MURPHY and ANOR v WRIGHT SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL PRIESTLEY, HANDLEY and SHELLER JJA 10 April 1992, 19 October 1992 [1992] NSWCA 168 GUARANTEE — OPTION GUARANTEE — ambiguity — uncertainty. GUARANTEE — option in favour of creditor on default to attach guaranteed debt to property of guarantor — construction. OPTION — categories not closed — option to create equitable charge by attaching debt to property — manner of exercise. A guarantee of a loan provided in cl12 that on default by the Borrowers the Lender was entitled to attach the debt due to any of the assets of the Guarantor, and that the Lender might register a caveat against any property registered in the name of the Guarantor. The Borrowers defaulted, and the Lender lodged a caveat against certain land of the Guarantor. The Equity Division held that the Lender did not have a charge over the land and ordered the caveat to be removed. On appeal — Held: (Priestley and Handley JJA, Sheller JA dissenting) allowing the appeal:- (1) Although an ambiguous provision in a guarantee must be construed in favour of the guarantor, such a provision should not be held to be meaningless or uncertain except as a last resort. (2) The clause attempted to confer an option on the Lender, exercisable after default by the Borrowers, to create a charge over property of the Guarantor to secure the debt guaranteed. (3) The option was valid in relation to Torrens Title land because the clause specified the manner of its exercise viz: by the lodgment of a caveat. (4) The Lender had an equitable charge over the subject property as security for the debt guaranteed. ORDERS 1. Appeal allowed with costs. 2. Set aside the orders of Brownie J. 3. In lieu declare that on the true construction of the Deed of Guarantee of 22 April 1988 and in the events that have happened the appellants are entitled to an equitable charge over the property comprised in Folio Identifier 122/10650 as security for the debts owed by the respondent as guarantor of principal debts of Solfa Pty Ltd and Cadomet Pty Ltd pursuant to the Deed of Loan of 22 April 1988 as amended by Deed dated 15 August 1988. 4. Order that Caveat No E219435 be extended until the hearing of the proceedings in the Equity Division or the further order of a judge in that Division. If that caveat has already been removed order that the respondent be restrained until the final hearing of the proceedings in the Equity Division or the further order of a judge in that Division from registering or attempting to register any dealing with respect to the land comprised in Folio Identifier 122/10650. 5. Remit the proceedings to the Equity Division with liberty to the appellants to apply for the enforcement of the charge. 2 UNREPORTED JUDGMENTS 6.The respondent is to pay the appellants' costs of the proceedings in the Equity Division to date. 7. The respondent is to have a certificate under the Suitors Fund Act in respect of the costs of the appeal. Priestley JA The considerations for and against what the appellant says is the preferable construction of cll12 of the Deed of Guarantee in question in this case are, in my opinion, not far from being evenly balanced. This is shown by the reasons of Handley and Sheller JJA which I have had the benefit of reading, which lead to opposing conclusions. The relevant facts and considerations are set out in their reasons. There are two aspects of the construction question which in my opinion turn the scale in favour of the conclusion reached by Handley JA. The first of these is that his conclusion gives the clause some effect, where the other does not. The second depends upon asking whether a common intention of the parties can be seen from the document and, in particular, cl12. I have little doubt that the drafter of cl12 intended the meaning arrived at by Handley JA, notwithstanding that from the viewpoint of technical legal drafting it was very poorly done. What can properly be inferred about the intention and understanding of the guarantor? There is no evidence of her personal circumstances, nor so far as I can see her relationship with the other guarantors. The only information appears from the document itself, which shows two proprietary companies and three individuals each became guarantors. Two of the three individuals were male and the appellant female. She had the same surname and address as one of the two male guarantors. Whether she was mother, sister, wife or daughter does not appear. The obvious inference from the fact that she signed the guarantee is that she intended the Borrowers to have the benefit of the advances referred to in the document. What would she have understood had she turned her attention to the question of construction which has arisen in this appeal? On the assumption that she was not a lawyer, and on the assumption also that she carefully considered the document, it seems to me likely that she would have realised that the Lender was saying that if the Borrowers did not repay the money advanced to them, the Lender would be entitled to get from her not only money pursuant to her promise to pay but in addition to go direct to any property she might have and that this was to be security for the debt. Such a reading is in substance the same as that of Handley JA. Of course, she might not have come