SMITH v AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL PRIESTLEY, SHELLER and POWELL JJA 4 March 1996, 21 November 1996 [1996] NSWCA 482 SUBROGATION — circumstances in which party subrogated to rights of holder of debenture charge. MORTGAGES — "all moneys" clause — banker/customer mortgage — proper approach to construction — held: clause to be construed according to its language which in this case was — deliberately both very wide and also very particular, and not attacked as unfair. BANKING and BANKERS — security instruments — mortgage — "all moneys" clause — proper approach to construction — held: according to terms. WORDS and PHRASES — "all moneys". SUBROGATION — whether appellant came within doctrine. MORTGAGES — "all moneys" clause — width of language of — proper approach to construction of — whether such clauses should be "read down" — Held: (1) whether the appellant was subrogated to the debtor's Bank depended in part on construction of "all moneys" clause; (2) the approach to construction of such a clause is to give effect to its meaning as with any other legal instrument, according to its terms, understood in the context; (3) the words of the particular "all moneys" clause in question were very wide, very particular, deliberately so, were not claimed to be unfair and should be given the ordinary meaning which their wide language bore; (4) subrogation was applicable; (5) appeal allowed. ORDERS 1. Appeal upheld. 2. The orders made by Young J in the Equity Division of the Supreme Court on 16 June 1995 be set aside. 3. Declare that (i) Australia and New Zealand Banking Group Ltd (ACN 005 357 522) ("ANZ") was at relevant times a secured creditor of Yusen Daley Smith International Pty Ltd (In Liquidation) ("the company") under Registered Charge No 43368 over the undertaking and assets of the company for the whole of the amount of $1,325,000.00 paid out by ANZ on 6 October 1994 to Bank of Tokyo Australia Ltd for and on behalf of the company and all moneys, costs, charges, expenses and interest in or incidental thereto as are secured under the charge. (ii) Thomas Edwin Curtis Smith has the benefit of ANZ's rights under the said Registered Charge in respect of the said amount of $1,325,000.00, and ANZ's remedies for enforcing payment thereof. 4. The second and third respondents are to pay the appellant's costs in the Court of Appeal and in the Equity Division. 5. The second and third respondents are to have a certificate (if qualified) under the Suitors' Fund Act, 1951, in respect of the costs of the appeal. 6. Liberty to any party to apply to a judge of the Court with respect to the quantification of the said moneys, costs, charges, expenses and interest. 2 UNREPORTED JUDGMENTS Priestley JA On or about 6 April 1995 Mr Smith (the appellant) began proceedings in the Equity Division against Australia and New Zealand Banking Group Ltd (the first respondent or ANZ), Mr Binet (the second respondent or the liquidator) and Yusen Daley Smith International Pty Ltd (In Liquidation) (the third respondent or YDSI). At the time the proceedings at first instance began, the appellant was a creditor of YDSI in the sum of at least $1.325m. His case raised the issue whether he was a secured creditor, as he claimed, or unsecured, as the second and third respondents asserted. The proceedings were heard by Young J on | and 2 May 1995. On 16 June 1995 he dismissed them and ordered the appellant to pay the costs of the other parties. The appellant then initiated an appeal which relied on two grounds. The liquidator and YDSI filed a notice of contention. On proper notice of the appeal ANZ took no part in it. I will return to the grounds argued by the parties in this court after stating the circumstances leading up to the appellant's claim. In the first half of 1989 the appellant and Mr K Daly were directors and equal shareholders in Daly Smith Corporation Pty Ltd (DSC) which conducted a warehousing and transport business. Negotiations took place with a Japanese shipping company, Nippon Yusen Kabushiki Kaisha (NYK), for a joint venture. Agreement was reached and the way in which the venture was to be carried out was settled by two contracts made on 30 June 1989. By one contract (the purchase agreement), DSC agreed to sell its business to YDSI for $3.8m million. (YDSI then had a different name - it changed to YDSI on 10 August 1989). The other contract was a shareholders' agreement. The parties were New Wave Transport (Australia) Pty Ltd (NWT) a subsidiary of NYK, Mr Smith and Mr Daly. This agreement was subject to completion of the purchase agreement. It provided that NWT would become a 50% shareholder in YDSI, and Mr Smith and Mr Daly each 25% shareholders. The shareholders' agreement stated in Recital C that the parties had arranged for YDSI to borrow $3.8m and to purchase DSC's business. The shareholders' agreement made detailed provision for the manner of YDSI's conduct of its business and management of its affairs. What was