Meldov Pty Ltd v Bank of Queensland

On 30 November 2007, the defendant, the Bank of Queensland Ltd (“the Bank”) by mistake advanced $760,692.48 more than it intended to advance to two borrowers, John and Carmela Di Pietro. Within two months the Di Pietros drew down on this additional credit. Two years later, the defendant Bank exercised its powers of sale as a first mortgagee over two properties of the mortgagors securing the Bank’s advances to them. The Bank applied all the proceeds of sale of the second property in discharge of the Di Pietros’ obligations to the Bank. The plaintiff, Meldov Pty Ltd (“Meldov”), holds a second mortgage over the second of the two properties the Bank was selling. Meldov claims a portion of the proceeds of the sale of this second property under its second mortgage. Meldov’s entitlement depends upon whether or not the Bank’s mistaken advance to the mortgagors is secured under the “all moneys” clause of the Bank’s first mortgage over the property.

Altogether the Bank made three advances to the Di Pieros, who, mortgaged two properties in Victoria as security for the advances: one in Brunswick (“the Brunswick land”) and the other in Caulfield North (“the Caulfield North land”). The parties agree on all the relevant facts. The issue between them is the construction and effect of the “all moneys” first mortgage over the Brunswick land, the land over which Meldov holds its second mortgage.

Mr M. Young SC appeared for Meldov. Mr N. Evans appeared for the Bank.

The first transaction took place in April 2006. On 6 April 2006, the Bank provided a $1,450,000 million line of credit facility through account number 168 (“the LOC”) to the mortgagors, secured by a mortgage over the Caulfield North land. Bank account numbers are referred to in these reasons using only their last three digits. On 29 November 2007, the Bank increased the limit on this first facility, the LOC, from $1,450,000 to $1,627,500.

This coincided with the Bank’s entry into the second transaction. On 29 November 2007 the Bank provided the mortgagors with a variable rate commercial loan in the sum of $1,225,000 through account 757 (“the VRCL Facility”). The purpose of this second transaction was to enable the Di Pietros to refinance an existing first mortgage over the Brunswick land, land registered in their names. A third party, RMBL Investments Ltd (“RMBL”) held this existing mortgage. The VRCL Facility was secured by a mortgage over the Brunswick land, which was registered as a first mortgage on 10 December 2007 after the payment out of RMBL (“the First Mortgage”). The Di Pietros, the mortgagors directed the Bank to advance funds under the November 2007 VRCL Facility as follows:

The Bank made a mistake in executing those directions, a mistake that eventually precipitated these proceedings. The Bank dealt with the funds as directed under (1) – (3) above. But it mistakenly twice paid the $760,692.48. First it paid the $760,692.48 to RMBL as directed. But that amount was debited by the Bank to a “Loan Centre Temporary Debit Account”, rather than to either the LOC or the VRCL Facility. Secondly the Bank credited the amount of $760,692.48 to the LOC in addition to the payment of the same amount that it had made to RMBL. Thus instead of the intended credit to the LOC of $47,570.70 noted at (4) above, the Bank credited the LOC with $808,263.18 ($47,570.70 + $760,692.48). The additional $760,692.48 credit applied to the LOC is referred to in these reasons as the Additional Funds.

Between 3 December 2007 and 30 January 2008, in the two months after the second transaction the Di Pietros drew cheques against the LOC and exhausted the Additional Funds. It is not presently relevant whether any proceedings were taken against the Di Pietros for the Funds’ recovery and no evidence was offered in the proceedings as to any action against the Di Pietros.

The third transaction took place in April 2008. The Bank provided the Di Pietros with a temporary overdraft facility of $162,000 on 17 April 2008 through account 341. No additional mortgage from the Di Pietros secured this last facility.

Only three months later, in July 2008, the Di Pietros defaulted to the Bank.

