration of the release of the mortgage had effected a discharge of the personal obligation to pay contained in the mortgage (there being no obligation to pay cast on the first defendant under the terms of the loan agreement), that the discharge of that obligation in the mortgage meant that there were and could in the future be no amounts which the first defendant was or could in the future be required to pay to the plaintiffs under the covenants contained in the mortgage, and that there was and could be no “Amount Owing” under the deed of charge, with the consequence that the deed of charge was also discharged. [117] The present inquiry therefore turns to the effect of the release of mortgage which was signed by the plaintiffs on 14 March 2007 and registered in the Titles Office on 16 May 2007. -- 31 of 36 -- 32 [118] That release, which was in the approved form provided for under the LTA, relevantly provided: “5. Discharge/Execution by Mortgagee The Mortgagee releases the mortgage as a charge on the land described in item 2.” [119] In Groongal Pastoral Company Limited (in liquidation) v Falkiner,7 the High Court considered the effect of a release (described as a “discharge”) of a mortgage under the Real Property Act 1900 (NSW). That legislation provided for forms of instruments to be followed, but also expressly allowed (in s 103) for those forms to be used with such alterations as the character of the parties or the circumstances of the case made necessary. The High Court said at 164: “As mentioned, however, those forms may be accommodated to meet the actual requirements of the case, and so contain the actual bargain of the parties. When completely registered and stamped they are by force of law deeds with all the effect that law gives to a deed. The mortgage itself (sec. 57) is a security only. The personal obligation itself is independent of the security, but it is contained in and constituted by the statutory deed by which also it is secured. A discharge of the land may be effected by an endorsement on the mortgage under sec. 65, and that may be, according to its tenor and as sec. 65 says, a discharge (1) of the whole land from the whole or part of the principal sum secured or (2) of any part of the land from the whole of the principal sum. Reading that with sec. 103(2), the discharge may be moulded to the agreement of the parties. Then, says sec. 65, upon entry of the discharge the land is, to the extent of the discharge, no longer subject to the encumbrance.” [120] I note parenthetically that s 74 of the LTA provides that a registered mortgage “operates only as a charge on the lot ... for the debt or liability secured by the mortgage”. [121] The form of discharge with which the High Court was concerned in Groongal Pastoral provided: “Received from Ralph Sadlier Falkiner, this first day of September 1921, the sum of one hundred and twenty thousand pounds, being in full satisfaction and discharge of the within obligation.” [122] The High Court held, at 164, that this discharge was “in the most ample terms, apt to express a full and complete discharge of all personal „obligation‟.” The judgment of the Court concluded, at 165: “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.” (emphasis added) 7 (1924) 34 CLR 157. -- 32 of 36 -- 33 [123] In Grundy v Ley,8 Kearney J was required to consider the effect of a registered discharge of mortgage in the following terms: “Received from N J L the sum of all moneys due and payable being in full satisfaction and discharge of the abovementioned mortgage so far as it affects the land described in the following schedule.” [124] It was argued that this form of discharge was significantly different from that considered by the High Court in Groongal Pastoral. Kearney J referred at some length to the judgment in Groongal, to academic commentary on that judgment, and also to a number of other cases in which the construction of a registered discharge of mortgage had been considered. His Honour concluded, at 473, that: “... These authorities warrant an approach which would require some further expression relating to the personal covenant in order to give the subject discharge of mortgage the effect of releasing not only the land but also the personal liability of the mortgagor.” [125] Kearney J referred to the specific discharge before him, noting that “... the registration of the discharge is directed to freeing the title of the registered proprietor from the charge created by the mortgage, and the wording of the subject discharge of mortgage describes the moneys received as being expressly „in full satisfaction and discharge of the abovementioned mortgage so far as it affects the land ...‟.” (emphasis added) [126] His Honour held that the concluding phrase in the discharge (which I have highlighted) introduced “a crucial qualification upon the generality of the formula ...”, and further held that: “While such phrase and what follows describe the extent of the land released by a full or partial discharge, in doing so it also operates to concentrate the discharge upon its effect on the land and to displace the incidental effect of a release under the personal covenant. In my opinion, therefore, the wording of the subject discharge of mortgage does no more than to release the mortgaged land from the charge created by the subject mortgage. Accordingly I would hold that the registration of the discharge of mortgage in this instance did not have the effect of discharging the defendant‟s liability under her personal covenant in the subject mortgage.” [127] In Provident Capital Ltd v Printy,9 Basten JA (with whom Tobias and McColl JJA agreed) observed in obiter dicta at [27]: “In relation to discharge, s 65(2) provides that, upon registration of a discharge of mortgage, the estate or interest mortgaged „shall, to the extent specified in the discharge, cease to be charged with any moneys secured by the mortgage‟. Because a mortgage is a form of security, conferring powers against land, it can be discharged without affecting that which it secures, namely a personal covenant to pay: see Groongal Pastoral Company Ltd (In liq) v Falkiner [1924] HCA 54; 35 CLR 157 at 164. Whether a discharge of mortgage has the effect of discharging 8 [1984] 2 NSWLR 467. 