Supreme Court New South Wales Medium Neutral Citation: Perpetual Trustee Company Ltd v Moussa [2013] NSWSC 131 Hearing dates: 1 July 2011, 25 August 2011, 16 March 2012 Decision date: 28 February 2013 Before: McCallum J Decision: Pursuant to r 28.2 of the UCPR, the following question ordered to be decided separately (on the assumption that the mortgage and loan agreement were forged without the defendant's knowledge or consent): are some or all of the PTCL Amounts paid by Perpetual on or about 16 September 2005 capable of being amounts owing as defined in the Perpetual Mortgage Memorandum with the consequence that each or all of them are secured by the Perpetual mortgage? Separate question answered "no". Catchwords: MORTGAGES - mortgage allegedly forged - whether indefeasibility extends to obligation to pay amount owing MORTGAGES - construction - construing all moneys clause - objective contemplation of the parties - whether "amount owing" includes liability to make restitution PROCEDURE - separate question - Uniform Civil Procedure Rules r 28.2 - whether determination of separate question should be ordered Legislation Cited: Civil Procedure Act 2005 Consumer Credit Code Real Property Act 1901 Uniform Civil Procedure Act 2005 Uniform Civil Procedure Rules Cases Cited: Breskvar v Wall (1971) 126 CLR 376 Cuzeno RVM Pty Ltd v Overton Investments Pty Ltd [2002] NSWSC 88; (2002) 10 BPR 19,425 Estoril Investments Pty Ltd v Westpac Banking Corporation (1993) 6 BPR 13,146 Hills Industries Ltd v Australian Financial Services & Leasing Pty Ltd [2012] NSWCA 380 Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 Perpetual Trustees Victoria Ltd v English [2010] NSWCA 32; (2010) 14 BPR 27,339 PT Ltd v Maradona (1992) 25 NSWLR 643 Southwell v Bennett [2010] NSWSC 1372 Thomas v Silvia (1994) 35 NSWLR 96 Yazgi v Permanent Custodians Ltd [2007] NSWCA 240; (2007) 13 BPR 24,567 Texts Cited: Mason, Carter and Tolhurst, Mason & Carter's Restitution in Australia (2nd Ed, 2008) Category: Principal judgment Parties: Perpetual Trustee Company Ltd (plaintiff) Mariam Mohamad Moussa (defendant) Leslie Abboud (first cross-defendant) Registrar General (second cross-defendant) Representation: Counsel: Mr JT Svehla (plaintiff) Mr A Crossland (defendant) Mr A Rogers (second cross-defendant) Solicitors: File Number(s): 2010/58208 Judgment 1These are proceedings under s 60 of the Real Property Act 1900 for possession of a property in Arncliffe in the State of New South Wales. The proceedings were commenced by Perpetual Trustee Company Ltd on the strength of defaults in the payment of interest under a loan agreement allegedly secured by a registered mortgage over the property. However the defendant, Mrs Mariam Moussa, who is the sole registered proprietor of the property, claims that the signatures attributed to her on both the loan agreement and the mortgage were forged by her son and that the mortgage was granted to Perpetual without her knowledge or consent. 2Perpetual accepts that, if the signatures were indeed forged, the mortgage (on its proper construction) does not secure the unpaid interest relied upon by way of default or indeed any amount owing under the loan agreement. In those circumstances, without abandoning its primary claim, Perpetual amended its pleading to seek possession on the alternative premise that Mrs Moussa may be liable to make restitution for the amounts advanced by Perpetual, since those amounts were applied to discharge an earlier mortgage to the National Australia Bank (also alleged by Mrs Moussa to have been forged) and otherwise for Mrs Moussa's benefit. An aspect of the alternative claim is the further premise that any such amount Mrs Moussa may be liable to pay by way of restitution is secured by the mortgage, notwithstanding the alleged forgery. 3Recognising the complexity and breadth of the issues raised by those contentions, Perpetual seeks an order for the preliminary determination of a separate question. As will be apparent, the application raises questions of some legal and logical difficulty. Perpetual's intention is to obtain a ruling as to whether, if forged, the mortgage secures the payment of any amount Mrs Moussa may be liable to pay by way of restitution. However, Perpetual accepts that any liability to pay restitution remains to be determined at a further hearing. There was accordingly extensive debate at the hearing as to whether any separate question could appropriately be formulated. 4Perpetual ultimately proposed a separate question as follows: Are some or all of [the amounts paid by Perpetual] on or about 16 September 2005 capable of being amounts owing as defined in the Perpetual Mortgage Memorandum with the consequence that each or all of them are secured by the Perpetual mortgage? 5The parties agreed that, if the order for separate determination of that question were made, I should proceed to answer the question without further hearing. 6For the reasons that follow, I have determined that the order for separate decision of that question should be made and that the answer to the question is "no". Circumstances in which the application was brought 7For the purpose of Perpetual's application, Perpetual and Mrs Moussa submitted agreed and assumed facts. After the conclusion of the hearing, Mrs Moussa filed a cross-claim against the Registrar General, who then sought to be heard on the application. The proceedings were re-listed for further hearing for that purpose. The Registrar General was not in a position to agree to the "agreed facts" but was content for the Court to proceed on the basis that all of the propositions submitted by Perpetual and Mrs Moussa could be treated as assumed facts for the purpose of Perpetual's application. The following summary is based on that material. 