Reliance Financial Services Pty Ltd v Pineiro

These proceedings concern a Deed of Loan (“the Deed”) which the plaintiff claims was entered into between Reliance Financial Services Pty Ltd (ACN 003 478 966) as trustee of the Reliance Discretionary Trust, and the first defendant, Mr Victor Pineiro, on 8 February 2001. The plaintiff is a successor trustee of the Reliance Discretionary Trust (“the Trust”), and seeks to enforce the Deed against the first defendant. By its Statement of Claim filed on 5 February 2016, the plaintiff seeks judgment for the principal advanced under the Deed ($30,000) as well as interest at the rate of $400 per month from the date of the Deed to the present day.

The second defendant is the wife of Mr Pineiro. She co-owns land in Wonga Place at Ingleburn (“the Property”) as joint tenant with him. She was not a party to the Deed but is a party to the proceedings because the plaintiff also seeks the appointment of trustees for the sale of the Property pursuant to s 66G of the Conveyancing Act 1919 (NSW). The plaintiff claims that it has an equitable charge and equitable mortgage over Mr Pineiro’s share pursuant to the Deed.

The defendants resist the plaintiff’s claims on a number of bases. By their Amended Defence it is alleged that the Deed is not effective as a deed because it was not executed in accordance with the requirements of s 38(1) of the Conveyancing Act 1919 (NSW). It is then alleged that the plaintiff’s claim, in whole or in part, is barred under the provisions of the Limitation Act 1969 (NSW). It is further denied that any money was advanced under the Deed to Mr Pineiro. Whilst not specifically pleaded, the defendants also seek to contend that Mr Sam Cassaniti, who signed the Deed for the company, did not have authority to do so.

The plaintiff sues as the current trustee of the Trust. The Trust was established on 1 July 1994 with Reliance Investment Services Pty Ltd (ACN 003 478 966) as trustee. On 25 March 1997 that company’s name became Reliance Financial Services Pty Ltd (still under ACN 003 478 966)(“Reliance Financial Services 1”). It was trustee until 26 June 2008, when it was replaced as trustee by Reliance Financial Services (NSW) Pty Ltd (ACN 131 889 766). That company was in turn replaced as trustee by the plaintiff on 17 June 2014. The plaintiff’s name is also Reliance Financial Services Pty Ltd, but it bears ACN 146 317 919.

A point about the plaintiff’s standing to bring these proceedings was raised by the defendants on the pleadings, but was not ultimately pressed at the hearing. The plaintiff referred to Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd (2008) 74 NSWLR 550; [2008] NSWSC 1344, in which Brereton J concluded (at [9]-[11]) that loans and securities (and the causes of action arising from them) which had been entered into by previous trustees of the Trust were assets of the Trust. His Honour also concluded (at [54]) that Reliance Financial Services 1 had no right to retain those assets as against Reliance Financial Services (NSW) Pty Ltd, the new trustee, and that those assets had vested in the new trustee pursuant to s 9 of the Trustee Act 1925 (NSW).

In my view it is clear that the plaintiff, having replaced Reliance Financial Services (NSW) Pty Ltd as trustee, is the proper plaintiff to enforce the Deed against Mr Pineiro.

The Deed of Loan relevantly provides:

It is not disputed that Mr Pineiro signed the Deed on 8 February 2001. The evidence establishes that Mr Pineiro’s signature appears beneath the words “Signed sealed and delivered by Victor Pineiro”. Mr Cassaniti’s signature appears beneath the words “Executed by Reliance Financial Services…” and again beneath the words “in the presence of”.

Mr Cassaniti deposed in his first affidavit that on 8 February 2001 Mr Pineiro attended his office and executed the Deed in his presence. He further deposed that:

A photocopy of a cheque for $30,000.00 dated 8 February 2001 and made out to Victor Pineiro was in evidence. There was no evidence showing that the cheque was thereafter presented for payment.

Mr Cassaniti deposed in his second affidavit that, after he observed Mr Pineiro sign the Deed, the following occurred:

Mr Cassaniti was called by the plaintiff, but was not cross-examined. Neither of the defendants gave evidence.

The proceedings were not commenced until 5 February 2016. That is a few days shy of 12 years after 8 February 2004, the date the plaintiff claims the cause of action for repayment of the Loan Amount first accrued.