arranged in connection with YDSI's borrowing of the purchase price of $3.8m was - (i) Bank of Tokyo Australia Ltd (BOT) agreed to provide a loan facility of $3.8m to YDSI upon provision of certain securities, which were duly provided, being items mentioned in (ii), (iii) and (iv) following; (ii) NYK was to provide a Letter of Comfort to a maximum of $2.65m, being 50% of the facility amount of $3.8m plus accrued interest; (iii) NWT was to provide a Letter of Guarantee likewise covering $2.65m; (iv) another Bank Guarantee was to be provided, likewise covering $2.65m. This guarantee was given by ANZ on 5 July 1989 after it obtained the document referred to in (v) following from DSC; (v) by a document addressed to ANZ, dated 4 July 1989, executed under the seal of DSC, that company applied to ANZ to execute a guarantee for $2.65m in favour of BOT. This document (AB119, is reproduced overleaf. One leaf further over the document from the following page of the appeal book (AB120), which has been described as a confirmation of the content of the previous document, is reproduced. tb) Wren appropriate, dc "par week" #22. In other cases. insert "in ait". All parties in a bartnersnio or all parties to 8 joint BerOUNT to Hen, It cunomer ise Company, have ingemnity executed unger its Common Seal. ig onnn4ds Manage: AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED COMMERCIAL BANKING SERVICES, 8/4656 KIPPAX ST, SURRY HILLS NSW 2010 To facilitate mviour business transactions with (2) BANK OF TOKYO (AUSTRALIA) LIMITED ee eeeeSeSeSFSNSNSTSFS—SsS—t (the Favouree) I/We ask the Bank to execute a guarantee or secunty for an amount not exceeding TWO MILLION SIX HUNDRED AND FIFTY THOUSAND DOLLARS ONLY*** (s_21650,000.00%** _) ()__ IN ALL. In consideration of the Bank giving such a guarantee or security. I/We ask you to pay to the Favouree and to debit to my/our account without prior reference to me/us any sum or sums, not exceeding the amount stated above, which the Favoures may claim from you unde: the guarantee or security or may require on its termination by you. The Bank will not be responsible in any way for the correctness of any amount or amounts claimed or required. You may terminate the guarantee or security at any time at your discretion until its expiry or on termination by you/I/we will be wable. to the limit stated above, fo: all amounts which the Favouree may claim as payable or may require the Bank to pay. IMWe indemnify the Bank against any loss, costs or expenses. including legal coms between solicitor and own client, tat it may incu in making any payment or payments to the Favouree or that may arise from any claim on the Bank unde: the guarantee or security. I/We authorise the Bank to dedit my/our account with the usual charges and any stamp duty on the quarantee or security, and with any losses. costs or expenses for which I/we have agreed to indemnify the Bank. THE COMMON SEAL OF DALY SMITE = CORPORATION PTY LTD WAS EE! Sours taal AFFIXED IN ACCORDANCE WITH ARTICLES OF ASSOCIATION PRESENCE OF:- in the top right hand comer: it need not be an executed copy. Tisa7dype towing — pages is me annexe maned" € "referred toin rom Gay of the Alficavit of 2 Sysosy m ne AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED Ss A B eae. c accordance with authority for \ D operations on the account) Favouree To: (the Principal) Business or For (the Customer) E trading name Australia and New Zealand Banking Group Limited (the Bank) asks the Principal F to accept this Undertaking in connection with a contract or agreement between - the Principal and Customer for Soakcesen St LOAN OVER, SEVEN, (7), YEARS G . contracly agreement H ee unconditionally to pay the Principal on written demand tts font 3 or sums to an aggregate amount not exceeding ' Amount AND FIFTY THOUSAND DOLLARS ONLY#** dollars ($2,850,000.90*+# The Bank will pay this amount or any parts of it to the Principal on demand without reference to the Customer and even if the Customer has given the Bank notice J i - not to pay the money, and without regard to the performance or non-performance of the Customer or Principal under the terms of the contract or agreement. . Any alterations to the terms of the contract or agreement or any extensions of _ K + = . time or any other forbearance by the Principal or Customer will not impair or Hy discharge the Bank's liability under the undertaking. L This Undertaking remains in force until one of the following events occurs: * The Principal notifies the Bank in writing that the Undertaking is no longer required. M a * The Bank has paid the said aggregate amount or the balance outstanding to ~ ' the Principal. ' 2 nN ; cares + 400p.m.onthe.... 72°78 Oe Re |) 5 ae 19.98.07 He Notwithstanding anything stated in this Undertaking, the Bank has the right to [e) terminate it at any time by paying the Principal the aggregate amount or the . balance outstanding, or any lesser amount that the Principal may require. - Pp : 5 . -- f arty Dated at SURRY HILLS this FIFTH day of soy J9:9650 cz Q Ts ee R a, sae 'Signed and Hy the Batk AUSTRALIA AND MEW ZEALAND BARKING GR2E LIMITED ae: ats; MODORTCMATING 44S: BOONE A007 BORA BRAK 9 7 -.