The Di Pietros took advances from Meldov during the three month period between the third transaction and their default. On 14 May 2008, Meldov agreed to lend the Di Pietros the sum of $150,000, secured by a second mortgage over the Brunswick land (“the Second Mortgage”). The Second Mortgage was initially protected only by caveat lodged on 16 May 2008. On 2 January 2009 the plaintiff registered the Second Mortgage on the title of the Brunswick land.

In the meantime, the Bank realised its mistake in advancing the Additional Funds to the mortgagors. On 2 January 2009, it sought to correct the mistake and debited the LOC by $760,692.48, the amount of the Additional Funds. At the same time the Bank also debited the LOC by $67,485.72, being the interest the Bank claimed on the advance of the Additional Funds.

After the Di Pietros’ default, the Bank set about realising its securities. In so doing, it applied the proceeds of sale in the reduction of the LOC.

On 8 December 2009 the Bank’s mortgagee sale of the Caulfield North land settled. The Bank paid the total net proceeds of $2,356,581.28 from the Caulfield North land against the amount it claimed as then owing under the LOC account.

On 19 January 2010, the Bank’s mortgagee sale of the Brunswick land settled. After paying GST, the Bank applied the net sale proceeds from the Brunswick land of $1,856,629.56 as follows:

In doing so, the Bank exhausted the proceeds from the mortgagee sale of the Brunswick land. No residue remained from which the debt owed by the mortgagors to Meldov could be discharged. Because the Bank appropriated to itself the entirety of the Brunswick land proceeds, Meldov has not recovered any of the moneys due to it under the Second Mortgage. The quantum of what is owing to Meldov is not in issue at this stage of the proceedings. The parties have agreed to confine the hearing to the question of the construction of the First Mortgage as it applies to the Additional Funds.

The present question is whether the Additional Funds are secured by the First Mortgage. The Bank contends, firstly, that the Di Pietros as mortgagors were under a contractual obligation to repay the loan and that their contractual debt is secured by the First Mortgage; and secondly, that because the Additional Funds were advanced by mistake, they were recoverable from the borrowers in a restitutionary claim for moneys had and received, and hence they are also secured under the terms of the First Mortgage.

Meldov denies the Di Pietros were contractually required to repay the Additional Funds. It accepts that because of the Bank’s mistake, the Bank has a claim in restitution against the Di Pietros for an amount equal to the Additional Funds, but submits that this claim is not secured by the First Mortgage properly construed.

The parties’ contentions require closer examination of the terms of the First Mortgage, the LOC and the VRCL Facility.

The First Mortgage (Dealing Number AF5213585) incorporates the Bank’s standard mortgage Memorandum of Common Provisions (Number AA796), which contains terms in the form of an “all moneys mortgage”. Clause 4.1 of this memorandum to the First Mortgage (“the Memorandum”) provides that:

The phrase “total amount owing” used in clause 4.1 is defined in Memorandum, cl 1 as meaning:

This definition of total amount owing contains general words followed by words commencing “including”. Memorandum, cl 1 also provides that the term ‘including’ when used in the Memorandum is to be read so that the word:

Memorandum, cl 1 also provides that “any agreement covered by this mortgage” means:

The various agreements constituting the LOC and the VRCL Facility are agreements “covered by this mortgage”, and are detailed later in these reasons.

It is convenient to deal firstly with the Bank’s submission that the Additional Funds are secured contractually by the First Mortgage, then Meldov’s submission to the contrary, then the parties’ contentions whether the First Mortgage’s “all moneys” clause applies to the Di Pietros’ obligation in restitution to repay the Additional Funds.

The Bank submits that the Di Pietros were contractually liable to repay the Additional Funds to the Bank for any one of one general and three particular reasons under the VRCL Facility. If it is established that the Di Pietros owed a contractual obligation to repay the Additional Funds to the Bank, then Meldov does not dispute that such obligation would be secured by the First Mortgage.

Generally, the Bank submits that the First Mortgage secures under Memorandum, cl 4.1 “all money which … you owe us”, and that following the mistaken payment of the Additional Funds, the Di Pietros did ‘owe’ that money to the Bank within the ordinary meaning of the word ‘to owe’. The Oxford Dictionary defines “owe” as “to have an obligation to pay or repay (something, especially money) in return for something received”. The Bank submits that reference to the nature or circumstances of the debt is unnecessary.

Meldov argues that the type and character of the debt incurred is important, relying in part on certain guidelines expressed in Young J’s decision in Estoril Investments Pty Ltd v Westpac Banking Corporation (1993) 6 BPR 13,146 (“Estoril”) for that proposition. Those guidelines are considered below. Meldov further submits that there is no express provision in the Memorandum to the effect that the First Mortgage secures an obligation of the kind the Di Pietros owed here: a liability to make restitution of an amount mistakenly paid to the Di Pietros.

But the Bank submits in the alternative that if one does look at the circumstances the debt arises contractually under the VRCL Facility. It is not necessary to describe these alternative arguments because the Court has decided the case in the Bank’s favour on its principal argument. But some brief observations are made here now about these alternative arguments.

Firstly, the Bank submits that the Additional Funds may be characterised as an additional advance under the VRCL Facility, a facility secured by the First Mortgage. If the Additional Funds are an advance under the VRCL Facility, the drawdown of that advance exceeded the limit of the VRCL Facility. Therefore the Bank submits a contractual obligation to repay the Additional Funds arose immediately under the VRCL Facility, cl 2.4, which provides:

Secondly, the LOC General Conditions, cl 7.5 (and VRCL General Conditions, cl 13.5) expressly provides for the repayment of advances made under the LOC in various circumstances, including where an advance is made “because of an error”:

In my view the “legal obligations” referred to in this clause really only direct the Court back to the underlying legal position. Clauses so worded do not create obligations.

The LOC is an agreement covered by the First Mortgage within the meaning of ‘any agreement covered by this mortgage’ in Memorandum, cl 1. LOC General Conditions, cl 5.1 provides that the borrower must pay “the amount of credit and all other amounts borrowed from” the Bank. LOC General Conditions, Part D cl 1.3 is the same as the VRCL Conditions, cl 2.4: it provides for any amount drawn in excess of the facility limit to be repaid, as follows:

Thirdly, the Bank submits that the Di Pietros drawing down the Additional Funds by cheque from the LOC where the amounts drawn down exceeded the amount provided for under the facility, should be construed as a request by the mortgagors, the Di Pietros, for an advance on loan from the Bank. On 29 November 2007, the Di Pietros and the Bank agreed that the LOC limit would be $1,627,500. The mistaken crediting of the Additional Funds to the LOC raised the LOC beyond this agreed credit amount. The Bank submits that the second and fourth ‘established principles’ concerning the relationship of banks and their customers summarised in Andrews v Australia and New Zealand Banking Group Ltd (2011) 211 FCR 53 (“Andrews”) at [81] – [82] (and recently affirmed in Paciocco v Australia and New Zealand Banking Group Limited [2014] FCA 35 at [93]) are applicable here:

The Di Pietros, drew cheques for payment beyond the agreed credit amount of the LOC. So “by necessary implication”, the Bank submits, they requested the Bank to grant any necessary overdraft or loan on its usual terms as to interest and other charges to meet the cheques when presented. The Bank accepted those requests by permitting the cheques to be met. The funds were therefore drawn on the usual terms as to interest and other charges. This was an agreement within the meaning of ‘an agreement covered by this mortgage’ and thus an obligation secured by the First Mortgage.

As to the Bank’s first argument, Meldov denies that the mistaken payment of the Additional Funds can be characterised as an advance. Meldov submits that an advance is a consensual, not an accidental, paying of money. This argument is dealt with below.

As to the Bank’s second argument, Meldov submits that the Bank’s contractual power to “adjust debits and credits to the account” does not allow the Bank to take away from the Court the question of whether money is due under a restitutionary claim or not. The power only extends to allowing the account to “accurately reflect the legal obligations” of the Di Pietros and the Bank. The defendant cannot adjust the amount owing under the account and turn only a potentially successful but undetermined restitutionary claim into a debt by simply altering accounting entries. I accept Meldov’s submission on this issue.

To the Bank’s third argument, Meldov denies that that the mortgagors’ drawing down the Additional Funds from the LOC by cheques has the contractual effect for which the Bank contends. Unlike the situation contemplated in the fourth principle in Andrews, in my view Meldov’s submission is persuasive that the evidence shows that the LOC did not actually go into overdraft when the Di Pietros drew on the Additional Funds. Therefore, no contractual agreement to repay the Additional Funds is necessarily implied on Andrews principles, because there was no overdrawing beyond agreed limits.

The Bank also submits that the Additional Funds are captured by Memorandum, cl 4.1 not only as a contractual debt owed by the mortgagors to the Bank but also as an obligation owed in restitution. Meldov does not deny the existence of such a restitutionary obligation, but denies that the First Mortgage secures such obligations.

The First Mortgage’s Memorandum contains the terms of a commercial contract between the Di Pietros and the Bank. The principles of interpretation of commercial contracts were recently summarised by the High Court in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at [35] per French CJ, Hayne, Crennan and Kiefel JJ:

The Bank submits that a conventional application of those principles is required here. And the ‘all moneys’ clause in Memorandum, cl 4.1 should be construed by reference to the context in which it appears and by reference to the commercial purpose which the words were intended to serve. The relevant intention of the parties is to be ascertained from the language used.

The application of those principles has often been judicially considered in the context of mortgage “all moneys” clauses. In Olympic Holdings Pty Ltd v Windslow Corporation Pty Ltd (in liq) (2008) 36 WAR 342 (“Olympic”) at [43] (Buss JA, Steylter P agreeing), after reviewing the authorities on “all moneys” clauses, Buss JA concluded that: “all of the authorities may be reconciled on the basis that each of them involved the construction of particular instruments of security 'by reference to the context in which they appear and by reference to the commercial purpose which they were intended to serve’”.

Meldov’s principal submission may be shortly stated. Meldov submits that the all moneys clause in the Memorandum should be read as only covering obligations of “the same character as the Bank’s agreed advance”. Meldov further submits that a debt owing by reason of a restitutionary claim in consequence of a mistaken payment is not a debt “of the same type or character” as that arising from an agreed advance of funds. The latter is a consensual obligation arising from a mutually contemplated advance of funds. The former is a non-consensual and involuntary obligation contemplated by neither party.

Meldov founds its submission on the decision of Young J (as his Honour then was) in Estoril. There his Honour summarised what he described as nine “guidelines” applicable to the construction of the construction of “all moneys” clauses (or, as his Honour called them, “dragnet clauses”). His Honour noted that the guidelines, Northern American in origin, were applicable to Australian conditions. But he emphasized that “it all depends on the construction of the individual mortgage”. The guidelines that Young J set out at 13,151 – 13,152, are reproduced below. Meldov relies in particular on the third and fourth guidelines:

Young J provided further guidance (at 13,154) in Estoril, as to the occasions for the local application of these guidelines, stating that:

Young J further discussed the proper construction of “all moneys” clauses in Australia and New Zealand Banking Group Ltd v Comer (1993) 5 BPR 11,748 at 11,758, where his Honour said:

Estoril has been followed at first instance. In Re Modular Design Group Pty Ltd (1994) 35 NSWLR 96 (“Modular Design”) Santow J followed Young J’s approach in Estoril to the construction of an “all moneys” clause and (at 101-102) cited Young J’s nine guidelines. In Modular Design, Santow J also approved of approaching the interpretation of an “all moneys” type of clause with a predisposition against a wide interpretation which would “lead to consequences where the equity of redemption would be impeded or constrained”. Santow J noted in Modular Design that “[c]learly such predisposition may be rebuttable where the language is sufficiently clear and the equity of redemption not directly clogged”. The idea of approaching the task of construction with a predisposition towards or against a certain outcome has been questioned since Modular Design.

