Citibank Savings Limited v Stanley Stergiou and Ekaterine Stergiou [1995] ACTSC 43 (12 May 1995)

SUPREME COURT OF THE ACT

CITIBANK SAVINGS LIMITED v. STANLEY STERGIOU AND EKATERINE STERGIOU
No. SC181 of 1992 Number of pages - 20
Mortgages And Securities - Practice And Procedure

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
HIGGINS J

CATCHWORDS

Mortgages And Securities - mortgage over residential property enabling right to possession upon default - supplementary loan agreement - subsequent increase in size of credit limit - failure to make interest payments demanded - default on mortgage agreement - issuing of notice under s93 of Real Property Act - possession sought after non-compliance with notice in accordance with s96 of Real Property Act - examination of question of ability to enforce right to possession by ejectment.

Practice And Procedure - cross-claim alleging breach of mortgage agreement by the bank and unconscionable conduct.

Real Property Act 1925 (ACT), ss 93(2), 96

Trade Practices Act 1974 (Cth), ss 51AA, 51AB, 52
Fair Trading Act 1992 (ACT)

Campbell v Commercial Banking Co of Sydney Ltd (1879) 40 LT 137
Lamshed v Plakakis (1988) 47 SASR 316
State Bank of South Australia v Jeltes (1988) 49 SASR 307
City Mutual Life Assurance Society Ltd v Lance Creek Meat Works Pty Ltd

(1976) VR 1

Wilson v United Counties Bank (1920) AC 102
Davidson v Barclays Bank (1940) 1 All ER 316
Miles v Commercial Banking Co of Sydney [1904] HCA 54; (1904) 1 CLR 470
Frost v London J S Bank (1906) 22 TLR 760 (CA)
Plunkett v Barclays Bank Ltd (1936) 2 KB 107
Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447
Mansell v Cumming (1989) 86 ALR 637

HEARING

CANBERRA, 20 February 1995
12:5:1995

Counsel for the Plaintiff: Mr R Arthur

Instructing solicitors: Phelps Reid

Counsel for the Defendants: Mr S Stergiou

ORDER

THE COURT ORDERS THAT:

There be judgment for the defendants on the claim.
There be judgment for the plaintiff on the cross-claim.

DECISION

HIGGINS J The defendants are the registered proprietors of a Crown Lease for a term of 99 years commencing on 7 December 1964 in respect of Block 6 Section 46 division of Hackett (the property).

2. In or about October 1987, the defendants applied to the plaintiff, a banking institution, for a "credit line facility".

3. As a result, a document entitled "Mortgage Power Credit Line" was completed by the defendants. The property was then subject to a mortgage to National Westminster Finance Australia Ltd (Natwest Finance).

4. The application form was apparently signed and dated on 27 November 1987. It requested a credit limit of $100,000.00.

5. Mr Linnane, Canberra State Manager of the plaintiff, deposed that, following the execution of this application, the defendants were notified of its acceptance.

6. The document purporting to be an acceptance is dated 9 November 1987 (sic). There was no explanation for this apparent anomaly. It may be that the "9" should have been "29". It was signed by each of the defendants although no date is assigned to their signatures. The credit limit offered was to be secured by a registered first mortgage over the property.

7. Upon receipt by the plaintiff of that acknowledged acceptance, the defendants' solicitors were requested by the plaintiff to prepare a Memorandum of Mortgage, acting for all parties.

8. The mortgage, as drawn, secured:

Any loans, advances, credit, credit line facility or other
financial accommodation to a limit of ONE HUNDRED THOUSAND
DOLLARS ($100,000.00).

9. It was executed on 8 April 1988. It was entered on the Certificate of Title on 25 May 1988. On that same date, the mortgage to Natwest Finance over the property was discharged. Thus, as from that date, the plaintiff became the first and only registered mortgagee of the property.

10. Somewhat before 25 May 1988, it would seem about 13 April 1988, an account with a limit of $100,000.00 and numbered 767016983 and 4100118676 was opened. On that date a sum of $62,375.40 was debited to cover the sum required to discharge the mortgage to Natwest Finance and the solicitor's costs incurred by the plaintiff.

11. Further debits and credits were thereafter recorded by the plaintiff. The debits generally represented cheques drawn on the account by the defendants.

12. By a document dated 12 July 1989, the defendants applied to increase the credit limit on their account to $140,000.00.

13. The plaintiff, by letter dated 12 September 1989, accepted this application subject to completion by the defendants of necessary documentation. A "Supplementary Loan Agreement" was signed by the defendants on 3 October 1989. Inappropriately, the defendants also signed as "Guarantors". On 31 October 1989 the limit expressed in the mortgage was varied by increasing it to $140,000.00. The variation was entered on the Certificate of Title on 11 December 1989.

14. At about this time the plaintiff opened a separate account in the joint names of the defendants. It was numbered 767114481 and 4100226849. The first activity on the account was dated 24 November 1989. It was assigned a credit limit of $40,000.00. That was done so as to enable the plaintiff to charge an interest rate on the additional $40,000.00 different from that on the original account.

15. On 23 July 1990, the defendants executed a further application to the plaintiff seeking to raise the credit limit to $160,000.00.

16. On 28 August 1990 a letter of approval, subject to execution of further documentation, was despatched by the plaintiff to the defendants. A further "Supplementary Loan Agreement", undated, was executed by the defendants. A further variation of mortgage was executed on 24 September 1990 and entered upon the Certificate of Title on 18 October 1990.