§ N. pavzo coupak SHEN . - 'and I, the said Attorney : wus tame, ey ott attra fave, tere tes y ered. in the Office of the Regisirar Generai S ae 'Which this documeat " UR.SMITH v AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD (Priestley JA) 3 (The first of the reproduced documents was referred to by Young J, and frequently in argument in this court, as a guarantee. Mr Jacobson QC, for the respondents at the first argument, said that it was not strictly speaking a guarantee, and was known in some circles as a "'suicide bond". For convenience, and without thereby making assumptions about its effect, it will sometimes still be called a guarantee.) On 5 July 1989 YDSI drew down the $3.8m from BOT and paid the purchase price for the business. Shortly afterwards YDSI sought overdraft facilities from ANZ for purposes separate from those for which the 1989 document in favour of BOT had been given. ANZ agreed to the request taking as security a mortgage debenture, dated 23 October 1989 and registered 28 November 1989, which charged all YDSI's assets: "\.. with the payment to the Bank on demand... all and every sums and sum of money loans and advances heretofore lent or made by the Bank... or which may now or hereafter be lent or made by the Bank to or for the use or accommodation or at the request of the Mortgagor and for the time being remaining unpaid on any account or in any way whatsoever: AND ALSO all moneys which the Bank... has paid or become liable to pay or which the Bank shall pay or become liable to pay to for or on account of the Mortgagor ALSO all moneys owing or to become owing by the Mortgagor in respect of any other... advances" C132 of the mortgage debenture provided, in part: "...these presents shall be a continuing security notwithstanding any settlement of account intervening payment or other matter or thing whatsoever until a final discharge hereof shall have been given to the Mortgagor..." On 6 August 1992 YDSI ceased to be in overdraft with ANZ. It was argued for the respondents that on the proper construction of the mortgage debenture this meant that YDSI could then have called for its discharge. The contrary argument was that it could not have been required to discharge it while what was said to be a contingent liability to BOT remained on foot. Although it may not be relevant, ANZ at this time arguably took the latter view: see ANZ's letter of 10 November 1992 to the appellant, annexure JJ to Mr Binet's affidavit of 19 April 1995, and later discussion. Although I am not aware of any documentation of it in the appeal papers, it appears to have been accepted between DSC, YDSI, the appellant and Mr Daly, that the appellant and Mr Daly would each accept responsibility for half whatever liability might arise under DSC's guarantee to ANZ of 4 July 1989.1 Accordingly when in early 1994 (apparently after discussions of one or two of the shareholders buying out one or two of the others in circumstances which it was not necessary to explore for the purposes of the case) it was proposed that the ANZ guarantee of 5 July 1989 (para(iv) above) should be replaced by two guarantees for $1.325m each, and the appellant and Mr Daly should each give a guarantee for that amount to ANZ, in place of DSC's guarantee of 4 July 1989, the appellant (and other necessary parties) agreed. The form used for the guarantee to ANZ was the same as that in 1989. It was dated 13 April 1994. Like the earlier one it began with the printed words "To facilitate my/our business transactions with (a)...". The (a) referred to a sidenote which said "Insert name of Department, etc to whom guarantee... is to be given". In each the name "Bank of Tokyo" was inserted. It was signed by Mr Smith. It contained no direct 1. In the second argument the respondents agreed that this was not in dispute (T12-13). 4 UNREPORTED JUDGMENTS reference to YDSI, but the note at its foot required a copy of the form of guarantee to be issued by ANZ to be attached. A copy was attached, dated 22 April 1994. The presently material part was as follows: "AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD BANK GUARANTEE Guarantee content confirmed (Sgd) T Smith (Customer to sign in accordance with authority for operations on the account) BANK COPY To: BANK OF TOKYO AUSTRALIA LTD (the principal) For: YUSON DALY SMITH INTERNATIONAL PTY LTD (the customer) Australia and New Zealand Banking Group Ltd (the Bank) asks the Principal to accept this Undertaking in connection with a contract or agreement between the Principal and Customer for LONG TERM LOAN OVER SEVEN (7) YEARS In consideration of the Principal accepting this Undertaking at the request of the Bank in substitution for an earlier Undertaking dated 5 July 1989 previously issued by the Bank to the intent that the total