Constantine v Pates

The dispute between the parties is centred around the construction of a single clause of a deed entered into by them. The ultimate question is whether one party must now transfer its half-share of a property back to another party.

The plaintiff, Christine Constantine, and the first defendant, Stergos Pates, are sister and brother. The second defendant, Hygia Pty Ltd (Hygia), is a company through which the first defendant and his wife, Dr Vanitha Visvalingam, carry on a sleep medicine practice. The first defendant and Dr Visvalingam are the only directors and shareholders of the company.

The parties (including Hygia) entered into a Deed of Family Arrangement dated 22 May 2018 (the Deed). The Deed concerned the plaintiff’s interest in two residential properties. One property is located at X XXXXX Road, Marrickville, New South Wales, with folio identifier X/X (the Marrickville Property). The other is located at X XXXXX Avenue, Kingsgrove, New South Wales, with folio identifier X/X (the Kingsgrove Property).

The Deed required:

In the Deed, the parties acknowledged that Hygia’s payment of $700,000 was to be financed and secured by Hygia taking out a mortgage on the Marrickville Property. Consequently, on 22 May 2018, Hygia received a loan from the ANZ Bank with account number XXXX-XXXXX (the ANZ Loan). Shortly after the loan account was opened, a mortgage in favour of the ANZ Bank was registered against the Marrickville Property, identified as XXXXXXXXX (the ANZ Mortgage).

The Deed provides that “upon the repayment of the loan and discharge of the mortgage by [Hygia] over the Marrickville Property”, the first defendant was to transfer his half interest in the Kingsgrove Property back to the plaintiff.

What has triggered these proceedings is a refinancing transaction by the defendants. The ANZ Loan was paid out, and Hygia received a new loan from the NAB with account number XX XXX XXXX (the NAB Loan). Further, the ANZ Mortgage was discharged and a new mortgage over the Marrickville Property in favour of the NAB was registered, identified as XXXXXXXX (the NAB Mortgage). Settlement took place on 1 March 2022.

From here, each side’s principal contention can be shortly stated. The plaintiff’s case is that by reason of the repayment of the ANZ Loan and the discharge of the ANZ Mortgage, she is now entitled to have the first defendant’s interest in the Kingsgrove Property transferred back to her as the condition for that transfer back has been fulfilled. The defendants’ case is that simply substituting one loan obligation and mortgage for another was not a “repayment of the loan and discharge of the mortgage” under the Deed. Rather, they say those terms should be understood as a reference to the indebtedness to be incurred by Hygia on account of the contemplated payments to the plaintiff.

Ms J Mee of counsel appeared for the plaintiff. Mr GM McGrath of counsel appeared for the defendants. Each of Ms Mee and Mr McGrath provided written submissions (PWS and DWS respectively) and oral submissions in closing.

For the reasons set out below, I consider that the plaintiff is not presently entitled to a transfer back to her of the first defendant’s half-share in the Kingsgrove Property. It follows that the Statement of Claim must be dismissed.

The plaintiff relied on two affidavits sworn by her, one sworn on 31 July 2023 and one sworn on 31 July 2024.

A copy of the Deed was annexed to the affidavit of the plaintiff sworn on 31 July 2023 (see at [7]) as Annexure B. Missing from the copy of the Deed as annexed, was Annexure A to the Deed, which comprised a copy of an earlier deed which I have called the 2007 Deed (see below). A copy of the 2007 Deed was tendered by the defendants and marked as a separate exhibit.

The significance of the need to include in the evidence all annexures to the Deed is that when considering the “context” of such a document, the entire text of the Deed as well as any other deed, other document or statutory provision referred to in the text of the Deed is to be considered (see [63] below).

The defendants relied on four affidavits sworn by the first defendant (on 28 September 2023, 31 October 2023, 9 July 2024 and 24 September 2025), and on an affidavit by Dr Visvalingam sworn on 31 October 2023.

Only the first defendant was required for cross-examination.

I record that in the course of cross-examination of the first defendant, there were instances where the witness indicated that he did not understand the question. At one point I raised with counsel my concern that the witness was not understanding the questions as they were too abstract and suggested the witness may benefit from a more concrete form of questions to assist his comprehension (TR P41 L36-P42 L6). For other reasons, counsel did not pursue that line of questioning (TR P42 L8-10).

More generally, the first defendant appeared to me to be doing his best to answer the questions asked of him. I note there were no submissions made by the plaintiff to the contrary nor was the issue of the first defendant’s credit or reliability raised otherwise.

What is set out below was largely not in dispute, but to the extent it was, the following should be taken as my findings as to what occurred.

In relation to the Background to the Deed section below, for the purposes of the construction task before the Court, these facts and circumstances will be facts and circumstances found to be known to the parties at the time of executing the Deed.

The Marrickville Property was a family property. The first defendant gave oral evidence that this was the home in which he and the plaintiff grew up.

The mother and father of the plaintiff and the first defendant, Despina Pates (the mother) and Vasilios Pates (the father), lived together in the Marrickville Property. After the father died in 1997, the mother continued to live in the Marrickville Property by herself. The evidence does not reveal precisely how the Marrickville Property was owned prior to the father’s death, though the first defendant gave evidence under cross-examination that the property was always in the mother’s name. It is not in dispute that the mother was the sole proprietor of the Marrickville Property immediately before the Marrickville Property first came into the plaintiff’s proprietorship.

In or about 2006, the first defendant met Dr Visvalingam. They married in 2007. The affidavit evidence goes into some detail as to what happened to the relationship between the first defendant, and the mother and the plaintiff around that time, but none of that detail is necessary to traverse. Suffice it to say, it seems that the first defendant and Dr Visvalingam became, to use the first defendant’s own words, “estranged” from the plaintiff and the mother.

It was in 2007 when the Marrickville Property was transferred to the plaintiff. On 25 October 2007, the mother and the plaintiff entered into a “Deed of Family Arrangement” (the 2007 Deed), whereby the mother agreed to transfer to the plaintiff her right, title and interest in the Marrickville Property. There is no evidence or suggestion by either party that any consideration was paid for the transfer. However, the parties to the 2007 Deed agreed that the mother would have “the right to occupy and live in the premises exclusively for the remainder of her life until such time as the [mother] permanently vacates the [Marrickville Property]”. The plaintiff was also responsible for the payment of the costs of maintenance and upkeep, council rates, water rates, insurance premiums and any other statutory fees and charges in relation to the Marrickville Property.

As noted already, the 2007 Deed is expressly referred to in and attached to the Deed as Annexure A.

The first defendant was and is a sleep scientist and Dr Visvalingam is a medical doctor who specialises in respiratory and sleep medicine. Together they established a sleep clinic, and incorporated Hygia, the second defendant, to be the vehicle for the sleep medicine practice. Hygia was incorporated in 2014. The first defendant gave oral evidence, correcting what was said in his affidavit evidence, that while Hygia the entity was created in 2014, the actual sleep medicine clinic operated by him and Dr Visvalingam did not start operations until sometime in 2016 or 2017 (TR P26 L25-35). The precise dates of incorporation of the company and the establishment of the practice are not included here as relevant, in that those precise dates may not have been known to the plaintiff and thus known to both parties when the Deed was executed.

