Cameron v Arcobaleno Pty Ltd

This case concerned an application for declarations and for an order requiring that the first respondent release a mortgage from certain land. The first respondent had entered into a deed with a bank which held a registered mortgage over land – that mortgage secured an overdraft facility, and the deed provided for the transfer of the mortgage to the first respondent. The applicant argued that the transfer of the mortgage had the effect that the mortgage ceased to secure any debt; and alternatively, that recovery of the mortgage monies was now time-barred. Considering the first argument, Cooper J held that on the proper construction of the deed, the debt was in fact assigned to the first respondent such that the first respondent was entitled to recover the debt pursuant to the mortgage’s terms. His Honour also considered that any claim for payment of monies owed under the mortgage was not statute-barred, as the mortgage was subsequently acknowledged by the parties. His Honour accordingly dismissed the application.

Cooper J

6 June 2024

Background

The applicant and respondents were the registered co-owners of the subject land in varying portions. The National Bank of Australasia Ltd originally held a registered mortgage over the land, which secured a debt owed to it by the previous co-owners of the land under an overdraft facility. To prevent the bank from exercising its power of sale over the land, some of the co-owners formed a company – the first respondent in this proceeding – which entered into a deed with the bank to transfer the mortgage to the first respondent in 1999. Under the deed, the co-owners who created the first respondent paid the bank for what was then owing under the mortgage to the bank. The applicant’s interest in the land was transferred to her from her former husband pursuant to orders made in Family Court proceedings in 2002. [1]–[3], [9]–[15].

The applicant sought declaratory and other relief to the effect that once the mortgage was transferred from the bank to the first respondent, the mortgage ceased to secure any debt and should be removed from the title. Alternatively, she contended that any claim by the first respondent for payment of monies owed under the mortgage is statute-barred. [4].

Whether the mortgage secured any debt

The applicant argued that upon completion of the assignment of the mortgage, that is, when the first respondent paid the mortgage amount to the bank as consideration for the transfer pursuant to the deed, no further amount was owing to the bank. [28]. Justice Cooper dismissed this argument as it sought to treat the payment made by the first respondent under the deed as payment made to discharge the bank’s debt owed by the mortgagors.

Clause 1 of the deed provided:

“The [first respondent] agrees to purchase and the Bank agrees to transfer to the [first respondent] all of the Banks [sic] interest, rights and previleges [sic] as Mortgagee under that mortgage.”

Clause 2 provided that the consideration for the transfer was to be “the balance owed by the mortgagors to [the bank] on the date of completion”. Justice Cooper considered that the text of cll 1 and 2 made it clear that the parties did not objectively intend for the consideration to be paid by the first respondent or received by the bank in discharge of the debt. Rather, the transaction effected by cl 1 was merely the purchase by the first respondent of the rights held by the bank. As the monies paid pursuant to cl 2 was consideration to purchase those rights, that payment did not amount to a reduction of the debt. [24]–[25], [30].

The applicant also sought to rely on a line of authority to the effect that a transfer of mortgage under s 62 Land Title Act 1994 does not transfer a debt under a different instrument, in this case the overdraft facility which gave rise to the debt owed to the bank, such that there was nothing owing under the mortgage: Queensland Premier Mines Pty Ltd v French (2007) 235 CLR 81. In other words, the applicant’s argument was that the mortgage does not secure any debt because the debt owing to the bank was not assigned to the first respondent under either the transfer of the mortgage or the deed. [31]–[32].

Justice Cooper rejected this argument based on a construction of the deed. His Honour considered that the right to payment conferred by the mortgagors’ covenant to repay in cl 1 of the mortgage was a right which the bank held as mortgagee, and that right was the subject of the assignment in cl 1 of the deed. Upon completion of the assignment and transfer of the mortgage, the rights previously held by the bank vested in the first respondent. His Honour also considered that a reasonable businessperson would have understood cl 1 of the deed to mean that the respondent agreed to purchase, and the bank agreed to transfer, not only its rights as mortgagee under the mortgage but also the underlying debt owed by the original co-owners under the overdraft facility which was secured by the mortgage. [51], [56].

Having regard to cl 2 of the deed providing that the outstanding balance owed under the overdraft facility would be the price of the transfer of bank’s rights to the first respondent, his Honour considered that this was consistent with the first respondent removing the need for the bank to sell the land to recover the debt such that it would not be commercially sensible to conclude that the bank nevertheless retained its rights to recover that debt. On Cooper J’s construction, cl 1 of the deed therefore assigned the debt which the original co-owners owed under the overdraft facility to the first respondent, together with the bank’s rights as mortgagee under the mortgage. His Honour concluded that it followed from this construction that the mortgage continued to secure the mortgagors’ obligation to repay the debt to the first respondent, which was originally owed to the bank, and that the first respondent was entitled to recover that debt pursuant to the mortgage’s terms. [58], [61], [68].

Whether the claim for the payment of monies owed under the mortgage is statute-barred

The applicant contended that because the action to recover the debt accrued to the first respondent no later than 26 May 1999, the combined operation of ss 13 and 24(1) Limitation of Actions Act 1974 extinguished the first respondent’s title to the land. [71]–[73]. However, following Price v Spoor (2021) 270 CLR 450, Cooper J held that s 24 only operates once a limitation defence has been successfully pleaded, at which point s 13 operates to bar the remedy of recovery of land and s 24 extinguishes the title of the person seeking recovery. As the first respondent had not brought an action to recover the land and there was no plea for the limitation defence in s 13 by the applicant, s 24 had not been engaged. [74]–[76].

In any event, the applicant contended that any moneys owing under the mortgage were nevertheless time-barred. However, there was mail correspondence between the parties’ solicitors in which the applicant’s solicitor acknowledged the existence of the mortgage, and there was a deed (the Cameron Deed) entered into by the applicant and other parties which also acknowledged the mortgage. Justice Cooper was satisfied that the emails acknowledged the mortgage and also acknowledged the first respondent’s right to recover monies payable under it. His Honour also found that the Cameron Deed was an acknowledgement of the mortgage and that the applicant’s filing of an affidavit for the present proceedings, which exhibited the Cameron Deed, meant that the acknowledgements were made to the first respondent: Manicaros v Commercial Images (Aust) Pty Ltd (in liq) [2024] QCA 40, [209]. [78], [86]–[88], [93].

His Honour held that the consequence of these acknowledgements was that the limitation period was extended by virtue of s 35(1) Limitation of Actions Act 1974 such that the first respondent was not statute-barred from a right of action to recover the land. [94].

Disposition

The application was dismissed with costs. [102]–[103].

A Lukacs