ACP Properties (Townsville) Pty Ltd & Ors v 11 Oonoonba Road Pty Ltd & Anor [2022] HCATrans 227 (15 December 2022)

Last Updated: 16 December 2022

[2022] HCATrans 227

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Brisbane No B25 of 2022

B e t w e e n -

ACP PROPERTIES (TOWNSVILLE) PTY LTD ACN 631 282 203

First Applicant

ACP PROPERTIES (QLD) PTY LTD ACN 606 370 870

Second Applicant

STEPHEN GEORGE CAMPBELL

Third Applicant

and

11 OONOONBA ROAD PTY LTD ACN 615 776 148

First Respondent

TIMOTHY EDMONDS

Second Respondent

Application for special leave to appeal

GORDON J
JAGOT J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA AND BY VIDEO CONNECTION

ON THURSDAY, 15 DECEMBER 2022, AT 2.30 PM

Copyright in the High Court of Australia

____________________

MR N.H. FERRETT, KC: May it please the Court, I appear with my learned friend, MR J.P. HASTIE for the applicants. (instructed by Archibald & Brown Lawyers)

MS C.C. HEYWORTH‑SMITH, KC: May it please the Court, I appear with my learned friend, MR L.M. COPLEY for the respondents. (instructed by Macrossan & Amiet Solicitors)

GORDON J: Yes, Mr Ferrett.

MR FERRETT: Your Honours, the application seeks leave for a proposed appeal essentially under two headings, one relates to the operation of section 88 of the Property Law Act (Qld), the other relates to what will be sufficient to impute waiver to a party. If I can turn first to the section 88 point. You will have seen in the application book that two grounds are proposed. The first of those – well, both of them have to be seen against the background that section 88 and its analogues have been seen for a very long time now as what have been called machinery provisions. In other words, they do not create substantive rights – or they do not create new substantive rights as opposed to regulating and ensuring that priorities are observed when a mortgagee stands possessed of sale proceeds.

GORDON J: Do they have different operation other than the – as compared with the common law?

MR FERRETT: No, it does not. In our respectful submission, it – and this comes out of ANZ v Evans and also out of Mercantile Credits v ANZ that Justice Morrison cited in the first set of reasons in the Court of Appeal, that the provision stands to make sure that the priorities otherwise created at law and protected in equity are observed.

GORDON J: How do you deal with this allegation that the second mortgage was registered unlawfully?

MR FERRETT: We do no derogate from that. The finding has been made. The effect of it – or the reason for the effect of it – is not really made clear, with respect, in the Court of Appeal’s reasoning. The way you contest that is to say, if the company that was lawfully registered – in other words, the assignee of the NAB mortgage – had simply decided not to exercise its rights, that would have the same outcome. So, when ACPQ – the unlawfully registered mortgagee, if we can call it that – had gone ahead and done that without any sort of consent – if I can put it that way – without agreement of ACPT – the law, outside section 88, does not require that ACPT step in and take those proceeds.

We think that what the Court of Appeal did can be characterised as suggesting that section 88 provides some sort of obligation – provides for some sort of obligation to the eventual mortgagor. In that circumstance, one can see why the unlawful registration would matter. But, for the purposes of arranging priorities between mortgagees, in our respectful submission, it does not matter. That means that one goes back to – perhaps if I can take your Honours to page 67 of the book, which is the relevant passage of reasoning.

GORDON J: Is this the passage that you say critically identifies the error? Is that what you mean?

MR FERRETT: Yes, your Honour. If we look at paragraph [126] on page 67, starting from the third sentence starting, “However”, where his Honour Justice Morrison refers to the:

alteration of the priorities must be “lawfully achieved” –

that is picking up the language a couple of paragraphs down, in paragraph [128], from the passage in ANZ v Evans, if your Honours look – particularly at the last sentence of that excerpt.

In our respectful submission, that is to elevate the language of that passage from ANZ v Evans, and the passage from Mercantile Credits above it, beyond what was meant to be demonstrated by his Honour Chief Justice King, and then later by his Honour Justice de Jersey – as his Honour then was. They were drawing a contrast between the machinery effect of section 88 in ANZ v Evans’ case and what the law provided for in any event – rather than making any commentary about lawfully versus unlawfully registered documents, in our respectful submission. The elevation of that language, as we would respectfully put it, beyond what their Honours were trying to do really identifies the error. It becomes the more apparent ‑ ‑ ‑

GORDON J: So, how am I to read the last sentence of Chief Justice King’s statement from Mercantile Credits, “otherwise legally established” – lawfully established?

MR FERRETT: We do not say there is any difference between saying “lawfully established” and “legally established”, but that is talking about the priorities that exist at law, in any event, as distinct from the effect of the provision. It is not talking about the situation we have here, where someone got on the register, albeit unlawfully. Once one gets on the register, the interest is created, but it does not achieve indefeasibility under the legislation in Queensland. I will just take a moment, your Honour.

GORDON J: Certainly.

MR FERRETT: So the result of that reasoning, we say, is that one does not look to whether the second mortgage was unlawfully registered to analyse whether the lawfully‑registered, more senior mortgage is required to be exercised, and that is a critical part of the logic of the case. It relies on an obligation of ACPT, the lawfully‑registered mortgagee, to insist upon its rights. The other point that we make which we think qualifies this as something that is worthy of special leave is that on the construction that the Court of Appeal in Queensland gives it, there seems to be a tension between what is said there and what is said in Esber in the New South Wales Court of Appeal.

In our special leave application, which starts at page 94 of the book – but if I can take your Honours over to paragraph 20 on page 98, we identify that inconsistency and then set out the relevant paragraph. That is merely to point out that section 58(3), as it is in New South Wales, like section 88 in Queensland, does not have some independent operation. It is equity that requires the priorities to be observed. The statute merely makes sure that those equitable rules are observed.

As to the importance of the question, we point out in the application book – and I do not think there is any dispute about this – there are analogues in all the States. There is slightly different language in some of them, but the point is the same in that section 88 and its analogues are not intended to have effect or create new rights. In our respectful submission, that would be the effect of leaving this decision of the Court of Appeal to stand.

We should point out, also, your Honours, if I can take you to page 84 of the book – this is an extract from the second set of reasons. I draw your attention, in particular, to paragraphs 22 through 24. You may have seen that one other point we make in our argument in the special leave application – sorry, when your Honours are ready. You may have seen that one of the points that we make in this special leave application is that the decisions seem to have the effect of giving the benefits of section 88 to people who do not continue to be mortgagees. One of the things that arises from those paragraphs to which I have just pointed is that there seems to be an acceptance that the release of the mortgage before the NAB mortgage was put on the register had the effect of releasing the mortgage; that is why the reregistration was unlawful.

It has been released as a charge according to his Honour Justice Morrison, so that the only thing that remains are the personal covenants, because the language of the release was only to release the mortgage as a charge. But his Honour goes on with the agreement of the other members of the Court to say that there is still an entitlement for ACP to have its share of the mortgage proceeds only after NAB.

GORDON J: Is that an aspect of one of your proposed grounds of appeal, though? It is not, is it?

MR FERRETT: I think it is, with respect. If we go back to page 99 ‑ ‑ ‑

GORDON J: I am looking at page 94.

MR FERRETT: When we identify the argument for it, we make the point at page 99. We propose special leave questions at page 95 – and I draw your attention, in particular, to 4(b).

GORDON J: What is your complaint about the reasoning on page 84, then?

MR FERRETT: The reasoning on 84?

GORDON J: Giving rise to the conclusion that there was:

an entitlement under s 88(1) to have the proceeds of sale properly applied after the NAB loan was repaid –

What is wrong with that in terms of its application to those facts?

MR FERRETT: Because it demonstrates an error of construction of section 88, in that the only party, other than a mortgagee entitled to the residue – and this is at the end of section 88(1) – is, practically, the mortgagor. Other than that, ranking mortgagees are entitled to the proceeds, but the passage of reasoning at paragraphs 22 through 24 in the second reasons suggests that there was not any remaining security at the time.

GORDON J: I see.

MR FERRETT: So, that points out an error in the construction of section 88, in our respectful submission.

Can I say something about the other ground, which is with respect to waiver. As your Honours may have seen, the first and second applicants proceeded on what they said were their respective rights. ACPT, the first applicant, proceeded on the debt that it said it was owed under the NAB mortgage; the ACPQ, the second applicant, proceeded on the debt that it said it was owed. Each of those was a specified amount within the jurisdiction of the District Court.

The reasoning of the Court of Appeal, particularly in the second set of reasons, was to identify what it said should have happened, which was that NAB should have been satisfied out of the proceeds of sale first, and that left – sorry, ACPT should have been satisfied out of the NAB mortgage. That left a debt to ACPQ of about $1.9 million, and the Court of Appeal, assuming that we are wrong about the other arguments, found that ACPQ was then entitled to repayment out of the rest of the residue of its debt, and that reduced the amount owing on 31 May to about 834,000.

This is set out, your Honours, in the second set of reasons at page 85, the calculations. If you see the calculations there, you will see that the sale happens and it is identified on the second last line on 31 May 2019. I do not think it is controversial to say that this proceeding was commenced after that date. So, the logic to this point is that ACPQ was not entitled to go first, it was entitled to go second, and then the amount owing to it – once it had its share of the sale proceeds on account of its debt – was $834,000 because the rest had to go back. We see that on that second last line in that calculation.

The waiver point is based on an analogy with a case called Marks & Sons v Ridd Milking Machine. His Honour deals with that at paragraph [40] over on page 87 of the book. Essentially, what happened in that case was that ‑ ‑ ‑

GORDON J: We have got a factual distinction, though, here, have we not, because you had limited your claim to within the jurisdiction, had you not?

MR FERRETT: That is what it says in the judgment. There is a factual distinction to be made ‑ ‑ ‑

GORDON J: It does not sound very attractive to us.

MR FERRETT: I beg your pardon?

GORDON J: The factual dispute does not sound very attractive on a legal ‑ ‑ ‑

MR FERRETT: I do not think there is a factual dispute. It think that, with respect to his Honour, he does not quite summarise the facts correctly there. I do not think it would be a matter of controversy because it is a matter of just looking at what we pleaded on the claim – in the statement of claim. I am not suggesting that your Honour should enter the fray.

GORDON J: I will ask a different question. Is the analysis undertaken at paragraph [41] accurate or inaccurate? Because it is not just the pleading, it is also referrable to the opening submissions.

MR FERRETT: The claim that was maintained in the court was for a sum within the jurisdiction of the court. And that is to be distinguished from what happened in Marks because that was a claim for an amount up to the ceiling of the jurisdiction. The distinction is important because, on our argument, what the Court has done here is to say, this is what should have happened and if you had done it that way, then, on that conduct, the court would impute waiver to you. So, waiver is imputed on what we should have done rather than what we actually did, if that makes sense.

The point that we would seek to agitate on the appeal and which we would respectfully submit is a reasonably important one, is that the sort of conduct that can be used to impute waiver ought not to be materially different from the sort of conduct that can be used to impute election. It ought to be the sort of conduct that is unequivocal and, objectively analysed, communicates that kind of decision on the part of the person to whom waiver is being imputed. I see the red light has gone.

GORDON J: I think you have five minutes. Is that the red light? Sorry.

MR FERRETT: But to finish the point, where one looks at conduct which the court finds should have occurred, it is very difficult – in our respectful submission, impossible – to say that you can impute to a party objectively demonstration of intention to sterilise a right that plainly was not in contemplation at the time.

GORDON J: Thank you, Mr Ferrett.

MR FERRETT: Thank you.

GORDON J: We do not need to hear from you, Ms Heyworth‑Smith. In our opinion, an appeal would have insufficient prospects of success to warrant the grant of special leave. Special leave is refused with costs. We will excuse you from the Bar table while we arrange for the next matter to be called.

AT 2.48 PM THE MATTER WAS CONCLUDED