The Kingsgrove Property was and remains the property in which the plaintiff lives. Prior to the Deed, the plaintiff had co-owned the Kingsgrove Property with her then husband, Ioannis Constantine (the former husband). They owned the Kingsgrove Property as joint tenants. Recital D of the Deed acknowledges that the plaintiff and the former husband each owned 50% of the Kingsgrove Property.

It seems that in 2017, the plaintiff and the former husband decided to separate. It was in the context of this separation that the plaintiff sought the first defendant’s assistance as the plaintiff was not in a financial position herself to raise funds to buy out the former husband’s interest in the Kingsgrove Property, in the circumstances outlined below. Even though the plaintiff was the owner of the Marrickville Property, this was of limited assistance to her when needing to raise funds: she was unable to sell it as it was subject to a right of residence in favour of the mother (PWS [10]).

The evidence and the pleadings do not provide a great level of detail as to the facts that were the genesis for the making of the Deed. What seems to have happened is that in the context of the proceedings by which the plaintiff and the former husband were being separated, the Kingsgrove Property was put up for auction in around mid-2017. The plaintiff says this auction was arranged by the former husband as he wanted the money he was entitled to under the orders that had been made in the family law proceedings between himself and the plaintiff. The property was passed in at auction.

Potentially before, but certainly not long after, the plaintiff made contact with the first defendant for help. The first defendant agreed to help the plaintiff in some way financially, in the context of the plaintiff’s separation. At least from about August 2017, the earliest of the correspondence in evidence, the plaintiff (through the solicitor representing her in the family law proceedings with the former husband) and the first defendant (initially by himself, then through his own solicitor) began negotiations as to potential arrangements between the parties concerning the Kingsgrove and Marrickville Properties.

The next event with a firm date was the FCC making consent orders in the proceedings concerning the plaintiff’s separation from the former husband. Those orders were made on 23 November 2017, according to the pleadings. Those orders required the plaintiff to:

The first defendant and the plaintiff, through their respective legal representatives, continued their negotiations.

On 22 May 2018, as recounted earlier in these reasons, the parties entered into the Deed.

The first defendant gave evidence that the reason for the second defendant becoming a party to the Deed was because the second defendant would, of the three parties, be “in the best position to get a loan from a bank given its income stream” (TR P38 L8-11).

The key terms of the Deed are extracted below.

There are two sections to the Deed, being the Recitals and the Operative Part.

Recitals A, B, C, D, and E set out the background circumstances to the Deed. Given the background circumstances will provide information as to the surrounding circumstances known to the parties at the time the Deed was executed, I will set out those recitals (the “Transferor” is the plaintiff, “Transferee 1” and “Transferee 2” are the first and second defendants, respectively):

Recitals F and G are key recitals in relation to context and purpose and the construction issue before the Court, and so will also be set out in full:

Recital H contemplates that the parties might agree to sell the Kingsgrove Property prior to Hygia “repaying the loan and discharging the mortgage” (which has not occurred to date).

Recital I provides that for the purposes of the Deed, the parties agreed that the value of the Kingsgrove Property was $1,150,000 and the Marrickville Property $1,400,000.

There are 16 clauses in the Operative Part.

Clause 1 sets out the obligation on the part of the plaintiff to transfer to the second defendant the Marrickville Property for the sum of $700,000, and to transfer to the first defendant her interest in the Kingsgrove Property.

Clause 2 sets out the responsibility of the first and second defendants for the payment of stamp duty in relation to the transfers of the Kingsgrove Property and Marrickville Property, respectively.

It is cl 3 that refers to the 2007 Deed and refers to its location at Annexure A to the Deed. The terms of the clause provide that “on and with effect from” the date of the transfer of the Marrickville Property to the second defendant, the 2007 Deed was “novated” to the second defendant such that the second defendant then assumed all duties and responsibilities owed by the plaintiff to the mother.

The word “novated” is typically used in the context of the making of a new contract and extinguishing obligations under the old one (GE Commercial Corporation (Australia) Pty Ltd v Wallis [2015] NSWSC 704 at [12] (Adams J)). It may be (without needing to decide) that this is what was contemplated here, although it will be further noted that the mother, who was a party to the 2007 Deed, was not a party to the Deed. No party made any submissions in relation to this issue, and whether what has occurred was technically an assignment or a novation does not matter.

Clause 4 sets out responsibilities in relation to the Kingsgrove Property. The plaintiff and the first defendant were to be (and are) equally responsible for all costs relating to “maintenance repair and upkeep”, as well as for the payment of other associated outgoings.

Clause 5 is in the following terms:

Clauses 6(a) and 7 were frequently referred to by the parties in submissions, with both parties submitting that cl 6(a), in particular, was the focus of the construction task before the Court. The terms of those clauses are relevantly (emphasis added):

Clauses 8 to 16 are standard clauses included in deeds. Of those clauses, it will be noted that cl 11 provides that each party shall execute such further documents and assurances and take such further action as may be required to effect the intent of the Deed in accordance with the applicable law.

On 22 May 2018, as mentioned earlier, Hygia received funds under the ANZ Loan. An “ANZ Business Loan Statement” for the period 22 May 2018 to 29 June 2018 records an opening balance of $0.00 for the period, and then a “loan drawdown” of $800,000, such that on that day the balance was “800,000.00DR”.

On 5 June 2018, a lump sum of $30,000 was credited to the ANZ Loan. As at 5 June 2019, the balance of the ANZ Loan was recorded as “770,000.00DR”. Over time various payments are recorded in relation to the ANZ Loan, being payments in relation to interest only, save for particular repayments of the principal referred to below (noting it was an interest only loan until 22 May 2023).

After the mortgage in Bankwest’s favour over the Kingsgrove Property was discharged, the former husband was paid out, and the relevant transfers were effected, the ownership of the properties was as follows:

Events before and around 1 March 2022 are significant as it is at this time the plaintiff claims that cl 6(a) was engaged thus triggering the requirement for the first defendant to transfer back to the plaintiff his share of the Kingsgrove Property (TR P17 L6-8)

Following the lump sum payment of $30,000 referred to above at [50], interest payments continued to be made into the ANZ Loan, as recorded in the statements concerning the ANZ Loan.

As at 22 September 2020, the balance of the ANZ Loan was recorded as “770,000.00DR”, following the interest payment made for September 2020.

On 16 October 2020, the first defendant and his wife transferred the amount of $695,000 into the ANZ Loan. Following this transaction, the balance of the ANZ Loan was recorded as “75,000.00DR”.

By 31 December 2021, it appears a further $37,000 of repayments were made in relation to the ANZ Loan, as on that date the balance recorded is “38,000.00DR” (not all the statements concerning the ANZ Loan were in evidence). On 7 February 2022, a redraw from the ANZ Loan took place for the amount of $762,000. Following this transaction on 7 February 2022, the balance of the ANZ Loan was recorded as “800,000.00DR”.

