The Supreme Court of Western Australia has confirmed that commercial circumstances will be highly significant in construing or rectifying transaction documents where they are ‘susceptible to more than one meaning’.

In Saraceni v Mentha [No 2] [2012] WASC 336, the Supreme Court of Western Australia held that ambiguity as to the scope of charged assets in a suite of facility and security documents should be resolved in favour of the lender by reference to the obvious common intention of the parties.


Westgem Investments Pty Limited (Westgem) was the registered proprietor of land located in the Perth CBD known as Raine Square .  In April 2008 Westgem entered into a facility agreement (Facility Agreement) with Bank of Western Australia, BOS International (Australia) Limited (together, the Financiers) and others by which the Financiers agreed to provide finance for Westgem to complete a project to redevelop the land. 

The facilities were secured by way of fixed and floating charge, however, there was no definition of the ‘Secured Property’ that was the subject of the charge.  Rather, the charge purported to incorporate the definition of that term from the Facility Agreement.  The Facility Agreement defined ‘Secured Property’ as:

Any asset of a Transaction Party mortgaged, charged or otherwise secured in favour of the Security Trustee or any other Finance Party by way of a Security as security for the Secured Money....

From the Financiers’ perspective, the problem with this definition was that it is in the past tense (ie. on a strict interpretation of that clause alone, only property that was already secured at the time the Facility Agreement was executed would be charged).


Justice Corboy held the charge was “open to various interpretations”.  Accordingly, it was appropriate to look to the commercial circumstances surrounding the negotiation of the documents and to the objects of the party.  In this regard, his Honour held that:

  • the commercial circumstances were not controversial;
  • it was always a condition of the Financiers’ offer that Westgem would grant a fixed and floating charge over all of its assets and undertaking;
  • drafts of the charge were supplied with emails indicating that the document was intended to provide this; and
  • the charge read as a whole provided sufficient certainty to enable the Court to give effect to the parties’ objective intentions.


Great care should always be taken when documenting complex facility and security structures to ensure that the parties’ intentions are adequately reflected.

The decision confirms that the commercial circumstances will be relevant in interpreting documents, but only where there is ambiguity. 

And finally, some comfort for lenders: Justice Corboy held that “it would have been extraordinary if the Financiers had not sought whatever security was available to secure the facilities that they were to provide.