amount payable remains unchanged, the Bank undertakes unconditionally to pay the Principal on written demand from time to time any sum or sums to an aggregate amount not exceeding One Million Three Hundred and Twenty Five Thousand Dollars Only ($1,325,000.00) ***** The Bank will pay this amount or any parts of it to the Principal on demand without reference to the Customer and even if the Customer has given the Bank notice not pay the money, and without regard to the performance or non-performance of the Customer or Principal under the terms of the contract or agreement." It was common ground that parallel documents came into existence in regard to Mr Daly's obligation. The next presently relevant event directly affecting the appellant was that on 6 October 1994 BOT made demand on ANZ for $1,325m under the guarantee and was paid on the same day. By letter dated the same day ANZ notified the appellant of the demand and payment. The letter said that in accordance with the indemnity the appellant had given to ANZ his loan account with ANZ had been charged with the sum of $1.325m. The letter asked him to discuss arrangements concerning repayment of this loan. Prior to the demand by BOT the Japanese interests in the joint venture had been giving the appellant's position careful consideration: see the memos of 28, 29 and 20 September 1994 at AB 165-169. It appears to have been in connection with this consideration that by fax sent on 28 September 1994 YDSI asked ANZ to have the mortgage debenture "removed, preferably by 4 October 1994". ANZ replied by letter of the same date, referring to the request for removal and saying: "... we have now instructed our solicitors to proceed accordingly noting that 4 October 1994 is your preferred date of completion. We will advise you upon removal of charge." Noted on YDSI's copy of its fax of 28 September 1994 was: "Contacted P Turner 30/9/94 9:15 am ph 227 1437. He said the charge would be removed next week but not by the 4/10/94 as they have to retrieve records from central filing." By letter of 30 September 1994, Mr Turner of ANZ wrote to Gadens Ridgeway, as follows (leaving out formal parts): "YUSEN DALY SMITH INTERNATIONAL PTY LTD URJSMITH v AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD (Priestley JA) 5 ACN 003 715 062 RELEASE FROM A CHARGE Further to the recent telephone conversation with our Garry Mueller, would you please prepare the necessary documentation and proceed with releasing our charge over the abovementioned company. Our records indicate the charge being a Registered Mortgage Debenture No 54468, however, since we have been unable to locate the security documents this information has not been confirmed." Next was a fax from YDSI to ANZ dated 6 October 1994: "Further to my fax Dated 28 September 1994. Please confirm the charge has been removed. If it has not been what has to be done and what is your best estimate on timing." On ANZ's copy of this fax appears the note: "Telephoned 7/10/94 advised that our solicitors preparing forms". Then by fax dated 10 October 1994 from YDSI to ANZ: As a Director of Yusen Daly Smith International Pty Ltd has applied to the Supreme Court for the company to be liquidated ANZ should not incur any more cost on removing the charge referenced in my letter 6 October 1994." On ANZ's copy of this appears: "Too late. Already done". Finally, by letter dated 11 October 1994 Gadens Ridgeway wrote to ANZ: "CUSTOMER YUSEN DALY SMITH INTERNATIONAL PTY LTD We have prepared the enclosed "Discharge or release of property from a charge" form and a "Satisfaction Piece - full discharge" document(s) on the following basis: 1. There are no guarantor or borrowers who will have an ongoing obligation to ANZ who have not consented to the release of this security. 2. The facilities will be cleared in full on discharge. Should there be any guarantors who should consent to the discharge and should you require us to prepare appropriate consent forms - please advise. You should retain in your security packets all documents upon which loan security duty is paid to ensure a credit is available in the future if required. Noted on this is "R 12/10/94 GM Please now hold given YDSI last corro." From YDSI's fax of 10 October 1994 it appears that proceedings were commenced for the winding up of YDSI at about that date. A winding up order was made on 13 March 1995 and the second respondent appointed liquidator. In an affidavit by him read before Young J he said that preliminary assessment of YDSI's financial position as at 18 April 1995 showed estimated assets of $5.223m and liabilities $22.319m. This did not take into account contingent claims against YDSI of $1.18m or the costs of liquidation. Some of the assets were debts the collectibility of which was doubtful. 