The refinancing transaction which has caused this litigation, as described in [7] above, occurred in March 2022. In the ANZ Business Loan Statement for the period 31 December 2021 to 1 March 2022, on 1 March 2022, a “transfer” is recorded, with the words “from settlement funds 1809702 refinance” printed underneath the heading to the line item. An amount of $800,618.30 was credited to that account, resulting in a zero balance at the end. The final item in the statement was “loan closed”. It is this transaction that was said by the defendants (DWS [35]), and the plaintiff (TR P11 L8) to constitute the “refinance” and, on the plaintiff’s case, to trigger the operation of cl 6(a). I note that on the same day, Hygia’s loan account with NAB was opened, with $770,000, the funds comprising the NAB Loan, debited to Hygia on 2 March 2022.

At some point the mother left the Marrickville Property and entered an aged care facility. She ultimately died on 23 July 2025.

The legal principles to be applied are not in dispute.

The defendants, in their written submissions, cited the “often quoted statement” from the High Court of Australia in Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 209 CLR 165; [2004] HCA 52 at [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ):

The defendants also relied on the following legal principles as being relevant to the issue before the Court when making the following submissions, as stated in DWS [13]-[14]:

There appeared to be no dispute between the parties that the principles to be applied for the construction of a Deed are the same principles that are applied in the construction of a contract (Mercanti v Mercanti (2016) 50 WAR 495; [2016] WASCA 206 at [70] (Buss P); see also Wollongong Coal Ltd v Gujarat NRE India Pty Ltd (2019) 100 NSWLR 432; [2019] NSWCA 135 at [70] (Leeming JA, Bathurst CJ and McCallum JA agreeing); Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45; [2002] HCA 5 at [9]-[10] (Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ)).

As cited by the defendants in DWS [13] as quoted in [61] above, in Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited (2015) 256 CLR 104; [2015] HCA 37 (Mount Bruce), French CJ, Nettle and Gordon JJ stated at [46]-[52] (omitting citations):

The plaintiff indicated in opening that she was in agreement with the legal principles as cited by the defendant and as they applied to the Deed (TR P8 L7-22). Her oral submissions framed the issue in this case and the applicable principles in this way:

The legal principles relating to the fundamental importance of pleadings in litigation are well settled. On this issue Mason CJ and Gaudron J in Banque Commerciale SA (En Liqn) v Akhil Holdings Limited (1990) 169 CLR 279; [1990] HCA 11 (Banque) at 286-287 stated (footnotes omitted):

By her Statement of Claim (SOC) filed on 4 May 2023 the plaintiff seeks a declaration that the plaintiff is entitled to a transfer by the first defendant to the plaintiff of all of the first defendant’s right, title and interest in the Kingsgrove Property. The plaintiff also seeks an order that the first defendant do all things necessary on his part to perform and carry into effect the transfer provided for in cll 6(a) and 7 of the Deed.

There are 16 paragraphs to the “Pleadings and Particulars” section of the SOC. Many of those paragraphs set out background matters and are uncontroversial. Of the 16 paragraphs, in their Defence filed on 27 July 2023 (Defence), the defendants admit paragraphs 1, 2, 3, 4, 5, 6, 7, 8 and 10.

In relation to the remaining paragraphs of the SOC, paragraphs 9, 11, and 12 refer to the terms of the Deed and actions that were said to be taken in accordance with the Deed.

The key paragraphs around which the issue before the Court has been framed by the parties are paragraphs 13 and 14 of the SOC. Those paragraphs plead as follows:

The terms “Loan” and “Mortgage” are defined earlier in the SOC. The definition of “Loan” in the SOC is somewhat obscure. Paragraph 9(b) pleads as follows:

By contrast, “Mortgage” as defined in paragraph 10 is a clear reference to the first mortgage registered over the Marrickville Property in May 2018 (ie, the ANZ Mortgage).

Of paragraphs 13 and 14 of the SOC, the defendants pleaded the following in reply:

Paragraphs 15 and 16 relate to correspondence between the parties in 2023 and are not relevant for present purposes.

The terms of the Defence as filed rely on an alleged collateral agreement between the plaintiff and defendants (paragraphs 21-23). In substance, the defendants pleaded that there was an agreement between the parties that if the defendants could not meet the loan repayments from their own income, then the plaintiff agreed to the sale of the Kingsgrove Property and to the use of the proceeds of sale to pay off whatever outstanding balance there was.

In the course of the plaintiff’s opening, the Court was informed that the defendants no longer relied on the collateral agreement (TR P8 L6-7). The defendants later confirmed this to be the case (TR P42 P8-13).

The respective cases of the parties were conducted on this basis.

In the course of the plaintiff’s opening, the plaintiff referred to the death of the mother (TR P6 L30) and appeared to suggest that the fact of the mother’s death was relevant to my task of construing the Deed (TR P12 L45-50, PWS [12](h)). In her opening submissions, the plaintiff submitted the following:

Following this opening, for their part, the defendants made the following objection (TR P15 L15-27, 36-41):

I accept the defendants’ concerns as to the raising of further and new issues without having pleaded and particularised them, and note those objections raised to be wholly consistent with the principles set out in Banque above. As a part of the fundamental notice and thus procedural fairness issues that arise, the defendants have not had the opportunity to put on evidence that would meet the issues raised.

This issue has particular significance when the plaintiff seeks a finding on an issue that was not raised in her SOC and, as a consequence, where no (or no adequate) evidence has been filed in relation to it. To the extent that some evidence relevant to otherwise unpleaded issues may have been filed, I accept the evidence overall would be incomplete in relation to those unpleaded issues, given it was not included to squarely meet a pleaded claim.

Following the submissions set out above, the plaintiff sought to amend her SOC and plead the death of the mother as a fact (TR P16 L14-15).

To this the defendants indicated they did not dispute the mother had passed away, asserting there was no requirement to amend the SOC to include that fact. However, they also said that “[i]f the intention is to expand the case beyond the pleaded case, we object. In fact, we would object anyway. There’s no ground for it” (TR P16 L18-21 and see TR P17 L1-20).

In the result, there was no formal amendment to the SOC. However, there was also no dispute that the mother had died.

The defendants’ submissions as to the limited scope of the pleadings is also of particular relevance to the plaintiff’s submissions going to the broad financial circumstances of the first and second defendants at the time the Deed was executed, as well as in 2022, together with the plaintiff’s submissions going to cl 7 and what is later referred to as the “imminence issue”. These issues are addressed below.