8Mrs Moussa was originally one of two registered proprietors of the property together with her former husband. They were registered as joint tenants of the property. In 2002, a mortgage to RAMS Mortgage Corporation Ltd was registered on the title. In April 2004, Mrs Moussa's former husband consented to sell his interest in the property to Mrs Moussa. Mrs Moussa asserts that her signature was forged on both the RAMS mortgage and that agreement for sale. She alleges that her son, Mr Ali Moussa, then forged her signature on a loan agreement and mortgage with the National Australia Bank ("NAB"). For the purposes of the present application only, Perpetual accepts that Mrs Moussa signature is repeatedly forged, as alleged by her. 9The NAB paid out the RAMS mortgage (approximately $100,000), $280,000 to one E Moussa, stamp duty and various related settlement expenses, totalling $394,720.16. It debited the mortgage account in the amount of $420,000 and credited $23,340.69 to a second NAB account in Mrs Moussa's name. As at 17 June 2004, Mrs Moussa was the sole registered proprietor and NAB was the first registered mortgagee on the title. 10The Perpetual loan agreement and mortgage were purportedly entered into by Mrs Moussa in September 2005. Again, for the purposes of the present application, Perpetual was content to assume that Mrs Moussa had no knowledge of those transactions and that her signature on the relevant documents was forged by her son. 11On 16 September 2005, Perpetual advanced $451,741.17 to discharge the NAB mortgage; $112,755.18 by bank cheque in favour of Mrs Moussa and $2,150.00 to other parties in respect of the settlement. The claim in restitution is based on Perpetual's payment of those amounts (referred to in the pleading as the PTCL Amounts). The bank cheque in favour of Mrs Moussa was deposited into a Westpac account in her name. She denies that she was in substance or fact the customer on that account. As at 6 October 2005, Perpetual was the first registered mortgagee on the title to the property. 12Repayments on the loan from Perpetual were evidently made for some period. The original statement of claim filed by Perpetual on 4 March 2010 relies upon a default in repayment on 30 November 2009. The pleading asserts that Perpetual served on Mrs Moussa notices pursuant to s 57(2)(b) of the Real Property Act and s 80 of the Consumer Credit Code requiring her to pay $7,744.05 on or before 19 February 2010, being the amount of two alleged missed interest payments and enforcement expenses. The only relief sought in the original statement of claim was an order for possession. 13By her amended defence filed 13 August 2010, Mrs Moussa admits the existence of the loan agreement and the mortgage but denies signing those documents, asserting that the signatures attributed to her were forged by her son without her knowledge or consent. The defence asserts on that basis that the loan agreement is therefore void and, accordingly, that the mortgage (although registered) secures no debt. 14On 15 July 2011, Perpetual filed an amended statement of claim seeking, in the alternative and conditional upon Mrs Moussa succeeding in establishing that the loan agreement and mortgage were not signed by her, a declaration that she owes Perpetual the PTCL Amounts in restitution and an order that she pay those amounts. The proposed separate question does not purport to determine Perpetual's entitlement to that relief. Reasons for determining that the question should be decided separately 15Rule 28.2 of the UCPR states: The court may make orders for the decision of any question separately from any other question, whether before, at or after any trial or further trial in the proceedings. 16The principles relating to the determination of separate questions under that rule are conveniently summarised in the judgment of Hallen AsJ (as his Honour then was) in Southwell v Bennett [2010] NSWSC 1372 at [15]. Relevant to these proceedings are the following principles there stated: (e) As a general rule, the discretionary power to order separate determination of a question should be approached with caution: Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180 at [436], per Callinan J; Tepko Pty Limited v The Water Board [2001] HCA 19; (2001) 206 CLR 1, at [168]-[170] per Kirby and Callinan JJ: Commonwealth Bank v Clune [2008] NSWSC 1125 at [6], per Johnson J; Bailey and Bailey v Director-General Department of Energy Climate Change and Water and Ors [2010] NSWSC 979 at [4] per Studdert AJ. (f) In exercising its discretion, the overriding purpose of the Civil Procedure Act 2005, namely the just, quick and cheap resolution of the real issues in the proceedings (s 56) must be given effect. (g) Generally, all questions of fact and law should be determined at the one time: Tallglen Pty Ltd v Pay TV Holdings Pty Ltd (1996) 22 ACSR 130 at 141-42; SPI Spirits (Cyprus) Ltd v Diageo Australia Ltd [2006] FCA 14. If the Court is to depart from that position, the party seeking the separate determination of a question must satisfy the Court that it would be 'just and convenient' for that order to be made: Reading Australia Pty Ltd v Australian Mutual Provident Society [1999] FCA 718 at [8]-[9], see also Energy Australia v Australian Energy Limited [2001] FCA 1049. (h) While it may appear attractive, superficially, to order the trial of a separate question, experience often shows that it will not be so, for example, because of the complications that can arise in relation to appeals, or to overlapping factual issues, or to questions of credit, if the same witnesses have to give evidence in relation to a question that is separated and those questions that are not: Idoport Pty Ltd v National Australia Bank Ltd [2000] NSWSC 1215 at [7(6)] per Einstein J.; Owners Corporation Sp 70672 v Trustees of Roman Catholic Church [2010] NSWSC 946 at [16] per Ball J. (j) Before a question is to be separately determined, it must be possible to clearly see that it will facilitate the quicker and cheaper resolution of the proceedings: Tallglen v Pay TV Pty Ltd at 142, per Giles CJ in Comm D; Parramatta Stadium Trust v Civil and Civic Pty Ltd; Century Medical v THLD (NSWSC, 27 August 1996, unreported). (n) It may be appropriate to determine a separate question, even if it will not resolve all the issues, provided that there is a strong prospect that the parties will agree upon the result when the core of the dispute has been decided, or if the decision will obviate unnecessary and expensive hearings of other questions: City of Swan v Lehman Brothers Australia Ltd [2009] FCA 784; (2009) 73 ACSR 86 at [27] per Rares J. The determination of the one question should enable a sensible reassessment of litigation risks, which is generally likely to encourage some form of settlement discussions. (r) Each case will have its own dynamics that dictate the relative importance of various factors to be considered in exercising the discretion conferred. 