'Young J decided against the appellant's claim to be a secured creditor (by subrogation to ANZ's mortgage debenture) by reference to four questions: 1. Was the guarantee of 13 April 1994 given by Mr Smith on his own behalf or on behalf of YDSI? 2. What was the status of YDSI's mortgage debenture to ANZ at the time of payment of ANZ's debt? 3. Did s3(1) of the Law Reform (Miscellaneous Provisions) Act 1965 assist Mr Smith? 4. Was the overriding intention of the parties such that Mr Smith would in any event be barred from recourse to YDSI's assets to secure his guarantee to BOT? 6 UNREPORTED JUDGMENTS The arguments in this court were made by reference to the foregoing questions, although in the event, the arguments were confined to matters relevant to questions | and 2. In what follows I have dealt with all matters relied on by either party in the appeal. YOUNG J'S QUESTION 1. Young J's conclusion was that the guarantee was that of the appellant. He also said he could not see on any version the appellant was doing anything else than guaranteeing YDST's liability. Young J's conclusion on this point was that the appellant paid ANZ as a surety and was "entitled to be subrogated to whatever securities the ANZ had. What, as I understood it, became, in the second argument in this court, the respondents' principal substantive argument in regard to issues connected with Young J's question 1, was that once it was recognised that not YDSI but DSC had given the guarantee (so-called) of 4 July 1989 to ANZ, it became easier to see that, as was submitted for the respondents, the giving of the guarantee was not something done on behalf of or at the request of YDSI and that when in 1994 Mr Smith and Mr Daly gave substitute documents in replacement of the DSC document of 4 July 1989 neither of them, and relevantly not Mr Smith, was doing so on behalf of or at the request of YDSI. It was then submitted that Mr Smith did not get the benefit of the doctrine of subrogation unless the payment he made pursuant to his 1994 document (the payment being effected by ANZ debiting his account by $1.325 million) was made on behalf of YDSI. In the end, counsel agreed? that the critical issue was whether, on the one hand, it was right to say that Mr Smith did not do what he did on behalf of or at the request of YDSI, or, whether, on the other hand, it would be right for the court to infer that Mr Smith (in the shoes of DSC) committed himself to his 1994 document either on behalf of or at the request of YDSI. In making the submission that the former was the correct view to take, counsel for the respondents emphasised the form taken by the documentation which he said was inconsistent with and prevented any inference that either DSC's July 1989 document or Mr Smith's 1994 document was given for, or on behalf of, or at the request of YDSI. There are two reasons why I do not accept this submission. The first is that in my opinion, on the facts as stated, taking into account the documents, and in particular taking into account the form of bank guarantee set out at p4 of these reasons, the only reasonable inference is that first DSC and next Mr Daly and Mr Smith did what they did on behalf of YDSI and in respect of YDSI's indebtedness. The second reason is that acceptance of the respondents' submission would, it seems to me, mean that Mr Smith had no recourse against YDSI upon ANZ obtaining payment from him of the $1.325 million when it debited that amount against his account. There are two aspects of this consequence. One is that it does not seem to me to be open to the respondents at this stage of the appeal to rely on an argument having that effect. That is because both before Young J and in the argument before this court last year, the principal question in the case was presented as being whether the amount owed by YDSI to Mr Smith, the fact of indebtedness being common ground, was an unsecured or secured debt in the winding up of YDSI. The question was whether the debt was a secured debt by subrogation or whether, there being no entitlement to subrogation, it was unsecured. It was because that was treated as the principal issue that attention 2. Second argument (T17-18).) URJSMITH v AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD (Priestley JA) 7 focused on the position of the mortgage debenture given by YDSI to ANZ, whether it was still on foot at the relevant time, and what its proper construction was. It seems likely to me that the fact that no question was raised about the indebtedness of YDSI to Mr Smith reflected the view then taken by the respondents' legal advisers that that was the position which coordinately involves the idea that Mr Smith's document of 1994 committing himself to ANZ was one by which he undertook a commitment for or on behalf of YDSI. As I have already indicated, I think that such a view was correct. In any event, however, it seems to me too late for that matter to be investigated at this stage of the appeal, having been common ground and the parties having conducted their cases on that basis for so long. In my view, therefore, what became the principal substantive submission (in the second argument in this