At the commencement of the hearing, I asked each of the parties to provide me with a question which they contended represented the issue that was before the Court. I gave the following formulation as an example (TR P3 L8-11):

Later in the course of the hearing, the plaintiff offered the following questions (TR P46 L46-P47 L8):

In relation to the two forms of questions set out above, the defendants stated that both appeared very similar and were probably quite acceptable (TR P55 L45-48), and added an alternative formulation for the Court’s consideration (TR P56 L4-7):

Having regard to the legal principles set out above, together with the factual background and the various formulations of the question for the Court set out above, I consider that the question before the Court for determination can be stated in the following way: are the words “the repayment of the loan and discharge of the mortgage” limited to the repayment of the first loan and discharge of the first mortgage taken out by the second defendant over the Marrickville Property, such that any refinancing by the second defendant would trigger the obligation of the first defendant to transfer his share of the Kingsgrove Property to the plaintiff? The issue is to be determined objectively, with the Court having regard to the text, context, and purpose of the Deed, as well as to the surrounding circumstances known to the parties. The subjective intentions and expectations of the parties and evidence of negotiations do not form part of the surrounding circumstances which can be permissibly taken into account.

Before considering the real issue in the proceedings, I will address associated issues raised in submissions by the parties.

Relevant to the surrounding circumstances at the time of executing the Deed, the plaintiff asked the Court to draw an inference that the first defendant had no right to deal with his interest in the Kingsgrove Property (TR P7 L38-P8 L4; PWS [12](d)). This was articulated orally by the plaintiff in the following way:

I also note the plaintiff’s submission at PWS [11](h), which is:

Consistent with this approach taken by the plaintiff, the plaintiff sought to cross-examine the first defendant as to his own (subjective) views as to his purpose in requiring as a part of the Deed having half of the Kingsgrove Property in his name. She suggested that having 50% of the Kingsgrove Property in his name was “of no use” to the first defendant both in 2018 and at the time of the hearing (TR P40-42). Many questions around this issue were objected to and not allowed by me given I did not consider them relevant to the construction task before me.

When the first defendant was asked questions on this issue which were allowed or not objected to, he made clear that his subjective purpose for having half of the Kingsgrove Property in his name was as “security” for the Marrickville Property (see TR P41).

In the end, the plaintiff’s submissions did not clarify what the significance was to the construction of cl 6(a) of the first defendant not having a right to “deal” with the Kingsgrove Property. This being so, I do not propose to address the question of whether the first defendant could “deal” with the Kingsgrove Property.

Furthermore, I do not accept that the Court ought properly consider whether there is currently any commercial purpose of the transfer, including any consideration of the significance of the recent death of the mother. Apart from the obvious issue that the Court does not have before it any proper evidence in order to address this issue (as this issue has never been pleaded or particularised, as observed earlier), as a matter of law I do not consider that to do so forms part of the construction task before the Court.

In opening submissions, the plaintiff took the Court to a transaction recorded on 16 October 2020 in an ANZ Business Loan Statement for the ANZ Loan, where $695,000 was credited to that account by the first defendant and his wife (as recounted in [55] above). In relation to this transaction, the plaintiff submitted (TR P10 L46- P11 L2):

In relation to the redraw which occurred on 7 February 2022 (as recounted in [56] above), it was later submitted (TR P11 L7-10):

To the extent the plaintiff invites the Court to accept her contention that these two transactions recorded in the ANZ Business Loan Statements show the defendants were “easily” moving money around, I decline that invitation. As the defendants submitted, in a submission I accepted, the sole question on the pleadings is about whether “the loan” was repaid and “the mortgage” discharged within the meaning of cl 6(a). Whether the plaintiffs could move money around “easily” between accounts is not relevant to that issue.

The plaintiff submits that cl 7 of the Deed provides context to cl 6 and submits there is effectively a representation by the defendants that they have financial capacity, and an undertaking by the defendants to repay “the mortgage” in full, using their best efforts, as soon as practicable (TR P11 L35-40, PWS [17](b)-(d)).

The plaintiff submits that objectively understood, the promise to “repay the mortgage in full … as soon as practicable” was a promise to pay the mortgage “imminently”, especially in light of the defendants’ confirmation by cl 7 that they have financial capacity to “repay the mortgage” (the plaintiff submitted this representation demonstrated they already had the financial capacity to pay the mortgage in full). Seven years having passed since the Deed was entered into, the plaintiff submits the contemplated time for repayment, be it “imminently” after the Deed was entered into or “as soon as practicable” thereafter (whatever the precise content of that term), had passed. It was suggested the Court did not necessarily need to find precisely how long the parties had contemplated the defendants would take to repay the loan for which the Marrickville Property was security, however the Court would need to find that in any event that period had expired now. This was referred to as the “imminence issue” (TR P11 L42-49, [12](g)), and it was submitted that a question for the Court was “[h]as it [the period in which the defendants should repay “the loan”] expired now?” (TR P12 L9).

As part of her submissions in relation to cl 7, the plaintiff stated that the ability of the defendants to repay any loan is relevant to the Court’s construction of the Deed (TR P12 L15-21).

In the course of cross-examining the first defendant, and in the context of multiple (understandable) objections on behalf of the defendants to a line of questions going to the financial circumstances of the first defendant in 2022 and currently, the plaintiff gave the following explanation of the relevance of an inquiry into cl 7, despite the parties agreeing the focus of the question before the Court was in relation to cl 6(a) (TR P31 L17-24):

Later cross-examination by the plaintiff again sought to focus on transactions made by the defendants after the Deed was entered into, the apparent purpose of which was to establish a failure by the defendants to adhere to the promises made in cl 7, to which an objection was made by the defendants, including that, “[t]his is an entirely different case” (TR P38 L43-P39 L26).

The defendants submitted that the plaintiff’s suggestion the loan had to be repaid “imminently” “just does not recognise the reality of the Deed”, which was “contingent on events” (TR P61 L46-50). I will address whether cl 7 contemplates an “imminent” repayment by Hygia of whatever loan it was to take out later, as part of considering cl 7 as context to cl 6(a).

The defendants also submitted that, realistically, a circumstance known to the parties at the time was that it was not going to be possible to generate an income from the Marrickville Property until the mother had died or else had gone into a nursing home. Although the parties could not know this at the time, the mother lived another seven years and resided at home for much of that period (TR P65 L1-6). Based on this, it was submitted it was unlikely that anyone would have realistically expected an imminent repayment (TR P65 L10-18), and that a reasonable person would have thought that reasonable commercial efforts would have been made to repay the loan that was taken out, as the defendants undertook to do in the Deed (TR P65 L46).

In terms of the question of construction before the Court, I do not accept it is relevant whether the time for the defendants to have repaid the loan and discharged the mortgage has now expired, if cl 7 even provides for a specific time period for the defendants to fulfil their obligation to repay. The finding sought was not pleaded, nor does the inquiry arise when having regard to the legal principles outlined above, and the terms of the main issue as defined above (separately from considering the terms of cl 7 of the Deed as part of the context to cl 6(a)). I decline to make any findings on this issue.

To the extent I am wrong on this and the question does form a part of the task of construction, I would still decline to make any findings in relation to the question posed. The reason for this is because the Court does not have a proper evidentiary basis on which to make any finding. For example, the Court would need to hear submissions on what constitutes “best commercial efforts” and, as part of this, would be required to evaluate and consider evidence of the financial circumstances of the defendants over time. There is no, or no adequate, evidence before the Court on this issue in order to undertake this assessment.