The plaintiff relies upon ss 16 and 42(1)(a) of the Limitation Act 1969 (NSW) which provide for limitation periods of 12 years. Section 16 concerns causes of action founded on a deed; s 42(1)(a) concerns causes of action to recover principal money secured by mortgage.

However, the defendants contend that s 14(1)(a) of the Limitation Act applies because the cause of action is founded upon a contract and not on a deed. If that is correct, s 13 of the Limitation Act would operate so that the cause of action would not be maintainable if brought after the 6 year period specified in s 14(1)(a).

In these circumstances, it becomes necessary to consider the nature of the alleged causes of action, and when they first accrued to the plaintiff or a person through whom the plaintiff claims.

The first matter to determine is whether the Deed is effective as a deed, and thus capable of giving rise to causes of action founded on a deed for the purposes of the Limitation Act.

By their Amended Defence, the defendants denied that the Deed is effective as a deed “because in its execution the requirements in section 38(1) of the Conveyancing Act 1919 were not met.” Section 38 provides:

The plaintiff submitted that Mr Cassaniti was not “a party to the deed” within the meaning of s 38(1) and was thus able to attest to Mr Pineiro’s signature. The plaintiff also submitted that there is a conceptual difference between a signatory and a party in s 38 (see subsections (1A) and (1B)), which meant that although a party to a deed could not attest a signature, a signatory could. The plaintiff submitted that a distinction was to be drawn between Mr Cassaniti acting as an agent on behalf of the plaintiff when he executed the Deed, and Mr Cassaniti acting in his personal capacity when he witnessed Mr Pineiro’s signature.

The defendants submitted that s 38(1) applied to all parties to a deed, even if the party is a corporation. It was then submitted that s 38 required that an independent witness attest to the signing of the deed by each party, and that in the present case Mr Cassiniti, who signed the Deed on behalf of Reliance Financial Services 1, was not an independent witness who could attest the signing of the Deed in accordance with s 38(1).

The parties referred to a number of cases which they submitted supported their construction of the statute. The plaintiff relied upon Bank of Victoria v M’Michael (1882) 8 VLR (L) 11. In that case, the manager of the plaintiff bank had attested the signing of a mortgage to which the bank was a party. The primary judge had concluded that the manager “must be considered as virtually a party in the transaction” so was not competent to act as an attesting witness under the relevant legislation. The Victorian Court of Appeal stated (at 12):

The defendants sought to distinguish this case, on the basis that the bank manager represented a party, but had not been a signatory for that party. They submitted that this distinction was critical, with the result that Mr Cassaniti’s signing on behalf of the plaintiff precluded him from being able to attest to Mr Pineiro’s signature.

Both parties referred to McIntosh and Anor as Trustees of the Estate of Camm (a bankrupt) v Linke Nominees Pty Ltd [2008] QSC 79. Mr Linke, the majority shareholder in the defendant company, had executed a deed acting both in his personal capacity and on behalf of the company. It appears that the execution was witnessed by the solicitor for the plaintiffs. Dutney J stated at [30]-[36]:

In Re Farm Pride Foods Ltd [1999] QSC 174 (referred to in the above extract at [30]), Chesterman J considered an argument that a deed had not been validly witnessed by someone not a party to it. It is clear that the matter was considered in obiter. Chesterman J stated (at [15]) that the exact relationship of the witnessing party with the respondent was uncertain. The witness had variously been described as a “consultant” to the respondent and as “the representative” of the respondent. The plaintiff in the present case submitted that the passage which speaks of a person who is “identified with a party to a deed” was lacking in analysis.

I also note the reference by Dutney J in the above extract to National Australia Bank Ltd v Landmont Investments Pty Ltd [2003] QDC 42. McGill DCJ there considered an application for summary judgment on a guarantee given by the four defendants. The first, second and third defendants were corporations and the fourth defendant was a natural person. His execution of the deed had been attested by the manager of the plaintiff bank. McGill DCJ was required to consider whether s 45(2) of the Property Law Act 1974 (Qld), which similarly required attestation by “a witness not being party to the instrument”, had been complied with. His Honour recounted a submission “that the word ‘party’ in the subsection should be given a wide interpretation, consistent with its purpose of ensuring that someone independent witness the signature”. His Honour then stated at [13]-[14]:

The defendants pointed to Doe v Chambers (1836) 4 A & E 410; 111 ER 841. In that case, an indenture of feoffment bore a seal affixed by the Bank of England. Next to the seal were the words “John Knight, Secretary”. The defendants in that case contended that Mr Knight was an attesting witness and ought to be called. The trial judge had rejected that contention. On appeal, the Court of King’s Bench agreed that Mr Knight was not an attesting witness. Williams J stated (at 414; 843):

The defendants also relied upon Deffell v White (1866) LR 2 CP 144, which dealt with a similar issue. The directors of a company had passed a resolution requiring that the seal of the company only be affixed to documents in the presence of two directors, and that “such affixing shall be attested by their respective signatures”. The seal of the company was affixed to a bill of sale in the presence of two directors who signed their name, and was countersigned by the secretary of the company. The bill of sale was then registered under certain legislation which required that an affidavit of each attesting witness be filed with the bill for registration. A question arose as to whether the two directors were attesting witnesses and accordingly required to file affidavits. Sitting in the Court of Common Pleas, Erle CJ (with whom Byles and Keating JJ agreed) stated (at 146):

Erle CJ continued at 147:

Reference was also made to Mostyn v Mostyn (1989) 16 NSWLR 635. In considering whether the document in question was a deed, Young J (as his Honour then was) stated at 638:

His Honour then continued at 638-9:

The defendants also referred to Netglory Pty Ltd v Caratti [2013] WASC 364, in which Edelman J extensively reviewed the authorities on attestation of deeds. His Honour was considering s 9 of the Property Law Act 1969 (WA), which provided that every deed “shall be attested by at least one witness not being a party to the deed.” His Honour stated at [140]-[146]:

Mention should be made of two further cases. In Edwards v Skilled Engineering Pty Ltd (Court of Appeal (NSW), 14 March 1989, unrep) the Court of Appeal held that the deed in question had been validly attested to by the solicitor of the signing party.

Finally, in Commonwealth Bank of Australia v Serobian [2009] NSWSC 302 Hammerschlag J stated (at [357]-[359]):

The first point to determine is whether s 38 applies to corporations, so that the execution of the Deed by Reliance Financial Services 1 was required to be attested by an independent witness. The defendants submitted that the effect of subsection 38(5) is merely that s 38 is not intended to be inconsistent with provisions dealing with the execution of deeds by corporations such as s 127 of the Corporations Act, but still applies alongside those provisions. I am unable to accept that submission. I consider that the effect of s 38(5) is that a corporation executing a deed need not comply with the requirements of s 38. Subsection 38(5) states that nothing in the section “shall affect” the execution of deeds by corporations. If corporations were required to comply with s 38, that would clearly “affect” the execution of deeds by them. That would not be consistent with the clear words of the section. The defendants were unable to refer me to any authority which establishes that s 38 applies to corporations, and I am not aware of any to that effect, although I note that in Segboer v A J Richardson Properties Pty Ltd (2012) 16 BPR 31,325; [2012] NSWCA 253 at [48] Sackville AJA stated that the requirements of s 38(1) were satisfied in relation to a deed executed by an attorney of a corporation. In that situation, s 38 may be relevant by reason of s 51A(3) of the Conveyancing Act, which makes specific reference to s 38. I do not take his Honour’s statement to imply that s 38 must be complied with whenever a corporation executes a deed. I therefore think the better view is that the section has no general application to the execution of deeds by corporations. It follows that only Mr Pineiro’s signature was required by s 38 to be attested by a witness not being a party to the deed.

The central question of statutory construction is whether “a party to the deed” in s 38(1) should be read as going beyond an actual party to the deed to include a person such as Mr Cassiniti who signs the deed on behalf of a company, so as to bind the company to the deed. If that is so, such a person is not capable of attesting the signature of a party to the deed. It is clear that Mr Cassaniti is not a party to the Deed in the conventional sense of the word; he is neither bound by the Deed nor entitled to enforce it.

In Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27; [2009] HCA 41, Hayne, Heydon, Crennan and Kiefel JJ stated at [47]:

As the plaintiff noted, a distinction is drawn in subsections 38(1A) and 38(1B) between a party and a signatory. Subsection 38(1A) provides a method by which a deed can be signed in the name of one person by another person, and attested “by a person who is not a party or signatory (except by way of attestation) to the deed”. Subsection 38(1B) provides a method by which a person can affix “his or her mark” to the deed, rather than a signature, which may then be attested by a person who, again, is “not a party or signatory (except by way of attestation) to the deed”.

