DUGGAN and ORS v COMMONWEALTH BANK OF AUSTRALIA and ANOR SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL GLEESON CJ, HANDLEY and SHELLER JJA 24 September 1997, 18 December 1997 [1997] NSWCA 97 Mortgages — duty of care of mortgagee to mortgagor — estoppel Contracts contract of guarantee — construction and interpretation — privity The appellants in this appeal were Duggan, Point Piper Marina Pty Ltd (PPM) and Raffindale Pty Ltd, Duggan being a director of the other two. PPM operated the marina on freehold land of which Raffindale was the registered proprietor, and adjoining leasehold land, of which Raffindale was the lessee from the Maritime Services Board. On 9 October 1987 Raffindale mortgaged the freehold land to the Commonwealth Bank of Australia (the first mortgage), and PPM granted the bank an equitable mortgage over the whole of its business and property (the equitable mortgage). On 20 October 1988 an AGC Bailment Plan was entered into between AGC, AGC (Advances) and Point Piper Marina (Wholesale) Pty Ltd, as bailee. Under the Plan, Wholesale might take goods on bailment from AGC. For a fee which Wholesale agreed to pay by monthly instalments, Advances guaranteed to AGC the due observance and performance by Wholesale of all its obligations and indemnities under the Bailment Plan. In consideration of the guarantee, Wholesale agreed to pay Advances on demand any amount paid by it under the guarantee. Raffindale gave a guarantee to AGC and Advances of the due performance by Wholesale as supplier of its obligations "under or arising out of each and every Supplier's Agreement". PPM and Duggan gave guarantees to AGC and Advances in the same terms. Raffindale gave AGC a second mortgage over the freehold land, to secure to AGC the payment of the principle sum and interest thereon, and a mortgage of its interest in the leasehold land. On 8 November Wholesale charged the whole of its assets and undertaking with the due and punctual performance, observance and fulfilment of "the Obligations", and PPM gave a charge in the same terms to AGC. Following default around March 1991, receivers were appointed by AGC and the bank. Various disputes arose as to amounts owing and proceedings were begun in both the Federal and Local Courts. Deed of Settlement was entered into on 3 November 1993. AGC was not a party to the deed but offered to accept an amount in full and final settlement of its claims against the Duggan group. The date for payment to both the bank and AGC was | March 1994, and Duggan set about trying to re-finance the business. At the appellant's request, the bank provided a one and only extension of time for repayment until 31 March 1994. By 18 May settlement had not taken place, and the bank appointed a receiver of PPM and requested immediate possession of the property. In 1991 the Maritime Services Board proposed the installation of facilities for the disposal of sewage from vessels at marinas around the harbour, and Duggan, along with the receiver appointed by the bank, lodged tender documents for the Point Piper Marina to be nominated as a site for an installation. However, by the time the necessary documents had been executed and delivered it was too late. In the proceedings below the appellants claimed the bank was not on 18 May 1994 entitled to appoint a receiver and agent in the circumstances, that it was estopped from claiming a right to make that appointment, and that the bank and AGC were negligent in failing to execute the required deed of consent for the installation of the sewage pump service required of them as mortgagees, or failing to do so within a reasonable time. The 2 UNREPORTED JUDGMENTS trial Judge dismissed the statement of claim, and accepted AGC's cross-claim that it was entitled to a declaration that the debt due by Wholesale to Advances was secured by the second mortgage given by Raffindale to AGC. Held: There was no doubt that the bank had power under the terms of the equitable mortgage to appoint a receiver and the rights under that mortgage were preserved in the Deed of Settlement. There was no basis upon which it can be said that the appellants lost the chance of paying out the bank on or before 20 May 1994, assuming, for the purpose of argument that the appellants were led to believe that they had until the end of that day to repay. No basis was established for saying that the bank and AGC were required to execute the documents within a reasonable time at all. Even if a duty existed under the terms of the agreement to which they were asked to consent, the trial Judge was not persuaded that AGC's delay of four weeks amounted to a breach of that duty, or that the time that passed between the receipt of the documents by the bank and the date when the project became no longer possible was unreasonable. The trial Judge's construction of the clause the subject of the cross-claim was correct. A matter not raised at trial nor on appeal was that the structure of the documents did not create a situation whereby Wholesale or Raffindale became indebted to AGC as the form of the declaration sought to acknowledge. However, since the parties, particularly the appellants, were content at the trial that the answer to the question of the meaning and effect of a clause in the second mortgage should dictate the decision on whether the declarations should be made, the appellants should not on this appeal be allowed to resile from this position. Gleeson CJ I have had the opportunity of reading in draft form the judgment of Sheller JA. I agree with the orders proposed by his Honour and with his reasons for those orders. Handley JA I agree with Sheller JA. Sheller JA INTRODUCTION William Joseph Duggan, Point Piper Marina Pty Ltd (PPM) and Raffindale Pty Ltd (Raffindale) appeal from a decision of Cohen J of 28 April 1995. In proceedings the appellants began in 1994, his Honour dismissed their statement of claim with costs and made declarations and orders on cross-claims filed by the first defendant, Commonwealth Bank of Australia (CBA), and the third defendant, Australian Guarantee Corporation Ltd (AGC). The second defendant, Peter James Hedge, was not joined as a party to the appeal. Mr Duggan was a director of PPM and Raffindale. PPM operated the Point Piper Marina at 5 Wunulla Road, Point Piper on freehold land, of which Raffindale was the registered proprietor, and adjoining leasehold land, of which Raffindale was the lessee from the Maritime Services Board of New South Wales (MSB). The business included the provision of marina berths, boat repairs and service and the sale of new and second hand boats. On the land there was a workshop, boatshed, jetty and slipways, and in the bay adjoining the jetty between sixty and one hundred moorings available for hire. CBA MORTGAGES On 9 October 1987 Raffindale mortgaged the freehold land to CBA (the first mortgage) and PPM granted CBA an equitable mortgage over the whole of its business and property (the equitable mortgage). BAILMENT PLAN On 20 October 1988: WRIGGAN and ORS v COMMONWEALTH BANK OF AUSTRALIA and ANOR (Sheller JAB ean AGC Bailment Plan was entered into between AGC, AGC (Advances) Ltd (Advances) and Point Piper Marina (Wholesale) Pty Ltd (Wholesale), as bailee. Advances and Wholesale were not parties to the proceedings. Under the Bailment Plan, Wholesale might take goods on bailment from AGC. For a fee which Wholesale agreed to pay by monthly instalments, Advances guaranteed to AGC the due observance and performance by Wholesale of all its obligations and indemnities under the Bailment Plan with an immaterial exception. In consideration of the guarantee, Wholesale agreed to pay to Advances on demand any amount paid by it under the guarantee. * Raffindale gave a guarantee to AGC and Advances of the due performance by Wholesale as supplier of its obligations "under or arising out of each and every Supplier's Agreement", a term defined to include any agreement or arrangement from time to time in force between Wholesale and AGC and Advances or either of them in relation, inter alia, to "the hire or bailment or sub-bailment of goods to (Wholesale) or the letting of goods into the possession of (Wholesale) (being an agreement or arrangement which (Wholesale) has entered into or purported to enter into in the course of carrying on or in connection with the business)." * PPM and Mr Duggan gave guarantees to AGC and Advances in the same terms. * Raffindale gave AGC a second mortgage (X979331) over the freehold land at 5 Wunulla Road, Point Piper (the second mortgage) and a mortgage of its interest in the leasehold land. The second mortgage was expressed to secure to AGC the payment of the principal sum and interest thereon, and incorporated a memorandum filed in the Land Titles Office, T078584, as amended in the mortgage document. As amended, "The Principal Sum" was defined to mean: "the aggregate of all moneys the payment of which from time to time forms part of the Obligations and all moneys which the Mortgagee is from time to time required to pay under or by reason of any guarantee, bond, agreement or indemnity now or at any future time given by the Mortgagee to any company which is now or at any future time becomes related to the Mortgagee within the meaning assigned to that term in the Companies (NSW) Code or by any such related company to the Mortgagee (as the case may be) in respect of the due performance and observance of any agreement, contract, transaction, obligation, matter or thing by the Mortgagor." Cl1(i) of the Memorandum, as amended, relevantly gave the expression "the Obligations" the following meaning: "the totality of all the obligations and liabilities of the Mortgagor to the Mortgagee (whether liquidated or not and whether contingent or presently accrued due and whether relating to the payment of moneys or the performance or omission of any act or thing and including all rights sounding in damages only and all obligations not presently owing but which might become owing in the future and including all rights which may accrue to the Mortgagee consequent upon the occurrence or non-occurrence of any event which is declared by any of the undermentioned documents to constitute a default thereunder):- (e) arising under in or by reason of any guarantee given by the Mortgagor to the Mortgagee, relating to the payment of moneys or the performance of obligations by any person or corporation." On 8 November 1989: 4 UNREPORTED JUDGMENTS * by Deed of Charge Wholesale charged the whole of its assets and undertaking with the due and punctual performance, observance and fulfilment of "the Obligations" and "including but not limited to the payment to" AGC "of all moneys the payment or repayment of which from time to time forms part of the Obligations and all moneys which are declared by [AGC] to be part of the moneys hereby secured". "Obligations" was defined to mean the totality of all the obligations and liabilities of Wholesale to AGC including "(d) The Collateral Liabilities", an expression defined to mean "all moneys which are now or during the currency of this Instrument become owing (whether primarily or secondarily, whether liquidated or not and whether contingent or presently accrued due), by the Mortgagor, Customer or Guarantor to any company which is or at any time hereafter becomes "related" (within the meaning assigned to that term [in the Companies Code or Companies Act (as the case may be) in force in the place of incorporation of the company]) to the Mortgagee." ¢ PPM gave a charge in the same terms to AGC. DEFAULT In about March 1991, fallowing default, AGC appointed Mr Hedge as receiver and manager under the leasehold mortgage and shortly afterwards CBA appointed Mr Palmer as receiver under the equitable mortgage. Various disputes arose as to the amounts owing and the appellants and associated companies refused to pay to CBA the amounts claimed by it. On 30 April 1991 Mr Duggan and Thomas Salter Clarke Pty Ltd (TSC) began proceedings in the Federal Court against CBA for defamation arising out of CBA's refusal to pay TSC cheques. On 14 October 1991 AGC appointed Mr Hedge as its agent over the freehold land pursuant to its second mortgage. DEED OF SETTLEMENT On 3 November 1993 a Deed of Settlement was entered into between the appellants, TSC and Wholesale (the Duggan group) and CBA which provided for the settlement of the Federal Court proceedings and also Local Court proceedings brought by CBA against Mr Duggan to recover moneys advanced on a credit card. The following clauses are material to this appeal. The property referred to was the freehold land at 5 Wunulla Road, Point Piper. "2. The Duggan group will pay to the Bank the sum of $1,250,000.00 on or before 1 March 1994 together with interest on that sum at the rate of 8.50% per annum from 1 November 1993 until the date of payment ('the settlement moneys'). 