The real issue before the Court is whether a reasonable person in the position of the parties would have understood the meaning of the words “the repayment of the loan and discharge of the mortgage” in cl 6(a) of the Deed, as limited to the repayment of the first loan and the discharge of the first mortgage taken out by the second defendant over the Marrickville Property, such that any refinancing by the second defendant would trigger the obligation of the first defendant to transfer his share of the Kingsgrove Property to the plaintiff.

The submissions made by the parties are set out below, together with the Court’s consideration and determination on the issue.

The plaintiff’s contention is that on the plain language of cl 6(a), read in conjunction with Recital E, “the loan” and “the mortgage” referred to were the specific loan and specific mortgage that the second defendant first took out with ANZ immediately following the execution of the Deed, which was repaid and discharged, respectively, on 1 March 2022 (PWS [17](a)).

The plaintiff submitted that “the text is always the starting point and there are a number of provisions in the Deed that are relevant and must be read together, including, … [the] extensive recitals in the Deed” (TR P47 L31-34). In this, the plaintiff noted there was no definition or explanation of “the loan” or “the mortgage” in the Deed and that those terms appear for the first time in the recitals.

Specifically, within the text of cl 6(a), the plaintiff claimed it was significant that the terms were in the form of “the loan” and “the mortgage”, using the definite article. However, it is not the case the definite article was exclusively used. Recital E referred to the acknowledgement by the parties that the second defendant “will take out a mortgage on the Marrickville Property”, and Recital F refers to “any mortgage to [sic] the Marrickville Property” (emphasis added to both quotes). The defendants adverted to Recital F in their oral submissions (TR P63 L40-47).

More generally, the plaintiff submitted that the natural and ordinary meaning of the words is that the loan and the mortgage referred to in cl 6(a) were the ones that were entered into soon after the Deed was executed (TR P50 L35-37).

I do not accept this submission. For one thing, it might be questioned whether recourse to the “ordinary and natural meaning” of “the loan” and “the mortgage” is even helpful in this case. The defendants did not argue that the ANZ Loan or the ANZ Mortgage were not, respectively, a loan or a mortgage under the Deed. Rather, their case is that the pairs of words “the loan” and “the mortgage” refer to something more than a specific loan or mortgage. Second, I see no reason that the natural and ordinary meaning of the words, without more, would convey that “the loan” and “the mortgage” refer only to the loan received and mortgage granted by Hygia soon after the Deed was entered into. The expressions “the loan” and “the mortgage” could refer to a particular loan and mortgage, as submitted by the plaintiff. However, it seems to me that the words could also naturally refer to the indebtedness incurred by the second defendant, as the defendants contend. The word “the”, in qualifying each of “loan” and “mortgage”, could be read as being a specific reference to the borrowings and security over the Marrickville Property obtained by the second defendant contemplated by the Deed, without cl 6(a) being triggered by reference to a specific loan agreement or mortgage instrument.

I am of the view that the text alone does little to assist in determining what a reasonable person in the position of the parties would understand the text in cl 6(a) to mean. As submitted, the Deed does not contain any definition of the terms “the loan” and “the mortgage”. While I accept that those words ought to be given their ordinary and natural meaning (Southern Cross Assurance Co Ltd v Australian Provincial Assurance Association Ltd (1935) 53 CLR 618 at 636; [1935] HCA 56 (Rich, Dixon, Evatt and McTiernan JJ)), for the reasons stated in the previous paragraph, it is not clear that the words even have a single natural or ordinary meaning, as the plaintiff contends.

Of course, cl 6(a) must be considered with regard to the broader context of the Deed: Mount Bruce at [46] (French CJ, Nettle and Gordon JJ). This means that even if I am wrong to not accept the plaintiff’s submission as to what the natural and ordinary meanings of “the loan” and “the mortgage” are, those ordinary meanings would in any event be a starting point.

When considering context, the plaintiff submitted that of the recitals, Recital E first mentions “a mortgage”. I accept that, as the plaintiff submitted, the reference to “a mortgage” realistically also carries with it an implied reference to a loan for which “a mortgage” would be security. The plaintiff explained that “a loan was for the purposes of the payment of that money as secured by a mortgage on [the Marrickville Property]” (TR P47 L40-49). “That money” refers to the sum of $700,000 which the Recital mentions, being the sum Hygia was prepared to provide the plaintiff to enable her to comply with the FCC’s orders (the substance of which is set out in [30] above).

To the extent I am to consider the words used in cl 6(a) in the context of reference to “a mortgage” in Recital E, I am of the view that a reasonable person would understand the words “the loan” and “the mortgage” in cl 6(a) to be references to any loan and any mortgage. The reason for this is because Recital E explains that in order to provide the plaintiff with the $700,000, the second defendant will take out “a mortgage” on the Marrickville Property. In this, I am of the view that a reasonable person would understand that in order for the second defendant to be able to provide the plaintiff with the $700,000, the second defendant was required to incur debt by way of a loan, secured by a mortgage. I see no basis for a reasonable person to limit their understanding of the words used in cl 6(a) as reference to the “first loan” or “first mortgage” taken out after the Deed is executed, in circumstances where it can be understood from Recital E that the second defendant will go into debt in order to provide the $700,000. Further, and as a matter of logic, this incurred debt might well exist beyond the initial entry into the first loan and the first mortgage taken out in relation to a debt after the Deed is entered into. In my view, it is unrealistic to think otherwise, in particular, where the party taking out the loan was a company and where commercial considerations, such as seeking the best interest rates on any loan, will be paramount.

This reasoning assumes that a reasonable person will understand that when a company (or natural person) takes out a loan, secured by a mortgage, that at some point that company (or natural person) may consider it prudent, financially responsible and advantageous to refinance, for example, in circumstances where interest rates change and it may be commercially advantageous to do so. With this understanding, I am of the view a reasonable person would understand the references to “the loan” and “the mortgage” as a reference to the underlying indebtedness, and that that indebtedness might well attach to more than one loan (or mortgage) in the context of refinancing before repayment is achieved. I am of the view a reasonable person would have this understanding. On this issue, the following exchange took place with counsel for the plaintiff (TR P51 L43-P52 L9) (emphasis added):

The response by the plaintiff did not explicitly argue that to refinance would not have been in the contemplation of the parties at the time the Deed was executed, but rather argued that renegotiation would be required if the occasion arose.

On the issue of refinancing and interest rates, the following submissions were made by the defendants in reliance on the evidence that the interest charged on the loan went from 4.03% to 2.45% following the refinance (TR P62 L49-P63 L32):

Events post-dating the Deed do not affect the construction of it. The last paragraph of the transcript passage just quoted has, perhaps unintentionally, the makings of a submission that “the realities of where finance and Australia was on 1 March 2022”, or the fact that there were cheaper loan products available on the market years after 2018, should somehow affect the Deed as it would have been understood in 2018. To the extent that was being submitted, so much should be rejected. At the very least, it would be unrealistic to contend the reasonable person in the position of the parties in 2018 would have any foresight into the financial conditions or loan products market for a period so long after the Deed was entered into.