Meldov also cites Fountain v Bank of America National Trust and Savings Association (1992) 5 BPR 11,817 (“Fountain”) as supporting its contentions. In Fountain the Court of Appeal found that a guarantee given by a debtor in 1981 was secured by the “all moneys” clauses in a 1976 loan. The Court held (at 11,819–20) that “all moneys” clauses “must be confined in their operation by reference to the context in which they appear and by reference to the commercial purpose which they were intended to serve”. The relevant “all moneys” clauses in the mortgage were as follows:

Gleeson CJ (with whom Kirby P agreed) reasoned to the conclusion that the debtee could demand security for the later guarantee in the following way at 11,820:

In construing the all moneys clauses in Fountain Gleeson CJ considered whether the transactions sought to be captured by the clause were “within the purview of the ongoing banking arrangements the subject of” the original agreement containing the “all moneys” clauses. In my view this question Gleeson CJ posed in Fountain can be usefully posed in the present case.

Meldov next cites Smith v Australia and New Zealand Banking Group Ltd (1996) NSW ConvR 55-774 (“Smith”) in which Kirby P considered the Estoril guidelines. Meldov submits that Kirby P gave the Estoril guidelines in the following terms (at 55,937):

In my view, Smith provides commentary upon and indicates caution in applying, rather than support for, the Estoril guidelines. Kirby P noted in Smith that any judicial predisposition towards construing “all moneys” clauses narrowly should be resisted given the availability of legislative, common law and equitable remedies in the case of unfair, misleading or deceptive securities (at 55,937):

In Smith, the Court of Appeal considered the following two Estoril guidelines that Young J had considered at first instance:

The Court in Smith held that if the Estoril guidelines were left to one side, that on ordinary principles of construction the parties should be taken to have intended the words in the “all moneys” clause of the mortgage to have the wide effect that they would naturally bear. Priestley JA said (at 55,938):

The parties’ submissions in these proceedings directed the Court to the 5 February 1996 decision of Smith as reported at (1996) NSW ConvR 55-774. However, it appears that due to a mistake of fact in that judgment, the Court of Appeal withdrew those reasons and issued a revised judgment on 21 November 1996, which is reported at (1999) NSW ConvR 55-884. The revised judgment (Smith v Australia and New Zealand Banking Group Ltd (1999) NSW ConvR 55-884) expresses the point in similar terms. As Priestley JA said (at 56,909):

Next Meldov cites Jageev Pty Ltd v State Bank of New South Wales (No 2) (1996, 23 August 1996, Sperling J, unrep) (“Jageev”). In Jageev Sperling J, like Young J in Estoril, read down an “all moneys” clause, which Sperling J accepted on a literal reading would cover a liability of any kind owed to the bank. Sperling J seems to have felt obligated in Jageev by the guidelines set in Estoril and following cases to read the clause down (at 4):

The Bank points out that Sperling J’s application of the Estoril guidelines in Jageev was doubted in Murphy; Re Bankrupt Estate of: Donnelly v Commonwealth Bank of Australia Ltd (1996) 140 ALR 46 (“Donnelly”). Hill J in Donnelly held (at 52) in the absence of a rule that “all moneys” clauses be read contra proferentem, that is against the interests of the mortgagee responsible for drafting the clause, said that:

In Donnelly (at 54) Hill J noted that the Estoril guidelines had “not received enthusiastic endorsement from the New South Wales Court of Appeal”, citing Fountain and Smith. Hill J therefore did not follow Estoril in Donnelly and found that the “all moneys” clause secured the relevant debt, which had arisen as an obligation to the bank in that case as a result of theft or misappropriation. Hill J found that the mortgage’s language was clear, having been deliberately drawn with great width in order to ensure so far as was possible that any moneys owing to the bank were secured, howsoever the obligations may have arisen. His Honour held that Estoril would not require an “all moneys” clause to be read down if its language actually covered a given factual situation. Hill J set out (at 53) the following relevant principles as applicable in New South Wales:

When considering these authorities in their chronological order it is appropriate to mention at this point that the Bank relies upon Ronan v ANZ Banking Group Ltd (2000) 2 VR 531 (“Ronan”), a decision of the Victorian Court of Appeal. The appellants in Ronan had put at issue whether a mortgage over property belonging to a father, initially granted in order to secure his family partnership’s trading account, also secured loans made to the partnership after the mortgagee had been made aware of the father’s death. Ormiston and Batt JJA held (at [52]) that on principle an “all moneys” clause in a mortgage which secured “all loans advances credits and banking accommodation together with interest thereon” by a mortgage, “should be construed having regard to the context in which the mortgage came to be executed and by reference to the commercial purpose it was intended to serve, but otherwise the intention of the parties is to be ascertained from the language used…”. Meldov notes in its submissions that their Honours had not been taken to Estoril, given their statement that “… [s]ave for reference to some statements of general principle and to Macrae and one other case mentioned below, counsel cited no cases at all on the meaning and effect of the relevant clauses in the mortgage”. Meldov submits that it is not surprising that the Victorian Court of Appeal did not consider the application of the Estoril guidelines, and that Ronan should not be relied on for the proposition that reference to Estoril is unnecessary when considering “all moneys” clauses.

Meldov next relies upon Cuzeno RVM Pty Ltd v Overton Investments [2002] NSWSC 88; (2002) 10 BPR 19,425 (“Cuzeno”), as an example of a case where Palmer J followed Estoril to read down an “all moneys” clause so it did not secure contingent liabilities which had not crystallised by the date the parties agreed the mortgage was to be repaid. Citing Fountain, Estoril and Smith, Palmer J said (at [55]):

In my view, Cuzeno can be read not so much as an example of reading down an “all moneys” clause under the Estoril guidelines but as applying orthodox principles of construction to an “all moneys” clause.

Much the same can be said in my view in relation to the next decision, Oversea Chinese Banking Corporation v Malaysian Kuwaiti Investment Co Sdn Bhd [2003] VSC 495. There Redlich J considered whether the mortgage at issue was, at the time of its execution, intended to secure further advances that might be made pursuant to a subsequent agreement. His Honour considered the principles applicable to the construction of “all moneys” clauses at [31] – [37], including the Estoril guidelines, and noted at [36] that:

The Court of Appeal in this State has recently referred to the Estoril guidelines in Rich v Westpac Banking Corporation [2014] NSWCA 136 (“Rich”). Both Ward and Emmett JJA referred in their judgments to the appellant’s reliance upon the guidelines. But each of their Honours found that particular language of the relevant contractual documents made unequivocally clear that those guidelines could not apply (at [38] – [42] per Ward JA and at [89] – [95] per Emmett JA). The closest the Court came to approving the Estoril guidelines was at [94], where Emmett JA stated in relation to what is the fourth guideline that “At best, [it] could be no more than a presumption”. In my view the discussion of the Estoril guidelines did not appear in anyway determinative in Rich, which again was an application of the well-established principles of construction.

Rich was an application for leave to appeal from Bellew J’s judgment in Westpac Banking Corporation v Cvitanovic as Trustee of the Bankrupt Estate of Rich [2013] NSWSC 1759. Counsel for the applicant before Bellew J in that case relied upon the second, third, fourth and seventh of the Estoril guidelines to read down the relevant “all moneys” clause. Bellew J noted the Estoril approach, including Young J’s emphasis that “it all depends on the construction of the individual mortgage”, had been taken in several cases. Bellew J’s analysis of the application of the “all moneys” clause to monies advanced subsequently by the respondent to the deceased established that the Estoril guidelines were not directly applicable in that case. Meldov’s submission that Bellew J applied the Estoril guidelines puts the matter rather too highly in my view. His Honour certainly referred to the guidelines but found that they did not apply upon the construction of the individual mortgage.

Finally Meldov relied upon Perpetual Trustee Co Ltd v Moussa [2013] NSWSC 131 (“Moussa”), McCallum J found in Moussa that the relevant mortgage would on its true construction not have secured a liability for restitution of moneys mistakenly-paid due to a fraud. Although this was not the basis upon which her Honour decided the case. The relevant loan agreement and mortgage were accepted in Moussa to have been forged by the mortgagor’s son without the mortgagor’s knowledge. The mortgagee sought to argue that the mortgagor was nevertheless liable to make restitution for the amounts advanced, since the son had directed the amounts to be applied for the mortgagor’s benefit.

McCallum J accepted the mortgagee’s argument that the key clause 1.1 was a clause which delimited the mortgagee’s interest in the land and hence attracted indefeasibility. However, in the alternative her Honour considered whether the “all moneys” clause in the relevant mortgage would otherwise secure a liability to make restitution, such liability potentially having arisen on the facts. Her Honour found that it would not.

The operative “all moneys” clause in Moussa did not secure a particular amount of money, but rather charged the land with “the amount owing”, which was defined in the following way:

The mortgagor’s promise to repay “the amount owing” in Moussa was not clearly stated in the contractual documents. McCallum J found the clearest expression of that promise in the following provisions which relate to the general obligations that the mortgagor assumed and the consequences of default:

McCallum J considered the nature of the liability in restitution to pay a sum of money at [47] – [51]. Firstly, her Honour found that the liability may be described as a ‘debt’, citing Deane J’s statement in Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 (“Pavey”) at 255. Her Honour found that there was “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”, that is, a restitutionary debt. Secondly, her Honour considered that the perhaps most significant aspect of the nature of a restitutionary debt was that it is one that is “imposed rather than agreed, assumed or implied”, citing K Mason, JW Carter and GJ Tolhurst, Mason & Carter's Restitution Law in Australia (2nd ed 2008, LexisNexis Butterworths) at 75. Thirdly, her Honour found that the imposition of the debt “turns on an evaluative judgment of the court”. The payment of money under an operative and causative mistake of fact will establish a prima facie liability in restitution, however liability also requires that there are no recognised circumstances that would make an order for restitution unjust.

Her Honour also found that it was “conceivable that an appropriately drafted covenant in a mortgage could secure the payment of such a liability”, but no such clause appeared in the Moussa mortgage: at [52].

In light of those findings and the principles derived from Estoril and Cuzeno at [55], McCallum J found that the terms of the mortgage, which emphasised that the parties intended to secure only voluntarily assumed obligations, did not secure an involuntarily imposed liability in restitution (at [56]-[59]):

Meldov therefore submits that the Memorandum does not secure a liability in restitution to repay amounts, because:

It seems to me that the Estoril guidelines have a role to play, in the construction of all moneys clause, but their role cannot be determinative consistent with established authority. As Young J himself stated in Estoril (at 13,154), the guidelines are not intended as some “general rule that mortgages must be construed as if they were limited to debts of the same type as those for which the mortgage was originally taken out”. His Honour emphasised immediately after setting out the guidelines at 13,152 that “it all depends on the construction of the individual mortgage”. The intention of the guidelines is to provide guidance as to the true construction of an all moneys clause in a mortgage. Despite being labelled ‘guidelines’, the enumerated principles in Estoril are perhaps best seen as convenient tools of analysis which delineate where the likely boundaries of an “all moneys” clause will lie, and they are useful for that purpose. They are not inflexible rules and the role they play is subordinate to the general principles of construction, as most recently stated at the highest level in Woodside.

In approaching the construction of Memorandum, clause 4 and the definition of “total amount owing” the authorities discussed do not justify in my view any predisposition to reading down those provisions according to the Estoril guidelines. Those guidelines are and remain a very helpful tool of analysis. Rather, I should follow the limits expressed on the use of those guidelines in Fountain and Smith and otherwise must apply the principles of construction in Woodside.

