MISTRONI v STEINDLBERGER AND ANOR SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CLARKE, HANDLEY and SHELLER JJA 16 October 1992, 16 October 1992 [1992] NSWCA 159 MORTGAGE — TERMS — S93, CONVEYANCING ACT 1919. Clarke JA This is an appeal from a decision given by Mr Acting Justice Needham on 6 March 1992. As a consequence of that decision the following orders were made: "1. The clause fifthly in Mortgage dated 30 May 1986 and registered number W371001 is void as a penalty. 2. The amount due by the plaintiffs to the defendant under the Mortgage is $51,151.53. 3. In the events that have occurred the Mortgage between the cross-claimant as Mortgagee and the cross-defendants as Mortgagor and dated 30 May 1986 in respect to the property being the whole of the land contained in Volume 7830 Folio 165 incorporated the following terms: (a) 'Firstly - the Mortgagor will pay to the Mortgagee the principal sum, or so much thereof as shall remain unpaid, on 29th day of March 2001." (b) 'Fourthly - the Mortgagor shall pay principal and interest at the rate of fifteen and one half (15.5) per cent per annum by instalments of principal and interest of $1,076 per month. The first instalment is to be made on 30th day of June 1986 and each subsequent payment to be made on 30th day of each subsequent month." THE COURT ORDERS THAT 4. The defendants pay damages to the plaintiffs in the sum of $2,734.80 and that the plaintiffs be entitled to the interest on the joint account referred to in orders made on 3 December 1991. 5. The defendant pay the costs of the plaintiffs in a sum to be agreed or as taxed as the case may be." The dispute with which Mr Justice Needham dealt arose out of the mortgage which had been entered into between the parties on 30 May 1986. The respondent was the mortgagor and the appellant the mortgagee. The respondent borrowed the sum of $70,000 which was secured by this mortgage over property which the respondent had purchased. The title to the land was under the Real Property Act and the mortgage was registered under that Act. The first condition in the schedule of the mortgage read that the mortgagor will pay to the mortgagee the principal sum or so much thereof as shall remain unpaid on the twenty ninth day of May 2001. The second condition need not be referred to. The third condition provided that the mortgagor observe the provisions set forth in the memorandum filed in the Registrar-General's office as number Q.860000 which provisions were deemed to be incorporated therein. 2 UNREPORTED JUDGMENTS Under the fourth condition the mortgagor undertook to pay principal and interest at the rate of fifteen and a half per cent per annum by instalments of principal and interest of $1,076 per month. There is provision for the first payment and each subsequent payment. The critical clause is the sixth which reads "The mortgagors may repay the mortgage at any time provided they give one month's notice and provided they pay all interest accruing to the date of discharge, together with a certificate from a qualified accountant in which the accountant certifies the final figures due for the discharge of the mortgage". In July 1991 the mortgagor decided to sell the property and on 18 July a letter was sent by their solicitors to the Attorney General for the mortgagee notifying that the mortgagors intended to repay the mortgage. On 9 August that letter was followed by another one in which it was said that the property had been sold and that settlement was anticipated about the end of October and this letter includes the certificate referred to in condition six. Thereafter a dispute arose between the parties as to the amount which the mortgagors were required to pay in order to secure a discharge of that mortgage. According to the mortgagors they were obliged to pay interest only until the date of the early discharge, which was intended to take place later in 1991. According to the mortgagee the mortgagors were entitled to discharge that mortgage only upon repayment of outstanding principal and the whole of the interest due until the date of discharge referred to in the first condition, that is, 29 May 2001. Before his Honour the appellant made I think two relevant submissions, first, he submitted that under condition six properly construed the mortgagors were obliged to pay interest until May 2001. The second was that in any event s93 of the Conveyancing Act applied and to the extent that condition six derogated from s93 it could not be relied upon. Most of the argument at the trial appears to have focussed on the second submission which has not been pressed in this court. It has been accepted that the answer to the question depends upon the proper construction of the sixth condition. Before considering that question it is important to note that under s93 a mortgagor is entitled to redeem the mortgaged property prior to the time appointed in the mortgage for redemption, but only on the basis that he or she pays to the mortgagee, in addition to any other moneys then owing under the mortgage, interest on the principal sum secured thereby for the unexpired portion of the term of mortgage. It is readily apparent that if the appellant's submissions are correct, then the sixth condition adds nothing to s93 and accordingly serves no useful purpose. The trial judge noted that this argument had been put to him and concluded that upon its proper construction cl6 enabled the mortgagor to repay the mortgage and obtain an early discharge upon payment of the total amount of