9 [2008] NSWCA 131. -- 33 of 36 -- 34 personal covenants contained in a separate contract or deed is a matter of construction of the instrument of discharge: see also Grundy v Ley [1984] 2 NSWLR 467 (Kearney J). It may be that a mortgagee will retain a personal right of action against the mortgagor, but it will no longer be a right enforceable against the land: see Queensland Premier Mines Ltd v French [2007] HCA 53; 82 ALJR 115.” (emphasis added) [128] Finally, I should also refer to Queensland Premier Mines Pty Ltd v French.10 That case was concerned with the question whether the right to recover money owed under a loan agreement, separate from but secured by a registered mortgage, was assigned by operation of statute when the mortgage was transferred. In the course of her reasons for judgment, Kiefel J (with whom the other members of the Court agreed) observed in passing at [58]: “During the course of argument on the appeal the question as to whether Marminta had any interest in the loan agreements, following its release of the mortgages, was raised. The question assumed Marminta was correct in its contention that it acquired that interest upon the transfer of the mortgages to it. Section 81(3) of the Land Title Act provides that a mortgage is discharged and the lot is released to the extent shown in the instrument of release, upon its registration. Some difficulty may sometimes attend the question whether the personal covenant to pay was discharged upon release. Much depends upon the terms of the release.11 [129] Returning to the present case, it is a question of construction as to whether the registered form (which took effect as a deed) operated both to release the charge and to discharge the personal covenants contained in the mortgage. [130] The form signed by the plaintiffs and which was then registered was, by its terms, a release. In The Laws of Australia12 it is explained13: A release is the discharge or extinguishment of a right of action which a person has, or claims to have, against another by an unequivocal statement that the right of action no longer exists. In the context of a contract, it is the statement by one of the parties that a claim which exists or is alleged to exist in relation to the contract or its performance is discharged. It is usual for a formal release to be made by deed, in which case there is no need to establish the existence of any consideration. However, if the release is not under seal, consideration moving from the party against whom the claim or action is released is necessary. The terminology also changes in such a case and the discharge is said to be effected by an accord and satisfaction …. A release not under seal is ineffective both at law and in equity in the absence of consideration, although, in some circumstances, the actions and statements of the parties may create an estoppel precluding reliance on the absence of consideration to defeat the release. 10 (2007) 235 CLR 81. 11 See, eg. Groongal Pastoral Co Ltd (In liq) v Falkiner (1924) 35 CLR 157. 12 Thomson Reuters, Legal Online 13 At [7.8.250], and omitting citations -- 34 of 36 -- 35 [131] If the release executed by the plaintiffs had provided simply that the plaintiffs released the mortgage, there would, I think, have been a good argument that this effected a discharge of all rights of action which the plaintiffs otherwise would have had under the mortgage, i.e. it would have operated to effect a release of the mortgage as a charge and a release of the personal obligations under the mortgage. But this is not what the release said in this case. The operative part of this release provided that the plaintiffs “release the mortgage as a charge on the land” (emphasis added). As noted above, by s 74 of the LTA the mortgage operates only as a charge on the land for the debt or liability secured by the mortgage. It seems to me that, as a matter of construction, the words “as a charge on the land” act to limit or qualify the ambit of the release, with a result similar to that discussed by Kearney J in Grundy v Ley – to adopt His Honour‟s words, the addition of the words “as a charge on the land” introduced a crucial qualification upon the generality of the release. Accordingly, as a matter on construction I find that the release in this case went only to release the mortgage as a charge. It follows that the release of only that charge on the land did not, without more, also operate to discharge the mortgagor from the personal covenants contained in the mortgage. [132] Counsel for the defendants invoked s 82(2), but that subsection has no application to the present case. Nothing in the instrument of release spoke to releasing the debt or liability in respect of any part of the mortgage. It was confined to releasing the mortgage as a charge on the land. [133] Accordingly, I am of the view that the release of mortgage registered on 16 May 2007 did not also effect a discharge of the personal obligations owed by the first defendant under the mortgage, and in particular did not discharge the personal obligation to pay. It follows that I conclude that the release of the mortgage did not have the effect of releasing or discharging the first defendant from its obligations under the deed of charge. Conclusion [134] Having regard to the way in which the parties‟ arguments were advanced, I think it appropriate to make the following declarations and direction: 1. declare that the first defendant was and is bound by the provisions of the Deed of Fixed and Floating Charge (in the form of the charge forming part of Exhibit GJW-17 to the affidavit of Gregory John Whyte sworn 24 March 2011, save for the definition of “Deed of Guarantee” which is amended by deleting the reference to “the Chargor” and adding the words “excluding the Chargor” after the word “parties” in the second line of the definition); 2. declare that the release of mortgage signed by the plaintiffs on 14 March 2007 and registered in the Titles Office on 16 May 2007 did not have the effect of releasing or discharging the first defendant from its obligations under the said Deed of Fixed and Floating Charge; 3. I will hear the parties with respect to any further or consequential orders as may be appropriate and as to costs. -- 35 of 36 -- 36 -- 36 of 36 --