Subsections (1A) and (1B) were added to s 38 by the Conveyancing (Amendment) Act 1976 (NSW), which came into effect on 2 December 1976. It is well established that where an Act is amended, the original Act and the amending Act are to be read together, and “[t]hus the effect of the amending Act may be to alter the meaning which remaining provisions of the amended Act bore before the amendment” (see Commissioner of Stamps (SA) v Telegraph Investment Co Pty Ltd (1995) 184 CLR 453 at 463; R v Seller (2013) 273 FLR 155; [2013] NSWCCA 42 at [100]). In the present case, the question arises as to whether the use of the phrase “party or signatory (other than by way of attestation)” in the amending Act alters the meaning of “party” in s 38(1).

In certain circumstances, regard may be had to extrinsic material, such as a Second Reading Speech, to assist in the task of interpretation of a provision of an Act (see Interpretation Act 1987 (NSW), s 34; Shorten v David Hurst Constructions Pty Ltd (2008) 72 NSWLR 211; [2008] NSWCA 134 at [10]-[27]). The Second Reading Speech of the Conveyancing (Amendment) Bill in the Legislative Council, which was given on 23 November 1976, includes the following:

It is clear from that extract that subsections (1A) and (1B) were included to facilitate the signing of deeds by illiterate persons and persons with a physical incapacity. The final sentence of the extract indicates that the legislature was concerned to ensure that vulnerable persons of that kind could not be deceived into signing a document which did not reflect their intention. “Signatory” is used in the final sentence to refer to the illiterate or incapacitated person.

However, the content of the Second Reading Speech is of no assistance in confirming that the meaning of “party” in s 38(1) is the ordinary meaning conveyed by the text (see s 34(1)(a) of the Interpretation Act). Further, even if s 38(1) is regarded as ambiguous or obscure, the Second Reading Speech does not assist in determining the meaning of the provision (see s 34(1)(b) of the Interpretation Act). The same is true of the Second Reading Speech in the Legislative Assembly.

Section 38, considered as a whole, should not in my view be read so that the prohibition on attestation by signatories (other than merely attesting signatories) contained in subsections (1A) and (1B) extends to s 38(1). Those subsections are plainly concerned with particular circumstances, and may been seen to be tailored to them.

Section 33 of the Interpretation Act calls for preference to be given to a construction that would promote the purpose or object underlying the Act over a construction that does not. That approach, however, may only be taken so far. In Newcastle City Council v GIO General Ltd (1997) 191 CLR 85, McHugh J said of the Commonwealth equivalent (at 113):

The defendants submitted that the purpose of s 38 was to ensure there was evidence of the execution of deeds which could be given by an independent witness. They submitted that the Court should adopt a purposive construction of the statute so that “a party to the deed” in s 38(1) would extend to a person (such as Mr Cassaniti) who was closely associated with an actual party to the deed, and signed the deed on behalf of that party, and was thus not an independent witness.

There is certainly force in that submission. However, I consider that it would be straining the language of s 38(1) too far to read “a party to the deed” as extending to a signatory (other than a merely attesting signatory) who is not a party to the deed. That would be an unnatural construction of the words as ordinarily understood. Moreover, the legislature has chosen to use different words in subsection 38(1) as against subsections 38(1A) and 38(1B). Only the latter subsections express a prohibition upon certain signatories being attesting witnesses. Had the intention of the legislature in 1976 been to prohibit signatories from attesting the execution of deeds more broadly, an alteration of subsection (1) to that effect could have been easily made. The legislature did not do so.

I also consider that “a party to the deed” within s 38(1) should not be read so as to include persons who, whilst not themselves parties to the deed, have a close association with a party to the deed. Given a party’s direct interest, it can readily be seen why the legislature would adopt the course of prohibiting attestation by a party. However, if a person is not a party to a deed, but tests of being “associated with a party”, “identified with a party” or “an interested party” are adopted to determine whether he or she is nonetheless excluded from attesting its execution, the answer may depend upon difficult matters of degree, such as whether a person was too identified with a party, or too interested in the outcome of the deed, to be able to attest to its execution. That approach would undermine the certainty which obtains in the approach which I prefer.

Bank of Victoria v M’Michael (supra) and Commonwealth Bank of Australia v Serobian (supra) indicate that the fact that a person is an “interested party”, which in both cases meant being an employee of a bank which was taking a mortgage over real property, does not preclude that person from attesting the signature of another party to the deed. Although his Honour did not finally decide the question, McGill DCJ’s statement at [14] of National Australia Bank Ltd v Landmont Investments Pty Ltd (supra) is to similar effect.

In two of the cases extracted above it was established that a party’s solicitor was permitted to be a witness (see McIntosh and Anor as Trustees of the Estate of Camm (a bankrupt) v Linke Nominees Pty Ltd (supra) and Edwards v Skilled Engineering Pty Ltd (supra)). A solicitor is plainly associated with or has an interest in their client.

It is true that in Re Farm Pride Foods Ltd (supra) Chesterman J took the view that a person “identified with a party to a deed” is not capable of attesting its execution. There is no further elucidation of what is meant by that expression, and his Honour did not cite authority in support of it. That approach is contrary to the weight of authority which I have outlined. I respectfully differ from his Honour concerning the construction of the word “party” in this context.

I do not consider the cases of Doe v Chambers and Deffell v White to be of particular assistance. Those cases establish that a director who attests the affixing of a company’s seal in accordance with its constitution does so as part of the execution itself, and is not to be regarded as an attesting witness. They do not address whether such a person, who would be in a position analogous to that of Mr Cassaniti, is capable of attesting the execution of the deed by another party.

By reason of his connection to Reliance Financial Services 1, it may be accepted that Mr Cassiniti had an indirect interest in the Deed, as that company stood to benefit financially from the interest it would charge on the loan to Mr Pineiro. Similarly, though, the bank managers who attested signatures in the cases to which I have referred could also be said to have an indirect interest in the deed. It must not be forgotten that Mr Cassaniti and Reliance Financial Services 1 are different legal entities. Mr Cassaniti’s execution of the Deed was an act done as an agent on behalf of the company, whereas his attestation of Mr Pineiro’s signature was an act done in his personal capacity. Even if he were the sole director and shareholder of the company, the distinction between the legal personality of the company and the legal personality of Mr Cassaniti must be maintained.

I have not overlooked the references in the cases to a person being present at the time of execution “for the purpose” of attesting the execution (see Wickham v Marquis of Bath (1865) LR 1 Eq 17 at 24; HCK China Investments Ltd v Solar Honest Ltd (1999) 165 ALR 680; [1999] FCA 1156 at [181]; Netglory Pty Ltd v Caratti (supra) at [144]). However, given that persons connected to a party are competent to attest the execution of a deed, as previously discussed, it is unclear whether attestation must be the sole purpose, the dominant purpose, or one of many purposes of the person who attests the execution. It is likely that the attesting bank managers in the cases to which I have referred were present on behalf of the bank for the purpose of overseeing the transaction in each case. It could also be said that they were present for the purpose of attesting execution by the customer. To my mind, the same reasoning applies in the present case. The fact that Mr Cassaniti was present in one capacity to execute the Deed on behalf of Reliance Financial Services 1 does not preclude him also being present in another capacity for the purpose of attesting Mr Pineiro’s execution. I am satisfied on the evidence that when Mr Cassiniti observed Mr Pineiro sign the Deed he was present for the purpose of attesting Mr Pineiro’s signature.

In my opinion, Mr Cassaniti was able to attest the execution of the Deed by Mr Pineiro. The requirements of s 38(1) of the Conveyancing Act were satisfied. The defendants’ contention that the Deed is not effective as a deed has not been made out. It follows that the plaintiff’s claim does not fall within s 14(1)(a) of the Limitation Act, and the plaintiff is therefore able to rely upon the 12 year limitation period provided for in ss 16 and 42 of the Limitation Act.

I turn then to consider the proper construction of the Deed, which is a necessary precursor to the application of the provisions of the Limitation Act to the plaintiff’s claim.