court) fails. One matter that I should record is that at one stage in the second argument reference was made to Wood Hall Ltd v The Pipeline Authority (1979) 141 CLR 443 as a case the court should have considered in its earlier reasons. Upon discussion of the case in argument however, it was agreed by counsel for the respondents that the decision did not furnish binding authority on any matter in issue in the present case. It does not seem to me to call for explicit consideration in the decision of the appeal. YOUNG J'S QUESTION 2. In answering question 2 Young J relied on two separate points for concluding that the mortgage debenture of October 1989 was not available to the appellant under the doctrine of subrogation. The first point was that as a matter of construction the mortgage debenture did not charge YDSI's assets with payment to ANZ of any amount for which it became liable pursuant to a contingent liability to pay a debt of YDSI's when that contingent liability was in existence when the mortgage debenture was given and not mentioned in it. He was of the view that such a situation fell within "one of the general rules of construction of all moneys mortgages". He thought a second guideline also applied which was that: "... one normally expects the parties' intention to be that once the original debt for which the charge was given is paid, then the charge becomes extinguished and is not available as the source of a security for a liability which crystallises after that date." As to the first guideline, Young J thought that the fact that ANZ never treated the contingent liability to BOT as secured under the charge confirmed its applicability. Counsel for the appellant said this argument was unavailable in view of ANZ's earlier mentioned letter of 10 November 1992 which, he argued, shows that at that date at any rate ANZ did treat the contingent liability as secured inter alia by the mortgage debenture. I am inclined to agree with this, because the letter, although addressed to DSC, speaks of the DSC "Group's" facilities with the Bank, and, in the first paragraph on its Page 2, seems fairly clearly to be referring to the mortgage debenture of 23 October 1989 over YDSI's assets as one of its securities for the "Group's" indebtedness. On this footing, I need to mention that ANZ's attitude may have changed later, but even that is doubtful in view of their solicitors' letter of 11 October 1994. (This letter reads to me like good advice from lawyers more aware of the possible pitfalls than the ANZ officers had been; the draft "satisfaction piece" was not unconditional; the officers' indications to YDSI of willingness to discharge the mortgage debenture seem to me (from the scanty evidence) to have been conditional on obtaining advice from the solicitors; and the officers would not have been likely to 8 UNREPORTED JUDGMENTS disregard that advice). If in fact the attitude of the relevant ANZ officers did change, there is nothing to explain why. It may not have been because of any view of the legal situation. It may just as easily have been due to the manoeuvrings recorded at p167-p169 (see especially para4 and paraS on 169) of the appeal papers. There is no evidence upon which any legitimate inferences can be based. The situation provides a good example why, if post contractual conduct can be used in construction of a contract, it must, in circumstances like the present, be used with great care: see the discussion in Hide and Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310, especially at 330B. The point about the letter of 10 November 1992 is in any event very much a subsidiary one in my approach to the construction of the mortgage debenture. As will appear, with respect to Young J's resort to his guidelines, I think the text of the document, in its context as a bank document which no-one has sought to set aside or rectify, governs its meaning, rather than the guidelines. Young J thought the application of the second guideline was also reinforced by ANZ's indication that it acceded to YDSI's request for a discharge; but the reasons I have given above in the section commencing with the words "ANZ's attitude" seem to me to deprive this argument also of any force. If the confirmations of the applicability of the two guidelines are therefore to be left out of account, the question simply becomes one of construction. Young J acknowledged that the guidelines he referred to were "just that, a method of approaching construction of a mortgage in its factual matrix". One aspect of the matrix is that ANZ gave the guarantee to BOT on 5 July 1989 and the report from Mr Timms (AB 86), which must have taken some time to prepare, to Mr Brennan of Central 2000, was dated 21/09/89. I see no reason why ANZ would have had any intention to restrict the extremely widely drawn words of its mortgage debenture in the way required by Young J's first guideline. The words are very wide; they are very particular; to my mind very obviously deliberately