In so doing, the scope of the words “all money which one or more of you owe us or will or may owe us in the future” must be given their ordinary meaning. They are wide enough to govern restitutionary obligations, which Deane J described in Pavey are capable of being be described as a debt.

The words should not be taken as inapplicable, as Meldov submits, merely because the Di Pietros’ liability to give restitution has not been fully determined by a Court. That is not a barrier to the securing of many undetermined debt obligations.

Gleeson CJ’s approach to construing an all moneys clause in Fountain is of particular use in this case in the construction task. The learned Chief Justice asked whether the transaction sought to be captured by the clause was “within the purview of the ongoing banking arrangements the subject of” the original agreement, in this case the First Mortgage and the creation of the VRCL Facility.

Here much indicates that such an obligation was within the purview of the ongoing banking arrangements. In particular the parties specifically contemplated in the VRCL Facility clause 13.5 the making of “errors”, including errors in the making of advances by the bank under the VRCL Facility. And the error made here was very clearly an internal bank accounting error occurring in the course of ongoing banking arrangements with respect to the giving effect to the very same facility, the VRCL Facility.

Moussa does not impair this reasoning. Moussa is not authority for the proposition that a debt owed in restitution will never be secured by a prior mortgage’s “all moneys” clause. Though providing a useful obiter discussion of the application of an “all moneys’ clause to a restitutionary debt in one circumstance, Moussa was decided upon its own facts, or specifically its own mortgage terms. Those facts are materially distinct from the instant case.

The Memorandum in the instant case more clearly and conventionally defines the Mortgagors’ obligation to repay the amount owing to the Plaintiff than was the case with the special mortgage provisions in Moussa. Additionally to Memorandum, cl 3.1 (which is materially similar to cl 1.1 of the mortgage in Moussa), Memorandum, cl 4.1 of the Memorandum states that the Mortagors mortgage the property “for the purpose of securing to us payment of the total amount owing you mortgage the property”.

Further, under the interpretation clause, Memorandum cl 2, the parties to the First Mortgage agree that the mortgage is to be interpreted broadly:

To give effect to that interpretation requires that the Court, as it says, should interpret the terms of the agreement broadly. The phrase “total amount owing” is itself defined broadly in the Memorandum, cl 1 as “all money which … you owe us”. It would not be giving effect to a broad interpretation of the Memorandum to interpret the stipulation that all money owed to the mortgagee should not include a restitutionary debt, which arises as a result of the transactional relationship as it does here. Whether that debt strictly arises under either the LOC or the VRCL Facility, as the defendant alleges, it is not necessary to determine. The restitutionary obligation that arose here is one that fits into the scope of the term ‘total amount owing’ broadly interpreted. The Memorandum contemplates that the mortgage will secure obligations owing to the mortgagee, including those incurred “because of an error”. It is not the Court’s place to stifle that contemplation through the application of a narrow interpretation which the Memorandum expressly disclaims.

The nature of the restitutionary obligation here provides a further distinction from Moussa. In Moussa, such an obligation arose through fraud and thus without the knowledge of the mortgagor. Such an obligation was of a different nature and character from the types of debts expressly secured by the First Mortgage. In this case, the Mortgagors had full knowledge of the mistaken payment that created the restitutionary debt and have used the Additional Funds. Although the Mortgagors did not request the payment of the Additional Funds and so did not voluntarily assume the relevant debt, their request for an advance from the VRCL Facility is the occasion for the creation of the obligation.

Moreover Additional Funds were provided to a commercial borrower as a consequence (even if an accidental consequence) of a transaction that the borrower agreed to secure with a mortgage. Given its genesis, the restitutionary obligation can be characterised in my view as being of the same character as those other obligations that arose through the transactional relationship of the Mortgagors and the Bank.

For these reasons I conclude that the Di Pietros’ restitutionary obligation to the Bank repay the Bank the moneys mistakenly overpaid by the Bank is secured by the Bank’s First Mortgage and Meldov fails on this issue. I therefore make the following orders: