Equititrust Limited v Willaire Pty Ltd [2012] QSC 206

SUPREME COURT OF QUEENSLAND CITATION: Equititrust Limited v Willaire Pty Ltd [2012] QSC 206 PARTIES: EQUITITRUST LIMITED ACN 061 383 944 (Plaintiff/Applicant) v WILLAIRE PTY LTD ACN 010 437 297 (Defendant/Respondent) FILE NO/S: BS 11273 of 2010 BS 3949 of 2011 DIVISION: Trial Division PROCEEDING: Trial ORIGINATING COURT: Supreme Court DELIVERED ON: 9 August 2012 DELIVERED AT: Brisbane HEARING DATE: 10 – 13 April 2012 JUDGE: Philip McMurdo J ORDER: In 3949 of 2011: 1. On the applicant’s claim, the mortgage numbered 711944444 be rectified by: (a) deleting page three of the schedule to the mortgage; and (b) amending the page numbers in the top right hand corner of pages 1 and 2 of the schedule to the mortgage by changing ‘3’ to ‘2’. 2. The respondent’s counterclaim be dismissed. In 11273 of 2012: 3. The respondent company be wound up. 4. David Lewis Clout be appointed as liquidator of the respondent company. CATCHWORDS: CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS - where the defendant/respondent -- 1 of 25 -- 2 sent a two page mortgage document to the plaintiff/applicant for execution – where the plaintiff/applicant returned the executed document with a third page inserted which had the effect of limiting the liability of the defendant/respondent‟s liability under the mortgage – whether the applicant executed the mortgage under a unilateral mistake which was induced by the conduct of the respondent and its solicitor – whether the mortgage document can be rectified to accord with the objective intention of the parties CORPORATIONS – WINDING UP – WINDING UP IN INSOLVENCY – STATUTORY DEMAND – THE DEMAND – OTHER PROCEDURAL REQUIREMENTS – where the plaintiff/applicant applied to have the defendant/respondent wound up in reliance on a number of events under s 459C of the Corporations Act 2001 (Cth) which it said resulted in a presumption of insolvency - where the plaintiff/applicant served a statutory demand on the defendant/respondent which it failed to comply with - where the plaintiff/applicant was then given leave to also rely on this failure as giving rise to the presumption of insolvency – whether the defendant/respondent company is presumed to be insolvent from an unsatisfied statutory demand if the failure to comply with the demand postdates that filing of the winding up application Corporations Act 2001 (Cth), s 459C, s 459P, s 459Q Trade Practices Act 1974 (Cth), s 87 Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Limited (2008) 232 CLR 314, considered Eroc Pty Ltd v Amalg Resources NL [2003] QSC 074, considered Golden Plantation Pty Ltd v TQM Design and Construct Pty Ltd [2010] NSWSC 1453, considered Leibler v Air New Zealand Ltd [1999] 1 VR 1, considered Masri Apartments Pty Ltd (in liq) and Anor v Perpetual Nominees Pty Ltd [2004] NSWCA 471; (2004) 214 ALR 338, cited Missing Link Network Integration Pty Ltd v Keene Consulting International Pty Ltd [2007] NSWSC 1377, cited Octavo Investments Pty ltd v Knight (1979) 144 CLR 360, cited Pinn v Barroleg Pty Ltd (1997) 23 ACSR 541, cited Sim v Ravenswood Resort Pty Ltd (receivers and managers appointed) [2003] WASC 121, cited Surdex Steel Pty Ltd v GB Manufacturing Pty Ltd [2012] VSC 90, considered Taylor v Johnson (1983) 151 CLR 422, cited Tutt v Doyle (1997) 42 NSWLR 10, considered Willaire Pty Ltd v Equititrust Limited [2010] QCA 350, cited -- 2 of 25 -- 3 Woodgate v Garard Pty Ltd (2010) 78 ACSR 468; [2010] NSWSC 508, considered Meagher RP, Heydon D, Leeming M, „Meagher, Gummow & Lehane‟s Equity Doctrines and Remedies‟ (4th edition), Butterworths, Australia, 2002 COUNSEL: G Handran for the applicant in BS 11273/10 and for the plaintiff in BS 3949/11 M Martin for the respondent in BS 11273/10 and defendant in BS 3949/11 SOLICITORS: Tucker & Cowen for the applicant in 11273/10 and for the plaintiff in 3949/11 QBM Lawyers for the respondent in BS 11273/10 and defendant in BS 3949/11 [1] Equititrust Limited is a money lender which advanced more than $16 million to a property developer called GAMP Developments Pty Ltd (“GAMP”) in 2004-2005. [2] Willaire Pty Ltd (“Willaire”) gave two mortgages to Equititrust as security for GAMP‟s debt. One was a mortgage over a property at Nerang, which was given in April 2008. The other was a mortgage over property at Southport which was given in September 2008. [3] The parties are in dispute as to the effect of these mortgages and some related documents signed by them. Equititrust claims that their effect is that Willaire is in all relevant respects a guarantor for the unpaid portion of the GAMP loan, together with interest. But Willaire says that Equititrust is entitled to no more than recourse against the mortgaged properties and to a limit of $3 million. It denies that it is personally liable to Equititrust. The debt owing by GAMP well exceeds $3 million. In May 2009, Equititrust was given judgment against GAMP for $5,428,226.61. [4] Equititrust has brought two proceedings which, at the request of the parties, were tried together. In one proceeding it claims to have the Southport mortgage rectified, on the basis of a unilateral mistake. Alternatively, it seeks the same relief in consequence of what it says was misleading and deceptive conduct by Willaire. [5] Alternatively again, Equititrust says that the terms of the Southport mortgage must give way to another document, signed at the same time by Willaire, on the true interpretation of which it was a guarantor of the entire indebtedness of GAMP. Willaire disputes that interpretation but says that if it is correct, there should be some rectification in its favour. [6] In the other of the proceedings which were heard together, Equititrust applies to wind up Willaire upon the insolvency ground. Consistently with its argument about its limited liability under the Southport mortgage, Willaire disputes that Equititrust, when making this application for winding up, was anything more than a contingent or prospective creditor which thereby required a grant of leave to make the -- 3 of 25 -- 4 application under s 459P(2) of the Corporations Act 2001 (Cth). It says that leave should be refused. [7] The alleged insolvency of Willaire is also disputed. Equititrust relies upon a failure to comply with a statutory demand. But this occurred after the winding up proceedings were commenced, raising a question to whether this failure can be relied upon by Equititrust. [8] There are further questions as to whether any of the presumptions of insolvency from paragraphs (c), (e) and (f) of s 459C(2) of the Corporations Act apply. There is also an issue of whether, in all the circumstances, Willaire should be wound up. [9] Because the questions in the winding up proceedings are affected by the outcome of the claim and counterclaim in the rectification proceedings, it is convenient to go to that case first. The rectification claims [10] In 2004, GAMP and Equititrust executed a credit facility deed for the terms of a loan by Equititrust of $13.21 million. Mr Spottiswood and Mr Ikin, directors of GAMP, were guarantors. The purpose of the loan was for GAMP to pursue a strata title development in Townsville. [11] By April 2008, the debt had grown to nearly $19 million. GAMP was in default and Equititrust had made demands upon it and the guarantors. It had given a notice of exercise of power of sale over the Townsville property. [12] GAMP sought to postpone the date for repayment by offering further security. Equititrust, through its solicitors, Tucker & Cowen, wrote to the two firms representing respectively the Spottiswood and Ikin interests, setting out a proposal. It was that Equititrust would not exercise any of its rights until 30 April 2008 upon conditions that Mr Ikin cause a mortgage to be granted over property in Mackay and that Willaire, which was controlled by Mr Spottiswood, would grant a mortgage over property which it owned at Nerang. Willaire‟s mortgage was to be a second mortgage ranking behind that registered in favour of the Commonwealth Bank of Australia. Willaire was not then a guarantor or otherwise exposed to the indebtedness of GAMP. It was a term of this proposal that Equititrust would limit its recovery under each mortgage to “$3 million per mortgage (being a total of $6 million)”. [13] Subsequently, Mr Davis (Davis Lawyers) for Mr Spottiswood and Willaire wrote to Tucker & Cowen setting out what was said to be the result of subsequent discussions about this proposal. Equititrust was to delay any enforcement action until 19 May 2008, on condition that “the security offered by Willaire Pty Ltd will be a non-recourse security, in accordance with the attached limitations”. The attachment was a copy of a mortgage which had in fact been signed by Mr Spottiswood for Willaire. It contained a separate page on which this appeared: “The aggregate actual and contingent liability of the Mortgagor under this Mortgage shall be limited as follows: (a) the Mortgagee releases the personal covenant of the Mortgagor to repay the Secured Moneys to the Mortgagee, to the extent that there is a shortfall in the recovery of Secured -- 4 of 25 -- 5 Moneys following the enforcement against Mortgage Property, other than up to the amount of $3,000,000; (b) the Mortgagor has no personal liability to repay the Secured Moneys other than as provided in this special condition; (c) the Mortgagee‟s rights are limited to realizing money from the Mortgaged Property from a sale of the Mortgaged Property or from rents and profits from the Mortgaged property; (d) no assets of the Mortgagor other than its interest in the Mortgaged Property may be claimed by the Mortgagee as a source for payment of the Secured Moneys; (e) the Mortgagee agrees not to exercise its rights under sub- clause (c) of this special clause, until after the date upon which the Mortgagee no longer holds an interest its prime security in Townsville over the self storage sheds, being lots 241 & 242 on SP 184345 and lot 300 on SP 202756; and (f) these provisions prevail over any provisions in standard terms document 709570525.” [14] On 21 April 2008, Tucker & Cowen wrote to Davis Lawyers and Mr Ikin‟s lawyers with a further proposal. Equititrust would refrain from exercising its rights until 19 May 2008, on conditions which included an immediate payment to it of $700,000 and the mortgages over the Mackay and Nerang properties, again upon the basis that Equititrust would limit its recovery under each mortgage to $3 million per mortgage. The letter enclosed drafts of those mortgages for execution and return. Each was relevantly in the same terms, save of course for the parties and the property involved. The “description of debt or liability secured” was within a schedule which referred to a principal sum of $3 million together with interest at certain rates. It incorporated the standard terms of a registered instrument used by Equititrust for its mortgages. [15] Later that day, the respective solicitors discussed that description in the draft mortgage of the secured debt. The result was an amended draft which was sent by Tucker & Cowen that evening. The schedule, in which the “debt or liability secured” had been described, was reworded to the following: “All moneys owing by GAMP Developments Pty Ltd ACN 106 875 147 to the Mortgagee under the Credit Facility Deed dated 22 November 2004 (as varied from time to time) but the liability of the Mortgagor to the Mortgagee under this Mortgage is limited to the amount of $3,000,000.” [16] On the following day, Mr Spottiswood executed that mortgage on behalf of Willaire and caused the required sum of $700,000 to be paid to Equititrust. He also countersigned the letter from Tucker & Cowen of 21 April 2008. The Nerang mortgage was subsequently registered. [17] The mortgage also contained this clause: “6 Covenant/Execution. The Mortgagor covenants with the Mortgagee in terms of the attached schedule and standard -- 5 of 25 -- 6 terms document no 709570525 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.” Those standard terms included a covenant by Willaire to pay “the Money Secured” to Equititrust as agreed between the parties or absent an agreement, upon demand. The term “the Money Secured” was defined to mean the indebtedness of “the Borrower” (relevantly GAMP) to Equititrust. [18] The result of this April 2008 transaction was that Willaire became a guarantor of the GAMP debt and mortgaged its Nerang property to secure that obligation, but with its liability limited to $3 million. This was not a “non-recourse” mortgage: rather, there was a personal covenant to pay Equititrust, subject of course to that cap of $3 million. [19] By August 2008, GAMP remained in default. It had entered into a contract to sell its Townsville property, but at a price which was less than its then debt to Equititrust, which exceeded $19 million. The directors of GAMP asked Equititrust to agree to release its security of the Townsville property upon payment of part of that debt (from the proceeds of sale) and to extend the date for repayment of the balance. In response, Equititrust wrote to them on 28 August 2008, setting out its offer to release its mortgage over the Townsville property and to extend the term of the balance of the loan to 30 September 2009. The offer was upon conditions for the provision of certain security which, relevantly here, was to be not only the “existing second mortgage given by Willaire” (that over the Nerang property), but also what was described as an “Existing First Registered Fixed and Floating Charge over Willaire”. In truth there was no such existing charge. [20] On 16 September 2008, Mr Spottiswood emailed Mr James of Equititrust, saying that he could not offer “a fixed and floating over the trustee company Willaire Pty Ltd”, but that he could offer a second mortgage over a property owned by Willaire at Southport. [21] On the same day, Ms Lough of Equititrust emailed Mr Spottiswood, attaching a draft mortgage over that Southport property. The draft comprised two pages. On the first page there was a covenant by the mortgagor in terms of the registered standard terms document used by Equititrust, as had been used for the Nerang mortgage. To that extent the draft corresponded with the Nerang mortgage. But the second page described the “Principal” in terms which did not provide for the limitation of Willaire‟s liability to $3 million, as was stipulated in the Nerang mortgage. [22] On 18 September 2008, Mr James emailed Mr Davis, attaching another letter of offer. Equititrust proposed to release its security over the Townsville property and extend the date for repayment of the balance until 30 April 2010. The letter provided that the outstanding balance should be secured by, amongst other things, the “Existing Second Mortgage given by Willaire … over … Nerang” and a registered second mortgage to be given by Willaire over the Southport property. Again, nothing was there said about a limit on the amount of Willaire‟s liability. But nor was it suggested that the terms of the Nerang mortgage, which contained that limitation, would be varied. -- 6 of 25 -- 7 [23] Later that day, Mr Spottiswood on behalf of GAMP countersigned that letter to accept the offer. He countersigned also as a guarantor. He did not countersign expressly for Willaire. [24] The Southport mortgage, in the form of the two pages as had been sent by Ms Lough on 16 September, was signed on behalf of Willaire by Mr Spottiswood and dated 18 September 2008. But at that stage, the mortgage was not returned to Equititrust. Late on Friday, 19 September 2008, Mr Davis emailed Equititrust‟s Mr McIvor and Mr James, requesting a reconsideration by Equititrust of the interest rate to apply on the balance of the loan. But he wrote that “regardless of this request, we have instructions to forward the documents to you in there (sic) current form … first thing Monday”. Importantly, he also wrote this: “… I confirm that Alan [Ikin] and Graham [Spottiswood] have both signed the loan facility agreement mortgages and guarantee that your company sent through over yesterday. We have inserted a clause in the loan facility agreement providing that the loan with you may be repaid early without penalty on seven days notice.” That was an unambiguous statement that Mr Spottiswood had executed the documents which had been sent by Equititrust, including the mortgage over the Southport property in its two page form. [25] Another of those documents was described as “Deed of Variation of Credit Facility Deed and Consent by Guarantor”. Willaire was a party to this agreement and was described with others as “The Security Provider”. The Deed provided that the original credit facility agreement would be varied in certain respects, including the extension of the final repayment date to 30 April 2010, and that the relevant security would include: “... (iv) Existing Second Mortgage given by Willaire … over … Nerang …; (v) Registered Second Mortgage given by Willaire … over [the Southport property] …” By cl 6 of the Deed, Willaire covenanted as follows: “(a) IN CONSIDERATION of these presents, the Security Provider HEREBY CONSENTS to the variation of the Principal Security as provided by this deed; and (b) The Security Provider HEREBY COVENANTS AND AGREES with the Lender that the liabilities and obligations of the Security Provider pursuant to the Credit Facility Deed shall also extend and apply to the liabilities and obligations hereunder of the Borrower in the same manner and to the same extent as if the terms and covenants of this Deed had originally been contained in the Principal Security AND nothing herein contained shall abrogate or otherwise detract from the liability of the Security Provider pursuant to the Guarantee or otherwise prejudicially affect any provision contained therein.” -- 7 of 25 -- 8 [26] The introduction of Willaire as one of the group described as “the Security Provider” was awkward, because Willaire had not been one of the entities so described in the Credit Facility Deed, as made in 2004 and varied in 2005 or otherwise a party to it. Thus it was not for Willaire to consent to a variation of the “Principal Security” because Willaire had not been a party to any of those documents. And Willaire, although described in the Deed of Variation as a Security Provider, was not identified also as a guarantor. [27] Significantly, this so-called Deed of Variation provided for no amendment to the terms of the Nerang mortgage and, more specifically, its limitation of Willaire‟s liability to the amount of $3 million. And at least on one view, it confirmed that limitation by referring to it as the “Existing Second Mortgage …”. [28] Clause 2 of the Deed of Variation provided as follows: “2. AFFIRMATION OF AGREEMENTS: The Borrower and the Security Provider HEREBY REAFFIRMS ITS AGREEMENTS AND OBLIGATIONS to the Lender under and pursuant to the Principal Security as are varied by this Deed AND shall duly and punctually pay to the Lender all moneys due, owing and payable under the Principal Security and all securities collateral to the Principal Security at the times and in the manner provided for therein and as amended by this Deed AND shall duly and punctually observe and perform all the covenants, conditions and obligations expressed or implied in the Principal Security or in any security or other instrument now or hereafter expressed to be collateral to the Principal Security AND it is HEREBY DECLARED that each covenant, condition and obligation contained in the Principal Security is to be incorporated in and to form part of this Deed as if each covenant, condition and obligation thereof had been set out in full in this Deed.” Again, this clause provided that the Security Provider would be liable according to its previous “agreements and obligations to the Lender under and pursuant to the Principal Security …”, to which Willaire had not been a party. However, the clause did provide that every covenant, condition and obligation contained in the Principal Security (the 2004 Credit Facility Deed) was to be incorporated in and form part of this Deed as if it had been set out in full within it. In that way, this term could be understood as imposing a liability upon Willaire of a nature and extent which corresponded with that of the original Security Provider. The Credit Facility Deed contained a guarantee by the Security Provider of the payment of all money owing by the borrower (cl 4.7) and an acknowledgement that what was there described as the “Security” charged the relevant property with payment of that money. [29] On the next day, 20 September, Mr McIvor emailed Mr Davis to decline the request for a reduced interest rate. [30] On the morning of 23 September, Mr Spottiswood telephoned Mr Davis. The content of that conversation is, I find, well recorded by this email sent by Mr Davis to Mr Spottiswood at 9.30am on that morning: -- 8 of 25 -- 9 “As discussed a few minutes ago, I confirm that you will come to my office today so that we can finalise the form of the limitation in the new Willaire mortgage being granted to EquitiTrust. I note that you require the limitation to ensure that no assets of Willaire are available to EquitiTrust, other than a maximum of $3 million from the proceeds of a sale of the 2 properties that Willaire owns and no other trusts are involved other than the Flower Shop Unit Trust. See you this afternoon.” At that stage it seems that the settlement of the sale of the Townsville property was expected to occur on that day, 22 September. At or about 1.22pm, Mr Davis emailed Mr McIvor and Mr James, advising that settlement had been tentatively booked for 4.15pm and advising that he would forward “settlement statements and other details to you as soon as they are finalised …”. A few minutes later, Mr Davis sent a further email about some other matters relevant to that settlement. [31] At or about 2.12pm on that day, Mr Davis received an email from a solicitor at Tucker & Cowen. The subject was some documentation which Mr Davis had been sent on 29 August 2008, which was not directly relevant to the terms of the extended facility for GAMP, but was something which, according to the email, had to be attended to before settlement of the sale. [32] At about the same time, Mr James emailed Mr Davis about two matters. The first was the documentation which was being sought by Tucker & Cowen. The other was put by Mr James as follows: “We will need the loan documents back prior to settlement so that we can confirm that they have been executed properly. Are they available now?” By “the loan documents” were meant, as Mr Davis well understood, the documents which had been sent to him in the previous week and which, as noted above and as Mr Davis had written on the previous Friday, had been signed by Mr Spottiswood. [33] Settlement of the sale did not take place on 22 September. On the following day, at about 9.23am, Mr Davis emailed to Tucker & Cowen the documents which they had requested. At about 1.14pm on that day, Mr Davis sent this email to Mr McIvor and Mr James (copied to Mr Spottiswood): “Mark/Tim, Attached are copies of the signed loan agreement and the two new mortgages. I will deliver the originals are (sic) settlement this afternoon.” One of those “new mortgages” was that offered by Mr Ikin. The other was the Southport mortgage to be granted by Willaire. In that respect, what was attached to the email was not only the two page document which had been sent to Mr Davis and signed by Mr Spottiswood for Willaire in the previous week, but also a third page of the mortgage (also signed by Mr Spottiswood) as follows: “All moneys owing by GAMP Developments Pty Ltd ACN 106 875 147 to the Mortgagee under the deed of variation of credit facility deed dated on or about 18 September 2008 (as varied from time to time) but the aggregate actual and contingent liability of the -- 9 of 25 -- 10 Mortgagee under this mortgage and under mortgage 711657015 is limited as follows: (a) $3,000,000 in total; (b) the Mortgagee‟s rights are limited under this Mortgage and under mortgage 711657015 to realizing money from the sale of the Mortgaged Property under this Mortgage and under mortgage 711657015; and (c) no assets of the Mortgagor other than its interest in the Mortgaged Property under this Mortgage and under mortgage 711657015 may be claimed by the Mortgagee as a source for payment of the Secured Moneys. The Mortgagee acknowledges that the Mortgagor is only entering this Mortgage and has entered mortgage 711657015 in its capacity as trustee for the Flower Shop Unit Trust, being instrument no 711198097.” Mortgage 711657015 is the Nerang mortgage. Instrument number 711198097 was the instrument under which Willaire acted as trustee for the so-called Flower Shop Unit Trust and which had been inserted in the Nerang mortgage next to where Willaire was named as the mortgagor. At about 1.42pm on that day, Mr James forwarded that email to Ms Lough. At about 1.51pm, Mr Davis emailed to Mr McIvor and Mr James a copy of the deed of guarantee and indemnity signed by Mr Spottiswood and Mr Ikin. [34] At about 2.16pm, Mr James emailed Mr Davis, saying that Mrs Spottiswood should sign the mortgage as the company secretary of Willaire, as had been indicated on the drafts which had been sent to Mr Davis. He promptly replied, saying that he was arranging for Mrs Spottiswood to sign them. At the same time, as Mr James had requested, he sent an amended page of another of the documents, which was the letter of offer for the extension of the facility. According to that offer, an amount of $12.25 million was to be paid from the proceeds of sale. Mr Davis emailed Mr James and Mr McIvor, at about 2.51pm, saying that the amount which was able to be paid was $11,879,352, and asking for confirmation that settlement could occur on that basis. Mr James emailed Mr Davis at about 4.21pm, agreeing to that amount. [35] Settlement of the sale took place late in the afternoon of 23 September. At about 5.00pm on that day, Mr James signed the Southport mortgage for Equititrust which had been delivered at the settlement. His signature was witnessed by Ms Lough. It was registered on 25 September 2008. [36] What I have related so far is clear from the contemporaneous documents. I go then to the contest in the evidence as to whether certain things were said between the parties which might indicate their true intention as to the extent of Willaire‟s liability. [37] In his affidavit sworn on 22 March 2011, Mr Spottiswood said that there was a conversation with Mr McIvor “on or about 17 September 2008” as to what further securities were required by Equititrust. According to Mr Spottiswood, he said -- 10 of 25 -- 11 words to the effect: “Willaire will give you a mortgage over Southport provided Willaire‟s liability is limited to $3 million on both Nerang and Southport properties and nothing else” and that Mr McIvor had responded “Yes that‟s right”. He said that when the Southport mortgage was provided to Mr Davis, the draft “did not adequately provide for Willaire‟s liability to be limited to a total of $3 million payable from the sale of the Southport and Nerang properties and further that no other assets of Willaire were being exposed”, so that “it was accordingly not acceptable and required amendment”. He said that the terms of the mortgage were thereby amended “to reflect agreed terms and the intention and belief of myself and our solicitor”, being that Equititrust could have no recourse against Willaire other than against the Southport and Nerang properties, and even then limited to $3 million. [38] Mr Davis gave evidence to a substantially similar effect, although with some differences. He said that there was a telephone conversation between Mr Spottiswood and Mr McIvor, which Mr Davis overheard because he and Mr Spottiswood were in Mr Davis‟s office and the speakerphone was being used. Mr Davis said that occasionally he said things during this conversation, but it was mainly a conversation between Mr McIvor and Mr Spottiswood. Mr Davis thought that this conversation was on 16 or perhaps 15 September 2008. His evidence was that Mr Spottiswood said that Willaire was prepared to give a mortgage over the Southport property “but as with the previous mortgage, the liability of Willaire … had to be limited to $3 million, that $3 million being established back in - in April …” (a reference to the Nerang mortgage). He said that Mr McIvor agreed.1 [39] Mr Davis recalled a further conversation, which he said took place on the afternoon of 18 September, in which he telephoned Mr James after receiving the draft documents. His evidence was that he said to Mr James: “Obviously there‟s been a mistake. It doesn‟t have the limitation of liability clause in it. I‟ll prepare it and I‟ll send it over for your - or approval of - yeah, for your approval”. He said that Mr James responded “That‟s fine” and words to the effect that when it had been prepared, he should “send it through, and if we‟ve got any problems with it we‟ll let you know”.2 [40] Mr McIvor‟s evidence was that he did not say what was related by Mr Spottiswood in his affidavit. The somewhat different evidence of Mr Davis, that there was a conversation on about 16 September between Mr McIvor and Mr Spottiswood to which Mr Davis was also a party, in which this limitation was discussed, was not put to Mr McIvor. Although it is clear that Mr McIvor disputed any conversation about a monetary limit, preceding the September transaction, it can be said (in Willaire‟s favour) that on Mr McIvor‟s evidence, it was not expressly stipulated that what had been the monetary limit of $3 million, from the terms of the Nerang mortgage, would have to be removed. [41] Mr James no longer works for Equititrust and attended in response to a subpoena. He could recall a conversation in April 2008 about the Nerang mortgage and limiting Willaire‟s liability under it. In particular, he recalled suggesting then that Mr Davis should draft a clause and send it over and that he would have Tucker & Cowen review it. The fact of such a conversation is supported by the 1 T 3-7. 2 T 3-8, 9. -- 11 of 25 -- 12 contemporaneous documents of April 2008. But he did not recall such a conversation for the September transaction. He said that he looked at the documents which had been emailed to him on 23 September by Mr Davis, but he did not notice that the third page had been added. He said it was Ms Lough who had pointed out that Mrs Spottiswood had not signed the mortgage. It was also Ms Lough who attended on the settlement and there collected the original documents from Mr Davis. When she returned to the office, he signed for Equititrust without considering them further. Equititrust tendered an affidavit by Ms Lough, who was not required for cross-examination, in which she said that she did not notice that the third page had been added to the mortgage which she had prepared and which Mr James had sent to Mr Davis. [42] Mr James said that Tucker & Cowen brought the third page to his attention at some time after 27 July 2010. Mr McIvor said that he did not know of the third page until then. That timing is relevant because of the documents which passed between Tucker & Cowen and Willaire‟s then solicitors in and about July 2010. [43] Equititrust was then threatening to appoint receivers to Willaire and had given a notice of exercise of power of sale over the Nerang property. On 15 July 2010, Nyst Lawyers (for Willaire) inquired as to the basis on which Equititrust said that Willaire‟s security “extends above and beyond the amount of $3 million”. On 19 July, they wrote to Tucker & Cowen, inquiring as to how Willaire‟s liability was not limited to $3 million and to the Nerang property. They renewed that query on 22 July. [44] At that time, Tucker & Cowen were preparing a statutory demand with an affidavit in support, to be served upon Willaire. Drafts were sent by Mr Davey to Mr Kennedy of Equititrust on 26 July. Mr Davey there wrote that: “The Willaire stat demand is only for $3,000,000 without interest to try and avoid any dispute (genuine or otherwise) about the $3m cap on Willaire‟s liability. We can always issue another demand later for the balance.” [45] On the same day, Tucker & Cowen wrote to Nyst Lawyers in these terms: “In relation to the liability on the part of Willaire Pty Ltd, it is clear that the security for that liability is not limited to the real property at Cotton Street, Nerang because our client is also the registered mortgagee of the property at Scarborough Street, Southport. Both mortgages expressly state that they secure the moneys owing by GAMP Developments Pty Ltd. As to the alleged $3,000,000 cap on liability, we are instructed that it is unlikely that there is a $3,000,000 equity in the two mortgaged properties, thus making any dispute about the $3,000,000 cap an academic exercise, and in circumstances where your client does not appear to contend that they have already paid $3,000,000 and thus reached the alleged cap, it is one which will only serve to waste each party‟s time and money.” [46] On 29 July 2010, the statutory demand was served on Willaire by Equititrust. The supporting affidavit, made by Equititrust‟s Mr Kennedy, said that the $3 million was claimed as the amount owed by Willaire pursuant to the Credit Facility Deed -- 12 of 25 -- 13 dated 22 November 2004 and “owing by the Debtor Company pursuant to a Deed of Variation dated 19 September 2008”. [47] By a deed dated 23 September 2010, Equititrust appointed, or purported to appoint, receivers to the Nerang and Southport properties. The deed of appointment contained a recital as follows: “I pursuant to the terms of the Mortgages and the [Credit Facility Deed … dated 22 November 2004 as varied …], the Mortgagor was required to repay the Debt, capped at an amount of $3,000,000 on or before 30 April 2010.” (emphasis added) The deed of appointment of receivers was executed by Mr McIvor for Equititrust. In his evidence, he said that he did not read it before signing it and simply relied upon its preparation by the company‟s solicitors. Mr McIvor is a qualified lawyer. [48] Willaire applied to set aside the statutory demand. It was unsuccessful before the primary judge but succeeded upon its appeal.3 The Court concluded that in the context of an application to set aside a statutory demand, there was “a basis for an argument concluding that the intention of the parties at the time of the Deed of Variation and the Southport mortgage were executed was that the former operate subject to the latter”, so that Equititrust could have recourse only against the mortgaged property according to the mortgage.4 Muir JA, with whom the other members of the Court agreed, noted that “the respondent (Equititrust) accepted that the $3,000,000 limit upon the appellant‟s liability applies”. That acceptance was evident on the face of the statutory demand and its supporting affidavit. The evidence in that proceeding was not as extensive as in the present case, and it would appear that the Court was not taken to any question as to whether the Southport mortgage was executed by Equititrust under a mistake about its third page. [49] This conduct of Equititrust, in the framing of its statutory demand and in the terms of its deed of appointment of receivers, is clearly relevant to the question of what was the intention, subjectively speaking, of Equititrust on 23 September 2008 when it executed this mortgage. For Willaire, it is argued that this subsequent conduct is relevant in two ways. The first is that it involved several acknowledgments by Equititrust of a limitation upon Willaire‟s liability to the amount of $3 million. The second is that at that point there was no protest about the addition of the third page of the mortgage, that is to say there was no claim that Equititrust had been tricked by this page being inserted without its attention being drawn to it at the time. But as to the first point, the documents must also be read with the correspondence to which I have referred, which did not concede that there was a limitation of $3 million. As to the second point, Mr James said that he became aware of the third page only after this, when told of it by Tucker & Cowen. [50] I return to the controversy about whether the parties discussed any limitation which was to apply to the Southport mortgage. In my conclusion, they did not discuss any limitation to the effect that Equititrust could have recourse only to the mortgaged property. It is not as unlikely that they said something to each other about a monetary limit of $3 million. But in my conclusion, more probably than not this 3 Willaire Pty Ltd v Equititrust Limited [2010] QCA 350. 4 [2010] QCA 350 at [32]. -- 13 of 25 -- 14 monetary limit was not discussed either. The reasons for those conclusions are as follows. [51] The suggested conversation with Mr McIvor, according to either the evidence of Mr Spottiswood or that of Mr Davis, occurred very shortly before Equititrust prepared the relevant documents and sent them to Mr Davis. Had these limitations been discussed with and agreed by Mr McIvor, it is unlikely that they would have been overlooked almost immediately when the documents were prepared. [52] The circumstances in which this September transaction was made strongly indicate the unlikelihood of an agreement by Equititrust to limit its recourse to the mortgaged properties. What occurred in the April transaction is important here. In that transaction, Mr Davis had proposed that the Nerang mortgage be “non-recourse” in that sense. But that was specifically rejected by Equititrust. Come September, the bargaining positions of the parties had hardly shifted in favour of Willaire. Equititrust was demanding the provision of additional security, rather than agreeing to give up its right to recover from Willaire by taking steps which went beyond the mortgaged property. By the agreement which Willaire says was made in September 2008, Equititrust went from a position whereby it could recover up to $3 million from Willaire, from the Nerang property or otherwise, to one under which it could recover no more than that amount and limited to the Nerang property and the Southport property. There is no indication that the Southport mortgage was particularly valuable, such that Equititrust was likely to have compromised its position from the April transaction in order to obtain it. [53] Thirdly, there is the fact that, as I find, Willaire did not protest to Equititrust about the terms of the draft documents. In making that finding, I reject the evidence of Mr Davis that he did make such an objection to Mr James. The suggestion that there was such a conversation with Mr James on 18 September 2008 seems irreconcilable with the fact that, at about 7.18pm on 19 September 2008, Mr Davis emailed Mr McIvor informing him that the documents as drafted and submitted by Equititrust had been signed by Mr Spottiswood and Mr Ikin. In that email, Mr Davis referred to a clause which he had inserted in the “loan facility agreement”. He made no reference to any clause which he had inserted in the Southport mortgage. And as is clear from his email of 22 September 2008 to Mr Spottiswood, Mr Davis had not drafted a clause to be added to the mortgage at the time at which he advised Mr McIvor that it had been executed. In truth, the document in its two page form had been executed by Mr Spottiswood for Willaire which is why it was dated 18 September 2008. Mr Davis could not explain satisfactorily why he had caused Mr Spottiswood to execute the mortgage, and why he had advised Mr McIvor of this execution, without making any amendment to the draft which had been sent to him. He suggested that it was convenient to have the mortgage signed at that point, although it required amendment. This is very unlikely. Not only would the amended document have required some further signature by Mr Spottiswood (if Mr Davis was to comply with proper practice and having regard to the fact that he had witnessed Mr Spottiswood‟s signature) but also Mr Spottiswood had to return to his office anyway, because he was still to sign the letter of offer, as guarantor, and the deed of variation. [54] Mr Davis claimed that in this conversation he had told Mr James that he would draft the additional clause and send it to him for his consideration. But that is not what Mr Davis did. Instead, he included the new page within the mortgage which he -- 14 of 25 -- 15 attached to his email on the afternoon of 23 September, without in any way drawing attention to it. That omission was all the more serious for the fact that Mr Davis had advised Mr McIvor on 19 September that the documents, including the mortgage, had been executed. [55] Most probably, on or shortly before Monday, 22 September, Mr Spottiswood adverted to the fact that the documents which had been prepared by Equititrust for the September transaction did not limit Willaire‟s liability as he believed it should be limited. He then raised that with Mr Davis, who thought that the omission could be rectified, in the interests of Willaire, by drafting and including the third page of the mortgage. In doing so, Mr Davis seems to have overlooked the tension which would exist between the redrafted Southport mortgage, the (unchanged) Nerang mortgage (which was not non-recourse) and the Deed of Variation to the Credit Facility Deed (which, on one view, did not limit Willaire‟s liability in either way). [56] Now it can be said that Mr Davis did not wait until the settlement itself to produce to Equititrust the mortgage in its three page form. He did attach the mortgage in that form to his email earlier on the afternoon of 23 September. But he did so only after Mr James had emailed him, saying that Equititrust needed the loan documents back prior to settlement to confirm that they had been executed properly. Having advised on the previous Friday that the documents had been executed, he could not have withheld them any longer. [57] When Mr Spottiswood raised the matter of the limitation of liability with Mr Davis on 22 September, and in turn when they responded by the addition of the third page, what did they believe was the true intention of Equititrust? One possibility is that they believed that Equititrust was deliberately intent upon making Willaire‟s liability unlimited having adverted to the limitation from the terms of the Nerang mortgage. Another is that they thought that Equititrust had simply not adverted to the limitation from the Nerang mortgage. The latter is more probable. Rejecting as I have the evidence of Mr Spottiswood and Mr Davis about their suggested conversations with Mr McIvor and Mr James, I find that there was no discussion between the parties as to the specific matter of any limitation of liability. That is indicated by the contemporaneous documents. In its letters of 28 August and 18 September 2008, Equititrust required security in the form of the “existing second mortgage given by Willaire … over Nerang”. Had Equititrust adverted to the point and insisted upon Willaire‟s liability becoming unlimited, it would have referred to that matter specifically in its correspondence and provided for an amendment of the terms of the Nerang mortgage. [58] I infer then that Equititrust simply did not advert to the question when negotiating and entering into the September transaction and that this was the understanding of Mr Spottiswood and Mr Davis about Equititrust‟s state of mind. When they prepared and enclosed the third page of the Southport mortgage, they decided not to raise the point, lest it interfered with the settlement of the sale or brought a response from Equititrust which did insist upon the liability of Willaire being in all respects unlimited. [59] Equititrust seeks rectification of the Southport mortgage, by the deletion of page three, upon the basis of its unilateral mistake. Alternatively, it seeks the same outcome by an order under s 87 of the Trade Practices Act 1974 (Cth) (the TPA), because if page three remains it could suffer a loss which would derive from -- 15 of 25 -- 16 Willaire‟s contravention of s 52 of that Act by misleading or deceiving Equititrust as to the content of the documents. Equititrust also argued, in the alternative, for a construction of the documents by which the Southport mortgage would not limit Willaire‟s indebtedness under the Credit Facility Deed. If that third argument is correct, there would be no cause for rectification or an order under s 87. It is therefore necessary to consider it first. [60] As I have noted, if read alone cl 2 of the Deed of Variation was in terms which imposed a liability upon Willaire which, having regard to other terms of that deed, would be unlimited. In essence, the question is whether Willaire‟s covenant within that deed is subject to the limitations expressed in the third page of the mortgage. Equititrust argues that it is not, because the source of the indebtedness of Willaire to Equititrust is the deed rather than the mortgage, and the limitations apply only to the enforcement of the mortgage without affecting the state of the indebtedness. [61] Notwithstanding the terms of cl 2 of the Deed of Variation, Willaire was not made liable under the expressed basis of a guarantee. It was a party to the deed as a so- called security provider. That security included the Southport mortgage. This fortifies the basis for reading the deed with the relevant securities. Clause 11 of the deed provided that if there was any inconsistency between its provisions and those of the Principal Security, then the provisions of the deed should prevail to the extent of such inconsistency. But the Southport mortgage was not within the description “the Principal Security”, which instead was defined to mean the (original) Credit Facility Deed and the various letters identified in Schedule 4 of the deed, which relevantly included the letter of offer dated 18 September 2008. [62] The letter of offer described the Nerang and Southport mortgages as given by Willaire “as trustee under instrument 710959015”. But the specification of Willaire as such a trustee would not mean that its exposure to liability would be limited to the value of the assets of that trust. Although holding and mortgaging the properties as a trustee, Willaire was exposed to a liability beyond the extent of funds of the relevant trust (from which it could be indemnified for its liability to Equititrust) unless that liability was expressly limited to the extent of those funds.5 [63] Relevant to this question also is cl 4(d) of the Deed of Variation which provided as follows: “As further security the Borrower and Security Provider hereby charges (by execution of this deed as beneficial owner) all freehold and leasehold interest in any land(s) (or any part thereof) which the Borrower and Security provider may now have or during the currency of the securities may acquire and the Borrower and Security Provider further agrees that the Mortgagee may require execution by the Borrower and/or Security Provider of such form of additional security containing the same terms and conditions as the Mortgage referred to in the Schedule hereto. The Mortgagee shall in addition have the right to lodge a Caveat over any real and/or personal property of the Borrower or Security Provider howsoever held and the Borrower and Security Provider hereby (by execution of this deed) agrees and acknowledges that this Deed creates in favour of 5 Octavo Investments Pty ltd v Knight (1979) 144 CLR 360 at 367. -- 16 of 25 -- 17 the Mortgagee a Caveatable interest in respect of any Real Property of the Guarantor howsoever held.” Importantly, the further security which might follow from that clause was to be upon “the same terms and conditions as the Mortgage referred to in the Schedule hereto”, which in Willaire‟s case, would have required reference to the limitation within the Nerang mortgage. This makes it more difficult for Equititrust to contend that the Deed of Variation provided for an unlimited liability of Willaire for the indebtedness of GAMP. [64] Upon an objective view, the parties intended that their relationship be defined by all of the documents which they signed and delivered for their September transaction. The documents must be read together, especially as Willaire was a party to the deed by reason of the mortgages which it was providing. Objectively the parties did not agree that the specific provisions of the third page of the Nerang mortgage should give way to the general terms of cl 2 of the Deed of Variation. [65] Going to that third page, it can be said, in Equititrust‟s favour, that the clause commenced with a limitation which was expressed to be “under this mortgage and under [the Nerang] mortgage …”. The specific limitations which were specified in (a), (b) and (c) then followed. In (b), what was restricted was “the Mortgagee‟s rights … under this Mortgage and under [the Nerang] mortgage …”. But then there was the limitation in (c), by which no assets of Willaire, other than its interests in the property the subject of the mortgages, might be “claimed by the Mortgagee as a source for payment of the Secured Moneys”. On its face, that limitation would preclude the recovery of a judgment debt by recourse to other property of Willaire. Equititrust would argue that this would affect its remedies only insofar as it sought to exercise its rights under either of the mortgages. But in seeking to use other assets, which were not mortgaged, to recover its debt, it would not be seeking to enforce the mortgages. In my view, the limitation in (c) should be understood, upon an objective view, as expressing the intention that beyond the Nerang and Southport properties, Willaire would not be liable at all and that the specific and critical limitation upon the liability of Willaire was intended to govern the relationship between these parties, notwithstanding the more general terms of cl 2 of the Deed of Variation. To limit that limitation to Equititrust‟s rights as a mortgagee would deprive the provision of any effect. [66] It follows that I do not accept the alternative argument for Equititrust that absent any rectification, the liability of Willaire is relevantly unlimited. It is necessary then to consider the claims for rectification and under s 87. [67] As to rectification, I have found that Equititrust did not advert to the question of a limitation of Willaire‟s liability. I infer that the relevant minds within Equititrust, which I would identify as those of Mr McIvor and Mr James, simply assumed that Willaire‟s liability would be unlimited when they put the offer to vary the terms of the facility and it was apparently accepted by Friday, 18 September. I have found that Mr Spottiswood and Mr Davis understood that this was Equititrust‟s state of mind. [68] When Mr Davis attached the mortgage to his email on the afternoon of 23 September to Mr James, he must have anticipated that the insertion of the third page might be identified by Equititrust prior to the settlement. But in his mind, that -- 17 of 25 -- 18 would not have been inevitable, which is why he did not draw attention to the amendment, as a practising solicitor would be expected to do. Nothing was then said or written on behalf of Equititrust to indicate that it was alert to the addition of the third page of the mortgage and that it agreed to it. That is likely to have made Mr Davis and his client believe that the insertion of page three had gone unnoticed, rather than thinking that Equititrust had agreed to the amendment. I infer that when this transaction was completed on 23 September, Willaire through Mr Spottiswood and Mr Davis thought that more probably than not, Equititrust had not noticed the inserted page three, but had proceeded under a mistake that the mortgage which had been signed and returned was in the form in which it had been sent to Mr Davis in the previous week. [69] I find that Equititrust did complete the transaction and execute the mortgage under that mistake, which was induced by the conduct of Willaire and its solicitor. The conduct consisted of the representation that the two page mortgage had been signed and the subsequent provision of a signed mortgage without correcting the impression that what was being returned was what had been sent to Willaire. Willaire by Mr Davis and Mr Spottiswood must have appreciated that from what it had been told and then from what it had not been told, Equititrust was mistaken. [70] These facts provide the jurisdiction to rectify the Southport mortgage upon the basis of Equititrust‟s unilateral mistake. The first exception to the general rule that rectification is not permitted for unilateral mistake is that it can be granted when the party which is not mistaken is guilty of fraud, whether actual, constructive or equitable.6 Some of the cases have discussed the state of mind which is required of the party against whom rectification was sought, suggesting that something less than actual knowledge of the plaintiff‟s mistake could be sufficient. An example is the judgment of Handley JA in Tutt v Doyle, where after setting out a passage from the majority judgment in Taylor v Johnson,7 his Honour continued: “However the majority also endorsed wider principles which entitle a court of equity to grant relief for unilateral mistake in cases not covered by this principle. They approved (at 431) the statement by James LJ in Torrance v Bolton (1872) LR 8 Ch App 118 at 124, that the power to set aside a contract for unilateral mistake was based on the ordinary jurisdiction of equity „to deal with‟ any instrument or other transaction „in which the court is of the opinion that it is unconscientious for a person to avail himself of the legal advantage which he has obtained‟. They also approved the decisions in Riverlate Properties Ltd v Paul [1975] Ch 133 at 145 and Thomas Bates & Son Ltd v Wyndham’s (Lingerie) Ltd [1981] 1 WLR 505 at 514-516; [1981] 1 All ER 1077 at 1085-1086, where rectification, and not rescission, was granted on this ground. They noted (at 432) that in the United States and Canada: „… the rule that relief from contractual obligations on the ground of unilateral mistake will be granted where 6 Meagher RP, Heydon D, Leeming M, „Meagher, Gummow & Lehane‟s Equity Doctrines and Remedies‟ (4th edition), Butterworths, Australia, 2002 at [26-075]. 7 (1983) 151 CLR 422 at 432-433. -- 18 of 25 -- 19 enforcement of the contract would be unconscionable is well established.‟ In those jurisdictions relief is available where one party „knows that the other party … might well be mistaken‟ or „had reason to know of‟ the other‟s mistake (at 432). The Doyles‟ claim was „a mere equity‟ and not an equitable estate or interest in the land: see Latec Investments Ltd v Hotel Terrigal Pty Ltd (In Liq) (1965) 113 CLR 265 at 277-278, per Kitto J. Accordingly they bore the onus of establishing that the Tutts knew, or had reason to know, that the Doyles were, or might well be, mistaken. The Tutts were not required to establish that they were bona fide purchasers for value without notice of the Doyles‟ mistake.”8 [71] In Eroc Pty Ltd v Amalg Resources NL,9 Muir J reviewed many of the authorities, including Tutt v Doyle, before saying that: “[49] The requirement that the non-mistaken party‟s conduct, in order to provide a basis for relief, must be unconscionable or inequitable has long had general acceptance. [50] The notion that in some circumstances, mere standing by with knowledge of the other parties‟ mistake may constitute unconscionable or inequitable conduct founding a basis for equitable relief, also finds considerable support in the authorities. So too does the conclusion that something less than actual knowledge of the mistake may suffice. …” Muir J also cited the judgment of Kenny JA in Leibler v Air New Zealand Ltd10 and in particular the statement by her Honour that: “In some circumstances … it may be enough that the non-mistaken party chooses to leave the mistaken party under the misapprehension in executing the agreements.”11 [72] Therefore if Willaire did not know for a fact, but believed that it was likely that Equititrust had completed the transaction and executed the mortgage under the mistake that the mortgage was in the form which it had drafted, that uncertainty is not fatal to Equititrust‟s claim for rectification. On my findings, the conduct of Willaire through its solicitor‟s conduct with the knowledge, I infer, of Mr Spottiswood, was unconscionable in its deliberate omission of any reference to the alteration to the document especially in the context of what had been said about its execution. [73] The particular rectification sought by Equititrust is the deletion of page three of the schedule and an incidental change to its pagination. The consequence of that would be to remove any limitation upon Willaire‟s liability. There would still be the express limitation within the Nerang mortgage. But as was conceded by counsel for 8 (1997) 42 NSWLR 10 at 14-15. 9 [2003] QSC 074. 10 [1999] 1 VR 1. 11 [1999] 1 VR 1 at 26. -- 19 of 25 -- 20 the plaintiff, the practical result would be to make Willaire‟s liability unlimited. It was submitted that this was the appropriate relief because this would make all of the documents then accord with the basis upon which the parties negotiated the September 2008 transaction and with the belief of Equititrust as to its effect. [74] I have found that Equititrust proceeded upon the premise that Willaire‟s liability was unlimited, although it did not specifically advert to the change from the limited liability under the Nerang mortgage. Willaire believed that probably Equititrust was proceeding upon that premise when completing the transaction. In turn, Willaire represented that it was agreeing to the transaction upon the same premise. Having established a case for some rectification of the document, I do not see that it is appropriate to go further than the deletion of the third page, and in particular, to add other words to impose the same limitation as was expressed in the Nerang mortgage. To do so would make the document consistent with neither of the respective understandings of the two sides about its effect. And it is far from established that had Equititrust adverted to the question of whether Willaire‟s liability should be limited still in terms of the Nerang mortgage, Equititrust would have so agreed. It was, after all, then seeking an improvement in the value of the security which it held from Willaire. [75] The rectification of the Southport mortgage by the deletion of the third page might be thought to result in some tension between it and the Nerang mortgage. However, the limitation expressed in the Nerang mortgage was as to the liability of the mortgagor “under this mortgage”. If the point is of any practical relevance, the limitation in the Nerang mortgage would continue to preclude the recovery of more than $3 million from the Nerang property. Therefore, the two documents could be reconciled. [76] I conclude that there should be an order for rectification by deleting page three of the schedule to the mortgage which is numbered 711944444 and by amending the page numbers in the top right hand corner of pages 1 and 2 of the schedule to the mortgage by changing “3” to “2”. [77] It is unnecessary then to consider the alternative case brought under s 87 of the TPA. However, should it become relevant, I should say that upon my findings, Willaire engaged in conduct in contravention of s 52. It misled Equititrust by making it believe that it had executed and delivered a mortgage in the form in which it had been sent to Willaire for execution. That contravention is established by reference to the same conduct of Willaire upon which the rectification claim is founded, but without the necessity of the element of unconscionability which I have found for the equitable claim. As to the appropriate relief for that conduct, I would have been satisfied that there was at least a risk of loss or damage by reason of that contravention for it to be appropriate for relief to be granted under s 87 in the same terms as the order for rectification. [78] It follows that Willaire‟s counterclaim, which was for rectification to ensure that its liability was non recourse and limited to $3 million, must be dismissed. Winding up application [79] The outcome upon the rectification proceedings is that Equititrust is to be treated as a creditor which is entitled to apply for the winding up of Willaire in insolvency under s 459P(1) of the Corporations Act, without requiring the leave of the Court -- 20 of 25 -- 21 under s 459P(2). Had I reached a different conclusion on the rectification and s 87 claims, Equititrust would have been a contingent or prospective creditor requiring that leave. It is unnecessary for a contingent or prospective creditor to seek leave at the outset of winding up proceedings. Leave can be sought at the hearing of the winding up application.12 Leave could not have been granted without a prima facie case that the company is insolvent: s 459P(3). As appears from the discussion below, the company is presumed to be insolvent and there is no evidence to rebut the presumption. Had leave been necessary, that requirement would have been satisfied. [80] I turn then to the question of insolvency. When this application for winding up was filed, it relied upon events which were said to result in a presumption of insolvency according to s 459C(2)(c), (e) and (f). Equititrust relied upon its own appointment of receivers, to which I have referred above at [47]. It also relied upon an appointment by the Commonwealth Bank of receivers and managers, which was made only a few days before the application was filed. It did not rely upon any failure to comply with a statutory demand. At the time of the filing of the application, its then demand had been upheld by the primary judge and Willaire‟s appeal was yet to be heard. [81] Subsequently, it served another statutory demand upon Willaire (for unpaid costs which had been ordered against Willaire). Willaire applied to set it aside. It was varied by an order made on 31 January 2012, with the effect that compliance with the demand was required by 7 February 2012. Willaire failed to comply with that demand. Equititrust was given leave to amend this application to rely also upon that failure as giving rise to a presumption of insolvency. That leave was granted without determining the question which must now be considered, which is whether the company is presumed to be insolvent from an unsatisfied statutory demand if the failure to comply with the demand postdates the filing of the winding up application. [82] Section 459C applies for the purposes of, amongst other things, an application to wind up under s 459P (as here) and an application for leave to make an application under s 459P(2). Section 459C(2) provides as follows: “459C(2) The Court must presume that the company is insolvent if, during or after the 3 months ending on the day when the application was made: (a) the company failed (as defined by section 459F) to comply with a statutory demand; or (b) execution or other process issued on a judgment, decree or order of an Australian court in favour of a creditor of the company was returned wholly or partly unsatisfied; or (c) a receiver, or receiver and manager, of property of the company was appointed under a power contained in an instrument relating to a circulating security interest on such property; or 12 Masri Apartments Pty Ltd (in liq) and Anor v Perpetual Nominees Pty Ltd [2004] NSWCA 471 at [52]; (2004) 214 ALR 338 at 347. -- 21 of 25 -- 22 (d) an order was made for the appointment of such a receiver, or receiver and manager, for the purpose of enforcing such a security interest; or (e) a person entered into possession, or assumed control of such property for such a purpose; or (f) a person was appointed so to enter into possession or assume control (whether as agent for the secured party or for the company).” By s 459C(3) that presumption of insolvency operates except so far as the contrary is proved for the purposes of the application. [83] Within paragraphs (a) through (f), several events are described as giving rise to the presumption. Those paragraphs are preceded within the subsection by the words which require the Court to presume the insolvency of the company if the relevant event occurred “during or after the 3 months ending on the day when the application was made”. On the face of this provision, that same qualification as to timing of the event applies to each of the events specified within paragraphs (a) through (f). The event must occur during the three months ending on the day when the application is made or after that period. The words “or after” would seem to unambiguously permit an applicant to rely upon an event although it occurs after the application is made. In at least four decisions, it has been said that an applicant may rely upon a failure to comply with a statutory demand which postdated the commencement of the winding up proceedings. They are Pinn v Barroleg Pty Ltd;13 Sim v Ravenswood Resort Pty Ltd (receivers and managers appointed);14 Missing Link Network Integration Pty Ltd v Keene Consulting International Pty Ltd15 and Golden Plantation Pty Ltd v TQM Design and Construct Pty Ltd,16 although in that last decision, a qualification was added by Barrett J to which I will return. [84] The first three of those cases were not followed by Palmer J in his judgment in Woodgate v Garard Pty Ltd.17 The fourth case, Golden Plantation v TQM Design and Construct, was decided after his judgment. In obiter dicta, Palmer J interpreted s 459C(2) as meaning that although any of the events in paragraphs (b) through (f) might be relied upon if they occurred after the making of the application to wind up, but the event within (a), that is to say a failure to comply with a statutory demand, would not be relevant if it occurred after the winding up application was filed.18 He reached that conclusion effectively because of the requirements of s 459Q. It provides that if an application for a company to be wound up in insolvency relies upon a failure to comply with the statutory demand, the application must set out particulars of service of the demand and of the failure to comply with it, and have attached to it a copy of the demand, any order varying the demand and an affidavit which verifies the relevant debt. As he observed, it would be impossible to comply with s 459Q if the application when filed relied upon a failure to comply with the statutory demand, which was then an anticipated but not yet an actual failure. He 13 (1997) 23 ACSR 541. 14 [2003] WASC 121. 15 [2007] NSWSC 1377. 16 [2010] NSWSC 1453. 17 (2010) 78 ACSR 468; [2010] NSWSC 508. 18 (2010) 78 ACSR 468 at 485-486; [2010] NSWSC 508 at [85]. -- 22 of 25 -- 23 observed that in those three cases, the relevance of s 459Q seemed to have been overlooked. [85] In Golden Plantation v TQM Design, Barrett J agreed with that analysis by Palmer J but added this: “As Palmer J also observed, a presumption of insolvency arising under s 459C(2)(a) from failure to comply with the statutory demand after filing of the winding up application is, however, available to the plaintiff in cases where the winding up application, when filed, is based otherwise than on such a failure.”19 With respect, I am unable to identify that observation in the judgment of Palmer J. Still, Golden Plantation v TQM Design is an authority supporting this application by Equititrust, because when filed this application relied upon other events as giving rise to the presumption of insolvency. [86] In a recent decision in the Supreme Court of Victoria, Surdex Steel Pty Ltd v GB Manufacturing Pty Ltd,20 Gardiner AsJ preferred the analysis of Palmer J in Woodgate (which was said to be supported by Golden Plantation Pty Ltd v TQM Design) to that in Pinn v Barrowleg and Missing Link Network Integration Pty Ltd. But that judgment did not deal with the circumstance here, where there were other events which were relied upon within the application as filed. [87] In my opinion, the failure to comply with this statutory demand is within s 459C(2)(a) and requires a presumption of Willaire‟s insolvency. The first reason is that there is no authority for the proposition that in a case such as this, where the application is filed originally upon other events giving rise to the presumption, a subsequent failure to comply with the statutory demand must be disregarded. I agree with Barrett J that the effect of s 459Q is to make it “impermissible to file an originating process on (the basis of non-compliance with a statutory demand) until the failure has occurred and particulars of it can be stated”, but that s 459Q does not preclude a reliance upon a failure to comply with a demand which occurs after an application is duly commenced.21 [88] Secondly, to disregard this statutory demand would be inconsistent with the obiter dicta of the majority judgment (Gleeson CJ, Hayne, Crennan and Kiefel JJ) in Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Limited, as follows: “[21] The temporal focus of s 459C is upon a period which commences three months before the date of the application for winding up, but the period does not terminate upon the date on which the winding up application commences. The question for a Court is whether any of the identified events has occurred at any time after the commencement of the relevant period. The Act does not require any further consideration of whether the event persists at the date of the application for winding up. [22] If one of the specified events has occurred at any time during the identified period, the Court must presume that the 19 [2010] NSWSC 1453 at [31]. 20 [2012] VSC 90. 21 [2010] NSWSC 1453 at [31]. -- 23 of 25 -- 24 company is insolvent. But the presumption may be rebutted. Section 459C(3) provides that: „A presumption for which this section provides operates except so far as the contrary is proved for the purposes of the application.”22 That passage followed immediately after a description of the several circumstances giving rise to a presumption of insolvency within s 459C(2). The event within s 459C(2) there was a failure to comply with the statutory demand, although that case was not concerned with the present question. Therefore the passage which I have extracted is clearly referable to an event within s 459C(2)(a) as it is to others within s 459C(2). [89] That passage was not considered in Woodgate v Garard. It was considered in Surdex Steel Pty Ltd v GB Manufacturing Pty Ltd, but it was said to be of no relevance because it did not consider the specific question which arose for consideration there. With respect, such a statement within a majority judgment of the High Court is relevant to the present question, although that was not the question before the Court. The statement is an authoritative indication of the need to interpret this provision according to its unambiguous terms. [90] In a case such as the present, the result is thereby one which accords with the evident object of Part 5.4, which is that insolvent companies ought to be wound up. A failure to comply with a statutory demand should be more telling for being more recent at the time of the hearing. To exclude such an event would be anomalous. [91] Once that question is resolved in favour of Equititrust, it follows that Willaire is proved to be insolvent. The presumption of insolvency must be made and there is no evidence to rebut it. [92] It is unnecessary then to consider the alternative events relied upon for the presumption, but something should be said about them. The appointment by the Commonwealth Bank was of receivers and managers over certain real property. The notice of appointment described that property as being that within title reference 14919209 and that having title reference 50773532. The former was the Southport property. The latter reference was to the Nerang property.23 The question was whether this was an appointment under a power contained in an instrument relating to a floating charge (now a circulating security interest) on such property. Under the equitable mortgage given to the bank, Willaire charged “the mortgaged property” (cl 2), which was defined by cl 3 to mean: “… all and singular the undertaking and property of the Mortgagor and all its assets whatsoever and wheresoever both present and future including its uncalled capital for the time being AND all and singular the undertaking property and all the assets whatsoever and wheresoever both present and future held by the Mortgagor as trustee of the Flower Shop Unit Trust …” By cl 6, the charge was to operate as a fixed charge as regards “all present and future real and leasehold property …” as well as certain other property to be a 22 (2008) 232 CLR 314 at 326. 23 That was originally within two title references 13060012 and 17175168 which, as appears from the deed of appointment made by Equititrust on 23 September 2010, were combined into title reference 50773532. -- 24 of 25 -- 25 floating charge as regards all other assets. Therefore, these real properties were subject to a fixed charge in favour of the bank. Equititrust submitted nevertheless that the receivers were appointed under a power contained in an instrument relating to a floating charge, because although this property was subject to a fixed charge, the relevant power was in an instrument which related to a floating charge because it also created such a charge over other property. No authority was cited for that argument and it is unnecessary to express a concluded view upon it. [93] The appointment by Equititrust was of receivers and managers of the same real properties. As I have discussed, the Deed of Variation of September 2008 contained a charging clause within cl 4. That appears to have been a fixed charge. But the deed of appointment sought to rely upon the incorporation of the terms of the original Credit Facility Deed, by operation of the Deed of Variation. That original deed contained a charging clause (cl 4.5), which was subject to cll 7(1) and 7(2). There was the further question under this charge of whether this was a floating charge (or a circulating security interest) over Willaire‟s property, including these two real properties. [94] The remaining issue is whether there is any discretionary reason not to wind up Willaire. It was argued that given that no other creditor supports the application, it should be refused in the special circumstances of this case. That submission loses any substance which it had, once it is concluded that Equititrust is more than a contingent or prospective creditor. Willaire is an insolvent company with no suggested prospects of revival. In my conclusion, it should be ordered to be wound up. [95] There will be an order appointing David Lewis Clout as liquidator. [96] I will hear the parties as to any further orders in either of these proceedings, consistently with these reasons. -- 25 of 25 --