17Mrs Moussa and the Registrar General opposed the separate decision of the question propounded by Perpetual. It was submitted on behalf of the Registrar General that, notwithstanding the comprehensive agreed and assumed facts submitted for the purpose of the application, there remained some uncertainties, the significance of which could not be known. In my assessment, any uncertainty as to the factual premises of the separate question is inconsequential for present purposes. The critical issue sought to be raised is the proper construction of the mortgage on the assumption that both it and the loan agreement were forged without Mrs Moussa's knowledge or consent. That is an issue which can be determined regardless of the concerns identified on behalf of the Registrar General. 18It was further submitted that the question itself is poorly articulated in that it fails to formulate a precise legal question. Whilst reasonable minds can always differ on such matters, I am satisfied that the question is apt to capture a legal question of sufficient precision. As already noted, Perpetual accepts that, on the assumption that the transaction documents were forged without Mrs Moussa's knowledge and consent, the wording of the mortgage is such that it does not secure repayment of the loan. The issue Perpetual seeks to have determined is whether it can nonetheless salvage its claim for possession, without proceeding down the path of a lengthy hearing of the forgery issues, by resting on its alleged entitlement to an order for restitution. That is the only context in which the issue of the "capacity" of the PTCL Amounts to be secured by the mortgage is raised on the pleadings. In effect, Perpetual seeks a ruling as to whether, as a matter of law, its alternative basis for seeking possession must also fail (on the proper construction of the mortgage and on the assumed premise that the relevant documents were forged). 19A more difficult issue is the utility of the separate determination. Perpetual acknowledged that, even if the question were answered in the affirmative, it would remain to be determined, at a further hearing, whether Mrs Moussa was in fact liable to make restitution as alleged. Perpetual suggested that this should occur at a further, separate hearing, again so as to avoid the need for a lengthy hearing on the fraud defences, which would almost certainly involve the joinder of additional parties and the engagement of handwriting experts. 20Plainly, there would be real difficulties with that course. Most significantly, as submitted on behalf of Mrs Moussa and the Registrar General, it may entail requiring Mrs Moussa to be cross-examined twice. Further, Mrs Moussa's cross-claims in the proceedings may require determination of the fraud allegations in any event. As submitted on her behalf, the effect of the alleged forgery of the NAB documents and her denial that she had the benefit of the funds deposited in the account in her name are matters that would have to be determined as an aspect of Perpetual's restitution claim. Accordingly, the joinder of additional parties and the need for a lengthy hearing of the allegations of fraud would not necessarily be avoided by a positive determination of the separate question. 21In my view, however, the determination of the question has real utility. The proposition that the mortgage would secure any amount payable by way of restitution is novel and is an important premise of Perpetual's present strategy. Perpetual submitted that an adverse determination on that issue would prompt it to re-assess its position and that a determination either way would promote the resolution of the proceedings. Bearing in mind that it was Perpetual that brought forward the application, that submission should not lightly be disregarded. I am satisfied that the determination of the separate question should enable a sensible reassessment of litigation risks, which is likely to encourage settlement discussions. 22For those reasons, I am satisfied that the order for separate determination should be made. Reasons for deciding that the answer to the separate question is "no" 23It is convenient to repeat the question: Are some or all of [the amounts paid by Perpetual] on or about 16 September 2005 capable of being amounts owing as defined in the Perpetual Mortgage Memorandum with the consequence that each or all of them are secured by the Perpetual mortgage? 24The determination of that question requires an understanding of the nature of a mortgage under the Real Property Act. A mortgage is defined in s 3 of the Act as "any charge on land (other than a covenant charge) created merely for securing the payment of a debt". The essence of the grant of such an interest is the existence of a promise on the part of the proprietor of the land to repay a debt on terms coupled with the proprietor's concession that, in the event of any default in doing so, the debt may be recovered by selling the land. 25The simplicity of that proposition is complicated, however, by the system of title by registration effected by the Real Property Act. In the case of a forged mortgage, registration of the mortgage creates a charge on the land that, by force of the statute, is indefeasible notwithstanding the absence of knowledge or consent of the registered proprietor. So much is clearly established by a long line of authority in this country following the decision of the High Court in Breskvar v Wall (1971) 126 CLR 376. 