to any conclusion at all. If so, she is not really in a position to say the document did not reflect her intention. Her only intention would be to become bound by whatever obligations the document contained. Had she asked any person with a reasonable knowledge of caveats what the reference to a caveat against any property registered in her name meant, she would have been told that a common use of the caveat idea, probably the most common in transactions of everyday life, was as a way of noting on the register interests in the property of a registered proprietor of land under the Real Property Act not otherwise mentioned there. If she sought no advice, but relied on her own understanding, the situation would in my opinion be as I earlier outlined it. It also seems to me that a lay person trying to understand what was meant by the clause would probably more readily see what it was intended to do than a lawyer more used to the correct and precise forms of technical words in documents securing moneys advanced by commercial lenders. URJ MURPHY and ANOR v WRIGHT (Handley JA) 3 It seems to me to be more than speculation to infer that had the respondent turned her mind to the question of the meaning of the clause she would, more likely than not, have realised in a general way that both her property and her personal promise were to be security for the advances to the Borrowers. Although in a practical sense the question whether she was in effect pledging her property as well as her promise would be of some importance to her in the event of default by the Borrowers, because if the promise were personal only, and if her funds were insufficient to pay, and if she sought to delay payment, it would take the Lender longer to force the sale of any property she owned, in the end the Lender would, by one means or another, be able to compel the sale of her property whether she had given security over it or not; ultimately the question whether or not she had given such security would concern competing creditors more than her. In short, the second matter I have been considering seems to me to point more towards the construction proposed by Handley JA as being in accord with the intention of both the Lender and the guarantor than the opposing construction. For these reasons, as well as those given by Handley JA, I agree with the orders he proposes. Handley JA In this matter I have had the benefit of reading in draft form the reasons for judgment of Sheller JA. He sets out the relevant facts and the history of these proceedings and there is no need for me to repeat these matters. The question for the Court concerns the construction and effect of cll2 of the Deed of Guarantee which provides:- "Twelfthly - In the event of default by the Borrowers in payment of moneys due under the Security Documents or in performance or observance of any covenants therein then the Lender shall in addition to the rights set out herein or in the Security Documents be entitled to attach the debt due to any of the assets of the Guarantor or Guarantors whether such assets be real or personal and further the parties hereto agree that in the event of such default the Lender may register a caveat against any property registered in the name of any or all of the Guarantors until the Moneys Secured are repaid." This Court is bound by the statement in Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549 at 561 of the principles to be applied in the construction of a guarantee. In a joint judgment four Justices said:- "At law, as in equity, the traditional view is that the liability of the surety is strictissimi juris and that ambiguous contractual provisions should be construed in favour of the surety... A doubt as to the status of a provision in a guarantee should therefore be resolved in favour of the surety." What troubles me about the conclusion of Brownie J is that it gives no effective meaning or operation to cl12. In the result the Judge has either treated the clause as meaningless, illusory or void for uncertainty. This case does not concern an ambiguous provision open to differing interpretations, one of which is more favourable to the guarantor than the other. Both before Brownie J and this Court the appellants have offered an interpretation of cll2 which would give it some effective operation. There are difficulties with this interpretation as the judgment of Sheller JA demonstrates. However the guarantor has been unable to offer an alternative interpretation which would give the clause any effective operation. In these circumstances it seems to me that it is necessary for the Court to consider principles of construction in addition to that stated in Ankar Pty Ltd v National Westminster Finance. In particular it is necessary to consider the principle that a contractual 4 UNREPORTED JUDGMENTS provision, especially in a commercial contract, will not be held void for uncertainty or ambiguity except in a most extreme and intractable case. The relevant principles are those stated by Barwick CJ in the well known passage in Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 at 436-437 where his Honour said:- "But a contract of which there can be more than one possible meaning... is not therefore void for uncertainty. As long as it is capable of a meaning, it will ultimately bear that meaning