3. The settlement moneys will be accepted by the Bank in full and final satisfaction of all its claims against the Duggan group. 8. In the event that the settlement moneys are not received by the Bank on or before 1 March 1994 the Duggan group hereby consent to the Bank having immediate possession of the property and to exercising at any time thereafter its power of sale in respect of the property. Further, the Duggan group, without charge, shall do all things reasonably necessary at the request of the Bank or its solicitors to assist the Bank in obtaining possession of the property and in selling the property and will sign all consents to the sale of the property as may be required. 9. The Duggan group hereby confirm the validity and efficacy of all the mortgages, guarantees and equitable mortgages given by them to the Bank and acknowledge that the mortgages, guarantees and equitable mortgages in their WRIGGAN and ORS v COMMONWEALTH BANK OF AUSTRALIA and ANOR (Sheller JAB terms secure the obligation to pay the settlement moneys and nothing in the short minutes or this deed shall abrogate the liability of the Duggan group under the mortgages, guarantees and equitable mortgages, other than as provided for in this deed." AGC was not a party to the deed and Mr Hedge remained as receiver under the leasehold mortgage. However, AGC offered to accept $825,000 on or before 1 February 1994 in full and final settlement of its claims against the Duggan group. In correspondence it was agreed that the date for payment of $825,000 should be 1 March when payment was due under the Deed of Settlement. Mr Duggan set about trying to re-finance the business. NON-PAYMENT On 14 February 1994 Price & Co, the appellants' solicitors, wrote to Mr Fowler, a Manager, Lending Services, of CBA, who had the responsibility for the account, confirming that their client had received written approval for re-financing on the terms "as discussed with you over the phone". The letter continued "We confirm that settlement shall take place by no later than the 30th March 1994, however that we are hopeful that settlement shall in fact take place a lot sooner than that." By letter of 17 February 1994, Mr Fowler wrote to Price & Co: "In terms of the Deed of Settlement the Commonwealth Bank is entitled to receive the following: (a)The settlement sum of $1,250,000. Cl2 refers. (b) Interest on that sum at the rate of 8.50% per annum from 1 November 1993 until the date of payment. Cl2 refers. (c) Cost of submitting the property to public tender being $14,292. The Bank met this expense on behalf of Mr Duggan. Cl4 and our letters dated 5 November 1993 and 30 November 1993 refer. (d) The Bank was required to pay the sum of $77,000 to P J Hedge, as Receiver and Manager of AGC. Mr Hedge was an outstanding creditor who demanded payment of rent. Such sum was paid on 4 January 1994. Interest is payable on this amount. Cl6 refers. The Bank will only release its securities upon receipt of the total amount owing." On 22 February 1994 Mr Fowler wrote to Mr Duggan acknowledging the contents of the letter of 14 February from Price & Co. The letter continued: "Nevertheless, in terms of cl4 of the Deed of Settlement the Bank requires full repayment of the amount owing, the sum of which is detailed in our letter to Price & Co of 17 February 1994, on or before 1 March 1994. Should such payment not be forthcoming the Bank intends to consider its remedies under cl8 of the Deed of Settlement." On the same day Price & Co responded, confirming that the client had approved re-financing which should settle no later than 30 March 1994. The letter went on: "We therefore would be pleased to receive your earliest confirmation and undertaking that the bank will not proceed against our client on or before 31 March 1994." EXTENSION OF TIME On 24 February 1994 Mr Fowler wrote to Price & Co as follows: "The Bank will provide a one and only extension for repayment until 31 March 1994. 6 UNREPORTED JUDGMENTS This is the last extension the Bank is prepared to provide, and it should not be assumed by you or your clients that any further extensions of time sought will be granted. Upon expiry of the deadline of 31 March 1994 the Bank will look to the remedies available to it in terms of the Deed of Settlement." The loan moneys which had been offered did not eventuate and Mr Duggan made further attempts to obtain finance from brokers. In a letter dated 23 March 1994, a firm of solicitors, Smith & Pasternacki, indicated that they had been instructed by a mortgage manager of a syndicated finance group that conditional approval had been given to a loan of $2.4 million. One condition was the obtaining of an independent valuer's verification of an earlier valuation. The establishment fee was 1 percent, or $24,000, and the first six months' interest was payable in advance on drawdown, which would have led to a deduction of a further $126,000. This offer was accepted and on 31 March Mr Duggan sought a valuation from Colliers Jardine. On the same day Mr Duggan saw Mr Fowler and gave him a copy of the solicitor's letter of conditional offer and indicated he was waiting on the valuation. Cohen J found that there was no insistence by CBA on completion, but on the other hand, no specific extension of time was given by Mr Fowler. On 11 April Mr Fowler spoke to Mr Pasternacki who could not give an assurance that the loan would proceed but indicated that it probably would. Nothing further happened until 20 April when Mr Duggan returned from a holiday and found that the valuation had not arrived. It was not received until 5 May. There was no explanation for the delay. On 9 May Price & Co sought a payout figure from CBA which was sent to them by letter of 10 May. The current payout figure was $1,396.309 which included the sum of $77,000 paid to Mr Hedge and referred to in the letter of 17 February 1994. On 10 May Mr Price rang Mr