17. It was intended by the plaintiff to alter its records so that the two accounts previously established became fused. Account 767016983/4100118676 was to be the surviving account with a single credit limit of $160,000.00.

18. Statements in respect of that account (the first account) issued showing a credit limit of $160,000.00 but the balance debited to the other account was not transferred to it. The credit limit for the other account (the second account) was simply deleted.

19. By 15 November 1991, according to the plaintiff's records, the first account was fully drawn down to the credit limit of $160,000.00. As a result, the total of the defendants' apparent indebtedness to the plaintiff was about $200,000.00.

20. It was not until 15 November 1991 that the plaintiff's officers noticed the oversight. That realisation was triggered when the defendants failed to make certain interest payments demanded by the plaintiff.

21. On 22 February 1992 at 4.45pm, a notice purporting to comply with s93 of the Real Property Act 1925 (ACT) (RP Act) was delivered to the firstnamed defendant at the property. The notice alleged that: You are in default under the terms of the Mortgage dated the 24th day of September 1990 between Citibank Savings Limited as Mortgagee and yourself as Mortgagor in respect of the property ... in that you have failed to make payments pursuant to the said Mortgage as follows:-

15/11/91 $470.13
15/12/91 $442.74
15/01/92 $454.00

22. It then purported to call up "the full amount of the principal sum under the mortgage". It noted that "interest continues to run". It sought costs in the sum of $200.00. It allowed one month to remedy the default. It was issued by the then solicitors for the defendants as "solicitors for the mortgagee", that is, the plaintiff. It was dated 7 February 1992.

23. On 23 March 1992, the plaintiff caused a writ of summons and statement of claim to issue seeking possession of the property by reason of non-compliance with that notice. The defence, dated 20 May 1992, simply denied all allegations made in the statement of claim.

24. The pleadings thereafter have followed a tortuous and confusing course.

25. Since June 1992 or thereabouts, the defendants have represented themselves (save for the period from September 1992 to January 1993 and from September 1993 to October 1993). The firstnamed defendant in particular has filed many lengthy and confusing documents. Many contain allegations which are both exaggerated and bizarre. Most of the statements made are purely rhetorical. Little of it has any legal relevance. However, given the situation of disadvantage the defendants are in as litigants in person of non-English speaking background, it is the duty of the Court, so far as it can, to assist them to confront and deal with the true merits of the case so far as the evidence presented allows it so to do.

26. On 30 June 1993, a Full Federal Court, of which I was a member, set aside an order which had been made by Master Hogan on 29 January 1993 granting leave to the plaintiff to enter judgment for possession of the property. As a result, the judgment for possession, entered pursuant to that leave on 15 February 1993, was set aside.

27. It appeared to the Court that the plaintiff had purported to rely on a right to possession alleged to have arisen under cl.13.1 of the mortgage. As to that proposition, the Court observed:

In our view, the language of cl.13.1 is quite inapt to confer
upon the (plaintiff) a right to ejectment independently of the
right conferred in s96 (RP Act). What it does is no more than
confirm that the mortgagee may exercise the statutory right in
the event of default.

28. It held, therefore, that the statement of claim of 23 March 1992 disclosed no cause of action. That statement of claim was struck out, but the plaintiff was granted liberty to replead.

29. On 26 August 1993 the plaintiff filed an amended statement of claim. The default pleaded was particularised as follows:

Particulars:
Accounts number 4100226849
(also numbered 767114481)
Instalments due in the period
from 15 November, 1991 to
15 March, 1992 inclusive $ 2,210.97
Instalments due in the period
from 15 April, 1992 to
15 August, 1993 inclusive $ 7,097.89
Account number 4100118676
(also numbered 767016983)
Instalments due in the period
from 15 November, 1991 to
15 March, 1992 inclusive $ 8,837.14
Instalments due in the period
from 15 April, 1992 to
15 August, 1993 inclusive $26,949.72
Total instalments due in the period
15 November, 1991 to 15 March, 1992
inclusive $11,048.11
Total instalments due in the period
15 April, 1992 to 15 August, 1993
inclusive $34,047.61

30. The statement of claim went on to allege:

7. It was a term of the Mortgage that if default was made in
payment of any instalment of interest secured by the Mortgage
the principal sum shall become due and payable on demand.
8. By notice in writing dated 7 February, 1992 the Plaintiff
demanded payment of the principal sum then due, and the sum
remains unpaid.
Particulars of principal sum due on 7 February, 1992
Account number 4100226849
(also numbered 767114481) $ 39,400.00
Account numbered 4100118676
(also numbered 767016983) $159,888.71
Total due $199,288.71
9. Pursuant to S.96 Real Property Act 1925, the Plaintiff is
entitled to possession of the land.

31. After a number of applications concerning the provision by the plaintiff of particulars of its claim, the defendants filed their amended defence and amended cross-claim on 24 February 1994.

32. They denied the relevantly alleged default. Their defence also alleged that the plaintiff had failed to adhere to the terms of the mortgage. That allegation was not particularised in the defence.