Of significance in the construction of the Deed is whether a reasonable person would have understood that within the period of the operation of the Deed, the second defendant may wish to refinance to, for example, take advantage of more attractive interest rates. I am of the view that a reasonable person in the position of the parties at the time of the Deed would have understood this to be the case. For this reason, I consider the context of the words in the Deed provided by Recital E support a construction that the words of cl 6(a) mean any loan and any mortgage referable to the indebtedness incurred by the second defendant on account of the contemplated payments to the plaintiff, and accept the submission of the defendants that clear and specific language would have been required to bind the second defendant to the first loan and first mortgage only, such that a refinancing would trigger the obligation to retransfer the Kingsgrove Property.

The second point of context raised by the plaintiff was Recital F, where she suggested this recital was the only one that addressed the question “[f]or what purpose was the Kingsgrove [P]roperty transferred?” (TR P48 L1-12). It is this recital that explicitly refers to the second defendant bearing “the risk if [it] cannot afford to repay [a further mortgage]”. Of this the plaintiff submitted, “it does indicate that the purpose of the transfer of the Kingsgrove [P]roperty was to some extent about risk if Hygia could not afford to pay it back” (TR P48 L14-16). It is Recital F that also refers to the “risk that the Mother would face if [Hygia] were to default on any Mortgage to [sic] the Marrickville [P]roperty”.

The plaintiff says the terms of Recital F are significant for two reasons. First, she submitted that on the face of the Deed there is reference to a consideration of the second defendant not being able to afford to repay a loan. Secondly, she submits in the recital there was a reluctance on the part of the parties to enter into an agreement that could expose their mother to being removed from the Marrickville Property (TR P48 L25-48).

The plaintiff further acknowledged that the terms of this recital were consistent with “some real super concern” that the Marrickville Property was not sufficient security for a loan (of $700,000), and that “the only apparent indication on the face of this Deed” was because “the parties wanted to protect the mother from being booted out” (TR P49 L1-5).

On this latter consideration, that is, the need to protect the mother from being removed from the Marrickville Property, the plaintiff submitted (TR P49 L5-9):

The death of the mother is not relevant to the question of construction at the centre of this case.

I accept that Recital F goes to the purpose of the Deed, and thus will address the submissions raised in relation to this recital below.

In her submissions, the plaintiff drew support from cl 5, prohibiting the plaintiff from lodging a caveat on the Kingsgrove Property within 30 days of the Deed (but not thereafter), stating the provision was “curious”. Of this the plaintiff noted the clause had been drafted by lawyers and suggested the clause indicated that the first defendant had in contemplation doing “something” with the Kingsgrove Property. The plaintiff further acknowledged that the clause may have had a particular purpose but submitted that there was no evidence on this issue and so there was only so much the Court could do in terms of the limited evidence (TR P49 L11-21).

In relation to the context of the terms of cl 5, the defendants submitted that it “wasn’t a sort of innocent game of cards of shuffling caveats” (TR P59 L44-45). The defendants submitted that “there is only one point of a caveat, and that was to stop someone obtaining priority by obtaining or creating an interest in land, legal or equitable”, and “that the Court would say the new registered proprietor of half of the Kingsgrove Property was able and had a free reign to create a mortgage or charge over the land for 30 days, this being at least the initial period when he would need to finance it” (TR P59 L44-P60 L3). The defendants further submitted (TR P60 L5-12):

The defendants also said that the consequence of cl 5 is that it was within the contemplation of the parties that there may be two mortgages referable to the Deed, and thus “the mortgage” must be read “in a wider way” (TR P61 L1-3).

I do not accept the submissions of the defendants on this issue. Of course, I should prefer a construction of cl 5 (as relevant to the construction of cl 6(a)) that would avoid it otherwise being rendered redundant: Jingalong Pty Ltd v Todd [2015] NSWCA 7 at [79] (Sackville AJA, Meagher and Leeming JJA agreeing). But cl 5 itself has a clear operation in preventing the plaintiff from lodging a caveat on the title of the Kingsgrove Property for thirty days from the date of the Deed, before removing the restriction thereafter. Thus, neither the plaintiff’s nor the defendants’ constructions of cl 6(a) would render cl 5 redundant. I agree with the plaintiff’s submissions that the most that could be said about cl 5 is that it suggests the first defendant had in contemplation doing “something” with the Kingsgrove Property. The defendants did not point to anything that would support their contentions that cl 5 was put in for the purpose of allowing for the possibility of the Kingsgrove Property being mortgaged. Even if I had accepted the defendants’ submissions as to the purpose of cl 5, I would not have accepted that this alone would help suggest cl 6(a) contemplated multiple loans and mortgages. The defendants did not address why “the mortgage” and “the loan” in cl 6(a) would include any mortgage or loan referable to the Kingsgrove Property, in circumstances where the Deed only ever expressly refers to a loan and mortgage in relation to the Marrickville Property. Accordingly, cl 5 is of little assistance in construing cl 6(a).

In her written submissions, the plaintiff made the following submission in relation to cl 7 (PWS [17](b)):

I have already referred to the imminence issue above (at [84], [99]-[107]) in the context of the plaintiff seeking to rely on the mother’s death and post-Deed evidence, none of which had been pleaded.

The ultimate significance of this submission is that if a reasonable person would understand that the repayment was to occur imminently, this would support a construction of the words of cl 6(a) that only the first loan and first mortgage was contemplated by the Deed, and any subsequent loans or mortgages from a refinancing would not have been contemplated.

In her closing submissions, the plaintiff returned to the imminence issue, again in the context of her submissions in relation to cl 7, on which there was significant reliance (TR P 51 L15-23):

In relation to the last question posed as to current circumstances, I have already declined to make any determination on this issue (see [106] above).

More specifically in relation to the construction task before the Court, the plaintiff submits that on the face of the Deed there is no mention of a loan for a certain period. However, she submitted that inferences can be drawn from cl 7 as to the periods the parties had in mind (TR P50 L25-30).

It was contended by the plaintiff that if refinancing were to be included as a part of the parties’ understanding of the loan and the mortgage, that they would have said something about the length and “some kind of substitution” (TR P50 L45-47).

Of the submissions made in relation to cl 7 more generally, I do not accept the submission that this clause represents an undertaking on the part of the defendants to repay “the loan” imminently. Whilst I accept that it is cl 7 that will be of primary relevance when considering any timing of repayment, I am of the view that the undertaking by the defendants to “repay the mortgage in full using their best commercial efforts as soon as practicable” does not dictate imminent repayment (whatever that might mean). For example, “best commercial efforts” could conceivably contemplate refinancing in circumstances where it would be commercially advantageous to do so, in which case, repayment within the meaning of the Deed will take place beyond the repayment of the first loan and refinancing with another.

