Allco Managed Investments took a mortgage and a fixed and floating charge. The mortgaged property was sold for a shortfall so the lender then moved against five other properties owned by the borrower. The borrower argued that the fixed and floating charge was so drafted that it was limited to the mortgaged property.
The letter of offer, which together with the boilerplate in the lending booklet formed the contract of loan, read:
Security: Settlement is conditional upon the following security being provided in a form that is acceptable to the Lender.
First Registered Mortgage over 35 Chandos Street, St Leonards NSW
First Ranking Fixed Charge over the assets and undertakings of Oakland Property Holdings Pty Ltd specific to its interests in the Property.
The words specific to its interests in the Property were one factor considered as being determinative in the finding that the charge did not intend to cover all assets and undertakings, but rather all assets and undertakings specific to its interests in the Property.
The fixed and floating charge was entered at the same time as Oakland granted a mortgage over the Chandos Street property. The charge stated:
The Chargor hereby charges the Secured Assets to the Chargee for payment of the Secured Money.
This charge constitutes a fixed and specific charge over the Secured Assets comprising any of the following.
(a) Real estate of any kind.
“Secured Assets” were defined as:
All assets and undertaking of the Chargor specific to the property at 35 Chandos Street, St Leonards (Property) and the development thereof including leases and agreements for lease, contracts, agreements, licences, options and any interest in the Property and building materials and equipment, permits, architectural drawings, plans and specifications, used for or in conjunction with the development at the Property whether owned at the date of entering into this Charge or acquired at a later date.
In construing the charge the judge held that:
The agreement contained in the letter of offer forms part of the objective matrix of facts which can be used to interpret the charge. There is no clause in the charge stating that the charge superseded the loan agreement.
The letter of offer shows that it was the parties’ intention that the secured property should be limited to “the assets and undertaking specific to its interests in the Chandos Street Property.
Accordingly the judge declared the charge did not charge real property other than the Chandos Street Property.