which the courts... decide is its proper construction:... The question becomes one... of ascertaining the intention of the parties... So long as the language employed by the parties, to use Lord Wright's words in Scammell v Ouston is not 'so obscure and so incapable of any definite or precise meaning that the court is unable to attribute to the parties any particular contractual intention' the contract cannot be held to be void or uncertain or meaningless. In the search for that intention, no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements. Thus will uncertainty of meaning, as distinct from absence of meaning or of intention be resolved." Similar principles were enunciated by the House of Lords in a different context in In Re Gulbenkian's Settlements (1970) AC 508. At 517, referring to a clause in a deed of settlement, Lord Reid said:- "This clause does not make sense as it stands.... But the client must not be penalised for his lawyer's slovenly drafting. Under modern conditions it may be necessary to relax older and stricter standards. If I adopt methods of construction appropriate for commercial documents and documents inter rusticos I must consider whether underlying the words used any reasonably clear intention can be discerned." At 522 Lord Upjohn said:- "There is no doubt that the first task is to try to ascertain the settlor's intention,... The court... starts by applying the usual canons of construction... But very frequently, whether it be in wills, settlements or commercial agreements, the application of such fundamental canons leads nowhere. The craftsman has used words wrongly, his sentences border on the illiterate and his grammar may be appalling. It is then the duty of the court by the exercise of its judicial knowledge and experience in the relevant matter, innate commonsense and desire to make sense of the settlor's or parties' expressed intentions, however obscure and ambiguous the language that may have been used, to give a reasonable meaning to that language if it can do so without doing complete violence to it." One must first construe the clause and then determine its legal effect. Certain matters are reasonably clear. The clause attempts to give the Lender an entitlement ('"shall... be... entitled") to attach the debt to an asset which is to be "in addition to the rights set out herein or in the Security Documents". This entitlement arises on default. The clause purports to confer a further entitlement on the Lender to "register a caveat against any property registered in the name of all or any of the Guarantors." Until default there is no entitlement and hence there can be no charge or agreement to charge any property of the Guarantor. On default an entitlement accrues to the lender but at that stage there is still no charge or agreement to charge. URJ MURPHY and ANOR v WRIGHT (Handley JA) 5 The language is not felicitous because the voluntary attaching of a debt to property requires some act by its owner but the clause contemplates that an act of the Lender will have this effect. However the Guarantor has agreed that the Lender may do this act. In my opinion the clause should be construed as an attempt to confer on the Lender an option which can be exercised on default. The Guarantor has agreed that in that event the Lender may attach the debt to any of her assets. The attachment of a debt to property by agreement is apt to create an equitable charge. It is necessary to consider in more detail whether either principle or authority prevents this Court from holding that the clause confers on the Lender an option which when exercised will create an equitable charge over the subject property. The suggested option would be unusual. Commonly options relate to the sale of property, or the renewal of leases, licences or other agreements. However on principle the categories of options cannot be closed. See for example Bazrba v Gas and Fuel Corporation (1976) 136 CLR 120 (option to acquire easement), requirements contracts (Great Northern Railway Co v Witham (1873) LR 9 CP 16), bill discount facilities, unused overdrafts and the like. McGuiness on Guarantees (1986) at 41 treats the guarantee in Mallett v Bateman (1865) LR 1 CP 163 as an option to "put" the principal debt to the guarantor. See also the various types of option contracts illustrated by the cases collected in Corbin on Contracts (1963 Edition) Vol 2 para267. These include Murphy v Hanna (1917) 164 NW 32 (option to borrow on security taken by intended lender) and Calvine Mills Inc v Slesinger Inc (1958) 258 Fed 2d 228 (option for seller to arbitrate disputes, binding on both parties after seller demanded arbitration). In Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57 at 76 Gibbs J, after a full analysis of the authorities, said:- "For these reasons I consider that an option to purchase... is a contract to sell the land upon condition that the grantee gives the notice and does the other things stipulated in the option. An option to purchase regarded in that way... gives the grantee the right, if he performs the stipulated conditions, to become the purchaser." In my opinion cl12 should be construed as a conditional contract by the Guarantor authorising the Lender to attach the debt to her property. On this basis the clause fails to confer an effective option