Fowler and asked if a meeting could take place to discuss the amount of the settlement. Mr Fowler said he was in no position to negotiate a compromise but arrangements were made for a meeting that afternoon. According to Mr Fowler, at the meeting either Mr Price or Mr Duggan said that finance of $2.4 million had been approved and that settlement would proceed on the following Wednesday, which was 18 May 1994, but that only $1,284,708 would be available for CBA. When Mr Fowler asked why the full amount was not being paid he was told there was a dispute as to whether the $77,000 should have been paid to AGC. It was proposed that the amount offered be paid as a settlement, with Mr Duggan entering into an agreement to pay the shortfall if a court action by him against AGC and its receiver to recover the $77,000 were successful. Mr Fowler said that he could not make that decision but he would refer it to Mr Edwards, his superior, and let them know. Mr Duggan denied that it was said that settlement would proceed on the following Wednesday. He said that Mr Fowler asked when he thought he would be likely to settle and Mr Duggan said that he had been told that it should be within the next seven to ten days, that is by Friday of the following week, which was 20 May. This was denied by Mr Fowler. Mr Price, who was present at the meeting and swore an affidavit as to another conversation with Mr Fowler, did not refer to this conversation at all. He neither agreed with nor denied what Mr Fowler said. Cohen J preferred the evidence of Mr Fowler as to whether there was a reference to Wednesday, 18 May. At the time of the conference Mr Fowler had written a few notes at the end of which appeared "Wednesday 18/5/94". His WRIGGAN and ORS v COMMONWEALTH BANK OF AUSTRALIA and ANOR (Sheller JAY Honour said not only did he prefer Mr Fowler's evidence to that of Mr Duggan but the contemporary note confirmed that there was reference to that date. He did not consider it significant that it was not included in Mr Fowler's typed diary note which said "Settlement may proceed next week." Cohen J said: "Tt was not suggested that an extension of time was given until that date or that it was made as a deadline for completion to take place. It was an indication that this was the date when settlement was expected to take place. There is some confirmation in the letter written by Mr Price to the broker dealing with the lenders dated 12 May which indicated that he wished settlement to take place as urgently as possible and would be grateful if it could be tentatively arranged for Wednesday 18 May." APPOINTMENT OF RECEIVER Settlement did not take place on 18 May. Some time on chat day CBA appointed Mr Hedge as receiver of PPM. Mr Hedge went to the marina on 19 May and handed Mr Duggan a notification of his appointment. He also handed him a letter dated 18 May from CBA requesting immediate possession of the property at 5 Wunulla Road, Point Piper pursuant to cl2 and cl8 of the Deed of Settlement. On 20 May Mr Price rang Mr Fowler and discussed the appointment of the receiver. Mr Fowler agreed that there had been negotiations after the Deed of Settlement and accepted that whilst CBA had previously indicated deadline dates for completion, in the recent discussions there had not been any mention of a final date or a suggestion that CBA would move to appoint a receiver. He also agreed that in the previous meetings, which would have included the meeting on 10 May, there had been no suggestion by him that CBA would take possession. Cohen J said: "Mr Price said that Fowler in that conversation [on 20 May] said that Price had said on 10 May that settlement would take place 'to-day'. Mr Price took a detailed diary note of this conversation and he was not cross-examined. I accept that this is an accurate record." The detailed diary note is dated 20 May. The relevant note is "BF said he thought we'd settle 'today'." There is no other evidence to support his Honour's conclusion that in the conversation on 20 May Mr Fowler said that Mr Price had said on 10 May that settlement would take place "today". The diary seems to be no more than a record of what Mr Fowler thought the position was and is said to be inconsistent with his Honour's conclusion that on 10 May either Mr Price or Mr Duggan had told Mr Fowler that settlement would proceed on 18 May. His Honour said: "Although Mr Duggan had spoken about finance being nearly ready there was no specific evidence before the Court that established that on or about 18 May arrangements for adequate finance were in fact in place. Mr Taylor, a financial consultant with Associated Finance Group, had been engaged by Mr Duggan to look for finance. He said that he secured from a Mr Hammond, a finance broker, interest in facilitating a loan and it was this which led to the offer in the letter from Smith and Pasternacki. Mr Taylor expected that the valuation of the security would have taken no more than ten to fourteen days. He said in his evidence that by early May, when the valuation had been completed, it was a matter of waiting for the solicitors to complete the matter for settlement. Mr Taylor said that Mr Hammond was also a finance consultant and that they were sharing the transaction. It was Mr Hammond who was responsible for getting the syndicate 8 UNREPORTED JUDGMENTS members. Mr Duggan said that after the meeting with Mr Fowler on 10 May he spoke to Mr Taylor who told him that there was a difficulty with the loan because one of the members of the syndicate had become tired of waiting for the valuation and had withdrawn his funds. Mr Taylor is further alleged to have said that a substitute member had been located but it would take another week or so for him to arrange to have his funds available. I permitted this evidence over an objection, on the basis that it only established what Mr Taylor had told Mr Duggan, thus relating only to Mr Duggan's state of mind, and not to prove the facts. Mr Hammond was not called to give evidence so that I do not know what was the availability of funds, at least up to the end of May. When asked what he could have done if, on 10 May, he had been given another seven days to have the finance available, Mr Duggan said that he would have tried to have the matter hurried on but he agreed that there was little more that his solicitors could do other than what they were already doing, even if they were further pressed. He said that as an alternative he may have been able to obtain finance through an equity partner and he nominated a Mr Neville Creighton. When pressed, however, Mr Duggan did not answer whether he had discussed with Mr Creighton whether he could get the funds and he agreed that in any case he would probably have had to ask the Bank for a further extension. Mr Creighton was not called, so it is not known whether he was either willing or able to provide the funds as an equity partner, or, if he were, how much he would have made available or how long this would have taken." PUMP-OUT INSTALLATION In 1991 MSB was interested in arranging for the installation of facilities for the disposal of sewage from vessels using Sydney Harbour. It proposed that, together with the Public Works Department, it would install four such facilities at marinas around the harbour and that these would be available for boat owners to use. Towards the end of 1991 Mr Palmer, then the receiver of PPM appointed by CBA, in conjunction with Mr Duggan, lodged tender documents in order to have the Point Piper Marina nominated as one of the sites to be chosen for an installation. In due course Mr Hedge, then the receiver appointed by AGC over the leasehold, confirmed that his client had no objection to the installation. In February 1993 contract documents, including final designs, were forwarded to the marina for Mr Duggan's attention. A development application to the Woollahra Council was in due course approved. Progress was slow. Cohen J found that although Mr Duggan was anxious to have the installation on his marina, he had not been pressing for it to be completed quickly, because he was more anxious to ensure that he settled his disputes with CBA. However that may be, no final documentation was prepared by the solicitors for MSB until some time before it was forwarded under cover of a letter dated 16 November 1993. On 23 December copies of the agreement and deed were sent to Mr Price for execution by his client. On 25 January 1994 Mr Price replied, seeking some amendments and noting that his client was anxious to proceed as soon as possible. Not until 21 February were the final amendments agreed. Three days later Mr Price sent the documents, executed by his client, to MSB's solicitors. In due course these were sent to Mr Hedge for execution by him. The only document requiring his execution was a deed of consent but this related to the deed of agreement, a service agreement and a variation of lease. WRIGGAN and ORS v COMMONWEALTH BANK OF AUSTRALIA and ANOR (Sheller JAD On 9 March Mr Hedge returned the consent document executed and the other documents to his solicitors. On the same day they were sent on to AGC for its execution but not returned until 7 April. During this time Mr Price had been pressing the solicitors acting for AGC to have the consent executed and returned. Mr Price then sent the documents to CBA under cover of a letter dated 15 April addressed to Mr Fowler. The letter asked him to return the documents duly executed together with a bank guarantee which CBA had already agreed to give in respect of the installation. There was no mention of urgency. At some point Mr Fowler sent the documents to Mr Everest who was now handling the accounts. Mr Everest sent the documents on to CBA's legal department where they were received on about 10 or 11 May. Later in May Mr Price was seeking to have the matter dealt with urgently. On 25 May he urged Mr Everest to take some urgent action. Mr Everest said that the legal department had been asked to hurry and that the advice should be ready by 30 May. However, by that time it was too late. In April or early May the responsible officer of MSB had come to the conclusion that there was no need to have a fourth pump-out installation and so recommended to the Public Works Department that the installation should not proceed. In the result, a decision was made not to continue with the facility. The reason was lack of future use of the facility if it was installed. The officer concerned said that the final decision was with the Public Works Department but that it would have acted upon the recommendation of MSB. He agreed that if the necessary documents had been executed and delivered in February or March 1994 there was no doubt that the installation work would have proceeded. If that day in fact had been April 1994 it was hard to say, but it was probable that it would have proceeded as long as this had occurred before the review in early May. RELEVANT CLAIMS AGAINST CBA AND AGC AND CROSS-CLAIM BY AGC In 1994 the appellants began these proceedings and in their amended statement of claim made two claims that relate to this appeal, first, that CBA was not on 18 May 1994 entitled to appoint a receiver and agent in the circumstances which existed at the time, and that it was estopped from claiming a right to make that appointment and second, independently of the first claim, that CBA and AGC were negligent in failing to execute the required deed of consent for the installation of the sewage pump service required of them as mortgagees, or failing to do so within a reasonable time. Cohen J rejected all the appellants' claims and dismissed the statement of claim. The appeal was directed to his Honour's findings on the two matters to which I have referred. In addition, on AGC's cross claim his Honour accepted that AGC was entitled to a declaration that the debt due by Wholesale to Advances, amounting to $457,608.37, was secured by the second mortgage given by Raffindale to AGC. APPOINTMENT OF RECEIVER Cohen J described the appellants' submission as follows: "In respect of the appointment of the receiver, it was submitted for the plaintiffs that if Mr Duggan had been informed on 10 May that the last day for the extension was to be in seven days' time, then he would have informed his brokers of that fact or he would have arranged for an equity partner to pay out the Bank. It was further submitted that the appointment of the receiver effectively 10 UNREPORTED JUDGMENTS brought to an end any prospect of the plaintiffs' obtaining further finance in the short-term, arising out of evidence that financiers are somewhat wary of lending money once a receiver has been appointed. It was further submitted that if Mr Fowler had told Mr Duggan that the last day for an extension was 18 May then a further extension would have been sought and, on the evidence of Mr Fowler, it was more than probable that he would have given or recommended that further extension." There was no doubt that CBA had power under the terms of the equitable mortgage to appoint a receiver and the rights of CBA under that mortgage were preserved by cl9 of the Deed of Settlement. Ground 1 (b) in the appellants' notice of appeal was as follows: "His Honour should have found that the First Respondent was estopped from appointing a Receiver until giving the Appellants reasonable notice of its intention to do so, or, alternatively, giving the Appellants a reasonable opportunity of obtaining funds to pay out the indebtedness of the Appellants to the First and Second Respondents." The appellants' oral submissions seemed to proceed on the basis that they were entitled to the relief claimed because there was something unfair in CBA's failing to give a notice of demand or failing to give notice that it proposed to appoint a receiver; compare Bunbury Foods Pty Ltd v National Bank of Australasia Ltd (1984) 153 CLR 491 at 502-3 and Bond v Hong Kong Bank of Australia Ltd (1991) 25 NSWLR 286 at 294 and following. At one point, the appellants' counsel submitted that there was no power to enforce repayment until a notice of demand had been given. This argument overlooks cl2 of the Deed of Settlement which required the Duggan group to pay the sum of $1,250,000 "on or before 1 March 1994", a date which, for present purposes it can be accepted, the parties agreed to vary to 31 March 1994. According to sG of the equitable mortgage, the debtor (PPM and Wholesale) covenanted with CBA to pay CBA at such time or times and in such manner as might at any time and from time to time "be agreed in writing between the debtor and the bank and in default of any such agreement on demand the moneys hereby secured." At latest after 31 March 1994, the appellants were obliged to pay the amount agreed without further demand. That obligation remained intact and carried with it all rights that flowed from default including the power to appoint a receiver. In any event, while the appellants may have been entitled to such time as was reasonably necessary for implementing the mechanics of repayment after the time for repayment, they were not entitled to "time to go out and try to borrow the money necessary to enable (them) to discharge (their) obligations"; Bond v Hong Kong Bank at 295D. The only question, as the notice of appeal acknowledged, was whether in some way CBA represented to the appellants that it would not, during some period of time, seek to enforce its remedies, and the appellants acted on that representation to their detriment. Cohen J found that there was no evidence of any express representation and said: "The question then arises as to the basis upon which estoppel can be claimed. Messrs Duggan and Price left the Bank on 10 May having indicated that settlement would take place shortly, possibly by 18 May, or at least, by implication, by 20 May. No complaint as to that had been made by Mr Fowler on behalf of the Bank. They were accordingly entitled to assume that the Bank would not act under its securities until at least a week had passed. The WRIGGAN and ORS v COMMONWEALTH BANK OF AUSTRALIA and ANOR (Sheller JA)I conversation between Mr Fowler and Mr Price about whether the Bank would consider a compromise when the cheque was produced also would have indicated that the Bank had no intention of taking immediate action. Accepting that there was an implied representation to this effect, it is not easy to see what Mr Duggan did in reliance upon it. He agreed that all efforts were being made by him and his solicitor to bring the financier to settlement. The conversation with Mr Taylor must have made Mr Duggan realise that there could be some doubts about the finance being available and the conversation with Mr Hedge on 19 May showed that there had been no final agreement because Mr Duggan spoke of needing a week or so to have the finance in place. He later suggested that the end of the month might be the appropriate time. It is clear that funds were not available by 20 May but there is no evidence as to whether they had ever been finally agreed upon or whether the syndicate was ever prepared to advance the money. This was not then a case of Mr Duggan having received an indication that the Bank was not about to act, causing him to relax and not seek to have the matter completed, when he could have taken steps to have payment made within a short time. The situation did not change after 10 May and there is nothing in the evidence to show that Mr Duggan could have done anything to bring about a settlement at any time. Mr Duggan suggested that he could have obtained an equity partner to pay out the Bank. In the absence of evidence as to that person's availability or the amount he could invest, I cannot accept this statement as an indication that Mr Duggan could have done anything more than he was already doing if he had known that the Bank would act to protect its interests by the end of the following week. Assuming, however, that Mr Duggan's evidence is correct, and he had said that he would settle within seven to ten days, and subsequently left the Bank with the knowledge that it did not object to that extension, then it could not be said that he had been misled by the Bank if it in fact had appointed a receiver at the end of that time. In effect, if Mr Hedge had been appointed at 5 pm on 20 May I do not consider that it could be claimed that Mr Duggan had been led into the belief that he was secure from action by the Bank so as to be able to object to the appointment. The funds were not available by that date and this could not be said to have been caused by the appointment of a receiver. There is nothing to show that the manager of the proposed syndicate was aware of the appointment on 18 May and thereafter declined to continue with the loan. In those circumstances I do not consider that the plaintiffs should be put in a better position because the Bank acted in what was at the most two days early although, as Mr Duggan was not informed until 19 May of the appointment, it was effectively only one day early. I cannot accept that the Bank would have waited longer and granted a further extension because of its past acts. Mr Fowler said that if he had been assured of settlement in a few days he may have recommended waiting for that time. The history of promised payments over the previous three months had not been one to engender any confidence that the current hopes would be realised. The matter was in any case out of Mr Fowler's hands. The agreement in November 1993 had resulted in the Bank agreeing to accept an amount much less than its claim. An offer made six months later to delay or perhaps reduce the agreed amount still further was not a factor which would have encouraged further delays. I therefore cannot assume that if an application had been made on 20 May for further time that those who were then in charge of the account would have agreed. 12 UNREPORTED JUDGMENTS I am accordingly not satisfied that the plaintiffs, although encouraged by the Bank's attitude on 10 May, acted to their detriment in reliance upon that attitude. Further, the appointment of the receiver did not bring about a situation which would have been different even if the Bank had delayed that action by a further two days. I therefore consider that the appointment was valid. This will mean that it is not necessary to consider questions of damage which is said to have flowed from the appointment." The only point of challenge to this conclusion was that in some way there was a lost opportunity which his Honour failed to take into account. The appellants relied on Foran v Wight (1989) 168 CLR 385; The Commonwealth of Australia v Clark (1994) 2 VR 333 at 337. In my opinion, there is no basis at all upon which it can be said that the appellants lost the chance of paying out CBA on or before 20 May 1994, assuming, for the purposes of the argument, that the appellants were led to believe that they had until the end of that day to repay CBA. The evidence, and his Honour's findings, are entirely against any such conclusion. In my opinion, this ground of appeal fails. ALLEGED NEGLIGENCE The second part of the appeal depends upon the claim that CBA and AGC, or either of them, were negligent in failing to execute the deed of consent to MSB within a reasonable time. The claim was founded upon some general duty of care alleged to have been owed by CBA and AGC as mortgagees to the appellants as mortgagors. In Downsview Nominees Ltd v First City Corporation Ltd [1993] AC 295, a case to which the parties did not refer, the Privy Council rejected the existence of any such duty, for reasons set out at 312 and following. At 312 Lord Templeman, who wrote the advice, referred to two basic principles equity had evolved for the enforcement of mortgages and the protection of borrowers, first, that a mortgage is security for the repayment of a debt and, secondly, that a security for repayment of a debt is only a mortgage, and said: "From these principles flowed two rules, first, that powers conferred on a mortgagee must be exercised in good faith for the purpose of obtaining repayment and secondly that, subject to the first rule, powers conferred on a mortgagee may be exercised although the consequences may be disadvantageous to the borrower". See also per Cole J (as he then was) in Westpac Banking Corporation Ltd v Kingsland (1991) 26 NSWLR 700 at 708-9 and the cases there referred to. The appellants have not established any basis for saying that CBA or AGC were required to execute the documents within a reasonable time or at all. That apart, Cohen J pointed out that the terms of the agreement to which they were asked to consent obliged them to accept a possible diminution of their existing rights and a possible responsibility additional to any they had under the mortgages. Even if a duty existed his Honour was not persuaded that AGC's delay of four weeks amounted to a breach of that duty, or that the time that passed between the receipt of the documents by CBA on 15 April and 6 May when a decision had been made not to proceed with the installation was unreasonable. In my opinion, this ground of appeal against both CBA and AGC fails. That leaves only one further ground of appeal against AGC relating to the amount it claimed in its cross-claim in respect of moneys due to Advances. WRIGGAN and ORS v COMMONWEALTH BANK OF AUSTRALIA and ANOR (Sheller JAB RAFFINDALE MORTGAGE X979331 AS SECURITY FOR AMOUNTS PAYABLE BY WHOLESALE TO ADVANCES Cohen J made a declaration in terms of para28(d) of AGC's cross claim that mortgage registered number X079331 [sic] from Raffindale to AGC stands as security for such sums as may on an accounting be found to be payable to Advances by Wholesale or on its behalf His Honour noted that there was no dispute on the part of the appellants that as the deed of charge of 8 November 1989 entered into by Wholesale with AGC gave security to AGC for the debts due under the bailment plan, the deed of charge itself became a "Supplier's Agreement" within the meaning of cl7(a)(i) of the guarantees each of PPM, Raffindale and Mr Duggan executed in favour of AGC and Advances on 20 October 1988, because it was in relation to the hire or bailment of goods, so that the liability of Wholesale to Advances and thus to AGC was guaranteed by Raffindale. The issue for his Honour to determine was whether that liability of Raffindale was secured by the second mortgage X979331 given by it over the freehold land. Cohen J held that it was, because Raffindale's guarantee was of the due performance by the Supplier, Wholesale, of all its obligations (whether or not then existing) under or arising out of each and every Supplier's agreement, which included any agreement or arrangement between Wholesale and AGC or Advances or both in relation to the hire or bailment of goods to Wholesale, or the letting of goods into the possession of Wholesale entered into in the course of Wholesale's carrying on of its business, and hence the liability under the charge given by Advances to AGC. The appellants