so. YDSI at no time claimed they were unfair. There was no hint that they were not in accordance with the parties' agreement. The word rectification was not mentioned. No suggestion of overreaching was made. In all the circumstances I can see no reason for construing the words in a sense other than I think they were intended to bear and which in ordinary meaning they did bear. In the result I do not agree with the first point relied on by Young J as to the availability of the mortgage debenture for subrogation purposes. As to the second point, it loses force if the first point is unavailable. In my view, because the charge did secure ANZ's liability under its guarantee, ANZ was not obliged to agree to YDSI's request for discharge on 28 September 1994; it did not then either discharge or bind itself in equity to discharge the mortgage debenture by any particular date; in the event it did not discharge the mortgage debenture and the stage was never reached when it ought to have been done: equity will not therefore treat it as if it had been done. My conclusion on Young J's second question is therefore that the appellant was subrogated to ANZ's right as a secured creditor of YDSI in regard to ANZ's payment of $1.325m to BOT. YOUNG J'S QUESTION 3. The conclusion in the preceding paragraph makes it unnecessary to consider question 3. YOUNG J'S QUESTION 4. Young J had no need to answer question 4. He indicated that he thought the point taken by the liquidator and the third respondent had some force, but did not examine it in any depth or decide it. URJ SMITH v AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD (Powell JA) 9 In this court the respondents sought to support it in their written submissions, but in the oral argument expressly abandoned it. I need therefore say nothing more about it. There was some discussion of the orders that would be made if the court came to the conclusions I have reached on questions | and 2. Each side put in a written submission as to the appropriate form. In the result I propose that the final orders of this court on the appeal should be: 1. Appeal upheld. 2. The orders made by Young J in the Equity Division of the Supreme Court on 16 June 1995 be set aside. 3. Declare that (i) Australia and New Zealand Banking Group Ltd (ACN 005 357 522) ("ANZ") was at relevant times a secured creditor of Yusen Daley Smith International Pty Ltd (In Liquidation) ("the company") under Registered Charge No 43368 over the undertaking and assets of the company for the whole of the amount of $1,325,000.00 paid out by ANZ on 6 October 1994 to Bank of Tokyo Australia Ltd for and on behalf of the company and all moneys, costs, charges, expenses and interest in or incidental thereto as are secured under the charge. (ii) Thomas Edwin Curtis Smith has the benefit of ANZ's rights under the said Registered Charge in respect of the said amount of $1,325,000.00, and ANZ's remedies for enforcing payment thereof. 4. The second and third respondents are to pay the appellant's costs in the Court of Appeal and in the Equity Division. 5. The second and third respondents are to have a certificate (if qualified) under the Suitors' Fund Act, 1951, in respect of the costs of the appeal. 6. Liberty to any party to apply to a judge of the Court with respect to the quantification of the said moneys, costs, charges, expenses and interest. Sheller JA I agree with Priestley JA. Powell JA I agree with Priestley JA. 1. Appeal upheld. 2. The orders made by Young J in the Equity Division of the Supreme Court on 16 June 1995 be set aside. 3. Declare that (i) Australia and New Zealand Banking Group Ltd (ACN 005 357 522) ("ANZ") was at relevant times a secured creditor of Yusen Daley Smith International Pty Ltd (In Liquidation) ("the company") under Registered Charge No 43368 over the undertaking and assets of the company for the whole of the amount of $1,325,000.00 paid out by ANZ on 6 October 1994 to Bank of Tokyo Australia Ltd for and on behalf of the company and all moneys, costs, charges, expenses and interest in or incidental thereto as are secured under the charge. (ii) Thomas Edwin Curtis Smith has the benefit of ANZ's rights under the said Registered Charge in respect of the said amount of $1,325,000.00, and ANZ's remedies for enforcing payment thereof. 4. The second and third respondents are to pay the appellant's costs in the Court of Appeal and in the Equity Division. 5. The second and third respondents are to have a certificate (if qualified) under the Suitors' Fund Act, 1951, in respect of the costs of the appeal. UNREPORTED JUDGMENTS 6. Liberty to any party to apply to a judge of the Court with respect to the quantification of the said moneys, costs, charges, expenses and interest. Counsel for the Appellant: DF Jackson QC / RW Cameron Solicitors for the Appellant: McLaughlin and Riordan Counsel for the 2nd and 3rd Respondents: G Downes QC / JE Thomson Solicitors for the 2nd and 3rd Respondents: Blake Dawson Waldron