on the Lender over the Guarantor's property other than her Torrens title land. As to such other property in the language of Gibbs J there are no "stipulated conditions" for the exercise of the option. To that extent the option fails because the manner of its exercise has not been specified. The position is otherwise in relation to Torrens title land because, once the "entitlement" has arisen, the Lender has the right to "register" a caveat. S74F(1) of the Real Property Act enables a person who claims to be entitled to an estate or interest in any land to lodge a caveat against the title. A registered proprietor cannot by contract confer a right to lodge a caveat where no caveatable interest exists. See Tooth & Co Ltd v Barker (1960) 77 WN (NSW) 231 at 233, 242-3. If the clause only confers a contractual right it will be ineffective. However the existence of this right suggests that the Lender was intended to have an equitable charge which would support a caveat. In my opinion the Lender's entitlement on default to attach the debt to Torrens title land of the Guarantor may be exercised by lodging a caveat against such property. It might be objected that cl12 fails to define or limit the property of the Guarantors which falls within its terms. Here I would invoke the decision in 6 UNREPORTED JUDGMENTS Tailby v Official Receiver (1888) 13 Ap Cas 523. At 543 Lord Macnaghten said:- "The mode or form of assignment is absolutely immaterial provided the intention of the parties is clear." And at 533, 536 Lord Watson said: - "Mere difficulty in ascertaining all the things which are included in a general assignment... will not affect the assignee's right to those things which are capable of ascertainment or are identified... As Cotton LJ said in In Re Clarke 'vagueness comes to nothing if the property is definite at the time when the court is asked to enforce the contract." See also the decision of this Court in Bridge Wholesale Acceptance v Burnand (unreported, 17 July 1992). It is now necessary to -consider the legal effect of the action of the Lender in attempting to exercise this option by lodging the caveat. The critical words are "be entitled to attach the debt due to any of the assets of the Guarantor." The clause is not referring to attachment by judicial or statutory process. The concept of a debt becoming attached to property so as to confer an equitable interest in favour of the creditor is a familiar one. Sheller JA refers to floating charges which "attach" to future property of the grantor. This is but one example of the operation which equity gives to contracts for the assignment of future property. In Tailby v Official Receiver (1888) 13 Ap Cas 523 similar principles were held to be applicable to a bill of sale which charged future book debts as security for a debt. Lord Macnaghten said at 541-3:- "... the bill of sale... belongs to a class of securities of which perhaps the most familiar example is to be found in the debentures of trading companies. It is a floating security reaching over all the trade assets of the mortgagor for the time being, and intended to fasten upon and bind the assets in existence at the time when the mortgagee intervenes.... It has long been settled that future property, possibilities and expectancies are assignable in equity for value. The mode or form of assignment is absolutely immaterial provided the intention of the parties is clear. To effectuate the intention an assignment for value, in terms present and immediate, has always been regarded in equity as a contract binding on the conscience of the assignor and so binding the subject matter of the contract when it comes into existence, if it is of such a nature and so described as to be capable of being ascertained and identified." (emphasis supplied) In Palette Shoes Pty Ltd v Krohn (1937) 58 CLR 1 at 27 Dixon J said with reference to an assignment of the future book debts of a business: - "Because value has been given on the one side, the conscience of the other party is bound when the subject comes into existence... Because his conscience is bound in respect of a subject of property, equity fastens upon the property itself and makes him a trustee... for the assignee... the prospective right in property which the assignee obtains... may survive the assignor's bankruptcy because it attaches without more eo instant) when the property arises and gives the assignee an equitable interest therein. (In In Re Lind...) In that case Swinfen Eady LJ describes the effect of the decisions thus: 'It is clear... that an assignment for value of future property actually binds the property itself directly it is acquired - automatically on the happening of the event, and without any further act on the part of the assignor."' (emphasis supplied) See also Boambee Bay Resort v Equus Financial Services (1991) 6 ACSR 532 at 535 per Mahoney JA. Cl12 should be interpreted in the light of these established principles. Attaching a debt to property therefore involves charging it with the debt. URJ MURPHY and ANOR v WRIGHT (Handley JA) 7 The principle that the exercise by a creditor of a contractual authority from a debtor can create or alter a security interest over property of the debtor is a familiar one. The conversion of a floating into a fixed charge by its crystallisation is one example. The creditor has a power or option on default to appoint a receiver and the exercise of this power creates a fixed specific charge. The relevant principles were summarised by Buckley LJ in Evans v Rival Granite Quarries (1910) 2 KB 979 at 999 in a well known passage that was approved by Gibbs J in Luckins v Highway Motel (Carnarvon) Pty Ltd (1975) 133 CLR 164 at 173. A similar principle governed the effect at law of an agreement to transfer future goods as security for a debt. This was explained by Lord Chelmsford in Holroyd v Marshall (1862) 10 HLC 191 (11 ER 999) at 216-218 (1008-1009):- "At law an assignment of a thing which has no existence, actual or potential, at the time of the execution of the deed, is altogether void... But where future property is assigned, and after it comes into existence possession is either delivered by the assignor or is allowed by him to be taken by the assignee... the property would pass... ... if the deed contained a licence or power to seize the after acquired property... the assignee might have taken possession and so have done the act which was necessary to perfect his title at law. This will clearly appear from the case of Congreve v Evetts (10 Exch. 298), in which there was an assignment of growing crops... as a security for money lent, with a power for the assignee to seize and take possession of the crops... and Baron Parke said, 'If the authority given by the debtor... had not been executed, it would have been of no avail... but when executed... it is the same... as if the debtor himself had put the plaintiff in actual possession of such crops."" The cases thus illustrate how a power over property conferred by its owner can, when exercised by the donee, create a specific security over that property. In my opinion the action of the Lender in lodging the caveat operated as an exercise of its option to attach its debt to the subject property, and created an equitable charge over that property. The Deed of Guarantee did not include any power of attorney which might possibly have authorised the Lender to execute a charge over particular property of the Guarantors. However cl19.2 of the loan Facility Deed of 22 April 1988 which was executed by the Guarantors did so. No submissions were addressed either to Brownie J or to this Court based on the existence of this power and the appellants made no attempt to exercise it. I therefore express no opinion on its possible relevance. During the hearing some question was raised as to the competency of the appeal and senior counsel for the appellants submitted that the appeal was competent without leave because the orders appealed from were final. I agree. The orders finally disposed of a principal cause pending between the parties. See Hall v Nominal Defendant (1966) 117 CLR 423 at 443, 444. In my opinion the following orders should be made:- 1. Appeal allowed with costs. 2. Set aside the orders of Brownie J. 3. In lieu declare that on the true construction of the Deed of Guarantee of 22 April 1988 and in the events that have happened the appellants are entitled to an equitable charge over the property comprised in Folio Identifier 122/10650 as security for the debts owed by the respondent as guarantor of principal debts of Solfa Pty Ltd and Cadomet Pty Ltd pursuant to the Deed of Loan of 22 April 1988 as amended by Deed dated 15 August 1988. 8 UNREPORTED JUDGMENTS 4. Order that Caveat No E219435 be extended until the hearing of the proceedings in the Equity Division or the further order of a judge in that Division. If that caveat has already been removed order that the respondent be restrained until the final hearing of the proceedings in the Equity Division or the further order of a judge in that Division from registering or attempting to register any dealing with respect to the land comprised in Folio Identifier 122/10650. 5. Remit the proceedings to the Equity Division with liberty to the appellants to apply for the enforcement of the charge. 6. The respondent is to pay the appellants' costs of the proceedings in the Equity Division to date. 7. The respondent is to have a certificate under the Suitors Fund Act in respect of the costs of the appeal. Sheller JA This is an appeal from a decision of Brownie J of 25 March 1992 vacating an order extending the operation of a caveat. On 22 April 1988 a Deed of Guarantee was made between Burns Philp Trustee Co Ltd ("Burns Philp") as "Lender" in its capacity as trustee of the Estate Mortgage Trusts ("the Trusts"), two named companies as the "Borrower" or "Borrowers" and five named persons including the respondent to this appeal as the "Guarantors". The Deed recited the advance by the Lender of Principal Moneys upon the terms and conditions set out in the security documents, which included a Deed of Loan of the same date and, in the events which happened, a registered first Mortgage of certain land dated 15 August 1988, these documents being referred to, with others, as the "Security Documents". On 15 August 1989 the Borrowers failed to pay the Principal Moneys in accordance with the Deed of Loan as amended and in accordance with the terms of the Mortgage. By orders of the Court made on 7 November 1990 the appellants were appointed trustees of the Trusts in place of Burns Philp and Burns Philp's interest in the Security Documents was vested in them. On or about 21 January 1992 the appellants caused a caveat to be lodged against certain land of which the respondent was the registered proprietor claiming to be chargees pursuant to the Deed of Guarantee and in particular Clause Twelfthly. On 24 January 1992 the appellants' solicitors wrote to the respondent advising that the Borrowers were in default and that their clients "have attached the debt due to the property" being the land the subject of the caveat, "in accordance with Clause Twelfthly of the Deed of Guarantee". On 20 February 1992 the appellants applied by summons to the Equity Division of the Court for an order pursuant to s74J (2) (a) of the Real Property Act 1900 extending the operation of the caveat lodged by them until further order. On 20 March 1992, in the proceedings instituted by the summons, Brownie J ordered the separate determination of the following question: "Did the defendant in clause Twelfthly of the Deed of Guarantee made on 22 April 1988 agree to grant any security interest in any asset to the plaintiff." Relevantly the Deed of Guarantee provided: "NOW THIS DEED WITNESSETH that the Guarantors HEREBY EXPRESSLY GUARANTEE the due and punctual payment by the Borrowers of all principal moneys and all interest and all other moneys for the time being and from time to time owing or payable under or pursuant to the Security Documents (all such moneys being hereinafter included in the reference to "Moneys Secured") as and when the same ought to be URJ MURPHY and ANOR v WRIGHT (Sheller JA) 9 paid respectively and hereby expressly guarantees the due and punctual performance by the Borrowers of all covenants and provisions on the part of the Borrowers contained in the Security Documents and the following covenants and provisions shall have effect: Twelfthly - In the event of default by the Borrowers in payment of moneys due under the Security Documents or in performance or observance of any covenants therein then the Lender shall in addition to the rights set out herein or in the Security Documents be entitled to attach the debt due to any of the assets of the Guarantor or Guarantors whether such assets be real or personal and further the parties hereto agree that in the event of such default the Lender may register a caveat against any property registered in the name of any or all of the Guarantors until the Moneys Secured are repaid." Brownie J delivered judgment on the question for separate determination on 25 March 1992. He pointed out in his judgment that cl12 does not purport to create any charge but rather gave the Lender the right, upon the happening of an event of default, to "attach" the debt due to certain assets, then identified and apparently including both the existing assets of the Guarantors and the assets which the Guarantors might acquire in the future. Although the drafter should be taken to have intended the provision to have had some meaning and effect his Honour did not consider that one could spell out of the words either the granting of an immediate charge (which, in the absence of any specification of the property would have produced its own problems; see Halsbury para528 and Fisher and Lightwood, Law of Mortgage 10th ed, 24) or the promise by the Guarantors to create such a charge.. His Honour answered the question posed, No, and gave judgment for the respondent. The appellants appealed from this order. Mr Macfarlan QC, who appeared for the appellants, submitted that by cl12 of the Guarantee the Guarantors agreed that upon default in payment of the debt by the Borrowers and the identification by the Lender of assets of the Guarantors to which the Lender elected to attach the debt, the assets of the Guarantors so identified would be subject to a charge in favour of the Lender to secure performance of the obligations of the Guarantors to the Lender under the Guarantee. It was argued that an agreement to charge ascertainable property creates a binding charge as soon as the property is ascertained; Halsbury 4th ed vol 32 para528; Meagher Gummow and Lehane 2nd para652. Mr Hutley, who appeared for the respondent, referred to the principle succinctly stated in Ankar Pty Ltd v National Westminister Finance (Australia) Ltd (1987) 162 CLR 549 at 561. "At law, as in equity, the traditional view is that the liability of the surety is strictissimi juris and that ambiguous contractual provisions should be construed in favour of the surety". He submitted that there was no operative provision in the Deed of Guarantee which purported to effect an alteration of interests in real property. The conferring of liberty on the Lender to "attach" the debt to assets, whatever that was intended to effect, involved no act by the Guarantors creating or granting or agreeing to create or grant a charge on the assets in favour of the Lender. T agree with the conclusion that Brownie J reached. The word "attach" is used to describe the effect of a floating charge. "It attaches to the subject charged in the varying condition in which it happens to be from time to time"; per Lord MacNaghten in The Governments Stock and Other Securities Investment Co Ltd 10 UNREPORTED JUDGMENTS v The Manila Railway Co Ltd [1897] AC 81 at 86. "It is not, of course, a distinguishing feature, although it is a feature, of a floating charge that it attaches to future-acquired property"; per Kitto J in Stein v Saywell (1969) 121 CLR 529 at 556. But the language of cl12 is not the language of charge by the Guarantors of their assets. It does not create a charge which is attached to assets. Nor do the Guarantors promise to create a charge attached to assets. The appropriate language of charge by the Guarantors is absent. All that is said is that the Lender shall be entitled to attach the debt due to any of the assets of the Guarantor or Guarantors. It is true that the agreement provides that in event of default the Lender may register a caveat against any property registered in the name of all or any of the Guarantors until the moneys secured are repaid. It is argued on behalf of the appellants that from this flows an implication that the clause as a whole should be read as an agreement by the Guarantors to charge such assets as the Lender may identify in the event of default by the Borrowers with payment of moneys due under the security. But this is to imply the grant by the Guarantors of an interest in the nature of a charge over assets where the language of the clause provides for something else. The Guarantors do not by cl12 expressly charge their assets nor, in my opinion, can such a charge be implied from the terms of the clause or of the Deed of Guarantee. The Guarantors are entitled to the benefit of a strict construction. Since preparing my reasons for judgment in draft in this matter I have had the benefit of reading the judgments prepared by Priestley and Handley JJA. The judgment of Handley JA demonstrates the intractability of the language chosen by the parties. It may be that the parties intended that the respondent Guarantor should create no immediate interest by way of security. I doubt it. However, we are agreed that none was created by the language used. An intention to create an interest by way of security after default in payment by the Borrower is, to my mind, unlikely and unreal. The entitlement on default is said to be an option in favour of the lender pursuant to which the lender may create a charge. The language used in cl12 relates this entitlement "to any of the assets of the Guarantor or Guarantors whether such assets be real or personal." Yet it is argued that the option is exercisable by the registration of a caveat. Thus the exercise is limited to Torrens title land. With respect I do not think the language of cl12 allows us to hold that an option was either intended or granted, even less that it was one exercisable by registering a caveat. The language, imperfect as it is, says no more than that insofar as the entitlement to attach the debt due applies to property registered in the name of all or any of the Guarantors the lender may register a caveat against that property. In my opinion to construe the language used as creating an option is not permissible. I think in truth the parties may have meant by the deed to say that the respondent created or promised to create a present charge analogous to a floating charge which attached to selected assets on or after default. But the question to be answered is "What is the meaning of what the parties have said?" not, "What did the parties mean to say?"; Norton on Deeds (1906) page 43 (2nd ed page 50) quoted with approval by Lord Simon of Glaisdale in L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 at 263F. The appellants' claim to an extension of the caveat depends upon their having an interest by way of charge in the land subject to the caveat. Since, in my opinion, they have failed to demonstrate that they have such an interest, the order for extension of the URJ MURPHY and ANOR v WRIGHT (Sheller JA) 11 caveat was rightly vacated and judgment rightly entered for the respondent. The appeal should be dismissed with costs. 1. 2. 3. 5. Appeal allowed with costs. Set aside the orders of Brownie J. In lieu declare that on the true construction of the Deed of Guarantee of 22 April 1988 and in the events that have happened the appellants are entitled to an equitable charge over the property comprised in Folio Identifier 122/10650 as security for the debts owed by the respondent as guarantor of principal debts of Solfa Pty Ltd and Cadomet Pty Ltd pursuant to the Deed of Loan of 22 April 1988 as amended by Deed dated 15 August 1988. Order that Caveat No E219435 be extended until the hearing of the proceedings in the Equity Division or the further order of a judge in that Division. If that caveat has already been removed order that the respondent be restrained until the final hearing of the proceedings in the Equity Division or the further order of a judge in that Division from registering or attempting to register any dealing with respect to the land comprised in Folio Identifier 122/10650. Remit the proceedings to the Equity Division with liberty to the appellants to apply for the enforcement of the charge. 6.The respondent is to pay the appellants' costs of the proceedings in the Equity Division to date. 7. The respondent is to have a certificate under the Suitors Fund Act in respect of the costs of the appeal. Counsel for the appellant: R B Macfarlan QC/L Einstein/L Osei Solicitors for the appellant: Middletons Moore & Bevins Counsel for the respondent: N C Hutley Solicitors for the respondent: Henry Davis York