26It can scarcely be said in the circumstance of a forged mortgage that any covenant for the payment of a debt is in fact given by the mortgagor. However, in accordance with s 41(1) of the Act, upon registration of a mortgage, the land becomes "liable as security in manner and subject to the covenants, conditions, and contingencies set forth and specified" in the mortgage (my emphasis). The critical task in the case of a forged mortgage is to identify the provisions of the mortgage fall within that description, such that they can be enforced against the estate or interest of the innocent registered proprietor: Perpetual Trustees Victoria Ltd v English [2010] NSWCA 32; (2010) 14 BPR 27,339 at [11] per Sackville AJA; Allsop P and Campbell JA agreeing at [1] and [2] respectively. 27That is ultimately a question of construction of the mortgage as to whether or the extent to which it grants a security interest that can be enforced against the land: English at [12]. As there noted by Sackville AJA, the reliance by lenders on ever-wider clauses designed to charge the land as security not only for a specific loan sum but for any money advanced or due in the past or future has, ironically, left them more vulnerable to the effects of forgery, particularly where such clauses depend for their effectiveness on the incorporation of other forged documents not amenable to registration under the Act. 28The judgment of Sackville AJA in English provides a convenient summary of the relevant principles (at [68]): 1. Registration of a mortgage does not transfer the fee simple estate, but the mortgage takes effect as a security over the land: RP Act, s 57(1). Upon registration, the land becomes liable as security in manner and subject to the covenants set forth in the mortgage: RP Act, s 41(1); Provident Capital v Printy at [25], per Basten JA (with whom Tobias and McColl JJA agreed). 2. Registration of a forged mortgage confers an indefeasible title on the mortgagee, provided that the mortgagee has not been party or privy to the fraud and no other exception to indefeasibility applies: Breskvar v Wall; Yazgi v Permanent Custodians at [14], per Beazley JA (with whom Ipp and Tobias JJA agreed); Pyramid Building Society (In Liq) v Scorpion Hotels Pty Ltd [1998] 1 VR 188, at 191, per Hayne JA (with whom Brooking and Tadgell JJA agreed). 3. Registration of the mortgage does not necessarily ensure the validity of every term of the mortgage, irrespective of the relationship between the term and the estate or interest created by the mortgage itself: Travinto Nominees Pty Ltd v Vlattas [1973] HCA 14; 129 CLR 1, at 17, per Barwick CJ (with whom McTiernan and Stephen JJ agreed). Hence a personal right created by a covenant in a mortgage, such as a guarantee, is not rendered indefeasible by registration of the mortgage: Mercantile Credits Ltd v Shell Co of Australia Ltd [1976] HCA 9; 136 CLR 326, at 343, per Gibbs J; PT v Maradona. 4. In New South Wales, the view has been taken that a personal covenant in a registered but forged mortgage to pay the amount of the mortgage debt, where the debt exceeds the value of the property, is not protected by the indefeasibility provisions of the RP Act: Grgic v Australia and New Zealand Banking Group Ltd (1994) 33 NSWLR 202, at 224, per Powell JA (with whom Meagher and Handley JJA agreed); cf Pyramid Building Society v Scorpion Hotels, at 196, where a different view may have been taken. 5. The registration of a forged mortgage validates those terms of the mortgage which delimit or qualify the estate or interest of the mortgagee or are otherwise necessary to assure that estate or interest to the registered proprietor: PT v Maradona, at 679; Yazgi v Permanent Custodians, at [19]-[20]. 6. It is necessary to construe the terms of a mortgage to determine the scope of the estate or interest in respect of which indefeasibility is conferred by registration of the mortgage: Yazgi v Permanent Custodians, at [22]. Thus whether registration of a forged mortgage allows the mortgagee to enforce its security interest in the land in relation to a debt or obligation arising under an agreement separate from the mortgage is a question of construction of the mortgage: Westpac v Clark, at [43], per Blanchard, Tipping and Wilson JJ. 7. Generally speaking, if the mortgagee specifies a sum of money (plus interest) as the amount secured by the mortgage, the charge created by the mortgage will secure the amount so specified even if the document creating the indebtedness is void under general law principles: Small v Tomasetti. 8. However, if as a matter of construction, the mortgage does not take effect as a security over the land in relation to a claimed debt or obligation, registration of the mortgage will not entitle the mortgagee to exercise remedies, such as the power of sale, to enforce any such claimed debt or obligation: Provident Capital v Printy, at [50]-[52]; Yazgi v Permanent Custodians, at [25]ff. The question of construction may be particularly difficult where the registered mortgage refers to antecedent documentation which is not incorporated in the Torrens register and which may be invalid on general law principles. Relevant provisions of the mortgage 29The Perpetual mortgage consists of a cover sheet, annexure A setting out the "certification, date and execution" and annexure B, which amends the cover sheet and incorporates the terms of a memorandum filed in the office of the Registrar General. In accordance with s 80A(4) of the Real Property Act, the effect of annexure B is that the provisions of the incorporated memorandum are deemed to be set out at length in the mortgage. Accordingly, to the extent possible, the mortgage and the memorandum must be read and construed as a coherent whole. 