33. The amended cross-claim was in the following terms:

9. In answer to the whole of the plaintiff's statement of claim:
a The plaintiff and its solicitors who also acted for the
defendants acted on confidential information held by and obtained
from the National Australia Bank Limited, Australia New Zealand
Banking Group Limited and National Westminister (sic) Finance
Limited.
b Concerning the Plaintiff for its own benefit and that of its
solicitors to the detriment of the defendants.
10 That, on 19 June 1993, the plaintiff acted in breach of
mortgage registered number 608104 pursuant to clause 13 2 (a)
of the said mortgage in exercising his power of sale as mortgagee.
a That the plaintiff denied the defendants access to their
personal possessions from 28 April 1993 to 5 June 1993.
b That the plaintiff remained in possession of the defendants
residence for the period 28 April 1993 to the 30 June 1993 in
breach of his duty to act conscionably as mortgage to the
defendants.
c That the plaintiff had acted in breach of section 93 of the
Real Property Act 1925 and the terms of mortgage by trespassing
on the defendants residence.
d That the plaintiff while in possession restrained Mr Stanley
Stergiou from entering his residence by way of a restraining
order.
e That the plaintiff while in possession of the defendants
residence offered the sale of the residence at an under valued
price.
11. That, the plaintiff owed them a duty not to act
unconscionably by virtue of section 51AA and 51AB (1) of the
COMMONWEALTH TRADE PRACTICES ACT 1974 ("The Act").
a The plaintiff has acted in breach of their duty referred to
in section 11 herein and has thereby caused loss and damage to
the defendants and that loss and damage continues.
b The plaintiff has acted in breach of section 60 of the Act
and by virtue of that breach the defendants have suffered loss
and damage and that loss and damage continues.
c The plaintiff owed them a duty not to act in a deceptive or
misleading way or a way likely to be deceptive or to mislead by
virtue of section 52 of the Act.
d In breach of duty referred to in sub paragraph (c) herein,
the plaintiff has caused the defendant loss and damage and that
loss and damage continues.
12. That by virtue of section 12 of the FAIR TRADING ACT of the
AUSTRALIA CAPITAL TERRITORY ("The ACT, Act") The plaintiff owed
the defendants a duty not to engage in conduct that was
misleading or deceptive or likely to mislead or deceive.
a In breach of the said duty referred to in paragraph 12
herein the plaintiff has caused the defendants loss and damage
and that loss and damage continues.
b The plaintiff in breach on section 26 of the ACT, Act has
caused the defendants loss and damage and that loss and damage
continues.

34. A reply and defence to counter-claim was filed on 22 April 1994. It was in the following terms:

REPLY
1. In reply to paragraph 4 of the Defence, the Plaintiff admits
that it dishonoured cheques drawn by the Defendants and that it
debited their account with charges, but says that neither the
dishonouring of those cheques nor the debiting of the account
nor any other conduct of the Plaintiff
(a) led the Defendants to believe
(i) that they were not in default of the mortgage, or
(ii) that they would not become in default of the mortgage, or
(iii)that the Plaintiff would not take any action in respect of
default by the Defendants under the mortgage, or
(b) caused the Defendants to become in default of the mortgage
and the Plaintiff is not thereby estopped from relying on the
said default.
DEFENCE TO COUNTER-CLAIM
1. In answer to paragraph 11 of the Counter-claim, the Plaintiff
admits that it dishonoured certain cheques drawn by the
Defendants and that it debited the Defendants' account with
certain charges but denies that it, or any person on its behalf,
assured the Defendants that their account limit could be
increased upon request without incurring additional charges.
2. In further answer to paragraph 11 the Plaintiff says that
such dishonouring of cheques or debiting of account or giving
of assurances (the giving of which is denied)
(a) was not unconscionable conduct contrary to Section 51AA and
51AB in that the Plaintiff did not take any unconscientious
advantage of the defendants, and
(b) was not harassment or coercion contrary to Section 60 in
that the Defendants were not at any time subjected to any
pressure by the Plaintiff and
(c) was not misleading or deceptive conduct contrary to Section
52 in that it did not involve any misrepresentation.
3. In further answer to paragraph 11, the Plaintiff says that
any loss or damage suffered by the Defendants was not by the
conduct of the Plaintiff.
4. In further answer to paragraph 11, and in the alternative,
the Plaintiff says that the cause or causes of action on which
the Defendants rely first arose more than three years before the
filing of the Counter-claim and are barred by Section 82.
5. In answer to paragraph 12, the Plaintiff says that no cause
of action arises out of the matters alleged because they
occurred prior to the commencement of the Fair Trading Act 1992.

35. The defendants alleged, in the firstnamed defendant's affidavit of 2 September 1994, that their account (the first account), after being debited with the sum due to Natwest Finance (plus legal costs), was also debited with $5,000.00 which debit was unexplained. By inference, at least, this was an allegation that such debit was unjustified.

36. The manner in which the increase in the credit limit from $100,000.00 to $160,000.00 had occurred was not disputed by them.

37. In respect of the first account, a sum of $62,375.00 was drawn down by the plaintiff to cover the defendants' existing indebtedness to Natwest Finance. Between 13 August 1988 and 10 July 1989 there were debits totalling $50,900.00 and deposits totalling $15,000.00. All interest payments were met as demanded from time to time.

38. Between 8 November 1989 and 16 November 1989 cheques totalling $20,000.00 were presented but dishonoured. Whether those cheques, each for $5,000.00, were intended to result in a single debit of $5,000.00 or of more is not clear. Two of the dishonour entries are in respect of the same cheque. It seems right to assume that the defendants, in that time frame, were seeking to have honoured only one of those various cheques and were effectively replacing them in the hope that one of them would be met. It is unclear why the cheques had been dishonoured as, by then, the plaintiff had approved the additional $40,000.00 credit limit and the defendants had signed and returned all necessary documentation.

39. Following the further application of July 1989, the second account was opened on 24 November 1989 with a limit of $40,000.00. As at 22 March 1990, $24,500.00 had been withdrawn from it. Those withdrawals seem to have been for the purpose of deposit in the first account. The total of deposits to the first account in that period was $24,500.00. A sum of $24,000.00 was, in the same period, shown as debited to the first account.

40. On 26 April 1990, a cheque for $4,000.00 was presented on the first account but dishonoured. A credit of $4,000.00 is shown as having been credited to the second account on 27 April 1990.

41. Between 26 April 1990 and 24 July 1990, $18,900.00 was debited to the second account with only that $4,000.00 being deposited to its credit. Whether that $4,000.00 was related to the dishonoured cheque being intended to provide funds to meet it, is not clear. If that was so, it was credited to the wrong account. If there was an error, it is not clear whether it was an error of the plaintiff or of the defendants. Over the same period, the first account suffered debits of $10,400.00 and had deposits of $10,025.00 made to it.

42. After the increase in the credit limit on the first account to $160,000.00 there were, up until 28 August 1991, withdrawals of $59,500.00 recorded, but no credits.

43. Until that time, monthly instalments of interest as and when demanded had been duly paid on each account.

44. Instalments of interest as demanded for the months of September, October and November 1991 were not paid on either account.

45. The cheques presented and dishonoured before September 1991 were as follows:

31/10/89 cheque no. 14716 $5,000.00
7/11/89 " 14717 $5,000.00
14/11/89 " 14718 $5,000.00
15/11/89 " 14718 $5,000.00
26/04/90 " 388254 $4,000.00

46. Bank charges of $126.00 were levied in respect of those dishonoured cheques.

47. Further, by reason of the choice made by the plaintiff to establish two accounts instead of one, an extra $67.88 was incurred in government charges between 15 December 1989 and 15 March 1994.

48. The defendants complain that there were further "unexplained direct payments" totalling $19,516.34 debited to their accounts between 27 November 1989 and 23 January 1990. It does, however, appear that those payments included or comprised interest levied by the plaintiff on the debit balance of the accounts from time to time.

49. There was also a complaint by the defendants that between 2 November 1987 and 28 January 1994 a total sum of $21,464.20 was levied for "unexplained fees" on the first account. Between 17 January 1992 and 2 February 1994, a sum of $49,022.85 was, they complained, also debited for "unexplained fees" on the second account. The defendants claimed that if the plaintiff had kept its accounts properly, they would not have appeared to have been in default when the plaintiff issued its notice. Further, they claimed that the total indebtedness when this action was commenced was approximately $167,304.00 rather than the $197,050.00 alleged by the plaintiff.

50. It appears that, on 26 August 1991, the defendants had applied to the plaintiff to increase their credit limit by a further $50,000.00. That request was refused. The defendants also complain of that refusal as being in breach of a representation or agreement made to or with them.

51. The defendants' case would seem to be that, as at 15 November 1991, they were not in default under the mortgage. They assert that the plaintiff was in default under the mortgage. They assert that the plaintiff was in default by reason of its making of unwarranted demands and its refusal to explain its accounting processes. Their allegations were set out in the first defendant's affidavit of 2 September 1994.

52. The initial debit of $550.00 additional to the sum required to pay Natwest Finance was explained as being the legal costs payable in respect of the transaction. Whilst the defendants complained of this debit as "unexplained", it is clear that this fee was properly incurred and properly debited to the defendants' account.

53. Mr Linnane sought to answer the defendants' evidence in an affidavit dated 14 October 1994. He asserted that there was no evidence that cheque 14721, drawn on the second account on 24 November 1989 for $5,500.00 had not been presented for payment. The effect of this statement is not clear. It would imply that the defendants, believing it had been met, had overstated their indebtedness by $5,500.00.

54. The setting up of the second account was clearly unauthorised. The evidence of Mr Linnane confirms that. It was done to suit the plaintiff's administrative convenience. It follows that any cost incurred in so doing should not have been debited to the defendants as if it formed a part of the debt due from them to the plaintiff.

55. Mr Linnane further concedes errors in entries relating to the first account, resulting in a greater debit balance being shown than was in fact due from the defendants. However, he asserted that error to have been only $41.51 in aggregate. Of course, that error would have had some minor consequential effect on interest payments due following each of the errors so conceded. It would not, however, have affected the substance of the plaintiff's demand.

56. Mr Linnane explains some of the discrepancy between the defendants' calculation of their total indebtedness by pointing to cheques drawn on the second account which were deposited to the credit of the first account. They totalled $15,000.00.

57. There is also a reference to other payments made to meet interest calculated by the plaintiff to be due on the first account between 21 April 1988 and 31 October 1991 totalling $73,276.11. Mr Linnane asserts that those payments "should not be deducted". They met interest payments which were, wholly or partly, matched by interest levied on the account.

58. There was a further debit of $300.00 made on 15 July 1989. The defendants referred to that as unauthorised. That was explained by Mr Linnane as being in respect of a "peace of mind" feature. There is no evidence that the defendants ever asked for or had this "feature" explained to them. The "peace of mind" feature purported to "cap" the interest rate at 18.4%pa in consideration of this annual levy.

59. There was a further sum of $300.00 debited on 8 September 1989, presumably also for the "peace of mind" facility. The debits so made were unauthorised and should not have been debited.

60. The remaining "miscellaneous charges" are not explained. They are simply asserted to be a consequence of the "default". The default referred to is the default alleged in the notice of 7 February 1992.

61. An issue was raised as to whether, in effect, the plaintiff had represented or agreed that it would permit the defendants to extend their credit limit to $254,000.00. If it had, the defendants would have been entitled, on request, to have extended their credit limit further as at 26 August 1991. I do not accept that the plaintiff had made any such representation or agreement. The defendants had requested and obtained a limit of $160,000.00. The plaintiff had mistakenly extended the limit, in effect, to $200,000.00, although only $160,000.00 of that limit was secured by the mortgage. The defendants sought, and were refused, an extension of their credit limit to $210,000.00. Had the plaintiff accepted that request, it might have obtained the defendants' agreement to extend the mortgage to embrace that level of indebtedness. As it happens, it did not.

62. There was a supplementary affidavit from Mr Linnane dated 15 February 1995. He referred to a credit of $5,000.00 shown as having been made on 28 November 1989 to the first account. He asserted that such credit did not represent a payment by the defendants as he had previously assumed. However, he could not offer an explanation for it. The records finally put before the Court show $15,000.00 in credits for November 1989. A sum of $10,000.00 was credited on 27 November 1989. A further credit of $5,000.00 was made on 28 November 1989.

63. That was apparently intended to be an answer to the first defendant's assertion in his affidavit that he had, on 21 July 1989, paid ANZ Bank cheque no. 004815 to the plaintiff for credit to the first account. Mr Linnane seeks to equate that payment with the credit of $5,000.00 on 28 November 1989. That seems unlikely as an explanation. In the result, I am not satisfied that the two statements can be reconciled.

64. The significant point is that Mr Linnane's evidence does not address the reason for the debit of $5,000.00 on 13 April 1988. That debit was not a result of any withdrawal of funds by the defendants. However, the answer made by Mr Linnane did not address that issue. Further, I simply do not know what happened to the cheque which the first defendant says was deposited on 21 July 1989.

65. The particulars given by the plaintiff on 6 February 1995 assert that, on the first account, a "Statement Bill" was debited for $1,884.80 on 15 November 1991, a further $1,774.38 on 15 December 1991 and $1,819.52 on 15 January 1992. The displayed debit balance was then $158,443.39, within the credit limit allowed. The term "Statement Bill" was a reference to the interest charge levied by the plaintiff on the previous outstanding balance.

66. The second account was particularised as showing:

15.11.91 Statement Bill 470.13 $29,870.13
15.12.91 " " 442.74 $40,312.87
15.01.92 " " 454.00 $40,766.87

67. It was the non-payment of the latter sums that was relied upon in the notice of 17 February 1992 as being the relevant default under the mortgage as varied.

The Issues
68. The issues were confused. The defendants, not having any legal knowledge, could not have been expected to assist to clarify them. They did not. The plaintiff seemed to have no clear view of the real issues either.

69. In its decision of 30 June 1993, the Full Federal Court defined the issue as whether the plaintiff had, by virtue of s96 (RP Act), acquired a right to possession which it could, by ejectment, enforce.

70. Section 96 (RP Act) provides, (relevantly):

The mortgage ... upon default in payment of ... any interest
... secured by any mortgage ... may -
***
(c) bring an action of ejectment to recover the land ...,
in the same manner in which he might have ... brought the action
if the principal sum ... were secured to him by a conveyance of
the legal estate in the land so mortgaged ...

71. That right arises in consequence of the operation of s93(2), which provides (relevantly):

If default is made in the payment of the ... interest ..., or
any part thereof, secured by the mortgage ..., and the default
is continued for the space of one month ... the mortgagee may -
(a) give to the mortgagor ... notice in writing to pay the money
then due and owing on the memorandum of mortgage ..., and that
sale will be effected unless the default be remedied; or
(b) leave the notice on the mortgaged ... land ...

72. Thus, the question which arises is whether, as at 23 March 1992, the plaintiff had acquired the right, pursuant to s96 (RP Act), to bring an action of ejectment.

73. There was also a factual issue raised on the pleadings as to whether the plaintiff acted wrongfully in dishonouring any or all of certain cheques issued by the defendants between 8 November 1989 and 16 November 1989 (four cheques for $5,000.00) and during April 1990 ($4,000.00). Was there default by the defendants under the mortgage as at 23 March 1992?

74. By that date the particulars of mortgage had been varied so as to secure:

Any loans, advances, credit, credit line facility or other
financial accommodation to a limit of ONE HUNDRED AND SIXTY
THOUSAND DOLLARS ($160,000.00).

75. The mortgagor (defendants) covenanted under clause 1(i) to pay:

... the monies hereby secured together with interest thereon on
all other applicable charges and fees at such time or times as
notified and directed by the Mortgagee (plaintiff).

76. Clause 1(ii) incorporates by reference the terms and conditions of the "Relevant Credit Contract". That term is defined by clause 1(ii)E, to mean:

... all or any loan contract, credit sale contract, continuing
credit contract Mortgage Power (Credit Line) Facility Letter of
Approval/Agreement and/or Credit Line Facility Agreement
(including overdraft) and standard terms and conditions thereof
entered into by and between, inter alia, the Mortgagor thereof
(sic) and the Mortgagee.

77. The term "Relevant Credit Contract" is a clear reference to the Credit Line Loan Agreement documentation being that originally signed on 9 (or 29) November 1987 and to the variation documentation signed upon increase of the limit to $140,000.00 and then to $160,000.00.

78. The latter two agreements merely had the effect of varying the original terms and conditions so as to apply the same to the varied credit limits.

79. The original agreement applied a variable interest rate, commencing at 15.4%pa. The "Repayment Schedule" proposed:

Interest only (credit and other applicable charges) monthly
repayments as set out in the monthly billing statement sent to
the Borrower (the defendants) with the right to make principal
reductions at any time at the discretion of the Borrower(s).

80. Any "Government Charges" in respect of the borrowing were also payable by the defendants in addition to those sums.

81. Terms and conditions were annexed to the credit contract. The annexure confirmed:

... agreement to the Citibank Mortgage Power standard terms and
conditions a copy of which is attached ...

82. The attachment, whatever it was, was not produced in evidence.

83. The only reference contained in the evidence to any entitlement of the plaintiff to levy charges greater than the variable interest rate was contained in clause 7 of the annexure which provided for:

Payment of all stamp duties (including collateral security)
shall be borne by the Borrower(s). As the credit line facility
is not intended as a high transaction account, draw downs
against the credit line will be limited to four in any one
calendar month. Drawings in excess of this limit will attract
a service charge of $10.00 each at Citibank Savings. In
relation to deposits the first two deposits during a billing
statement period are free, thereafter a fee of $3.00 ($4.00
for commercial account) to each deposit.

84. The records produced by Mr Linnane allege that a statement dated 15 November 1991 was sent to the defendants in respect of the second account. It recorded a debit balance of $39,870.13. A "credit charge" of $469.50 was notified. The notice requested payment of $470.13 by 30 November 1991, including the "Government Charge". The first account was the subject of a separate statement also dated 15 November 1991. It recorded a debit balance of $159,847.20. A "credit charge" of $1,882.87 was notified. The notice requested payment of that sum of $1,884.80 by 30 November 1991.

85. As at the date of the s93 notice, 7 February 1992, the following further notices had been forwarded to the defendants:

Date DR Balance Total Date for
First Account Credit Charge payment
and Duty
15/12/91 $161,621.58 $3,659.18 30/12/91
15/01/92 $163,441.10 $5,478.70 30/01/91
Second Account
15/12/91 $ 40,312.87 $ 912.87 30/12/91
15/01/92 $ 40,766.87 $1,366.87 30/01/92

86. By the time the writ was issued on 23 March 1992 the plaintiff had forwarded to the defendants a further statement on each account dated 15 February 1992 showing particulars as follows:

DR Balance Credit Charge Journal Due Date
Duty Charges

First Account $165,615.93 $1,774.83 $400.00 01/03/92 Second Account $ 41,612.92 $446.05 $400.00 01/03/92

87. Up until 30 November 1991, the defendants had met the credit charges demanded by the plaintiff on each statement of account forwarded to them. It is common ground and, in any event, the evidence demonstrates that, after 30 November 1991, they made no further payments on either account regarding themselves as then in dispute with the plaintiff.

88. The defendants were aware that two statements had been issued each month since the second account was established. However, they would not necessarily have deduced from these statements that every charge levied was warranted by their agreement with the plaintiff or whether the whole of the balance due was secured by the mortgage or whether the balance due had been correctly calculated.

89. I have no doubt that had there been only one account maintained by the plaintiff it would have been clear to all parties when the secured credit limit had been reached. Whilst there were two accounts each with a credit limit representing, in total, the approved limit then, although the defendants could justifiably complain that extra fees and charges so incurred should be met or waived by the plaintiff, it would still have been evident when the approved limit secured by the mortgage was reached or exceeded. That was, indeed, the situation until August 1990 when the approved limit was increased from $140,000.00 to $16,000.00.

90. The approved $160,000.00 limit was applied to the first account only. There was no limit applied to the second account. However, its debit balance was left as it had been and interest payments were requested monthly on the outstanding balance of each account as before.

91. That conduct of the plaintiff amounted to a representation that the first account only was to be regarded as secured by the mortgage. As at 30 November 1991, the plaintiff's records purportedly showed that the defendants had defaulted in payment of the sum of $1,884.80.

92. Charges levied without apparent justification by that time amounted to $332.00. To reverse those debits as at 30 November 1991 would still have left $1,550.82 due. Of course, there would have been an ongoing effect on the previous interest charges but that effect would have resulted only in a small further overpayment.

93. The real difficulty for the plaintiff is that the debit of $5,000.00 dated 13 April 1988 is not explained. Had that debit been reversed, it is clear that the remaining default alleged as at 30 November 1991 would have been wiped out. The interest, alone, levied for over 3.5 years on that unexplained debit would, in itself, have exceeded $2,500.00.

94. By the time the s93 notice was issued, the total amount alleged by the plaintiff to be due, subject to minor adjustments, was approximately $5,000.00. The notice, however, incorrectly demanded interest payments calculated on the second account only.

95. However, that error had the effect of understating rather than overstating the sum allegedly due. That does not, in my view, vitiate the notice: see Campbell v Commercial Banking Co of Sydney Ltd (1879) 40 LT 137; Lamshed v Plakakis (1988) 47 SASR 316.

96. It is enough that, as at 7 February 1992, the plaintiff proves that there was default under the mortgage such as to entitle the plaintiff to give notice under s93 (RP Act).

97. It may be noted that to entitle a mortgagee to give notice under s93 (RP Act) the default in question must have continued for a month. The notice was delivered on 22 February 1992. Thus there had to be a default as at 22 January 1992 which would justify the giving of a notice under s93 (RP Act). As at that date, the total default as recorded by the plaintiff was $3,659.18. It needed correction to take account of unexplained or unauthorised debits totalling at least $5,332.00. It also needed correction for the ongoing effect the retrospective reversal of those unauthorised or unexplained debits on the interest charges levied from time to time.

98. As O'Loughlin J held in State Bank of South Australia v Jeltes (1988) 49 SASR 307, it is sufficient for the purposes of the exercise by a mortgagee of powers granted under the mortgage that there be a demonstrated default. If a notice is required to establish a breach, then there must be non-compliance with that notice before the powers given to the mortgagee may validly be exercised.

99. Non-compliance with a valid s93 notice was, therefore, a matter which the plaintiff was obliged to establish to found a right under s96 (RP Act) to bring an ejectment action: see City Mutual Life Assurance Society Ltd v Lance Creek Meat Works Pty Ltd (1976) VR 1.

100. As at 7 February 1991, it was not demonstrated that there had been any default, whether in whole or in part, of any or all of any credit charge (including fees and duties) properly then payable by the defendants to the plaintiff which had continued for not less than one month.

101. It follows that the plaintiff's claim for possession has not been made out.

Counter-Claim - Unconscionable Conduct
(i) Failure to allow an increase in credit limit
102. I have already noted that the evidence does not support the view that the defendants' credit limit would be raised on request up to the limit that would be warranted by the value of the security over the property.

103. The defendants relied on words attributed to Ms Halligan, an employee of the plaintiff with whom the defendants dealt. The first defendant's account of what Ms Halligan said to him does not seem to me to warrant the conclusion he asserts. It would be extraordinary if the plaintiff had bound itself to accept a future application to extend an agreed credit limit irrespective of its opinion as to the capacity of the defendants to service and ultimately repay the loan.

104. I reject this aspect of the counter-claim.

(ii) Dishonour of Cheques
105. Cheques were dishonoured as follows:

Date Amount Number Notice Date
31/10/89 $5,000.00 014716 3/11/89
07/11/89 $5,000.00 014717 09/11/89
15/11/89 $5,000.00 014718 17/11/89
15/11/89 $5,000.00 014719 16/11/89
26/04/90 $4,000.00 388254 02/05/90

106. The dishonour of those cheques was admitted by the plaintiff in its reply.

107. It was the defendants' case that the dishonour of these cheques was wrongful and had, according to their particulars of 15 February 1994,

... affected the defendants credibility with their business
trade which also caused an injury to their reputation.

108. If the dishonour had been wrongful, damage to reputation is a relevant head of damage under the Trade Practices Act 1974 (Cth) (TP Act) and/or the Fair Trading Act 1992 (ACT). However, as each alleged dishonour occurred before the latter Act came into effect on 1 January 1993, the Fair Trading Act has no application.

109. At common law a banker wrongfully dishonouring a cheque breaches the contract with the customer: see, for example, Wilson v United Counties Bank (1920) AC 102. A report of dishonour may, in some circumstances be defamatory: see, for example, Davidson v Barclays Bank (1940) 1 All ER 316; Miles v Commercial Banking Co of Sydney [1904] HCA 54; (1904) 1 CLR 470. In Frost v London J S Bank (1906) 22 TLR 760 (CA) the reason for dishonour was recorded as "Reason assigned - not stated". That statement was held not to convey a defamatory imputation. In Plunkett v Barclays Bank Ltd (1936) 2 KB 107, Du Parcq J considered "refer to drawer" was not a libellous endorsement. In that case the return of the cheque had not been wrongful.

110. However, the cause of action pleaded by the defendants was not breach of contract. It was alleged that the dishonour of the cheques was "conduct" that was "unconscionable", contrary to s51AA and/or s51AB of the TP Act.

111. Those sections provide, respectively:

51AA. (1) A corporation must not, in trade or commerce, engage
in conduct that is unconscionable within the meaning of the
unwritten law, from time to time, of the States and Territories.
(2) This section does not apply to conduct that is prohibited
by section 51AB.
51AB (1) A corporation shall not, in trade or commerce, in
connection with the supply or possible supply of goods or
services to a person, engage in conduct that is, in all the
circumstances, unconscionable.
(2) Without in any way limiting the matters to which the Court
may have regard for the purpose of determining whether a
corporation has contravened subsection (1) in connection with
the supply or possible supply of goods or services to a person
(in this subsection referred to as the "consumer"), the Court
may have regard to:
(a) the relative strengths of the bargaining positions of the
corporation and the consumer;
(b) whether, as a result of conduct engaged in by the
corporation, the consumer was required to comply with conditions
that were not reasonably necessary for the protection of the
legitimate interests of the corporation;
(c) whether the consumer was able to understand any documents
relating to the supply or possible supply of the goods or
services;
(d) whether any undue influence or pressure was exerted on, or
any unfair tactics were used against, the consumer or a person
acting on behalf of the consumer by the corporation or a person
acting on behalf of the corporation in relation to the supply
or possible supply of the goods or services; and
(e) the amount for which, and the circumstances under which,
the consumer could have acquired identical or equivalent goods
or services from a person other than the corporation.
(3) A corporation shall not be taken for the purposes of this
section to engage in unconscionable conduct in connection with
the supply or possible supply of goods or services to a person
by reason only that the corporation institutes legal proceedings
in relation to that supply or possible supply or refers a
dispute or claim in relation to that supply or possible supply
to arbitration.
(4) For the purpose of determining whether a corporation has
contravened subsection (1) in connection with the supply or
possible supply of goods or services to a person:
(a) the Court shall not have regard to any circumstances that
were not reasonably forseeable at the time of the alleged
contravention; and
(b) the Court may have regard to conduct engaged in, or
circumstances existing, before the commencement of this section.
(5) A reference in this section to goods or services is a
reference to goods or services of a kind ordinarily acquired
for personal, domestic or household use or consumption.
(6) A reference in this section to the supply or possible supply
of goods does not include a reference to the supply or possible
supply of goods for the purpose of re-supply or for the purpose
of using them up or transforming them in trade or commerce.
(7) Section 51A applies for the purposes of this section in the
same way as it applies for the purposes of Division 1 of Part V.

112. I consider that s51AA is more appropriate to the circumstances of this case than s51AB.

113. It seems to me that to state falsely that a bank customer had insufficient funds or no arrangements so as to dishonour a cheque would be a breach of s52 of the TP Act.

114. Section 52AA would be appropriate to a situation falling within the kind of circumstances adverted to in Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447. A false or misleading statement could, but need not necessarily, also amount to or form a material component of unconscionable conduct.

115. In the present case, the plaintiff had forwarded monthly statements to the defendants. The defendants do not claim to have misunderstood the purport of them. They showed that, at least so far as the plaintiff was concerned, the cheques which had been dishonoured would, if they had been honoured, have caused the credit limit then applicable to be exceeded. It could not be unconscionable conduct if the plaintiff had dishonoured cheques presented in those circumstances. If the plaintiff had led the defendants to believe that the cheques, or any of them, would be met notwithstanding the size of the resultant debit balance, it could be unconscionable conduct had the plaintiff, knowing that, dishonoured that representation. However, there is no evidence that the plaintiff was aware that its records were incorrect. There was no evidence that it had made any such representation. It is possible that the cheque dated 26 April 1990 was dishonoured because a credit of $4,000.00 was made to the wrong account. As I have noted, it is not clear whether, if that was so, it was the result of an error on the part of the defendants or of the plaintiff. Dishonour of a cheque by reason of an honest error on the part of the plaintiff would not be "unconscionable" conduct, even if it would be a breach of contract or a false or misleading statement amounting to a breach of s52 TP Act.

116. I am not satisfied that the defendants have made out a case of "unconscionable conduct". However, it is clear that, having regard to the unexplained debit of $5,000.00 on 14 April 1988 together with the remaining unauthorised debits of $332.00, the cheques in question should not have been dishonoured. I am assuming in so finding that the three cheques rejected in November 1989 represented only one attempted debit of $5,000.00.

117. I bear in mind that the defendants are self-represented. A libellous statement made in the course of trade and commerce, may also contravene s52 of the TP Act in certain circumstances: see, for example, Mansell v Cumming (1989) 86 ALR 637.

118. In the present case, whilst the defendants assert that the dishonour of the cheques in question caused them damage amongst their creditors, there is no evidence adduced to support that assertion. There is no evidence as to the form of any notice of dishonour or that any creditor was thereby misled or deceived. It is not even clear whether a notice of dishonour was published to any creditor of the defendants.

119. Nevertheless, the plaintiff's records do appear to have shown an incorrectly high debit balance. In those circumstances, the dishonour of the cheques was wrongful as between the parties. It was a breach of the contract between them. However, I am not able to conclude that any provision of the TP Act was thereby breached. Whilst a breach of contract has been proved, no actual damage has been proved to have been sustained. It may be possible to do so if it should be necessary for an account to be taken between the parties. However, there is presently no evidence to support any finding other than of breach of contract. There is no evidence to enable a finding as to damage suffered as a result. In any event, breach of contract has not been pleaded.

120. I reject the counter-claim insofar as it was based on dishonour of the cheques referred to.

General
121. It follows that the plaintiff fails in its claim for possession. The defendants fail in relation to their claim for relief under the TP Act. They have, however, established, at least to the prima facie level, various matters of set-off. There is a considerable adjustment required in the balance due, if it should be necessary to ascertain that sum. There would also be a question, at the least, as to whether, having given notice wrongfully calling up the balance due, the plaintiff would have any continuing right to interest and charges. However, that question does not fall for decision in these proceedings.

122. There will be judgment for the defendants on the claim and for the plaintiff on the cross-claim.

123. I will hear the parties as to consequential relief and costs.