What is an “all moneys” clause in security documents?

An “all moneys” clause is most commonly referred to in the context of a mortgage or charge. In that context, this type of clause means that all moneys owed to a lender are secured by the mortgage. Effectually, this means that the subject property under the mortgage or charge is security not only for the loans made under the mortgage or charge but also for any other secured and unsecured loans, such as a personal loan or credit card, made by the lender to the borrower.

What happens with multiple mortgages or guarantees?

In a situation where a borrower has multiple mortgages, if all are with the same lender, a default on any one of the mortgages can put the others at risk of falling within an “all moneys” clause.

However mortgages with other lenders will not fall within an “all moneys” clause.

Guarantors under loans can also be at risk – a guarantor could become liable for “all moneys” owed by the debtor, rather than only in relation to a specific guarantee.

How “all moneys” clauses has been interpreted by the courts

In one case considered by the Court, a husband and wife jointly owned a property. The mortgage on the property included an “all moneys” clause. The husband had an overdraft which became overdrawn by $200,000. The bank then sought to charge the wife’s interest in the property with the indebtedness of the overdraft. In this instance the Court held that the “all moneys” clause was unjust.

In a more recent case, a bank made a mistake and advanced over $700,000 more than it intended to advance under a credit facility which was secured by a property of the borrower. This additional sum was drawn down by the borrower within two months and the borrower quickly defaulted in the months afterwards.

The bank subsequently sold the property which had been provided as security for the original mortgage. The sale proceeds were applied toward all indebtedness of the couple, including the advance mistakenly made.

A legal argument then ensued between the first and second mortgagees as to the interpretation of what “all moneys” meant.

The second mortgagee claimed part of the proceeds of the sale of the property pursuant to its mortgage based on the fact that the “all moneys” clause only covered the agreed advance by the bank but not the original mortgage.

The relevant clause in the original mortgage defined the total amount owing as:

“at any time, all money which one or more of you owe us, or will or may owe us in the future, including under this mortgage or any agreement covered by this mortgage”

The Court considered that the above should be determined by what a reasonable businessperson would understand the terms to mean. The clause was therefore given its ordinary meaning and the Court held that the “all moneys” clause included the original mortgage.

Read and understand the fine print

Before executing documents it is important to read the “fine print” and note if there is an “all moneys” clause.

If such a clause is included, it should be assumed that it will encompass any other liability to the same lender in the case of a default, irrespective of the type of that liability. More often than not people just want to sign bank documents without wanting to know what all the ramifications are or what the defined words really mean or encompass. Meeting with a lawyer to have them explained might seem unnecessary or be viewed as an irritating additional cost.

It is always better to be more fully informed about what you are being asked to sign than not. If you or someone you know wants more information or needs help or advice, please contact us on 08 9422 8111 or email buslaw@taitlegal.com.au.