In reply to the plaintiff’s submissions that cl 7 contemplated the defendants would repay whatever loan they took out imminently, the defendants submitted they “could take out any loan they wanted and repay it any way or time they wanted within the broad limits of the need to repay any loan using their best commercial efforts” (TR P64 L33-36). In terms of the surrounding circumstances known to the parties at the time of the execution of the Deed, the defendants submitted (TR P65 L8-17):

I accept the submissions of the defendants on this issue. Where it is clear that the second defendant was required to obtain a loan in order to provide the plaintiff with the $700,000, rather than, for example, providing that sum out of cash reserves, such that it can be inferred that the first defendant did not have the cash reserves to provide the $700,000 either, and in circumstances where the defendants had additionally taken on the further financial responsibility of meeting new obligations in relation to half of the Kingsgrove Property (the first defendant) and the whole of the Marrickville Property (the second defendant), to suggest a reasonable person in the parties position would understand that repayment was to be imminent is fanciful.

Given this, I do not accept the submission that a reasonable person would understand that the repayment was to occur imminently, and accordingly, do not accept that the terms of cl 7(b) support a construction of the words “the loan” and “the mortgage” in cl 6(a) which mean those expressions refer only to the first loan received by and first mortgage granted by the second defendant.

Related to this, the plaintiff noted that cl 7 refers to both the first and second defendants, and submitted (TR P51 L38-41):

In this, the plaintiff appears to accept that it will have been understood by the parties that there may be refinancing between the first and second defendant, but not any refinancing which involved third parties, such as a bank.

I observe that what the plaintiff means by “refinancing between the parties” is not immediately clear. There was no loan between the first and second defendant. At the very least, the evidence does not establish there was.

The plaintiff’s submissions do not articulate why it is significant that the first and second defendants could arrange their financial affairs between them as they saw fit. If the submission is that because the defendants could rearrange their finances between them, there was no need for the Deed to contemplate Hygia ever refinancing the initial loan it took on, then I reject this submission.

I accept that the understanding of a reasonable person in the position of the parties of cl 7 is as the plaintiff submits, being that it is a matter for the first and second defendants as to how they choose to go about the repayment of any loan, and that it is not a concern of the plaintiff as to how they go about this.

However, I do not accept that the understanding of a reasonable person would be to limit any refinancing to that only “between” the first and second defendant. In my view, there is no reason to think that a reasonable person in the parties’ positions would understand that any potential refinancing would not include refinancing involving a bank.

The plaintiff submitted that the parties entered into the Deed in order to assist the plaintiff to buy out her former husband and keep the residence at Kingsgrove in which she lived (PWS [5]).

I have already set out the submissions made by the plaintiff in relation to the issue of purpose, in that she relied on the terms of Recital F as central to the purpose inquiry.

On the issue of the purpose of the Deed as a whole the defendants submitted that, for the plaintiff, there were many purposes and objects which the Deed set out to achieve. These included (TR P56 L29-P57 L3):

The defendants also suggested there were purposes which were “joint” between the first defendant and the plaintiff. These joint purposes were said to be as follows (TR P56 L3-14):

The defendants also cited the objectives of the defendants. First, the second defendant would acquire the remainder interest in the Marrickville Property, at a cost of $700,000. Second, the first defendant would obtain protection against the substantial risks of financial disaster for the first and second defendants’ incomes if anything happened to disturb or damage or end Hygia’s sleep medicine business. It was this purpose which was acknowledged as being the most contentious. The defendants submitted that this “protective or insurance” aim can be found specifically at Recitals E, F, G, and H, of which F is the most important, as well as in the operative clauses, in particular cll 6(a) and 6(b), along with cll 5, 7 and 11 (TR P57 L36-39).

Of all of the recitals and clauses, the starting point was said to be Recital F. This recital was said to specifically identify the transfer of the interest in the Kingsgrove Property as being a part of the consideration for the risk (if unable to repay) to the first and second defendants in incurring “the loan” and granting “the mortgage” referred to in the Deed.

The defendants submitted that the risks to the defendants were real. It was clear from the Deed, including Recital E, that the second defendant was expected to borrow most or all of the money on mortgage security to fund the transactions, “so that [the plaintiff’s] transactions and troubles would be sorted out safely for [the mother]” (TR P58 L1-2). In this, it was recognised that it was all debt, with no equity, and the second defendant faced ongoing substantial expenses, many of them not tax deductible, to look after the family. Moreover, no rental income could be obtained from the Marrickville Property given the mother was living there.

In sum, the defendants submitted (TR P58 L37-41):

In terms of the nature of the potential “protection” that might have been provided, the defendants pointed to cl 5 of the Deed, stating the Court could find that the purpose of that clause was to enable the new registered proprietor to create a mortgage or charge over the land for 30 days, this being at least the initial period when the defendants would need to finance it (TR P60 L1-3). That is, it was contemplated by the parties that in addition to any mortgage over the Marrickville Property, a further mortgage over the Kingsgrove Property might also be required to provide security to raise funds (TR P60 L5-12, P61 L1-9).

Except as already discussed above in relation to considering cl 5 as part of the context to cl 6(a), I accept the various purposes of the Deed as set out by the defendants, including those purposes in relation to the plaintiff, joint purposes, and the purposes of the defendants. In the context of considering the various purposes of the Deed, I consider that a reasonable person would have understood that the words in cl 6(a) are not limited to the first loan and first mortgage only.

To some extent, many of the purposes of the Deed identified by the defendants do not clearly point one way or another as to the scope of the expressions “the loan” and the “mortgage”. However, what might be described as the “protective” purpose of the transfer of a half-share of the Kingsgrove Property points, in my opinion, in the defendants’ favour. The Kingsgrove Property is expressly characterised as consideration for the risk taken on by the defendants in mortgaging the Marrickville Property. So much is in fact reinforced by Recital G and cl 6(a) itself. Once the risk posed to the defendants by “the loan” and “the mortgage” no longer exists, the security provided by the Kingsgrove Property is no longer necessary, hence why it is to be transferred back to the plaintiff (unlike the Marrickville Property). Recital H and cl 6(b) also somewhat support the notion that the purpose of the first defendant being given a half-share in the Kingsgrove Property was protective in nature (for the defendants). By contemplating that any sale proceeds from the Kingsgrove Property, if any sale was to occur, would be used first to repay “the loan” and discharge “the mortgage” over the Marrickville Property, the Deed again shows how the parties saw the Kingsgrove Property, namely as a kind of insurance against Hygia otherwise being unable to service “the loan”.

To give cl 6(a) a construction that would trigger the obligation in it after the first loan is repaid and first mortgage is discharged in the circumstances of a refinancing, being the construction the plaintiff submits should be given, thwarts this protective purpose. The defendants would still be facing the risk from a loan secured by a mortgage referable ultimately to the debt incurred by the defendants to fund the payment to the plaintiff yet would not have the benefit of the security provided by the first defendant’s half share in the Kingsgrove Property. The idea the Kingsgrove Property would be further security for the defendants is reflected throughout many parts of the Deed. By contrast, the defendants’ construction of cl 6(a) is consistent with this purpose. Given the plaintiff’s construction would appear to me to thwart what appears to be a key purpose of the Deed, and especially that of the transfer of a half-share in the Kingsgrove Property to the first defendant, this weighs against the plaintiff’s construction in favour of the defendants’ construction.