30Importantly, the mortgage does not secure an identified sum. Rather, it charges the land with "the amount owing", a term defined in the memorandum. The cover sheet (as amended in annexure B) provides: Mariam Mohamad Moussa of [address] for the purposes of securing to the mortgagee the payment of the amount owing, mortgages to the mortgagee all the mortgagor's estate and interest in the land specified above, and covenants with the mortgagee that the provisions set out in Annexure A, Annexure B and Memorandum No. 7269753 filed in the Land Titles Office are incorporated in this mortgage. 31The term "amount owing" italicised in that clause is defined in clause 35 of the memorandum as follows: amount owing means, at any time, all money which one or more of you owe us, or will or may owe us in the future, including under this mortgage or an agreement covered by this mortgage. Without limiting this definition, it includes money owing (or which will or may be owing) to us in our capacity as an assignee because we have taken an assignment of an agreement covered by this mortgage or this mortgage itself, and whether or not you were aware of the assignment or consented to it; or the assigned obligation was secured before the assignment; or the assignment takes place before or after this mortgage is delivered." 32Neither the mortgage nor the memorandum contains any clear promise to pay the "amount owing". In that context, it is necessary to consider the provisions of clause 1.1 of the memorandum, which provides: By signing this mortgage you undertake certain obligations as mortgagor. You also give us rights concerning you and the property - for example, if you do not comply with your obligations, we may take possession of the property, sell it and sue you for any remaining money you owe us. 33It is also necessary to consider the default provisions of the memorandum (clauses 18 and 19), which provide: When are you in default? 18. you are in default if: (a) you do not pay the amount owing on time; or (b) you do something you agree not to do, or you don't do something you agree to do, under this mortgage or an agreement covered by this mortgage; or (c) you are another person gives us incorrect or misleading information (including through your declarations under clause 1.6) in connection with this mortgage or an agreement covered by this mortgage; or (d) we reasonably believe you or another person has acted fraudulently in connection with this mortgage or an agreement covered by this mortgage; or (e) you or another person is in default under another security interest given in respect of the amount owing or withdraws from it or breaches its terms; or ... (f) you or another person does not carry out in full an undertaking given in connection with this mortgage or an agreement covered by this mortgage, within the period specified, or within seven days if no period is specified. What can happen then? 19.1 If you are in default and we choose to enforce this mortgage, we must give you a notice. (You must have been in default for one day or more before we may do this.) The notice must: (a) state that you are in default; and (b) specify a period of grace of at least 31 days. 19.2 The law (including statute law governing the exercise of our power of sale as mortgagee and, if applicable, a Consumer Credit Code) requires us to give you certain information before enforcing this mortgage. We may include that information in the notice under clause 19.1 or another notice. 19.3 During the period of grace given under clause 19.1, you are allowed to correct any default that can be corrected. If you do not correct that default within that period or if there is a default that cannot be corrected, then, to the extent it is not already due for payment, the amount owing becomes immediately due for payment at the end of the grace period without further notice. In addition, we may then do one or more of the following as well as anything else the law allows us to do as mortgagee: (a) sue you for the amount owing; (b) take possession of the property (We may remove personal possessions and either abandon them or store them without being liable to you. If we store them and you do not reclaim them within a reasonable time, we may dispose of them and use the proceeds towards paying the amount owing.); (c) do anything an owner or receiver of the property could do, including improving, selling or leasing it; and (d) appoint a receiver to do any of those things and anything else the law allows a receiver to do. ..." 34As already noted, Perpetual accepts that the effect of the mortgage is that, assuming Mrs Moussa's signature on the loan agreement was forged without her knowledge or consent, that agreement is void and there is no "amount owing" under it. The result is that, notwithstanding the fact that the title obtained by registration of the mortgage is indefeasible, it does not operate so as to secure any money owed under the loan agreement. Perpetual's concession on that issue is consistent with the line of authority summarised in English in the extract set out above. 35However, Perpetual submitted that the amounts paid by it were paid under mistake or were otherwise benefits obtained by Mrs Moussa at its expense, the retention of which is unjust. On that basis, Perpetual submits that Mrs Moussa is or will be liable to pay restitution to it and that any such liability falls within the definition of an "amount owing" secured by the mortgage. 36Mrs Moussa and the Registrar General submitted that any amount payable by way of restitution is not secured by the mortgage principally for two reasons. First, it was submitted that, in accordance with clause 1.1 of the memorandum, Mrs Moussa's obligation to pay any "amount owing" is contingent upon her having signed the mortgage. On the assumption that she did not sign the mortgage, she has no obligations under it and, although upon registration of the mortgage the land has become "liable as security in manner" in accordance with s 41(1) of the Real Property Act, it secures nothing. 37Secondly, it was submitted that any liability to make restitution does not, in any event, fall within the meaning of "amount owing" and is therefore not secured by the mortgage. 38For the reasons that follow, I accept each of those contentions. In my view, the mortgage on its terms operates as security only for the performance of obligations assumed by Mrs Moussa "by signing" the mortgage. Since (on the assumed premise of the separate question) she did not sign the mortgage, its provisions cannot be enforced against her interest in the land. Even if that conclusion is wrong, in my view any liability Mrs Moussa may have to give restitution to Perpetual is not an "amount owing" within the meaning of the mortgage and accordingly is not secured by the mortgage. Effect of clause 1.1 39There was no dispute between the parties as to the relevant principles. In particular, it was accepted that the registration of the forged mortgage validated those terms of the mortgage which delimit or qualify the estate or interest of the mortgagee or are otherwise necessary to assure that estate or interest to the registered proprietor: PT Ltd v Maradona (1992) 25 NSWLR 643 at 679; Yazgi v Permanent Custodians Ltd [2007] NSWCA 240; (2007) 13 BPR 24,567 at [19]-[20]. 40Perpetual submitted that clause 1.1 is such a clause. Specifically, it was submitted that it is a clause the operation of which is necessary to assure the mortgagee his interest and, accordingly, that it is a clause which is validated by registration (in the sense considered in PT Ltd v Maradona), operating as though Mrs Moussa in fact signed the mortgage. 41In my view, that submission misconceives the test. The object of identifying those terms which are "otherwise necessary to assure that estate or interest to the registered proprietor" is to ascertain whether the mortgage secures the debt, not to ensure that it does. As submitted on behalf of Mrs Moussa and the Registrar General, validation by registration means no more than that a clause contained in a dealing that would otherwise be void operates on its terms. It does not cure a dealing that is ineffective on its own terms. Accordingly, the first task for the court is to identify how the dealing does operate on its own terms. If the dealing is expressed in terms that include a promise to repay a specific debt or an acknowledgement of its existence, the invalidity flowing from the fact that the dealing is forged will be cured upon registration. However if, on its own terms, a dealing does not give rise to or acknowledge any obligation to pay a debt, that deficiency will not be cured by registration. 42In the present case, on the assumption that Mrs Moussa did not in fact sign the mortgage, no obligations arose under it. That conclusion does not derogate from the application of the statute in creating an interest which is indefeasible. It simply gives effect to the dealing in accordance with its own terms. In the language of s 41(1) of the Act, upon registration the land became liable as security in manner and subject to the covenants, conditions, and contingencies set forth and specified in the mortgage. In accordance with those covenants, conditions, and contingencies, the mortgage secured the performance of no obligation because the terms of the relevant covenant provided that the mortgagor took on any obligation under the mortgage "by signing it", which never happened. The Real Property Act does not convert a forged signature into that of the registered mortgagor. 43It may be acknowledged that the mortgage is expressed to have been granted "for the purposes of securing to the mortgagee the payment of the amount owing" (cover sheet, as amended in annexure B). That identifies the debt purportedly secured, but it does not inform the existence or otherwise of any obligation to repay it. The mortgage provides in terms that any such obligation is incurred "by signing" the mortgage. 44For those reasons, registration of the mortgage did not in my view cure the fact that, according to its terms, it secured no obligation to pay any amount. Whether liability to make restitution is an "amount owing" 45In case my conclusion as to the effect of clause 1.1 is wrong, it is necessary to record my reasons for concluding that any amount for which Mrs Moussa may be liable to make restitution is not an "amount owing" within the meaning of the mortgage. 46The mortgage provides that the mortgagor "for the purposes of securing to the mortgagee the payment of the amount owing, mortgages to the mortgagee all the mortgagor's estate and interest in the land". "Amounts owing" is defined in clause 35 as meaning: "at any time, all money which one or more of you owe us, or will or may owe us in the future, including under this mortgage or an agreement covered by this mortgage." 47The proposition contended for by Perpetual is that, upon the PTCL Amounts being advanced to Mrs Moussa in the circumstances assumed for the purpose of the separate question, she owed those amounts in restitution, or else will, upon the successful prosecution of Perpetual's claim. 48One of the issues agitated at the hearing was whether such a liability is capable of being a debt within the meaning of the definition of a mortgage in s 3 of the Act ("any charge on land...created merely for securing the payment of a debt"). That raises both a legal and a temporal question. It was noted on behalf of Perpetual that Deane J in Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 255 described the obligation to make payment in restitution as: an obligation or debt imposed by operation of law which arises from the defendant having taken the benefit of work done, goods supplied or services rendered (emphasis added). 49It is doubtful whether a debt arises on that basis at the time of th payment under mistake. That is an issue which may have a bearing on the manner in which Perpetual would be entitled to enforce the mortgage, but it is not necessary for me to resolve that question. At the very least, it may be accepted that a liability to make restitution can be enforced by obtaining a judgment, and perhaps that is the sense in which the term "debt" is to be comprehended in the passage of Pavey & Matthews set out above. I see no reason in principle why the Real Property Act should be construed so as to preclude the creation of a charge on land to secure the payment of such a debt. 50In light of the conclusions I have reached, it is not necessary for me to decide that issue. Nonetheless, it remains relevant to understand the nature of a liability to make restitution. Perhaps most significantly, a liability in restitution is one that is "imposed rather than agreed, assumed or implied": Mason, Carter and Tolhurst, Mason & Carter's Restitution in Australia (2nd Ed, 2008) at 75. 51Further, as explained by the Court of Appeal in Hills Industries Ltd v Australian Financial Services & Leasing Pty Ltd [2012] NSWCA 380, the imposition of such a liability turns on an evaluative judgment of the court. Whilst the payment of money under an operative and causative mistake of fact will establish a prima facie liability in restitution, it remains necessary to inquire whether there are circumstances which the law recognises as making an order unjust: at [66]-[73] per Allsop P. His Honour said (at [70]): The "moment of enrichment" is that of receipt: David Securities at 385; but it is the retention that is to be regarded as unjust for an order to be made. 52It is conceivable that an appropriately drafted covenant in a mortgage could secure the payment of such a liability, but I do not think any such clause is to be found in the Perpetual mortgage. 53The principles to be applied in interpreting "all moneys" clauses of the kind found in the Perpetual mortgage were considered by Young J (as his Honour then was) in Estoril Investments Pty Ltd v Westpac Banking Corporation (1993) 6 BPR 13,146 at 13,151-13,152, cited with approval by Santow J in Thomas v Silvia (1994) 35 NSWLR 96 at 101: There have been a whole series of cases in which courts have considered wide words used in mortgages to work out what the parties really intended. Sometimes the farcical situations which could be comprehended within wide words themselves illustrate that the parties could have not intended that the words be read literally. In other cases there will be different indicators. In Fountain v Bank of America National Trust and Savings Association (CA(NSW), 23 October 1992, CA 40288/92, unreported), the court looked at an all moneys clause and considered it appropriate to confine the operation of the clause 'by reference to the context in which they appear and by reference to the commercial purpose which they were intended to serve' (per Gleeson CJ at 6,7). In the United States of America, as can be seen from Nelson G and Whitman D, Real Estate Finance Law (2nd ed, 1988), pp 899-902, there have been a series of cases in which, what the Americans call 'dragnet clauses' have been read down by the courts. The learned authors say at p 899 that in the absence of such a method of construction, 'A mortgagor might naively execute upon his house a mortgage containing a dragnet clause and consequently find himself locked in to that particular lender for the rest of his life'. The learned authors then say: 'Dragnet clauses are generally upheld, but because their apparent coverage is so broad, and because the mortgagor is often unaware of their presence or implications, the courts tend to construe them narrowly against the mortgagee.' However, it must be emphasised that this is a question of construction. As has been pointed out time and time again, even in the American cases: 'The guiding principle in the construction of a 'dragnet' clause in a mortgage is the determination of the intention of the parties. The question frequently resolves itself into whether, in view of the surrounding circumstances and the language employed in the mortgage, the parties intended the security of the mortgage to operate upon a pre-existing or subsequently created indebtedness not specifically described in the mortgage.' See the annotations to First v Byrne am LR 1072 (Iowa Supreme Court 1947) at 1080. See also Monroe County Bank v Qualls 125 SO 615 (1929) (ala). Nelson and Whitman at pp 900-902 set out nine guidelines which illustrate how courts often approach dragnet clauses provided that the language permits them to do so. These can be summarised as follows: (1) The mortgage will only secure advances made or debts incurred in the future if the past debts are identified. (2) Only debts of the same type or character as the original debt are secured by the mortgage. (3) A dragnet clause will often cover future debts only if documents evidencing those debts specifically refer back to the clause. (4) If the future debt is separately secured it may be assumed that parties did not intend that it also be secured by the dragnet mortgage. (5) The clause is inapplicable to debts which were originally owed by the mortgagor to third parties and which were assigned to or purchased by the mortgagee. (6) If there are several joint mortgagors only future debts on which all of the mortgagors are obligated or at least of which all were aware will be covered by the dragnet clause. (7) Once the original debt has been fully discharged, the mortgage is extinguished and cannot secure further loans. (8) If the mortgagor transfers the land to a third party, any debts which the original mortgagor incurs thereafter are not secured by the mortgage. (9) If the real estate is transferred by the mortgagor advances subsequently made to the transferee are not secured by the mortgage even if the transferee expressly assumed the mortgage. Some of these circumstances have already occurred in Australia. I came to the same view as proposition (5) in Australia and New Zealand Banking Group Ltd v Comer (SC(NSW), Young J, 8 March 1993, 13896/1992, unreported) and reached the same view as proposition (6) in Williams v State Bank of NSW (SC(NSW), Young J, 7 April 1993, 2297/85, unreported). Generally it seems to me the guidelines set out in Nelson and Whitman are applicable to Australian conditions though I emphasise once more that it all depends on the construction of the individual mortgage. 54In Cuzeno RVM Pty Ltd v Overton Investments Pty Ltd [2002] NSWSC 88; (2002) 10 BPR 19,425, Palmer J held (at [55]): "... while the words of the 'all monies' definition of 'Mortgage Debt' in Memorandum, read in isolation from the circumstances in which the Mortgage was executed, are wide enough to produce the result for which Overton contends, it is axiomatic that an 'all monies clause' such as in the standard printed conditions in Memorandum must be construed by reference to the context of the transaction in which the clause appears and by reference to the commercial purpose of the transaction which the clause is intended to serve: Fountain v Bank of America National Trust & Savings Association (NSWCA 23 October 1992, per Gleeson CJ at 6, 7); Estoril Investments Pty Ltd v Westpac Banking Corporation (1993) 6 BPR 13,146 at 13,151 per Young J; Smith v ANZ Banking Group Ltd (NSWCA, 5 February 1996, per Kirby J)." 55The Perpetual mortgage includes a number of other provisions which point against the conclusion that a liability in restitution is secured by the mortgage. 56Clause 1.1 is relevant in this context, indicating an intention to secure voluntarily assumed obligations. As submitted with some force by Mr Crossland, who appeared for Mrs Moussa, a liability to make payment in restitution can only have come about completely contrary to the intention of the parties, and indeed due to the collapse of those intentions. 57The default provisions in the mortgage also point to an intention to secure obligations deliberately assumed by agreement. Clause 18 is firmly infused with the notion of debt subject to an agreed regime for repayment. In particular, clause 18(a) provides that the mortgagor is in default if she does not pay the amount owing "on time". As submitted on behalf of Mrs Moussa and the Registrar General, those words provide strong support for finding an objective intention that any "amount owing" must be owed pursuant to some agreement or arrangement between the parties delineating an agreed time for payment. Clause 18(b) reinforces that conclusion. 58Similarly, clause 19 (dealing with the means of enforcement in the event of default) speaks on the assumption of an agreed debt; specific amounts of money due at particular times; an obligation to make payments the lateness of which can be rectified during a period of grace and so on. 59A consideration of those principles points to the conclusion that the "all moneys" definition in the present case does not extend to include any liability in restitution. The definition of "amount owing" in my view sits uncomfortably with the notion of a liability in restitution, which is not of the same type or character as the debt the mortgage evidently sought to secure. There is nothing in the transaction documents to indicate that a potential liability in restitution was within the objective contemplation of the parties at the time the mortgage was executed. On the contrary, so far as the terms of the transaction documents reveal, the commercial purpose of the transaction was to secure the funds advanced in accordance with the loan agreement purportedly entered into between Perpetual and Mrs Moussa. 60I do not accept that it was within the objective contemplation of the parties that moneys mistakenly paid by the mortgagee as a result of the fraud of a third party would be secured by the mortgage. 61My conclusion on that issue is reinforced by the view expressed by Sackville AJA in English where his Honour said (at [85]): The contra proferentem principle would seem to have particular force when applied to the construction of an instrument not only drawn up by an institutional lender, but the terms of which are sought to be enforced against a party who is neither a party to the instrument nor aware of the circumstances giving rise to [in that case] estoppel. 62In my view, those remarks are of equal force in the present context. 63For those reasons, any liability Mrs Moussa may have in restitution does not, in my view, fall within the meaning of "amount owing" and is therefore not secured by the mortgage. Conclusion and orders 64Having regard to the reasons put forward by Perpetual for seeking the determination of the separate question I propose, unless any party wishes to be heard to the contrary, to make an order under s 26(1) of the Civil Procedure Act 2005 requiring the parties to mediate. 65For the reasons stated in this judgment, I make the following orders: (1)that, pursuant to r 28.2 of the Uniform Civil Procedure Rules, the following question be determined separately from any other question and before any further trial of the proceedings: On the assumption that the mortgage and loan agreement were forged without the defendant's knowledge or consent, are some or all of the PTCL Amounts paid by Perpetual on or about 16 September 2005 capable of being amounts owing as defined in the Perpetual Mortgage Memorandum with the consequence that each or all of them are secured by the Perpetual mortgage? (2)that the question set out in order (1) be answered "no". DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 07 March 2013