The plaintiff submitted that on the proper construction of cll 3 and 4 of the Deed, no money was due and owing until 36 months after 8 February 2001, but there was a discretion on the part of the Borrower to repay the loan amount before that time. The plaintiff submitted that although interest accrued at the rate of $400 per month, the Deed did not require interest to be paid each month. Rather, it said that interest accrued each month, but the amount that had accrued was not payable until the expiration of 36 months, at which time the principal also became payable. It contended that no money was due and payable under the Deed until 36 months after 8 February 2001, and no cause of action accrued until that time.

The defendants submitted that the proper construction of cll 3 and 4 was that interest was immediately payable from the first month after the advance was made by the Lender. They submitted that because cl 4 refers to a payment of interest at a rate per month “until completely paid”, an obligation to pay interest each month would be implied into cl 4. It was therefore said that a cause of action arose when Mr Pineiro failed to pay $400 of interest on 8 March 2001.

The meaning of the terms of a commercial contract is to be determined objectively, by what a reasonable business person would have understood those terms to have meant. That determination requires consideration of the language used by the parties, the surrounding circumstances known to them, and the commercial purpose or objects to be secured by the contract (see Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; [2004] HCA 35 at [22]; Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [47]; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12 at [16]).

Clause 3 of the Deed provides that the Borrower’s obligation is to repay “the Loan Amount and all interest on the Loan Amount by no later than 36 months from the date of the advance of the Loan Amount”. The first sentence of cl 4 of the Deed provides that the Borrower agrees to pay interest on the Loan Amount “at the rate of $400 per month until completely paid”. I do not think that those two clauses, read together, impose an obligation on the Borrower to pay interest each month from the date of the advance. It is cl 3 of the Deed which governs the time for repayment. That clause is expressed to cover both the Loan Amount and all interest on the Loan Amount. In my opinion, the first sentence of cl 4 only goes so far as to set out the rate of interest agreed to be paid on the Loan Amount, and provide that interest is to accrue until that amount is completely repaid. It does not provide that interest is to be paid each month from the date of the advance, and I do not consider that any obligation to that effect should be implied into the clause as submitted by the defendants. The plaintiff would not be able to bring proceedings to recover the Loan Amount or interest thereon until the expiry of the 36 month period. The cause of action to recover the Loan Amount and interest thereon first accrued on 9 February 2004.

Clause 4 of the Deed also provides for a second type of interest in addition to the $400 accruing monthly. It provides: “In addition, interest at this rate (worked out on a % per annum basis) is payable on the balance of All Moneys Due.” The plaintiff did not press a claim for this interest as part of its case.

The plaintiff submitted that interest under cl 4 may capitalise monthly, or perhaps annually. The Deed is silent on that matter. In the absence of any provision dealing with capitalisation, I do not think there is any basis to conclude that interest is to capitalise. In my opinion the $400 per month accrues as simple interest.

The following provisions of the Limitation Act are relevant:

Section 11 of the Limitation Act defines “mortgage” as follows:

The plaintiff submitted that its equitable charge (see cl 5 of the Deed) and equitable mortgage (see cl 6 of the Deed) both fell within s 42(1)(a) in relation to the principal due under the Deed. It also submitted that the “principal” under s 42(1)(a) should be understood as the $30,000 advanced under the Deed plus the amount of interest that had accrued after the expiry of the 36-month period. In relation to interest, the plaintiff submitted that s 43 provided a “cascading regime” which enabled it to recover the interest which accrued in the six years prior to the filing of the Statement of Claim.

The plaintiff also submitted that because it had a right to be registered as a legal mortgagee under the Deed, its claim in these proceedings should be treated as analogous to a registered mortgagee exercising a power of sale under s 58 of the Real Property Act. It was said that the effect of s 40 of the Limitation Act was that the Act did not apply to the exercise of the statutory power of sale, which, by analogy, would enable the plaintiff to recover the full amount of interest which had accrued under the Deed.

The defendants’ primary submission on the Limitation Act was that the Deed was not a deed. They also relied on the submission that the plaintiff’s cause of action arose one month after 8 February 2001, as interest was required to be paid each month. They submitted that the Statement of Claim was therefore filed out of time. I have not accepted those submissions.

