Esanda Finance Corporation Ltd ACN 004 346 043 v Leserv (No 4) Pty Ltd ACN 002 188 472 [1992] QSC 195

c c TRANSCRlPT OF PROCEEDINGS State Reporting Bureau, 4th Floor, The Law Courts, George Street, BR1SBANE. 0. 4000 Tel. (07) 227.4360 (Copyright in this transcript is vested in the Cro-wn. Copies thereof must not be made or sold without the written authority of the Director. State Reporting Bureau.) SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION DOWSETT J No 1290 of 1991 ESANDA FINANCE CORPORATION LIMITED ACN 004 346 043 and LE SERV (NO 4) PTY LTD ACN 002 188 472 BRISBANE .. DATE 9/6/92 •' JUDGMENT 1 Plaintiff Defendant -- 1 of 24 -- 090692 JUDGMENT MR P A FREEBURN (instructed by Messrs Corrs Chambers Westgarth) for the Plaintiff MR M J HAYNE (of Messrs Nicholsons) for the Defendant HIS HONOUR: The orders that I propose to make subject to any further submissions are as follows: a declaration in accordance with paragraph 1 of the prayer for r.elief; an order in terms of paragraph 5 of the prayer; an order that an account be taken of the moneys due for principal: and interest and rents and profits and that payment thereof be made within six months of the Registra-r's certificate, in default foreclosure, .. in which event I. further order that the defendant convey to the plaintiff all of its right, title and interest in and to the land contained in the Certificates of Title particularised in paragraph 7 of the statement of claim. I would also further make an order pursuant to s 99 (2) of the Property Law Act for sale subject to further submissions as to conditions.· I publish my reasons. MR FREEBURN: Your Honour, as regards the last matter the only 10 20 30 matter that concerns us is there is ----- 40 HIS HONOUR: That's not right. The whole thing affects you, doesn't it? MR FREEBURN:- The only matter that concerns us as a result of the orders is 0 68 r 5 provides for some rules relating to r· sale out of court. If that's what Your Honour proposes then there is a provision in there for Your Honour to state thegrounds - to state the evidence, first of all, that Your Honour is satisfied that all of the relevant parties are here so before the Court-and, secondly, Your Honour is required.to state the evidence for that conclusion. The last part of the proviso commencing at the bottom of p 6693 ----- . . . HIS HONOUR: I'm proceeding under s 99 of the Property Law Act. MR FREEBURN: section 99(2) of the Property Law Act seems to- 2 60 () () CJ -- 2 of 24 -- .- 090692 the authors of Duncan and Vann seeT(l,to contemplate that even in that event. HIS HONOUR: It is a different discretion, surely. Order 68 r 1 seems to confer a discretion, doesn't it? MR FREEBURN: Yes. HIS HONOUR: Is it not really therefore reasonable to infer that 0 68 r 5 relates to an exercise of such_ a discretion? That is the discretion under r 1. 10 MR FREEBURN: Yes, Your Honour. HIS HONOUR: I am exercising a discretion under s 99(2), aren't I? MR FREEBURN: Yes, Your Honour. HIS HONOUR: I may not necessarily be satisfied that it is necessary or expedient the property be sold because those are 20 c= not the conditions provided for ins 99(2), are they? c= MR FREEBURN: I certainly-agree ·with that approach by the authors Duncan and Vann. HIS HONOUR: This is not the first time I have found their commentaries to be incorrect. MR FREEBURN: Yes. They say at p 1012 ----- HIS HONOUR: Yes. MR FREEBURN: "The sale may be ordered to take place not on],y in court but also entirely out of court and in the latter case all parties interested in the property must be before the Court or bound by the order of the Court and the order must be prefaced by a declaration that the judge_is_so_satisfied." HIS HONOUR: Do they cite any authority for· it? MR FREEBURN: They cite ----- HIS HONOUR: As applying to s 99(2)? MR FREEBURN: The only Queensland authority cited is··o 68 r .5. HIS HONOUR: I can't s~e the logic of that when one is·. talking about a mortgage. 30 40 MR FREEBURN: There are two statutory powers to order a sale so and only one of the statutory powers, as Your Honour points out, -requires th:i,s con<;:U.:tion. ~ . . ... ~ HIS HONOUR: They have just run them both together probably so there is something on the page to look at. · MR FREEBURN: That's probably right. 3 60 -- 3 of 24 -- 090692 HIS HONOUR: Just thinking about it I can think of 1, circumstances in which you would want to ensure·that everybody was before the Court but I don't think you need o 68 r:l for that. MR FREEBURN: I might say there is no problem in this case, anyway, because Your Honour will recall my learned friend actsfor the registered proprietor for the potential mortgagee. HIS HONOUR: There is a clear title. MR FREEBURN: There was a clear title with one exception that five of the titles had a registered mortgage over them, but that's been- there was a release, anyway. HIS HONOUR: , I can't see that the provisions of the cases dealing with 0 68- I can't see thatth~ provisions of 0 68 r 5 or any of the cases in respect of 0 68 should necessarily be applied to proceedings under s 99(2). MR FREEBURN: Very well, Your Honour. - HIS HONOUR: Which I think concerns particularly the position of mortgagee. Do you want any conditions on the sale? MR HAYNE: I can't make any submissions on conditions. HIS HONOUR: It doesn't seem to me there is any need for it. Is it necessary to determine who is going to sell theproperty? . MR FREEBURN: It probably is, Your Honour. HIS HONOUR: Again, what do you want to do? How do you want to go about it? MR HAYNE: Your Honour, there is probably only one matter I should mention. I don't know really that it is a proper matter that I should raise as a condition, that knowing the particular defendant company in the event that he wants to appeal the matter, maybe sale should riot proceed until the appropriate time has expired or indication given because an appeal, of course, does not act as a stay. HIS HONOUR: You should apply for a stay if you choose to do that. MR HAYNE: Whether or not that is a matter for the ----- HIS HONOUR: You should apply for a stay. MR HAYNE: Yes, Your Honour. HIS HONOUR: The order should make provision for the plaintiffto take charge of the sale or do you want to come back for a sanction? MR FREEBURN: The plaintiff, Your Honour. I don't think my learned friend has any objection to the plaintiff conducting .4 10 20 0 0 30 0 40 50 60 -- 4 of 24 -- A I 090692 C' C' c: c the sale. I have handed a draft order up. MR HAYNE: That is the usual procedure in this, Your Honour. The only thing is we have a fairly difficult client who may have some particular views on the method of sale and how it should go. MR FREEBURN: If that's the case liberty to apply~ HIS HONOUR: I will direct that the plaintiff-have the carriage of the sale. Liberty to both parties to apply and I 10 suppose there should be an order that the costs of the sale be paid out of the proceeds? MR FREEBURN: Yes, Your Honour. It might assist if I hand up a draft order which has got that provision and another provision about costs. I think it really covers - I was just checking through it to see it incorporates everything mentioned. The declaration on p 2 can be deleted. HIS HONOUR: Surely what you should do is bring the draft ~ · relating to the orders that I have made. Wouldn't that be better? MR FREEBURN: Yes. HIS HONOUR: When you have got a transcript of thosesubsequent orders - and most of what I have said is in the · reasons - the subsequent argument will be in the transcript, why don't you prepare a draft and you can send it over or if you find you can't then we will just list it again briefly sometime and dispose of it that way. MR FREEBURN: Thank you, Your Honour. MR HAYNE: Indeed, Your Honour. THE COURT ADJOURNED AT 10.29 A.M. 5 20 30 40 50 60 -- 5 of 24 -- c c c IN THE SUPREME COURT , OF QUEENSLAND No. 1290 of 1991 BETWEEN: ESANDA FINANCE CORPORATION LIMITED A.C.N. 004 346 043 LESERV (NO. 4) PTY. LTD. A.C.N. 002 188 472 JUDGMENT- DOWSETT J. Delivered the Ninth day of June, 1992. Plaintiff Defendant Counsel: D.J.S. Jackson, Q.C. with him P.A. Freeburn for the Plaintiff P.R. Dutney, Q.C. for the Defendant Solicitors: Corrs Chambers Westgarth for the Plaintiff Nicholsons for the Defendant Hearing Date: 28th January, 1992. \\ -- 6 of 24 -- c c IN THE SUPREME COURT OF QUEENSLAND No. 1290 of 1991 BETWEEN: AND: ESANDA FINANCE CORPORATION LIMITED A.C.N. 004 346 043 LESERV (NO. 4) PTY. LTD. A.C.N. 002 188 472 JUDGMENT - DOWSETT J. Delivered the Ninth day of June, 1992 Plaintiff Defendant At all material times Zarista Corporation Pty. Ltd. was indebted to the plaintiff in a substantial amount of money. The initial advance was made in January, 1989 with repayment due within 1 2 months. This was extended until 18th May, 1990. Zarista failed to repay at that time, and the plaintiff indicated an intention to exercise its power of sale. David Charles Morphett, an officer of the plaintiff asserts that in or about C August, 1990 Pier Loren approached the plaintiff, indicating a desire to take over the liability of Zarista as part of a proposed joint venture involving him and/or his companies and Zarista. Mr .. Loren says that he has no recollection of such a conversation but does not deny that it occurred. The contemporaneous correspondence discloses an intention that Mr. Loren's interests secure the debt. Loren was a director of the defendant. On 2nd October, 1990 Loren wrote concerning the Zarista debt as follows:- -- 7 of 24 -- 2 "With some reluctance I repeat the offer made today through my associate Mr. John Ewens: (1) to pay at once, the arrears due to the last payment date at the 'reducible rate' of 20.75 per cent simple interest that you define 'lower rate'. (2) to undertake to meet all future instalments of interest at a rate not to exceed the one quoted above or at such lower rate as will be negotiated directly between the writer and ..• your company. (3) to execute a reasonable form of guarantee approved by my legal representative. (4) should the transaction now agreed upon between Goldco Investment Service as purchaser and Zarista and my own Co. as vendors fail to become unconditional before 15th October 1990, either Zarista Corporation Pty. Ltd. or one of my own Cos. will offer additional securities to a market value in excess of $1 M to further protect your eo. from the market risk you have accepted. It will be expected however that all expenses caused by the preparation of acceptable instruments, their stamping and registration will be at your cost so as to eliminate unnecessary red tape. Kindly confirm that $112,447.02 is the precise amount you require and forward to the above address the notice of any future instalment stating that previously requested penalty interest and interest on arrears so far incurred will not be demanded nor will the principal be called up before 18th November, 1990 or whatever later date has been previously agreed between the parties and of which I am not aware. To signify your acceptance of the above conditional offer kindly state Branch, Style and No. of your a/c. so that the above amount may be deposited by means of a Bank Cheque and such deposit notified shortly afterwards by fax. I sincerely hope that the early payout of the full amount due will protect us both from the difficult task of attempting to secure a renewal of this deal on equitable terms." 0 0 0 0 -- 8 of 24 -- c c c' 3 The plaintiff responded by letter dated 4th October, 1990, requesting a statement of Loren's "personal Assets and Liability position", and then, on 10th October wrote:- "The offer relates particularly to payment of arrears at a rate not to exceed 20.75 per cent and theprovision of a personal guarantee or, dependent on the result of a transaction between Zarista and Goldco Investment Service, additional security to a market value in excess of $1.0M. It is confirmed that your offer is acceptable in respect to points 1, 2 and 4 in your letter of 2/10/90, however because of the complex nature of your financial structure we would require your personal guarantee and guarantees of your companies both in their own right and as Trustees of any Trusts. You may want to consider replacing your guarantee by simply providing the additional security (point 4) with real property. In essence we are agreeable to the following:- 1 • 2. Payment of all arrears ... at the rate of 20.75 per cent defined as 'lower rate'. The amount of arrears as at 9/10/90 is $112,447.02. If that payment is received by 15/10/90 then we would not be demanding the principal to be called up before18/11/90. You should be aware that a Form 7, Notice ofExercise of Power of Sale, has been served on Zarista Corporation, however that notice will be satisfied on payment of the abovementioned $112,447.02. Your undertaking to meet all future instalments of interest at a rate not to exceed 20.75 per cent lower rate, or a rateto be satisfactorily negotiated between Esanda and yourself. 3. The execution of a Guarantee in a form acceptable to Esanda and all expenses associated with preparation, stamping and registration to be at your, or your companies cost. The -Guarantees to be provided are to consist of you personally and the following companies in their own right or as Trustee: (A list of companies follows, not including the defendant.) -- 9 of 24 -- 4 4. Should the agreement between Goldco Investments Service, Zarista Corporation Pty. Ltd. and your own company (not· known) fail to become unconditional before 15/10/90 either Zarista Corporation Pty. Ltd. or one of your companies is to provide additional security to a market value of not less than $1.0M with that security to be made available by 16/10/90. It should be noted that in addition to the above we would require the following matters to be settled: (a,) the letter of offer to Zarista Corporation Pty. Ltd. from Esanda dated 30th August 1990 to be signed and returned to this office by 15th October, 1990. (b) outstanding valuation fees ••. to be paid by 15th October 1990. (d) the confirming letter of acceptance of the mentioned offer from Goldco Investments Services. (e) a copy of the signed agreement between Zarista Corporation Pty. Ltd. and yourself." The letter of 30th August, 1990 referred to in para. (a) above was a letter confirming extension of time for repayment to 18th November, 1990, subject to certain terms, including the giving of further security by Zarista. Paragraphs 3 and 4 above presumably reflect the fact that the parties expected discharge of the Zarista debt upon completion of a conditional agreement between Goldco Investments Service, Zarista and Loren's interests. In the event that such agreement was not unconditional by 15th October, 1990, then additional security was required to secure Zarista's obligation to the plaintiff. Clearly, this was not an acceptance of the offer of 2nd October, but a counter-offer. Its terms differed from those of the letter of 2nd October as follows:- 0 0 0 0 -- 10 of 24 -- 5 (a) the plaintiff required guarantees from Loren and his companies wherea!:> , he had offered only a personal guarantee; (b) all guarantees were to be prepared, stamped and registered at the expense of· Loren or his companies; (c) in the event that the contract remained conditional and additional security was required, such security was to be provided by 16th October, 1990; (d) execution of the letter of 30th August, 1990 by c=· Zarista; c c (e) payment of outstanding valuation fees; (f) sighting of the agreement between Zarista and Loren and the letter of acceptance of the offer made by Goldco. On 11th October, Loren wrote on behalf of a company called Norel Nominees Pty. Ltd .. In response to the four numbered paragraphs in the letter of 10th October, Loren said as follows: "My answers to your propositions are: 1. Accepted. Payment will be made by bank cheque Monday the 15th October, 1990 at 10.00 a.m. at the ANZ Bank in South Melbourne in the A/ C you will quote on acceptance of this offer. 2 • Accepted. 3. Accepted conditionally upon all charges to be at your cost and the guarantee forms to be acceptable to my solicitor. To mitigate the burden I seem to impose on you, I attach hereto a statement of the interlockedshareholding in my Cos. that show Norel Nominees Pty. Ltd. to be the controlling entity as trustee for theLoren Family Trust: this knowledge may allow you to consider the preparation of a single guarantee or you -- 11 of 24 -- 6 may choose to forget the request altogether and implement - 4. which is accepted and, assuming 3 to remain unresolved, may be implemented by you forthwith by the collection, at your sole cost, of the unencumbered title of the freehold at the cnr. of Gold Coast Highway and First Avenue, Burleigh Heads that your solicitor may hold in trust on our behalf while we finalise our relationship; or our solicitor (Mr. John Tiley) may continue to hold, unencumbered in trust on your behalf pending the said resolution." The writer then dealt with the lettered paragraphs in the letter of 10th October as follows:- "As for the rema1.n1.ng part of your letter and specifically as to your request (c) I hereby consent to supply whatever documents or correspondence Mr. J. Tiley will consider adequate to satisfy your request: Please ask him directly. The request under (d) will have to be satisfied by my statement that I am in control of all future dealings of Zarista and that I do not approve all past ones but will be bound by any legally enforceable contractual obligation entered into by it; this includes the commitment to pay $1,500 valuation fees if the above conditions can be demonstrated to me or Mr. J. Tiley. I regret that I am compelled to conclude this letter on a sour note: not to do so would mean that I would have to ignore your request under (a) without giving you an adequate explanation. If you have perceived a note of disdain in my correspondence, you are perfectly right: I question the wisdom to deal with organisations so ruthless in their behaviour, so generous in the assessment of their own fees, so abandoned in compelling their failed or failing clients in underwriting oppressive new agreements that must be ultimately dishonoured. Your offer dated 30/8/90 is a signal example that should be provided to the recently appointed commission on banking to stress amongst other things, the unreasonable gap between the rate you offer your subscribers and the one you attempt to impose on ailing enterprises." Once again, the response fell short of an acceptance of the offer in a number of particulars, namely:- 0 0 0 0 -- 12 of 24 -- c 7 (a) the guarantees (if required by the plaintiff) were·to be at its cost, although the alternative proposed in para. 4 of the letter of 10th October was also acceptable; (b) the valuation fee would only be paid if Mr. Tiley was satisfied that there was a (c) legal obligation on Zarista to do so; the only documents to be supplied would be those deemed by Mr. Tiley to be adequate to satisfy the plaintiff's request; (d) Zarista would not accept the terms set out c· in the letter of 30th August, 1990. c On 12th October, 1990 the plaintiff responded as follows:- "Whilst recogn1.z1.ng your agreeance [sic] to some of the matters raised in our letter of 10/10/90 the following items require clarification by yourself:- 1. Esanda require a copy of the signed agreement between Zarista Corporation Pty. Ltd. and yourself. 2. 3. A copy of the account from Herron Todd White, Valuers, is attached for your reference. It would appear that given the number of guarantors required to satisfy our condition (No. 3) of our abovementioned letter, it may be mutually beneficial to instead have you provide support security by way of a registered first mortgage over the land located at Gold Coast Highway and First Avenue, Burleigh Heads. We confirm that all costs.associated with document preparation, stamping and registration are to be at your cost. This letter also left a number of matters unresolved, namely:- (a) Esanda still wished to sight the agreement; -- 13 of 24 -- 8 (b) Payment of the valuer's account was probably still required; (c) Esanda would prefer to take further security rather than guarantees, th~ cost of such security to be met by Loren. On 12th October Mr. Loren responded as follows:- "My offer remains unchanged and my answers to your specific requests are as follows:- 1. 2. I will not provide a copy of the requested agreement which is to remain confidential between the contracting parties but repeat that I and my company will be bound by any legally enforceable contractual obligation entered into by Zarista. I will add the $1,500 valuation fee to the main remittance provided I receive the formal consent of Zarista's directors which I now seek and will obtain this afternoon. 3. I spelt out my resolve not to meet or contribute to any costs associated with guarantees, mortgages, letter of liens, etc.: If you want them you pay for it." By letter dated 15th October the plaintiff responded:- "Further to your facsimile letter of 12/10/90 the following is requested:- 1. Could you please confirm the availability of collecting today (15/10/90) the Title Deed of the property located at Gold Coast Highway and First Avenue, Burleigh Heads. You have previously suggested the document is with your solicitor, Mr. J. Tiley. 2. The amount for payment today is $112,447.02 plus $1,500 valuation fees. Your funds may be lodged at any office of Esanda or ANZ Bank Branch to be credited to the above account name and no." On the same day Mr. Loren responded:- "In accordance with the contents of our correspondence of 2nd, 11th and 12th October, 1990 I confirm that the Title Deed of property at Gold Coast and First Avenue, Burleigh Heads is with Mr. J. Tiley, Solicitor who has 0 0 0 0 -- 14 of 24 -- c c\ 9 already been instructed to hand it to you or your credited representative. I am pleased that you have agreed to the terms of my offer and accordingly, I am now making payment of $11 2, 44 7. 0 2 plus $1,500 valuation fee to the credit of the above account." On the same day Tiley and Co., Solicitors forwarded to the plaintiff six certificates of title, a bill of mortgage and a release thereof under cover of a letter which relevantly provided as follows:- "At the request of Leserv (No. 4) Pty. Ltd. we handyou herewi.th the below mentioned Certificates of Title and Bill of Mortgage and Release:- (details of titles followed). The title deeds and the Bill of Mortgage and Release are made available to you in terms of the correspondence between Loren/Morphett and all costsassociated with the agreed security arrangement is to be at your expense." The mortgage and release, I would infer related to a mortgage over some of the titles in favour of the Commercial Banking Company of Sydney Limited. This bank merged with the C National Australia Bank Limited, which latter bank released the c~ mortgage on 4th December, 1989. This is relevant because of subsequent dealings with the deeds in the Titles Office. In an internal memorandum of the plaintiff dated 17th October, 1990 the following appears:- "Property finance is in the process of reviewing the above account and in due course we shall be taking additional security. To this end the borrower has provided us with the Certificates of Title and we enclose the same for your safekeeping." It is firstly necessary to determine whether there was an agreement pursuant to which the title deeds were deposited with the plaintiff and the terms of any such agreement. The defendant -- 15 of 24 -- 10 denies that agreement was reached, alleging that the physical delivery of the deeds was in contemplation of an agreement. The plaintiff submits that the defendant granted an equitable mortgage by deposit of title deeds. To the extent that possession of the title deeds has any significance, the defendant submits that they were delivered to the plaintiff by way of pledge, which I take to mean in this context that, whilst the plaintiff was entitled to retain them pending the discharge of an obligation by the defendant or some other person, it derived no right to enforce such obligation by recourse to the land contained in the titles. The ·solution to this problem must be found in the correspondence. c=) Conditions 3 and 4 in the letter of 1Oth October were cumulative, but the letter of 11th October presented them as alternatives, and the parties thereafter so treated them. There is a possible ambiguity in this aspect of Loren' s letter of 11th October. It is arguable that Loren intended that the para. 4 proposal be adopted only until the problems with the para. 3 c=) proposal were resolved. This interpretation assumes that the subsequent references to finalizing "our relationship" and holding the titles "pending the said resolution" are references to resolution of those problems. However in the context of the correspondence., and noting that repayment was expected to occur on 18th November in any event and further, that the para. 3 solution might well become irrelevant after 15th October, the better view is that the para. 4 solution was being advanced as the preferable solution to the whole problem, pending repayment on 18th November. The invitation to "forget the request c=) -- 16 of 24 -- 11 1 altogether", a reference to the request for guarantees, also suggests this interpretation. There ·is a further problem with the reference to holding the titles in trust. I will deal with this matter later. By the letter of 12th October, the plaintiff accepted that condition 3 was impracticable and indicated its willingness to proceed by way of "registered first mortgage over the land" at the cost of Loren. Again, the latter found this unsatisfactory as appears from his letter of 12th October. However his c objection was not to giving further security but rather to paying for it. The plaintiff 1 s letter of 15th October clearly indicates C a willingness to accept delivery of the title deeds as sufficient for its purposes and otherwise must be taken as conceding all points still in dispute. Loren 1 s letter of 15th October accepts that an agreement has been reached. I conclude that there was a binding agreement between the parties to extend time for discharge of the Zarista debt upon condition (amongst others) C that the title deeds to the Gold Coast property were delivered to the plaintiff. Loren had also offered to execute further C documentation at the plaintiff's expense. It is not necessary to decide whether that offer was accepted by the plaintiff and became part of Loren 1 s obligation under the agreement, or whether it was superseded by the mortgage by deposit. There is nothing inconsistent in having both an agreement to deposit the deeds and an agreement to execute a mortgage at the plaintiff's expense, if requested. The internal memorandum of 17th October should be understood in this context. -- 17 of 24 -- 12 Satisfied as I am that there was an agreement for the delivery of the certificates of title to the plaintiff, I turn to consider the second question, namely the mutual intention of the parties as to the purpose to be served by such delivery. As I have said, the plaintiff asserts that the delivery was by way of security; the defendant asserts that it was by way of pledge of the title deeds. Mere possession of title deeds is not, of itself evidence of a charge. See Dixon v. Muckleston (1872) 8 Ch.App. 155 at p. 162 and Re McMahon (1886) 55 LT 763 at p. 764. (J However where possession is given contemporaneously with an advance from the party receiving the deeds, the position is otherwise. (J Many of the cases considering this form of security have been directly or indirectly concerned with satisfaction of the requirement for writing prescribed by the Statute of Frauds and subsequent legislation, or more accurately, with the doctrine of part-performance. Although no such issue arises for present purposes, the cases can only be understood in that context. See 'Q for example Maddison v. Alderson (1883) 8 App. Cas. 467 at p. 480. A case in point is Burgess v. Moxon (1856) 2 Jur. N.S. 1059 at p. 1061 where the following passage appears:- "The undisputed facts of the case are these:- First,that Mr. Moxon now has the deeds; and next, that along with the deed he has a memorandum, not dated, but signed and in the handwriting of Mr. Burgess, proposing to give an equitable mortgage over the property comprised in the deed as a security for the debt which he owed. Mr. Moxon, therefore, being admitted to be a creditor of Mr. Burgess, comes intoCourt with the title deed of his debtor, and. with a written and signed proposal of his debtor that he shall hold that deed as a security for the money due to him by Burgess. I should have conceived, according 0 -- 18 of 24 -- c\ c~ 13 to the law of this Court, beyond all doubt, that a creditor coming into Court with his debtor's deed, and with a memorandum signed by his debtor proposing that he should hold that deed as a security for the debt, comes with a case that raises so strong a presumption that he holds the deed for the purpose stated in that proposal, that the burthen of proof must lie with the debtor who disputes the deposit by way of security; and unless he can adduce clear and strong evidence to rebut that presumption, the deed must be held to be in the possession of the creditor as that security for which it was proposed to be deposited. I should have considered that perfectly clear and unquestionable as the law of the Court, ••• " At p. 1064 his Lordship continued:- "Upon the whole case, therefore, it is one in which, in my view of the law, Mr. Burgess, in order to succeed upon his claim to have the deed delivered up,on the footing that it was not held by way of security, has, so far from adducing evidence to rebut that presumption, not adduced any evidence sufficient for that purpose. But if he had, Mr. Moxon, who, according to the law of the Court, is entitled to adduce evidence in support of the presumption arising from his possession has proved by evidence, to my mind satisfactorily, that the presumption arising from thepossession of the deed and the memorandum is one founded in fact, and supported by adequate evidence. Even if the evidence were equally weighed, instead of beyond all measure the weight of evidence being in favour of the case alleged by Mr. Moxon - even if there had been an equal weight, and the evidence had been so equally balanced as that any man's mind, giving fair weight to the evidence in each side, might find it difficult to say whether the:p;e was not a preponderance in evidence in favour of Mr. Burgess's statement - even that would not be enough to rebut a presumption; for when a presumption arises from a fact clearly proved, such as the possession of this deed,and the possession of this memorandum, to rebut such a presumption, the evidence must not be doubtfulevidence equally balanced, but clear evidence, which shall justify the Court in treating the presumptionwhich is raised by the undisputed facts as sufficiently rebutted." To similar effect is the decision in Russell v. Russell ( 1783) 1 Bro.C.C. 269. See also Ex parte Langston (1810) 17 Ves. 227 at p. 230 where the Lord Chancellor observed:- "It has been long settled, that a mere deposit of title deeds upon an advance of money, without a word -- 19 of 24 -- 14 passing, gives an equitable lien; and, as the Court would infer from that deposit, that the money, then advanced, should be charged, as if there was a written agreement, there. is no doubt, that, if it was made out by oath uncontradicted, additional advances would also be charged." The context indicates that the word "lien" is used in a very broad sense. To the same effect is Ex parte Mountfort (1808) 14 Ves. 606 and In re Wallis & Simmonds (Builders) Ltd. (1974) 1 W.L.R. 391 at p. 395 It emerges from a consideration of these and other cases () that where there is a deposit of title deeds accompanying an advance of money, the courts will infer an agreement to mortgage the relevant land to secure the debt. Eviden.ce will be received as to the true nature of such a transaction. In the present case, the common intention of the parties is to be found in the documentation. From as early as 2nd October, 1990 Loren was offering, "additional securities". In its letter of 10th October, the plaintiff also contemplated the provision of, "additional security • . • with real property". Point 4 of that letter referred to, "additional security to a market value () () of not less than $1. OM •.• ". The critical letter of 11th October () (from Loren) agreeing to point 4 indicated that the provision of that additional security could be, "implemented by you forthwith by the collection ••. of the unencumbered title of the freehold " As I have previously observed, Mr. Loren referred to holding those documents, "in trust on our behalf while we finalise our relationship", and to Mr. Tiley holding the titles, "unencumbered in trust on your behalf pending the said resolution". As I have -- 20 of 24 -- c\ c\ 15 said, these passages should be read as references to the resolution of the whole issue, namely the repayment of the Zarista debt. Quite clearly, para. 4 of the plaintiff's letter of 10th October required the provision of additional security. The references to trusts are clearly errors in terminology, given that Mr. Loren adopts the proposal in the earlier letter. Point 3 of the plaintiff's letter of 12th October again refers to, ·"support security by way of a registered first mortgage," and Loren' s reply of 12th October does not cavil with the concept of security, but only with the question of who is to pay for any documentation. The plaintiff's letter of 15th October agrees to take security by way of deposit. Loren' s letter of 15th October is only consistent with the delivery of the deeds being pursuant to the previous correspondence. Similarly, the solicitor's letter of that date records that the deeds, together with the bill of mortgage and the release were delivered, "in terms of the correspondence between Loren/Morphett and all costs associated with the agreed security arrangement is to be at your expense." In the circumstances I am quite satisfied that the deeds were delivered to secure the repayment of the Zarista debt. I should add that because neither Loren nor the defendant received an advance at the time of the deposit, but rather assumed responsibility for the debts of a third party, any presumption of deposit by way of charge arising from the deposit has no application in the present case. However the undisputed evidence flowing from the correspondence is sufficient to establish such a charge without reference to the presumption which tends to -- 21 of 24 -- 16 dominate the reasoning in some of the cases to which I have ' referred. There may be room for debate as to whether the defendant was a party to the agreement entered into between Loren and the plaintiff. Delivery of the title deeds to the plaintiff with knowledge of the prior correspondence between Loren and the plaintiff and . that the plaintiff was giving valuable consideration by way of forbearance in exchange for the deposit strongly suggest that the defendant became a party to the agreement. From the very beginning, Loren was negotiating on behalf of companies in which he had an interest, or was at least purporting to do so. From 11 th October, he was purporting to act on behalf of the registered proprietor of the property in question, the defendant. At the latest, Mr. Tiley's letter of 15th October was a clear offer by the defendant to the plaintiff to accept the title deeds in discharge of the obligations undertaken by Loren in the correspondence, which offer the plaintiff accepted. I conclude that the defendant was or became a party to the agreement not later than 15th October . . Issues of estoppel are raised in the reply. In light of my interpretation of the documentation, it is not necessary that I consider that issue. Indeed, it is not possible for me to do so in a meaningful way as reliance upon the doctrine of estoppel would only be necessary in the event that my construction of the correspondence was incorrect. Any such estoppel must also depend heavily upon the construction of the correspondence. An appellate court will be in as good a position as am I to make 0 0 0 0 -- 22 of 24 -- c 17 ~ appropriate findings of fact since all material evidence was given on affidavit. One outstanding issue appears on the pleadings. As I understand it, the title deeds were lodged in the Titles Office by the plaintiff to facilitate the registration of a caveat to protect its interest as equitable mortgagee. All of the deeds except one were subsequently delivered by the Registrar of Titles to the National Bank and returned by it to the defendant or interests associated with the defendant. Although the defence asserts that these incidents resulted in the release of any charge in favour of the plaintiff, this argument was expressly C abandoned by counsel for the defendant in the course of the trial. c In the circumstances I will make a declaration in accordance with para. 1 of the prayer for relief. As between the parties, the plaintiff is entitled to possession of the relevant certificates of title, I would therefore also order in terms of para. 5 of the prayer. As to paras. 2 and 3 of the prayer, these relate to the C claim for foreclosure. Sykes in his work "The Law of Securities" (4th ed.) at p. 316 recognizes that foreclosure is available in the case of an equitable mortgage by deposit of title deeds to Torrens Title land. See also Charters v. Cosmopolitan Land Banking eo. (1902) 28 V.L.R. 251 and Ryan v. O'Sullivan [1956] V.L.R. 99. The learned author at pp. 287-289 of the same volume discusses in detail the appropriate foreclosure procedure. Reference to that passage and to the authorities cited, in particular the decision of Philp J. (as he then was) in Stevens -- 23 of 24 -- 18 v. Hoberg (No. 2) [1952] Q.W.N. 13, the note of the observations by Griffith C.J. in Walker & Mackenzie v. Sachs (No.·101 of 1899; unreported) which appears at the foot of that report, and the report of proceedings in that same action on the application for an order absolute, reported at [1902] Q.W.N. 56, suggests that the proper order is as follows:- Order that an account be taken of the moneys due for principal and interest and of the rents and profits, and that payment thereof be made within six months of the Registrar's certificate, in default, foreclosure; in which event:- Further order that the defendant convey to the plaintiff all of its right, title and interest in and to the land contained in the certificates of title particularised in para. 7 of the statement of claim. I am also asked to make an order pursuant to s. 99(2) of the Property Law Act. This section authorises me to direct a sale of the mortgaged property on such terms and subject to such conditions as I think appropriate. I see no reason why such an order should not be made, however it may be appropriate to hear the defendant further as to any conditions. I will also hear submissions as to costs and as to the other proposed orders. (J 0 0 0 -- 24 of 24 --