principal outstanding and of interest which had accrued, until the date of the early discharge. In my opinion his Honour was correct and I adopt his Honour's reasons for reaching that conclusion. However, I think it is appropriate in deference to the arguments which have been put to give my own short reasons for the conclusion. The power that is granted to the mortgagors in the sixth condition is not simply a power to repay the mortgage, it is a power to repay the mortgage and obtain an early discharge. It is subjected to two conditions, first, the mortgagors must give one month's notice and, second, they must pay all interest accruing to the date of discharge. URJ MISTRONI v STEINDLBERGER AND ANOR (Clarke JA) 3 The requirement for one month's notice is readily acceptable as a condition designed to enable the mortgagee, not only to arrange for the discharge, but to re-organise his or her affairs. The condition that interest be paid to the date of discharge is also obviously a sensible condition, it is designed to ensure that interest is paid to the mortgagee while ever the moneys are outstanding. Understood in that way the condition is different from s93 and provides to the mortgagors a power to repay the mortgage and obtain an earlier discharge upon terms which could be seen to be fair to both parties. That is, perhaps, beside the point, except to the extent that when one endeavours to derive the presumed intention of the parties entering into the agreement, and this clause in particular, a fair result is more easily explicable. The alternative is that the parties expressly agreed that notwithstanding the early repayment and the early discharge, the mortgagee would have the benefit of his or her principal for reinvestment, and all the interest for the period between the date of actual discharge and the date mentioned in the mortgage document. One would, I appreciate, strain to find against such a presumed intention unless one was constrained by relatively clear language to reach that result. The language in condition 6 is, in my view, relatively clear, but in the other direction. I take the reference to the date of discharge in the sixth condition to be a reference to the date of the actual intended discharge, that is, the date on which the repayment is affected and an early discharge given. If that is right, then the mortgagors may obtain that discharge upon paying principal and interest which accrues up to that date provided, of course, that they give one month's notice. There are other clauses in the mortgage which, it is submitted, bear on the meaning of this clause. In particular our attention has been directed to provision ten incorporated in a memorandum, but I do not think that adds anything to the sixth condition or throws any light upon its proper interpretation. It is of some interest that the obligation undertaken by the mortgagors was to pay principal and interest on a monthly basis. Were the appellant's argument to be correct, there would be a rather odd situation that interest would be payable after the date of actual discharge upon the notional outstanding principal. It seems to me unlikely in the extreme that the parties intended that situation. Rather, I think, it clear that they intended that, provided that conditions were complied with, upon repayment of the principal and the interest to the date of the early discharge, the mortgagors were entitled to receive a memorandum of discharge. I agree with his Honour and I would be disposed to dismiss this appeal with costs. There is a cross-appeal, but it is unnecessary to deal with that for the argument which was presented to the court related to losses which had been suffered by the respondents as a result of events which have occurred since the date of the judgment. It seems to me relatively clear that any losses that have occurred have flowed from a stay of execution on the original judgment, and that if those losses are to be made good, that result can only be achieved by appropriate interlocutory procedures. It may be that the respondents should have sought protection in the form of an appropriate order when stay proceedings were taken earlier in the year but whether that is so or not, nothing that has appeared before this court supports the cross-appeal and that fact has, I think, been now conceded by counsel for the respondents. I propose to make the following orders; 1. The appeal be dismissed with costs. 2. The cross-appeal be dismissed with costs. 4 UNREPORTED JUDGMENTS 3. The parties be given leave to apply in relation to the moneys which are presently in a joint bank account in the names of the respondents' solicitor and the appellant's former solicitor. Handley JA I agree. It is clear that this appeal turns exclusively upon the true construction of c16 of the mortgage and as the learned Presiding Judge has said, it is not to be supposed the parties inserted into their mortgage an express term which did no more than restate the effect of s93 of the Conveyancing Act. Sheller JA I agree with the orders proposed for the reasons given by the learned Presiding Judge. Clarke JA: The orders of the court will be at present (1) and (2). Those orders are appeal to be dismissed with costs and cross-appeal to be dismissed with costs. Appeal dismissed with costs. Cross-appeal dismissed with costs. Counsel for the appellant: RI Goodridge Solicitors for the appellant: David Landa, Stewart and Co Counsel for the respondent: PH Blackburn-Hart Solicitors for the respondent: Lane and O'Rourke