In closing, the defendants relied on the extensive obligations that the defendants were taking on under the Deed and submitted that a reasonable person looking at the Deed and the circumstances known to the parties at the time would understand that the defendants were not locked into a specific individual loan taken out by the second defendant, secured by a specific individual mortgage over the Marrickville Property (TR P62 L27-32).

I accept this submission. Without leaving the terms of the Deed itself, Recital F clearly contemplates, and thus the parties to the Deed clearly acknowledged, risks and concerns in relation to the second defendant not being able to afford to repay a loan.

I further accept that given the newly acquired obligations for the defendants under the Deed, in terms of providing the $700,000 (Recital E, cl 1(a)) and payment of stamp duty on both property transfers (cl 2) up front, but also, in terms of the ongoing obligations in relation to the outgoings for both the Marrickville Property and the Kingsgrove Property (cll 3 and 4), that some level of flexibility, and indeed potential for Hygia to refinance, would have been understood as necessary by a reasonable person reading the Deed and having regard to the circumstances known by the parties at the time. I agree it would be harsh (and not as understood by a reasonable person) to interpret the Deed to mean that the defendants were locked into the first loan (and thus the first mortgage) that was taken out, and that the Deed locked the second defendant out of obtaining a loan with a better interest rate without triggering the need to transfer under cl 6(a). At the very least, given the significant ongoing financial obligations of the defendants (both in relation to the Kingsgrove Property, and in taking on the plaintiff’s obligations in the 2007 Deed concerning the Marrickville Property), an inability to refinance would be somewhat inconsistent with the intent expressed in the Deed that the plaintiff have the Kingsgrove Property returned to her as soon as practicable, insofar as the inability to refinance meant the defendants might have to take longer to pay off the first loan and first mortgage whilst also having to deal with their other simultaneous obligations regarding both properties.

It was submitted that the “open texture” of the Deed as a whole was incompatible with the imposition of extra restrictions on the meaning of words, including whether there could be more than one mortgage (TR P63 34-38).

The plaintiff submitted that the defendants had suggested the Deed left it “open to grant as many mortgages over [the Marrickville Property] as [they] please[d] for as long as [they] like[d] with absolutely no limitation” (TR P67 35-38). She submitted it would be an “outrageous interpretation of the Deed that no reasonable person could come to” (TR P67 L44-46).

I do not accept that the defendants could simply grant as many mortgages or take out as many loans as they please, nor that they could do so for however long they want. A reasonable person would understand that reasonable commercial efforts would have to be made. A reasonable person having regard to cl 7 (and possibly cl 11) would understand that there were limits on the extent to which refinancing could occur.

More generally, I accept the submissions of the defendants and consider that a reasonable person in the position of the parties, and knowing the surrounding circumstances, would understand that the second defendant may need to refinance. This may be for reasons inherently connected to the Deed, for example the ongoing obligations in relation to the two properties, but also for other reasons, such as seeking a better interest rate (TR P62-63).

By way of summary, the defendants submitted that nothing in any way suggests to a reasonable person that the identity of the mortgagee, the nature of the borrowing, or the funding of the obligations was of any relevance or interest to the plaintiff at all (TR P67 L7-8). I accept this submission. As much was conceded by the plaintiff in relation to cl 7, where the plaintiff acknowledged that how the first and second defendants arranged their affairs (between themselves) was really not the plaintiff’s concern (TR P51 L38-41). Whilst this was perhaps the subjective view submitted on behalf of the plaintiff, I am of the view that objectively, a reasonable person in the position of the parties would consider that how the defendants went about incurring and repaying the debt was not relevant to performance of their obligations in accordance with the Deed, except to the extent they might affect the defendants’ fulfilment of their undertaking to use “their best commercial efforts” to ensure the indebtedness incurred on account of the Deed was ultimately repaid.

The plaintiff finally submitted that if the Court did not accept her construction of cl 6(a), then the parties would be left with uncertainty in relation to whether there is any limitation on the meaning of the clause, in the sense of whether the defendants “can just keep doing this forever and ever until they die?”.

To the extent that cl 6(a) itself does not explicitly impose a temporal limit on the time within which any loan is to be repaid, I am of the view that the terms of cl 7(a) provide that guidance. That is, that the defendants undertook to repay the loan (noting the clause only refers to “the mortgage”) using their best commercial efforts as soon as practicable.

To the extent there is disagreement between the parties as to what conduct on the part of the defendants does or does not amount to “best commercial efforts”, and as to what “as soon as practicable” means, that is not an issue before the Court in these proceedings.

Having regard to the text, context, and purpose of the Deed, as well as to the surrounding circumstances known to the parties, I have concluded that a reasonable person would not have understood, as contended by the plaintiff, that the meaning of the words in clause 6(a) of the Deed, “the repayment of the loan and discharge of the mortgage”, is limited to the first loan and the first mortgage taken out by the second defendant in relation to the Marrickville Property, such that any refinancing which had the effect of paying out the first loan taken and discharging the first mortgage taken out (in substitution for a new loan and mortgage), would trigger the obligation of the first defendant to transfer his share of the Kingsgrove Property to the plaintiff. In this, it is my view that the use of the words “the loan” in cl 6(a) refers to the indebtedness to be incurred by the second defendant on account of the contemplated payments to the plaintiff under the Deed, and that as such, a reasonable person would understand that more than one loan (and mortgage) may be acquired before the repayment was achieved. It follows that in the circumstances of this case, the discharge of the ANZ Mortgage and the repayment of the ANZ Loan did not trigger cl 6(a) of the Deed, given that the ANZ Loan was immediately substituted by the NAB Loan, and the ANZ Mortgage was immediately substituted by the NAB Mortgage, and the same indebtedness of the second defendant referable to the Deed remained.

If the plaintiff had been successful in obtaining the declaration sought (contrary to the conclusion I have set out above), an order for specific performance was sought in the form of a transfer of the Kingsgrove Property pursuant to cll 6(a) and 7 of the Deed. In support of the claim for specific performance, the plaintiff submitted that damages were not an adequate remedy, noting the Kingsgrove Property is the plaintiff’s home and that this outcome was always contemplated by the Deed.

The defendants made brief oral submissions on the appropriate orders, in which they raised many issues which were said to justify giving the first defendant “a lengthy period” to transfer the Kingsgrove Property back (TR P66 L24-50). The plaintiff did not address the form of relief.

Had I needed to address whether specific performance should be refused on discretionary grounds, or the appropriate form of relief, I would have considered that I did not have sufficient evidence before me to address those questions and would have sought further submissions and evidence from the parties on those issues. At the very least, given it was raised on the defendants’ submissions, I would need further material going to the time that would have been necessary to give to the defendants to undertake any specific performance granted.

For the reasons set out above, I make the following orders: