Farrow Mortgage Services Pty Ltd (in liq) v Herzog & Anor [1992] QSC 226

IN THE SUPREME COURT 14:;0... 1)'1~ OF QUEENSLAND c~ C: c~ No. 623 of 1992 Before Mr. Justice G.N. Williams BETWEEN: FARROW MORTGAGE SERVICES PTY. LTD. (IN LIQUIDATION) A.C.N. 006 125 757 Plaintiff AND· --· ISRAEL HERZQG First Defendant AND: MARY HERZOG Second Defendant JUDGMENT - G.N. WILLIAMS J. Delivered the 25th day of June 1992 CATCHWORDS: Practice service out of jurisdiction - action on guarantee - implied intent of parties payment in Victoria - creditor no authority to make unilateral demand for payment in Queensland - action stayed. Solicitors: Burden - Barker Gosling for Applicants. Girach - Carter Newell for Respondent. Hearing date: 18th June 1992 -- 1 of 11 -- I . c IN THE SUPREME COURT OF QUEENSLAND BETWEEN: AND: AND: No. 623 of 1992 FARROW MORTGAGE SERVICES PTY. LTD. (IN LIQUIDATION) A.C.N. 006 125 757 Plaintiff ISRAEL HERZOG First Defendant MARY HERZOG Second Defendant • JUDGMENT- G.N. WILLIAMS J. Delivered the 25th day of June 1992 The defendants have applied to the court by summons for an order that service of the writ on them be set aside and that all proceedings in the action be forever stayed because this court lacks jurisdiction. The relevant facts can be fairly shortly stated. In the end there was no real dispute as to any essential fact. At all material times Arvon Nominees Pty. Ltd. was a company c~ incorporated in Victoria and had both its registered and its business office in Melbourne. Each of the defendants have been at all material times residents of Victoria. In about August 1985 Israel Herzog, a director of Arvon, negotiated with agents of Binyan Nominees Pty. Ltd. for a loan to Arvon. At all material times Binyan was a company duly incorporated in the State of Victoria. The material does not establish to what extent, if at all, Binyan carried on business in other Australian States. The loan negotiations were conducted at Binyan's office -- 2 of 11 -- 2 in Melbourne; all negotiations and arrangements for the loan were made in Victoria. It would appear that the one firm of Victorian solicitors acted for both parties to the loan transaction. All documents relating to the advance to Arvon were delivered to the applicants in Melbourne. The principal security document with respect to the loan was a Bill of Mortgage over land in Brisbane owned by Arvon. That mortgage was executed by Arvon in Victoria. Because it related to land in Queensland it has been registered at the Titles Office in Queensland and has been duly stamped in Queensland. The document was forwarded to Binyan' s Queensland solicitors to enable those steps to be taken, and the applicants knew (or must be taken as having known) that such would be done. If it be relevant it is asserted in an affidavit relied on by the respondent that the mortgage was prepared by Queensland solicitors. The mortgage referred to the fact that Binyan was "registered as a Money Lender in the State of Queensland" and also specified its registered address as such a money lender. Cl. 35 and Special Covenant 5 each provided that the laws of the State of Queensland should apply to the mortgage, that it should be governed by and construed in accordance with that law, and that "any proceeding in respect of any cause of action arising hereunder shall be instituted heard and determined in a Court of competent jurisdiction in Brisbane in the State of Queensland and such Court shall possess territorial jurisdiction to hear and determine such proceedings." ···:J () () -- 3 of 11 -- '' 3 Finally with respect to the mortgage mention should be made of cl. 29. When read with the Third Appendix it provided that all moneys payable under the mortgage should be paid to Binyan at "196-198 A'Beckett Street Melbourne" or at "such other place within Australia as the Mortgagee shall from time to time by notice in writing to the Mortgagor appoint." This action is primarily concerned with liability under a collateral security, namely a guarantee, given by the applicants to Binyan. The Deed of Guarantee was executed by all parties in Victoria. If it be relevant it appears to have been sent by the Victorian solicitors acting for both parties at that time to cl Binyan Is Queensland solicitors who had it stamped according to Queensland law. c~ c The Deed referred to the fact that Binyan was a registered money lender in Queensland and, in addition to its registered office in Victoria, the Deed refers to its registered address as a money lender in Queensland. Cl. 1 of the guarantee deals with the obligation on the guarantors to pay to the creditor, but it silent as to where such moneys should be paid. Cl. 10 provides for a notice of demand for payment but does not stipulate that the creditor in that notice may fix a place at which such payment is to be made. Cl. 11 imposes an obligation on the applicants as guarantors to pay any stamp duty on the document, and cl. 7 refers specifically to the Queensland money lenders legislation. There is nothing else in the Deed indicating any possible connection with Queensland. -- 4 of 11 -- 4 The respondent has asserted that on or about 13th November 1985 Binyan transferred the mortgage to Geelong Building Society and that in consequence on or about 21st February 1989 Binyan's rights pursuant to the guarantee were also assigned to Geelong Building Society. It is then further asserted that on or about 21st February 1989 Geelong transferred the mortgage to the plaintiff, Farrow Mortgage Services Pty. Ltd., and that on or about 9th April 1992 the rights under the guarantee were assigned by Gee long to the plaintiff. None of those assertions is challenged by the applicants. In terms of the mortgage only interest was payable periodically; the principal was repayable on the date being three years from when the first advance was made. The applicants have asserted in their affidavit, and this has not been challenged, that payments of interest have always in fact been made to the office of the Geelong Building Society at Geelong, Victoria, and, after notification of the assignment to the plaintiff, such payments of interest have been made to the pla.intiff at its Geelong office. It is not disputed that Geelong Building Society and the plaintiff are associated companies. On the basis of all that the applicants assert in their affidavit that it was "a term of the guarantee that any payments were to be made to the lender in Victoria." If it be relevant it should be noted that the assignment of the guarantee from Geelong Building Society to the plaintiff dated 9th April 1992 states that the assignment is governed by the law of Queensland. '> (J C) (] -- 5 of 11 -- c' 5 Further, if it be relevant, by Notice of Demand dated 18th February 1992 the plaintiff demanded that Arvon pay the principal sum and interest due under the mortgage to the plaintiff's Brisbane solicitors. Then by notices of demand dated 22nd April. 1992 the plaintiff called upon each of the applicants to pay the principal sum and interest under the Deed of Guarantee. Each notice required payment to be made forthwith to the office of the plaintiff's Brisbane solicitors. The action by the plaintiff seeking to recover the amount unpaid was commenced by specially endorsed writ issued out of this court. In paragraph 2 thereof reference is made to the fact that after execution of the mortgage in Victoria it was delivered to the plaintiff's solicitors in the State of Queensland. A similar allegation is then made in para. 5 with respe~t to the guarantee; the assertion made is that it was "delivered by the defendants to Binyan's solicitors at Bundall in the State of c~ Queensland." Reference is also made in that paragraph to the plaintiff's contention that the guarantee was "in respect of the c obligations of Arvon pursuant to the mortgage of property in Brisbane in the State of Queensland". Finally, so far as may be relevant, there is an allegation in para. 15 that the notices demanding payment pursuant to the guarantee "required payment to be made at the office of the plaintiff's solicitors in Brisbane in the State of Queensland." The writ was endorsed to the effect that it was "to be served out of the State of Queensland and in the State of Victoria". The endorsements would appear to be sufficient to -- 6 of 11 -- ,..--------------- 6 satisfy the requirements of Order 11 of the Rules of the Supreme Court and s. 11 of the Service and Execution of Process Act 1901. The applicants were in fact served in Victoria. It was submitted on behalf of the respondent that this court had jurisdiction because the action was concerned with the applicants' failure to pay money in Queensland; primarily the respondent relied on s. 11 ( 1) (d) of the Act, or para. ( 4) of Order 11 rule 1, which confers jurisdiction where "any act or thing sought to be restrained, or recovered or for which damages are sought to be recovered, was done or is to be done or is situate" within the State. Reference was also made to para. (3) of the rule or s. 11 ( 1 ) (c) of the Act which refers to "a breach () within the jurisdiction of a contract wherever made." Two principal submissions were made to the court on the respondents' behalf. Firstly, emphasis was placed on the fact that the guarantee was a collateral security to the mortgage which related to land in Queensland, and it was said that if this court had jurisdiction with respect to an action relating to the mortgage then ipso facto it had jurisdiction to deal with an action to enforce payment pursuant to the guarantee. The second ,:J submission was that in the circumstances the respondent, as creditor, had the power to fix the place of payment and had done so in the notice of demand; the relevant breach was therefore the failure to pay in Queensland in accordance with that demand. In my view the first argument is fallacious. The fact that this court has jurisdiction with respect to the mortgage is in no way determinative of jurisdiction with respect to the guarantee. The applicants are not parties to the mortgage and -- 7 of 11 -- ,·. • J' 0 c 7 they are in no way bound by contractual arrangements made between the mortgagor and mortgagee as to where payment should be made. The mere fact that in terms of the mortgage the money had to be repaid in Brisbane does not mean that moneys payable under the collateral guarantee were also payable in Brisbane. In addition to the specific clauses found in the mortgage conferring jurisdiction on the Queensland courts there is also the fact that the mortgage was over land in Queensland. None of those considerations are relevant when it comes to determining jurisdiction with respect to an action on the guarantee. Of more concern is the respondent's second argument that the breach (that is, the failure to pay the money) occurred in Queensland because the notice of demand required payment to be made there. A good starting point when considering that argument is the judgment of Dean J. in Earthworks & Quarries Ltd. v. F. T. Eastment & Sons Pty. Ltd. (1965) 8 F.L.R. 32. His Honour at 34 referred to the fact that it "has long been settled, at least since Sheppard's Touchstone, that prima facie where a contract or bond is silent as to the place of payment, it is for the debtor or obligor to seek our his creditor or obligee and the debt is payable where the creditor or obligee is found~" The qualification at common law on that principle was that there was no obligation on the debtor to seek out the creditor if the latter was abroad (that is, out of the jurisdiction). The governing principle for present purposes was, in my view, accurately stated by Dean J. when he said: "The place of payment depends on the place which, in the absence of express provision -- 8 of 11 -- 8 in the contract, it should be held from all the circumstances the parties should be taken as impliedly intending." That passage was approved of and applied by Yeldham J. in McFee Engineering Pty. Ltd. v. C.B.S. Constructions Pty. Ltd. (1980) 44 F.L.R. 340 at 351, and by Shepherdson J. in B.P. Australia Limited v. Wales (1982) Qd. R. 386 at 392. The "express agreement" may take several forms. The contract may expressly provide that payment is to be made at a specific place without more being said. In such a case payment at that place would be binding on the parties ... unless there was an agreed variation to the contractual (~ provision; in that situation neither party would have the unilateral right to vary the place of agreement. In some instances the contract may nominate a specific place for payment "unless otherwise agreed" (cf. Deer Park Engineering Pty. Ltd. v. Townsville Harbour Board (1975) V.R. 338 at 342). In such circumstances, as Gillard J. pointed out, "those words were intended to cover any agreement express or implied, made subsequently to the contract". Further, the agreement may provide that one of the parties (more usually the creditor) could unilaterally fix the place for payment (cf. cl. 29 of Arvon's mortgage). In that situation the debtor is obliged by the terms of the contract to accept any unilateral variation made by the creditor. It may well be as Shepherdson J. pointed out in B.P. Australia Limited v. Wales at 391, that where there is uncertainty the creditor may fix the place of payment to overcome the problem, but such power would, in my view, be limited to the situation where there was uncertainty. Where, applying the test formulated by Dean J., one could clearly infer from all the (] () -- 9 of 11 -- 9 circumstances that the par·ties intended payment to be made at a particular place the creditor could not, in the absence of an express provision conferring such power on him, fix some other place for payment. Finally, as established by McFee at 351 and Deer Park at 343 the circumstances relevant to the determination of the parties' implied intention as to place of payment include their conduct after the making of the contract. Having regard to the facts that the loan transaction was negotiated in Victoria, the guarantee was executed (made) in Victoria, the applicants' (guarantors) were residents of Victoria, Binyan and its assignees had their principal place of c:\ business in Victoria, and all payments of interest over the years were made to the office of Binyan' or its assignees in Victoria I have come to the conclusion that the parties to the guarantee must be taken as having impliedly intended that payments thereunder should be made in Victoria. There is nothing in the guarantee, or in the conduct of the parties, which in my view C could authorise the respondent to make a unilateral decision changing the place of payment from its Victorian office to the address in Brisbane of its Queensland solicitor. The only question argued before me was whether or not there was a breach within this jurisdiction of the obligation on the applicants, derived from the guarantee, to pay money. Issues such as, for example, the balance of convenience, were not addressed. The simple question for me to determine was whether or not this court had jurisdiction either under Order 11 of the Rules of the Supreme Court or Section 11 of the Service and Execution of Process Act to hear and determine the action. As -- 10 of 11 -- l~~-- 10 I have come to the conclusion that there was no obligation on the applicants to make payment pursuant to the guarantee in Queensland it follows that this court does not have the jurisdiction to hear and determine the action. In those circumstances it is appropriate to order that all proceedings in the action be forever stayed. (Flaherty v. Girgis (1987) 162 C.L.R. 574 especially at 583-7). I will order that all proceedings in the action be forever stayed, and further order that the respondent plaintiff pay the applicants' costs of and incidental to the application and the '~) action to be taxed. ,Y'J '·. -- 11 of 11 --