I will first consider the plaintiff’s argument that it should be treated as analogous to a mortgagee exercising a power of sale, and therefore have the benefit of s 40 of the Limitation Act. In Gleeson v Gleeson [2002] NSWSC 418, Bryson J stated (at [39]):

In Verduci v Golotta (2010) 15 BPR 28,865; [2010] NSWSC 506, Slattery J stated (at [90]):

The plaintiff in the present case seeks judgment for a debt due under the Deed, which will determine the amount secured by its equitable charge and equitable mortgage. If successful, it may then seek to enforce those security interests, including through the appointment of trustees for sale under s 66G of the Conveyancing Act. It would seem to me that obtaining that judgment debt and obtaining s 66G relief clearly falls within “a judgment or other judicial remedies for the principal and interest” (see Gleeson v Gleeson (supra)) which are captured by ss 42 and 43. I therefore do not accept that s 40 operates so that the plaintiff is not caught by the limitations specified in ss 42 and 43 of the Limitation Act.

Moreover, to the extent that s 40 operates to ensure that the Limitation Act does not affect rights or remedies under a mortgage, it is confined to the rights and remedies enjoyed by a registered proprietor under the provisions of the Real Property Act 1900 (NSW). So, for example, a registered mortgagee’s rights under ss 58 and 60 of that Act are not affected by the provisions of the Limitation Act. The plaintiff is not a registered proprietor under the Real Property Act and thus cannot have the benefit of the power of sale under s 58. The plaintiff is not in a position analogous to that of a registered mortgage. I do not think anything in s 23 of the Limitation Act bears upon that conclusion.

I also do not accept the plaintiff’s submission that the “principal” under s 42(1)(a) should be regarded as the principal advanced under the Deed ($30,000) plus the interest which would have accrued at the end of the 36-month period ($14,400). That approach would not be consistent with the conceptual distinction between principal and interest which is apparent in the language of the Deed.

It then falls to consider the effect of s 43 on the plaintiff’s claim for interest. In Gleeson v Gleeson (supra), after setting out s 43, Bryson J stated (at [41]-[42]):

It is relevant to note that in that case, there was an express obligation on the Borrower to pay interest “by equal monthly payments on the 30th day of each and every month in each and every year until the principal sum shall be fully paid and satisfied”. It could be said that s 43 would have a different operation in the present case because, as I have concluded (see [57] above), the Deed does not impose a monthly obligation to pay interest.

I am of the view that the absence of a monthly obligation to pay interest in the present case does not alter the operation of s 43 from that set out by Bryson J in Gleeson v Gleeson (supra). Interest under the Deed still accrues each month. After 36 months has elapsed, the Lender is entitled to sue at any time, and could sue for all interest which had accrued up to that point. I think that a cause of action for each new amount of interest accrued each month (after expiry of the 36-month period) because the Lender would be entitled to sue for an amount to which it was not entitled prior to that amount of interest accruing. The result is that the plaintiff is entitled to recover the interest which accrued in the six years prior to the date of filing of the Statement of Claim. Recovery of the interest which accrued prior to that time is barred by s 43.

There are three further matters which require consideration. The first concerns whether the advance under the Deed was actually made. By their Amended Defence, the defendants denied “that that sum pleaded or any sum was advanced to the first defendant”. The defendants submitted that although there was evidence of a cheque, there was no evidence that it was presented for payment by Mr Pineiro, or in fact paid. They submitted that on the proper construction of the Deed there was consequently no debt owing.

The plaintiff submitted that the argument that the first defendant never presented the cheque ought to have been specifically pleaded. It also emphasised that the proposition that Mr Pineiro did not cash the cheque could not be put to him in the witness box because the defendants chose not to adduce any evidence. The plaintiff also submitted that the Deed imposed an obligation to repay the Loan Amount of $30,000 irrespective of whether Mr Pineiro had cashed the cheque.

Mr Cassaniti deposed that he handed a cheque for $30,000 to Mr Pineiro shortly after the Deed was signed. A photocopy of the cheque was in evidence. The defendants chose not to cross-examine Mr Cassaniti, and they adduced no evidence themselves. I accept that a cheque for $30,000 was delivered to Mr Pineiro shortly after the Deed was executed. For the purposes of determining Mr Pineiro’s repayment obligations under the Deed, I do not think it matters whether he received the proceeds of the cheque. The Lender fulfilled its side of the bargain by providing Mr Pineiro with the cheque. Mr Pineiro promised to repay the Loan Amount of $30,000. I therefore do not accept the defendants’ submission that there is no debt owing because the advance was never made. In any case, I would infer from Mr Cassiniti’s unchallenged evidence about the transaction (including as to Mr Pineiro’s expressed need for funds), and the conversation with Mr Pineiro in 2005 (in which Mr Pineiro seemed to accept that he owed money), coupled with Mr Pineiro’s failure to give evidence, that it is likely that Mr Pineiro presented the cheque for payment and received the proceeds of the cheque.

The second matter is the submission by the defendants that the plaintiff had not proven that Mr Cassaniti had authority to execute the Deed on its behalf. The defendants tendered an ASIC search of Reliance Financial Services 1, which showed that Mr Cassaniti was not a director of the company at the time the Deed was executed. They submitted that there was no evidence of Mr Cassaniti’s authority to enter into the Deed, and that it was not the defendants’ task to point out in their pleading the plaintiff’s failure to prove its own cause of action.

The plaintiff submitted that this defence was a matter which should have been specifically pleaded by the defendants. It said that a decision not to adduce further evidence of Mr Cassaniti’s authority had been made on the basis of the Amended Defence.

Paragraph 4 of the Amended Defence denies that Reliance Financial Services 1 and the first defendant entered into a deed of loan, admits that the first defendant signed the Deed, and denies that the Deed is effective as a deed because of a failure to comply with the requirements of s 38(1) of the Conveyancing Act. In my opinion, the contention that the Deed was not effective as a deed because Mr Cassaniti did not have authority to execute the Deed on behalf of Reliance Financial Services 1 is a matter which ought to have been specifically pleaded. Uniform Civil Procedure Rules (2005) NSW, r 14.14(2) provides:

The Amended Defence does not suggest that Mr Cassaniti’s authority is in issue. The general denial in paragraph 4(a) does not specify the basis upon which the denial is made, and is followed by a specific challenge to the effectiveness of the Deed. The matter should have been pleaded in the way that the failure to comply with s 38(1) of the Conveyancing Act was pleaded in paragraph 4(c). I regard the issue of Mr Cassaniti’s authority as a matter which, if not pleaded specifically, would take the plaintiff by surprise. It would be unfair to the plaintiff to allow the matter to be raised at the hearing on the basis of the existing Defence. The defendants made no application to amend. I therefore decline to permit the defendants to raise the issue of Mr Cassaniti’s authority to execute the Deed on behalf of Reliance Financial Services 1.

I doubt that the matter would in any event avail Mr Pineiro, who is being sued on a deed that he has signed, and pursuant to which he has taken a benefit (see Edwards v Skilled Engineering Pty Ltd (supra) at 4, cited in Mostyn v Mostyn (supra) at 639). The cause of action remains one founded upon a deed.

The final matter is that the plaintiff has not yet adduced the usual affidavits of fitness and consent of its proposed trustees for sale. Its position at the hearing was that the issue of s 66G relief was ancillary to the issue of Mr Pineiro’s liability, and could be dealt with after the delivery of these reasons. It is therefore not presently necessary to consider an argument raised by the defendants that trustees for sale cannot be appointed without the first registered mortgagee (ANZ Bank) being joined as a party to the proceedings, as would be required in judicial sale proceedings (see King Investment Solutions Pty Ltd v Hussain [2005] NSWSC 1076 at [100]-[119]).

I have concluded that the plaintiff is entitled to recover the principal of $30,000 advanced under the Deed as well as interest which accrued in the six years prior to the filing of the Statement of Claim (accruing as simple interest). That appears to be an amount of $28,800. At this stage of the proceedings, the Court will simply order that judgment for the plaintiff be entered in the amount of $58,800 plus interest of $8,800 calculated at the rate of $400 per month from 5 February 2016 to the date of judgment. Judgment will therefore be entered for the plaintiff against the first defendant in the sum of $67,600.

Given the terms of cl 2(e) of the Deed it seems, prima facie, appropriate that the first defendant pay the plaintiff’s costs on an indemnity basis. However, the defendants indicated in their written submissions that they wished to be heard on costs. The Court will therefore direct that the parties serve and provide to my Associate brief written submissions on costs by 2 February 2018. It remains open to the plaintiff to press for the appointment of trustees for the sale of the Ingleburn property pursuant to s 66G of the Conveyancing Act. In those circumstances, the matter will be listed for further directions on 16 February 2018.