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  • Unreported Judgment

Van den Bergh v Davies


[2004] QSC 65

Reported at [2005] 1 Qd R 100





Van den Bergh v Davies and Anor [2004] QSC 065


(first respondent)
(second respondent)


BS 2557 of 2004




Originating Application


Supreme Court, Brisbane


29 March 2004




25 March 2004


Fryberg J


Application granted


MORTGAGES – Remedies of the mortgagor – Redemption – Right to redeem – Other matters – What amounts to “money owing or contingency owing to the mortgagee by the debtor”

National Bank of Australia Ltd v Mason (1975) 50 ALJR 362, applied

Perry v Rolfe [1948] 297, referred to

Richards v Commercial Bank of Australia (1971) 18 FLR 95, referred to


Mr M Taylor for the applicant

Mr A Shaw for the respondents


Wallace Davies for the applicant

Rhonda Penny & Associates for the respondents

  1. FRYBERG J:  The applicant, Ms van den Bergh, owns a block of land at Belmont.  It is mortgaged to the first respondent, Mrs Davies.  On 19 February she entered into a contract to sell it for $375,000.  She cannot complete the sale because Mrs Davies will not release the mortgage or will do so only on unacceptable conditions. So Ms van den Bergh has commenced proceedings for redemption.
  1. Settlement was due on 18 March but the purchaser has agreed to extend the settlement date to 31 March. The dispute therefore needs to be resolved as a matter of urgency. For that reason the proceedings have been commenced by application[1] and brought on in the applications list.

The creation of the mortgage

  1. In 2000 Ms van den Bergh was married to Mr Gerry Piggott. Toward the end of that year Mr Piggott and Mrs Davies went into business together. They established a company, Pied Piper Frozen Pastries Pty Ltd. They decided that the company should bank with Westpac Banking Corporation. Before it would advance money to Pied Piper, Westpac required security. In early 2001 Mrs Davies and her husband each provided guarantees and so did Mr Piggott. The Davies’ guarantees were supported by mortgages over two blocks of land. Mr Piggott did not have much property and gave no mortgage. The bank provided an overdraft facility of $140,000 (apparently since increased) and equipment finance to the extent of $275,000.
  1. On 11 November 2002 Ms van den Bergh executed the mortgage the subject of the dispute. It is not clear how this came about, but she was probably asked to do so by her husband. The mortgage has three sections. The first is a page in form 2 under the Land Title Act 1994.  The second is a schedule in form 20 under that act.  The third is a document number 701541646 registered under that act.  The mortgagees are Mr and Mrs Davies as joint tenants.  Mr Davies has since died and although his estate is named as a respondent to the originating application it was not served and took no part in the hearing.  It was common ground between the parties that
    Mrs Davies is solely entitled as mortgagee by survivorship.
  1. On the first page of the mortgage Ms van den Bergh charges her land "with the repayment/payment to the mortgagee of all sums of money referred to in item 5". There is no redemption clause and no time for redemption is prescribed. Item 5 contains a description of the "Debt or Liability Secured": "All money which the Mortgagor whether directly or indirectly or contingently or otherwise at any time and from time to time is or becomes liable to pay to the Mortgagee". To find out what that is one must go to the schedule.
  1. The schedule consists of seven clauses spread over three pages. There is also a schedule to the schedule. Relevantly the latter shows that there are no collateral documents and that the schedule was executed as a deed. The main clause is cl 3 headed "THIRD PARTY MORTGAGE". It sets out the agreement between the parties. The operative provision is cl 3.3. It begins:

"The Mortgagor has entered into this Mortgage as surety for the Debtor and the following provisions shall apply:

  1. as between the Mortgagor and the Mortgagee, the Mortgagor is a principal Debtor for the Mortgage Debt notwithstanding that as between the Mortgagor and the Debtor and the Mortgagor is a surety and accordingly, the Mortgage Debt shall be paid by the Mortgagor to the Mortgagee on demand. …"

"Mortgage debt" is defined to mean "the total of the money owing or contingently owing to the Mortgagee by the Debtor".[2] The balance of that subclause and the seven following subclauses then set out provisions designed to nullify the various decisions which courts of equity have made in cases involving guarantees over the last 150 years or so.  In particular para (d) provides that the mortgage "shall be and remain a continuing security and have full force and effect notwithstanding any settlement of account interim or intervening payment or any other matter or thing whatever until a final discharge of this Mortgage has been given by the Mortgagee".

  1. Clause 4 is headed "LIMITATION OF MORTGAGE". It provides:

"This Mortgage shall be security for a contingent liability of the Debtor to the Mortgagee as a result of the enforcement of a guarantee given by the Mortgagee, the Debtor and others to Westpac Banking Corporation in relation to the liability to Westpac Banking Corporation of Pied Piper Frozen Pastries Pty Ltd ACN 095 085 626."

It is common ground between the parties that the contingent liability referred to is the possible liability of Mr Piggott (“the Debtor”) for contribution in the event that Westpac should call upon Mrs Davies under her guarantee.  It is also common ground that Pied Piper owes the bank money, perhaps more than $500,000, but it is not in default under its arrangements and continues to trade with the bank’s support.  No demand has been made by the bank upon it or upon the guarantors and Mrs Davies has made no demand upon Mr Piggott or Ms van den Bergh. Neither of them is presently indebted to her for anything.

  1. I should record that this point that the argument before me related solely to the interpretation of the mortgage. It was not suggested that any question of estoppel arose or that Mrs Davies had in any way altered her position in reliance upon the mortgage. There is no suggestion that Ms van den Bergh received any consideration for executing the mortgage.
  1. The orders sought in the application were a declaration that on her undertaking to pay the amount if any found to be due on the taking of an account Ms van den Bergh be entitled to redeem the mortgage; and for an account to be taken.[3] However that was not how the matter was argued. It was common ground that nothing was presently due.  Mr Taylor for Ms van den Bergh submitted that his client was entitled to a release of mortgage capable of immediate registration. Mr Shah for Mrs Davies argued that she was not so entitled; given the nature of the mortgage (securing a contingent liability) the right to redeem has not arisen[4].

Release of the mortgage

  1. Although the mortgage contains no provision for its release it was not suggested that Mrs Davies can refuse to release it if the obligation which it secures be performed or the contingency embodied in that obligation becomes impossible of fulfilment. The same must be true if there is no liability which, on its proper interpretation, the mortgage secures. Without a release the title to the land could not be cleared of the mortgage.[5]  The source of the right to receive a release in such circumstances is curiously obscure.  In Perry v Rolfe Fullagar J said:

"The mortgagor is not seeking relief from forfeiture at law.  He is seeking to enforce a right, which, though doubtless equity alone can give a satisfactory remedy, is really a legal right.  It may be a contractual right, arising by implication, although the mortgage contains no express covenant by the mortgagee to execute a discharge on payment of what is due: it may be a right arising by implication from the terms of the Transfer of Land Act and especially sec.  163. In either case it is a legal right."[6]

In Noakes & Co Ltd v Rice Lord Macnaghten said, "Redemption is of the very nature and essence of a mortgage, as mortgages are regarded in equity.  It is inherent in the thing itself."[7]  The existence of the right has probably been thought so obvious that detailed consideration of its source was unnecessary.

  1. Under the mortgage in the present case Ms van den Bergh’s interest in the land is charged with the payment of "all money which [she], whether … contingently or otherwise at any time and from time to time is or becomes liable to pay" to Mrs Davies.  There are two ways in which the mortgage could be construed so as to give rise to possible liability.  First, the express recognition that she has entered into the mortgage as surety for the debtor implies a liability as a surety; second the "principal debtor" clause might impose on her a liability equivalent to that of the debtor.  For present purposes it is unnecessary to decide which basis applies, or whether both do. In either case the liability imposed is for the mortgage debt.  That means "the total of the money owing or contingently owing to the Mortgagee by the Debtor."
  1. If those words were not limited in any way liability would be imposed for all money owed by Mr Piggott to Mrs Davies on any account whatsoever. However they are limited by cl 4 to one particular contingent liability. It is important to bear in mind that although cl 4 limits the liability in this way, it does not substitute a new definition of "Mortgage Debt". That definition is important for present purposes. It defines the extent of Ms van den Bergh’s liability. That liability is for money “owing or contingently owing” by Mr Piggott. It is therefore necessary to examine the nature of the “contingent liability” referred to in cl 4.
  1. It was not disputed that the only possible liability was one which arose by way of liability to a claim for contribution by Mrs Davies in the event that she paid more than her fair share of liability to the bank. The right to contribution arises when a surety has paid or provided more than his proper share of the principal debt.[8] Prior to payment of more than the guarantor’s share of the principal debt there is no right to claim contribution.[9]  (For present purposes the possibility of quia timet proceedings for declaratory relief may be disregarded).[10] No existing liability is therefore possible in the present case.  Can it sensibly be said that money is “contingently owing” by Mr Piggott to Mrs Davies?
  1. It is helpful to identify what would have to happen to create an existing liability; in other words, to identify the contingencies. First, Mrs Davies would have to be liable to the bank. Her guarantee is in evidence, although it is probably incomplete. She put it into evidence so I assume that all relevant terms have been put before me. For her to become liable it would be necessary for Pied Piper to fail to pay its indebtedness and the bank to make demand upon her. Second it would be necessary that she pay more than her fair share of the indebtedness (fair that is as between the guarantors). Third it would be necessary that she make demand upon Mr Piggott or Ms van den Bergh for the appropriate share.
  1. In National Bank of Australasia Ltd v Mason, Stephen J noted the contradiction in terms in speaking of "monies now owing" and at the same time seeking to include therein monies owing only on contingency.  His Honour sought to overcome the difficulty created by the words "whether contingently or otherwise" by taking those words

“to refer not to contingent events upon the happening of which monies, will owe for the first time, become ‘now owing’, but rather as descriptive of one instance of the money being now owing, that is to say, where, in some transaction productive of liability only if some contingent events occurred is, that event does occur.  That is, the contingency which the clause refers to is not descriptive of the nature of the indebtedness of the bank but instead describes the contingent nature of the occasion which, the contingency having happened, has given rise to actual indebtedness.”[11]

In my judgment a similar approach should be adopted in the present case.  It seems to me that the events required to create a liability to Mrs Davies are so speculative that it does not make sense to talk of monies is being “contingently owing” to her.  To encompass this level of remoteness much clearer words would be needed.[12]

  1. It follows that at the present time nothing is secured by the mortgage. The wording of the mortgage is not sufficient to cover the possibility that something might someday become owing. That being so Ms van den Bergh is entitled to be given an executed release of it.
  1. The same result might be reached by a different route. In Fisher and Lightwood's Law of Mortgage, it is suggested that where no date for redemption is specified and the debt is repayable on demand by the mortgagee, the mortgagor may redeem at any time.[13]  If that is correct it would seem to be applicable in the present case.  This is a mortgage where no time is fixed for performance of the mortgagor’s obligation or for redemption.  That is also the reason why Mr Shah’s argument based on Hyde Management Services Pty Ltd v FAI Insurances Ltd[14] must be rejected.
  1. The application is allowed. I shall hear the parties on the form of order and on costs.


[1] Uniform Civil Procedure Rules, r 11.

[2] Clause 1.7.

[3] Compare Devlin v Surfers Paradise Investments Pty Ltd [1998] 1 Qd R 404.

[4] Hyde Management Services Pty Ltd v FAI Insurances Ltd (1979) 144 CLR 541.

[5] Land Title Act 1994, s 81.

[6] [1948] VLR 297 at p 302.

[7] [1902] AC 24 at p 30.

[8] Mahoney v McManus (1981) 180 CLR 370 at p 376.

[9] O’Donovan and Phillips: The Modern Contract of Guarantee, para 12-166.

[10] See McLean v Discount and Finance Ltd (1939) 64 CLR 312 at p 341.

[11] (1975) 50 ALJR 362 at p 368.

[12] Compare Richards v Commercial Bank of Australia (1971) 18 FLR 95 at p 99.

[13] Eleventh edition, para 28.5, citing G A Investments Pty Ltd v Standard Insurance Co Ltd [1964] WAR 264.

[14] (1979) 144 CLR 541.


Editorial Notes

  • Published Case Name:

    Van den Bergh v Davies and Anor

  • Shortened Case Name:

    Van den Bergh v Davies

  • Reported Citation:

    [2005] 1 Qd R 100

  • MNC:

    [2004] QSC 65

  • Court:


  • Judge(s):

    Fryberg J

  • Date:

    29 Mar 2004

Litigation History

Event Citation or File Date Notes
Primary Judgment [2005] 1 Qd R 100 29 Mar 2004 -

Appeal Status

No Status