submitted that the mortgage only secured debts due as the Principal Sum, and the first part of the definition of that phrase referred to the payment of moneys which formed part of the Obligations. In turn, Obligations referred to rights which might accrue consequent upon the occurrence or non-occurrence of any event which was declared by any of the undermentioned documents to constitute a default thereunder, the relevant document being the guarantee given by Raffindale. Cohen J said: "In my opinion this is a misreading of the definition of Obligations. Its principal meaning is in the opening words 'namely the totality of all the obligations and liabilities of the mortgagor to the mortgagee'. These are words of a wide meaning. What follows in the bracketed part of the definition are a number of situations or events which are to be taken as being included within that general meaning. They are not themselves exclusive definitions and accordingly one cannot go to those inclusive aspects in order to limit the general definition. If that were so, it would be an equally sound argument to say that obligations must be restricted to rights sounding in damages only, which is one of the matters said to be included in the definition. In my opinion the debts due by Raffindale under its guarantee include the liabilities of Wholesale to Advances. Accordingly that liability is secured by the mortgage." The appellants challenged this conclusion. It submitted that Cohen J's construction of the clause defining Obligations was too broad and _ that Raffindale's liabilities and obligations were not the same obligations as those of Advances. It was said that the clause defining the "Obligations" expressly referred to events which are "declared" by the relevant agreements "to constitute a default thereunder', and since there were no default provisions in Raffindale's 14 UNREPORTED JUDGMENTS guarantee, the liability by Wholesale to AGC did not fall within the definition of the "Obligations", and hence the "Principal Sum" which was secured by the mortgage. In my opinion, this is to mis-read the definition of the "Obligations". The part in parenthesis relied upon does not derogate from the primary meaning "the totality of all the obligations and liabilities of the mortgagor to the mortgagee". It merely makes plain that this primary meaning extends to cover, where relevant, amongst other things, "all rights, which may accrue to the mortgagee consequent upon the occurrence or non-occurrence of any event which is declared by any of the undermentioned documents to constitute a default thereunder." I agree with the conclusion that Cohen J came to on this construction point. PRIVITY OF CONTRACT However, as was pointed out during argument, what AGC has obtained and seeks to uphold is a declaration that the property, the subject of the second mortgage, is available as security for sums of money payable by a third party, Wholesale, to a fourth party, Advances. The examination of documents, which Cohen J undertook, indicated that payment was guaranteed by Raffindale which thereby became indebted to Advances. In turn, Advances under its guarantee became indebted to AGC. But at no stage did the structure of the documents create a situation whereby Wholesale or Raffindale became indebted to AGC as the form of the declaration sought acknowledged. What standing, therefore, did AGC have to enforce a security for a debt owed not to itself, but to another, Advances? In Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 115, Mason CJ and Wilson J said: "This Court has hitherto accepted that a third party cannot sue upon a contract and that a stranger to the consideration cannot maintain an action at law upon it." The parties did not raise this question at the hearing or on the appeal. The Court raised it and the parties provided written submissions. In the forefront of these additional submissions AGC argued that Raffindale ought not now to be permitted to raise the argument; Coulton v Holcombe (1986) 162 CLR 1; Hoecheong Products Co Ltd v Cargill Hong Kong Ltd [1995] 1 WLR 404 at 408-9. In particular, AGC said that had the issue been raised at the hearing, it would have dealt with the case in three different ways: 1. by leading evidence to support an argument based on a conventional estoppel (Eslea Holdings Ltd v Butts (1986) 6 NSWLR 175) preventing Raffindale denying that the mortgage was security for the debts to Advances; 2. by arguing that in the circumstances of the case it was entitled to assert that AGC held the promise to it that Raffindale would secure its property for the debts to Advances upon trust for Advances so that Advances could then, had it chosen, enforce such a trust even to the extent of joining AGC as a defendant; and 3. by arguing that Raffindale, having denied that the mortgage was security for the debts to Advances, had been unjustly enriched by not having enforced against it the obligation to recognise the consequences of the conclusion. In general, AGC relied upon Trident General Insurance Co Ltd v McNeice Bros Pty Ltd. At the trial the parties were content to limit their submissions to the meaning and effect of a clause in the second mortgage. The parties, and particularly the appellants, were content that the answer to this question should dictate the decision on whether the declarations sought should be made. I do not think that at this late stage the appellants should be permitted to resile from this position. WRIGGAN and ORS v COMMONWEALTH BANK OF AUSTRALIA and ANOR (Sheller JAB That is not to say that in due course further questions related to the matter now raised may not arise, if the property is sold, when the mortgagee comes to apply the proceeds of sale. Such a question may or may not arise, and it may or may not be too late to then raise it, but I do not think we, on this appeal, should canvass it further. CONCLUSION In my opinion the appeal should be dismissed with costs. Appeal dismissed with costs. Counsel for the appellant: M J Neil QC/R N Gye Solicitors for the appellant: Price & Co Counsel for the first respondent: R G Forster SC Solicitors for the first respondent: L E Taylor Counsel for the second respondent: P P O'Loughlin Solicitors for the second respondent: Clayton Utz