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Re: All monies on clause mortgages
They seem to have found ways around this nasty little clause in America and Australia, wonder when we will.
'All monies' clauses - will they work in all cases?
When drafting a letter of offer or facility agreement, it is important that all relevant securities (the lender wishes to be able to rely on to recover the facility) are expressly listed.
Most securities, such as mortgages, usually have an 'all monies' clause. On its face, such a clause means that the security secures all amounts owing by the mortgagor/guarantor/chargor to the financier, regardless of whether the amounts are owed now or in the future and as a borrower or as a guarantor.
However, recent authority confirms that such 'all monies' clauses may be read down by the courts depending upon the circumstances. If, for example, a security over a particular property is not expressly listed in a facility agreement as security for the facility, it is open for the courts to hold that the property may not be relied upon as security for that particular facility even though the security contains a sufficiently wide all monies clause.
The law:
In Fountain v Bank of America National Trust & Savings Association (1992) 5 BPR 11 (Fountain), the NSW Court of Appeal upheld an 'all monies' clause that was expressed to apply to a customer’s 'past, present, future and contingent obligations and liabilities to you (the bank), including those arising under successive transactions”. The Court considered the phrase “successive transactions” and noted that the subsequent borrowing of money by a related company (coupled with an associated guarantee provided by the original borrower) was a “successive transaction'. However, the Court was careful to note that an 'all monies' clause would not apply to every subsequent transaction entered into between the bank and the customer (or related party), and that such clauses must 'be confined to their operation by reference to the context in which they appear and by reference to the commercial purpose which they were intended to serve'.
This final comment in Fountain was picked up by the Federal Court of Australia in Handberg v Chacmol Holdings Pty Ltd (2004) FCA 720 (Handberg). In this case, a deed of charge containing a generic 'all monies' clause was read down and held not to apply to future advances made by Chacmol to Australian Underwriting Agencies Pty Ltd (AUA). The Court held that the charge should be confined to secure the initial transaction only (in this case, securing a pre-existing debt and a sale price) and that subsequent advances made by Chacmol to AUA did not form part of this initial transaction.
They seem to have found ways around this nasty little clause in America and Australia, wonder when we will.
'All monies' clauses - will they work in all cases?
When drafting a letter of offer or facility agreement, it is important that all relevant securities (the lender wishes to be able to rely on to recover the facility) are expressly listed.
Most securities, such as mortgages, usually have an 'all monies' clause. On its face, such a clause means that the security secures all amounts owing by the mortgagor/guarantor/chargor to the financier, regardless of whether the amounts are owed now or in the future and as a borrower or as a guarantor.
However, recent authority confirms that such 'all monies' clauses may be read down by the courts depending upon the circumstances. If, for example, a security over a particular property is not expressly listed in a facility agreement as security for the facility, it is open for the courts to hold that the property may not be relied upon as security for that particular facility even though the security contains a sufficiently wide all monies clause.
The law:
In Fountain v Bank of America National Trust & Savings Association (1992) 5 BPR 11 (Fountain), the NSW Court of Appeal upheld an 'all monies' clause that was expressed to apply to a customer’s 'past, present, future and contingent obligations and liabilities to you (the bank), including those arising under successive transactions”. The Court considered the phrase “successive transactions” and noted that the subsequent borrowing of money by a related company (coupled with an associated guarantee provided by the original borrower) was a “successive transaction'. However, the Court was careful to note that an 'all monies' clause would not apply to every subsequent transaction entered into between the bank and the customer (or related party), and that such clauses must 'be confined to their operation by reference to the context in which they appear and by reference to the commercial purpose which they were intended to serve'.
This final comment in Fountain was picked up by the Federal Court of Australia in Handberg v Chacmol Holdings Pty Ltd (2004) FCA 720 (Handberg). In this case, a deed of charge containing a generic 'all monies' clause was read down and held not to apply to future advances made by Chacmol to Australian Underwriting Agencies Pty Ltd (AUA). The Court held that the charge should be confined to secure the initial transaction only (in this case, securing a pre-existing debt and a sale price) and that subsequent advances made by Chacmol to AUA did not form part of this initial transaction.
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