fm t . / ; JUDSMENT No. 182 72S ~- o IN THE FEDERAL COURT OF AUSTRALIA ) NEW SOUTH WALES DISTRICT REGISTRY ) No. G344 of 1988 GENERAL DIVISION ) BETWEEN: R.J. WOOD PTY. LIMITED First Applicant KNIGHTWOOD CASH ''N' CARRY WHOLESALERS PTY. LIMITED Second Applicant A.S. KNIGHT & CO. PTY. LIMITED SS Third Applicant BEALE & JACOBS PTY. LIMITED Fourth Applicant RODGER & LLOYD PTY. LTD. Fifth Applicant ANTHONY GARDINER SHERLOCK and ERNEST GEORGE HARRIS First Respondents i ERNEST GEORGE HARRIS and WILLI JOSEPH WILDE Second Respondents AUSTRALIAN GUARANTEE CORPORATION LIMITED Third Respondent AGC (ADVANCES) LIMITED Fourth Respondent DESMOND STIRLING Fifth Respondent CORAM: Davies J. DATE: 18 March 1988 PLACE: Sydney MINUTES OF ORDER THE COURT ANSWERS the questions set aside for separate determination pursuant to Order 29 Rule 2 of the Federal Court Rules as follows:- Question 1: Answer: Question 2. Answer: Whether the purported appointments on 1 March 1988 of the first and second respondents as receivers and managers of the first to fourth applicants is invalid by reason of the said appointments purporting to be joint and several. Yes. Whether on a true construction of the mortgage debenture dated 18 September 1986, compliance with the provisions of Section 111 of the Conveyancing Act (NSW) 1919 have been dispensed with for non-monetary default. No. THE COURT ORDERS THAT:- NOTE: The respondent should pay the costs of and incidental to the above two separate questions. Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION BETWEEN ig No. G344 of 1988 R.J. WOOD PTY. LIMITED First Applicant KNIGHTWOOD CASH ''N' CARRY WHOLESALERS PTY. LIMITED Second Applicant A.S. KNIGHT & CO. PTY. LIMITED Third Applicant BEALE & JACOBS PTY. LIMITED Fourth Applicant RODGER & LLOYD PTY. LTD. Fifth Applicant ANTHONY GARDINER SHERLOCK and ERNEST GEORGE HARRIS First Respondents ERNEST GEORGE HARRIS and W J PH WILDE Second Respondents AUSTRALIAN GUARANTEE CORPORATION LIMITED Third Respondent AGC (ADVANCES) LIMITED Fourth Respondent DESMOND STIRLING Fifth Respondent CORAM: Davies J. DATE: 18 March 1988 PLACE: Sydney REASONS FOR JUDGMENT EX TEMPORE I turn to the questions of law. The proceedings are brought under the Trade Practices Act 1974 (Cth) and raise associated issues under State law. The following two questions, which in themselves contain no Federal element, have, for reasons of urgency, been set aside for determination separately from the other questions in the proceedings. See Order 29 Rule 2 of the Federal Court Rules. The questions are: (1) whether the purported appointments on 1 March 1988 of the first and second respondents as receivers and managers of the first to fourth applicants is invalid by reason of the said appointments purporting to be joint and several; and (2) whether on a true construction of the mortgage debenture, dated 18 September 1986, compliance with the provisions of 6.111 of the Conveyancing 3. Act N.S.W. 1919 have been dispensed with for non-monetary default. The first question concerns the applicants, R.J. Wood Pty Limited, Knightwood Cash 'n' Carry Wholesalers Pty Limited, A.8. Knight & Co Pty Limited and Beale and Jacobs Pty Limited. On 1 March 1988, purportedly acting under a mortgage debenture dated 18 September 1986, the third and fourth-named respondents, Australian Guarantee Corporation Limited and A.G.C. Advances Limited, by a number of separate deeds of appointment, appointed the first-named respondents, Anthony Gardiner Sherlock and Ernest George Harris, joint and several receivers and managers of the mortgaged premises described in the mortgage debenture. The question is whether such appointments were within the power conferred by the mortgage debenture. For the purpose of this question it is accepted that each of the applicants was in default and that the appointment of a receiver and manager was authorised. Clause 18 of the mortgage debenture provides that in the circumstances there set out the mortgagees, Australian Guarantee Corporation Limited and A.G.C. Advances Limited may "appoint a receiver and/or manager" of the mortgaged premises. Clause 63 of the mortgage debenture provides, inter alia, that:- "Except to the extent that such interpretation shall be excluded by or be repugnant to the context whenever the same is used herein the words 'the 4. Mortgagor' shall include the party described in Schedule 1 and its successors and permitted assigns and in every case jointly and severally and the word "Mortgagee' shall include the party described in Schedule 2 and its successors assigns and transferees and any person authorised by the Mortgagee to become the registered holder hereof., the word 'person' shall include a corporation or company or partnership; words importing the singular number or plural number shall include the plural number and singular number respectively, words importing any gender shall include all genders, the expressions "books of account' and 'documents' shall include bound or loose leaf paper writing, microfiche or microfilm, magnetic card or tape, punched card or tape, magnetic disk or any other type of recording and/or retrieval system whether electronic mechanical or otherwise whatsoever; any reference to statutes shall include all statutes or consolidating or in substitution for the statutes referred to. The words *'Mortgagor' and 'Mortgagee' shall also include where applicable any company respectively related to the Mortgagor or the Mortgagee as the case may be within the meaning of the Companies (Queensland) Code." Mr P. McClellan QC, senior counsel for the applicants, submitted that the law to be applied was stated in Lightman & Moss, The Law of Receivers of Companies at paragraph 4-06, that:- "It is a question of construction of the debenture whether the appointor can appoint more than one person to act as joint receivers. In the absence of some indication of a contrary intention, the singular in the debenture should be construed as including the plural [L.P.A. 1925,8.61(c)] and accordingly the power to appoint a receiver should be construed as a power to appoint joint receivers. Express provision in the debenture is required to authorise joint receivers to act severally as well as jointly." Mr McClellan also relied upon Picarda, The Law Relating to Receivers and Managers, in which it is stated at page 35:- "... debentures often provide expressly that unless the context otherwise requires the singular includes the plural. In both instances the relevant provision would empower the debenture holder to appoint joint receivers and managers even though the instrument talks only of a receiver and manager". Mr McClellan conceded, and I believe correctly so, that the subject mortgage debenture authorised the appointment of more than one receiver and manager, particularly having regard to the provisions of Clause 63 which state that a singlular term should be read ag including the plural term. Mr McClellan submitted, however, that the mortgage debenture did not authorise the appointment of two persons to act as receivers and managers jointly and severally. He submitted that any doubt was removed by Clause 63 of the debenture which specifically referred to the mortgagors in their joint and several capacities but made no such provision in respect of receivers and managers. Mr T.F. Bathurst QC, senior counsel for the respondents, submitted that if receivers and managers could be appointed to act jointly, they could be appointed to act severally and that there was no legal or commercial reason to limit the construction of the mortgage debenture to an appointment of receivers and managers jointly. But the appointment of two persons to hold such an office is ordinarily construed as requiring them to act jointly. Thus, 6. in Re Gudgeon and Another; ex parte Pegler and Another (1969) 13 F.L.R. 350 at p.352, Gibbs J. said:- "The general rule of law is that trustees have a duty to act jointly, and, in the absence of statutory provision to the contrary, if two persons were appointed to the office of trustee of a bankrupt estate, their authority would be joint and not separate and they would be obliged to act jointly in carrying out the duties of their office". The same principle applies with respect to receivers and managers. If two persons are appointed to act as receivers and managers, they must act jointly unless the instrument of their appointment specifically or impliedly authorises them to act severally. Likewise a power to appoint two or more persons to act as receivers and managers will be read as a power to appoint them to act jointly. A power to appoint two or more persons to act severally must be conferred expressly or by necessary implication. In my opinion, the appointment of Messrs Sherlock and Harris to act severally as receivers and managers was not authorised by the mortgage debenture. Mr Bathurst submitted that even if the appointment of the receivers and managers to act severally was invalid, nevertheless the authority conferred upon them to act jointly was valid and was not affected by the unauthorised grant. However, as is stated in Farwell on Powers (Third Ed.) at 7. p.147, the limitations attached to the exercise of power (in this case the power to appoint a receiver and/or manager) must be strictly observed. In Harold Meggitt Limited v. Discount & Finance Limited (1938) 56 W.N. (N.S.W.) 23, at p.24, Owen J. said:- "A power to appoint a 'receiver and manager' seems to me to be a very different thing to a power to appoint a 'Receiver:' Re Newdigate Colliery Ltd. [[1912] 1 Ch.468.]; Re Manchester and Milford Railway Co. [14 Ch.D.645.]. The only power of appointment conferred by this deed was a power to appoint a receiver and manager." In the present case the appointment of Messrs Sherlock and Harris to act jointly and severally was different in substance and effect from an appointment of them to act jointly. In my opinion, the limitations of the power to appoint a receiver and manager were not complied with and the exercise of the power was not valid. I would therefore answer the first question: yes. The second question concerns the applicant, R.J. Wood Pty Limited, and arises from the fact that on 11 March 1988 the appointments of Messrs Sherlock and Harris were revoked and new appointments were directed to Mr Harris alone to act as receiver and manager of the applicant companies. It is agreed that the applicant R.J. Wood Pty Limited is the lessee under a registered lease of real estate in New South Wales. Such property is apparently the whole or a part of the 8. mortgaged premises. Sections 111 and 115A of the Conveyancing Act 1919 (NSW) are therefore of relevance. Their general effect was outlined in Isherwood & Another v. Butler Pollnow (1986) 6 N.S.W.L.R. 363. No doubt because the Conveyancing Act is a statute of New South Wales, I was not in the present case asked to reconsider any aspect of the views expressed by the majority therein. The crucial provision appears in s8.111(2)(b)(ii) which speaks of the circumstance where "notice or lapses of time pursuant to this section has not been dispensed with by the agreement expressed in the mortgage". The notice and lapse of time referred to are those specified in sub-s. 111(3), in brief a notice is required specifying the default and requiring it to be remedied within a period to be specified being not less than one month. The argument before me was not directed to default under the terms of the mortgage debenture or to the provisions of sub-s. 109(2). For the purposes of the question, it is assumed that R.J. Wood Pty Limited is in default under the morgage debenture in respect of a non-monetary obligation. It is agreed that no notice was given under s.111 of the Conveyancing Act. The issue raised by the question as elaborated in argument is whether the mortgage debentures dispensed with notice and lapse of time otherwise required by g.111. 9. Clause 41 of the mortgage debenture deals with non-monetary default and provides that in the circumstances there specified: ",... the Mortgagor shall be deemed to be in default hereunder and thereupon or at any time thereafter, all moneys hereby secured and all costs charges and expenses as aforesaid shall at the option of the Mortgagee but only at such option forthwith or at any time thereafter without notice to the Mortgagor become and be payable to and recoverable by the Mortgagee as if the time hereinbefore appointed for the payment thereof had arrived anything to the contrary notwithstanding. The Mortgagee shall subject to any restriction imposed on the Mortgagee by Statute or otherwise similarly be entitled to exercise all or any of the rights powers and remedies conferred on the Mortgagee hereunder or by Statute or otherwise notwithstanding any omission to exercise or waiver of right to exercise any such powers on any previous occasion." Clause 53 of the mortgage debenture further provides:- "... it is a condition of this instrument that the provisions of any Moratorium or of any Federal State or other statute or regulations now or at any time hereafter in force having the effect of limiting restricting or suspending the rights powers or remedies by this security granted to the Mortgagee shall be excluded from and shall have no application to these presents or any collateral securities." Mr McClellan submitted that Clause 41, which deals specifically with non-monetary default, recognised the limitation placed by s.111 upon the appointment of a receiver. He submitted that Clause 53 was merely a general provision which did not override the operation of Clause 41. Mr Bathurst submitted that Clause 41 referred only to those 10. statutory provisions compliance with which may not be waived by the mortgage debenture, while Clause 53 waived compliance with all those statutory provisions compliance with which may be waived by the agreement. The issue is undoubtedly finely balanced. In my opinion, on balance, Clause 53 does not reach the mark to which Mr Bathurst has aimed it. Section 111 does not impose a statutory obligation in the circumstance where the mortgage debenture expressly dispenses with the notice or lapse of time described in sub-section 111(3). Clause 53 does not expressly dispense with such matters. It merely excludes the operation of statutory requirements. One must look first to see whether the agreement has dispensed expressly with the notice and lapse of time before one can ascertain whether or not there is a statutory restriction upon which Clause 53 may operate. Section 111 specifies the only means by which the agreement may waive compliance with its provisions as to notice and lapse of time. If that means be not adopted the restriction or limitation which it imposes and to which it gives effect may not be excluded. Once it has been concluded that Clause 53 does not express a dispensation of the notice and lapse of time requirements of 8.111, as I think it does not, then it necessarily follows that Clause 53 has no effect upon the operation of s.111. Although the provisions of s.111 11. may be waived in an appropriate case by subsequent conduct or agreement (as to which see, eg., In Re Thompson v. Holt (1890) 44 C.D. 492; Patterson v. McNaghten (1905) 2 C.L.R. 615 and Bennion On Statutory Interpretation at pp. 27-33.) They may not be waived or otherwise dispensed with by the mortgage debenture itself save in the manner which the section provides, namely that the parties may contract therein so as to extinguish or modify the requirement of the notice and a period of time. In brief, I think Clause 53 is too general in its terms to effect the dispensation of which s. 111(2)(b)(ii) speaks. That is not to say that Clause 53 has no effect. It may well have effect under s.109(2) of the Conveyancing Act but it was not submitted by either counsel that such effect was material in this present case. The term which was considered in the Isherwood & Another v. Butler Pollnow decision was sufficient to dispense with the s.111 requirement. As Mr Justice Kearney said at p.371:- "Each deed contains provisions dispensing with notice or lapse of time under the Act in respect of the exercise of the mortgagee's or receiver's powers." The Australian Encyclopaedia of Forms and Precedents (2nd Ed., Vol. 9, p.195) likewise sets out forms which direct their attention to notice and periods of default. Clause 53 does not use such terms and in my opinion does not operate so as to waive or otherwise exclude the operation of the provisions of 12. s.111. I shall therefore answer the second question: no. The respondent should pay the costs of and incidental to these two separate questions. I certify that this and the 11 preceding pag es are a true copy of the Reasons dor Judgment herein of the Honourable Mr Jaa. ce » Davies. Associate: Ve Date: Gal (485 -