Citibank Savings Limited v Stanley Stergiou and Ekaterine Stergiou [1997] ACTSC 59 (28 August 1997)

SUPREME COURT OF THE ACT

CITIBANK SAVINGS LIMITED v. STANLEY STERGIOU and EKATERINE
STERGIOU
No. SC 181 of 1992
Number of pages - 12
Real property -
Practice and procedure

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

HIGGINS J

CATCHWORDS

Real property - mortgages - mortgage over residential property enabling right to possession upon default - whether mortgagors in default in payment of instalments at time that ejectment proceeding commenced - whether debits made by mortgagee/bank were authorised or "requested" by mortgagors/account holders - whether mortgagee entitled to charge interest on credit charges due but not yet payable according to terms of billing statement - whether mortgagors have discharged onus of proving that cheque was deposited.

Practice and procedure - affidavits - whether irrelevant, scandalous, or without substance or foundation.

Real Property Act 1925 (ACT), ss93, 94, 96 (c)

Land Titles Act 1925 (ACT)

Young v Queensland Trustees Ltd [1956] HCA 51; (1956) 99 CLR 560

Crimean v Fabian [1968] 1 CCR Vic 176

Seldon v Davidson [1968] 2 All ER 755

HEARING

CANBERRA, 16 April 1997 (hearing), 28 August 1997 (decision)

28:8:1997

Counsel for the Plaintiff: Mr R Arthur

Instructing solicitors: Phelps Reid

Counsel for the Defendant: Self

ORDER

THE COURT ORDERS THAT:

1. There be judgment for the defendants.

2. The plaintiff pay the defendants' costs.

DECISION

HIGGINS J

On 12 May 1995, I gave judgment for the defendants upon the plaintiff's claim for possession of premises the subject of a Crown Lease in respect of Block 6 Section 46 Hackett, known as 80 Mackenzie Street.

The plaintiff appealed against that decision to the Federal Court of Australia. On 13 June 1996, a Full Court of the Federal Court delivered a judgment allowing that appeal.

It was further ordered, inter alia, that the matter be remitted to this Court for further determination in accordance with the reasons given for that decision. Leave was granted to the parties to adduce further evidence in accordance with such further directions as this Court might consider appropriate.

The reasons of the Full Federal Court

The claim for possession was based on alleged default by the defendants in payment of instalments under a mortgage held by the plaintiff over the abovementioned Crown Lease.

I had taken the view that any such default was required by s93 of the Real Property Act 1925 (ACT) (now renamed the Land Titles Act) to have continued for a month before notice thereunder could lawfully be given. That, I considered, was a condition precedent to the exercise of the right to bring an ejectment action pursuant to subs96(c) of that Act.

The Full Court did not agree. Their Honours held that, whilst compliance with s93 was necessary to enable the statutory power of sale under s94 of the Act to be exercised, it did not prevent ejectment being pursued even if the statutory power of sale following that ejectment could not be exercised.

Clause 16 of the mortgage document was considered the source of the right to bring ejectment proceedings. It provided,

The Mortgagor hereby attorns and becomes tenant from week to week to the Mortgagee of the mortgaged property at a weekly rent equivalent to and varying with the amount of interest for the time being payable under this Mortgage clear of all deductions to be paid on the days appointed for payment of interest but so that such rent shall be accepted in or towards satisfaction of interest payable PROVIDED ALWAYS that the Mortgagee may at any time after any default under this Mortgage without giving previous notice of the intention so to do enter upon and take possession of the mortgaged property of which the Mortgagor is tenant and may determine the tenancy created by this clause.

Their Honours expressed the opinion that (8-9),

It is unnecessary to consider the nature of the mortgagors' right to possession of the mortgaged property under the attornment clause contained in the mortgage (cl 16) to determine whether such a clause made the mortgagors tenants or created a tenancy by estoppel. In either case the clause was sufficient to ground an action of ejectment by the mortgagee. ... The commencement of the ejectment proceeding was an act by the mortgagee to determine the right of possession recognised in the attornment.

The remaining issue, as their Honours have identified it, is therefore, (9),

... whether Mr and Mrs Stergiou were in default in the payment of interest on the sum secured by the mortgage at the time the ejectment proceeding was commenced on 23 March 1992.

Certain irregularities and apparent anomalies in the accounts of the defendants as at 23 March 1992 were revealed in the evidence before me and before the Full Court.

- Credit Charges

The Full Court noted that the calculation of interest appeared to have resulted in the regular debiting of "credit charges" and of interest thereon which did not appear to be in accordance with the terms of cl 4 of the mortgage.

The plaintiff contended otherwise. That issue was not determined by the Full Court but remitted to me for decision.

- Unexplained debit of $5,000

The Full Court was of the view that the issue as to this "unexplained debit" had not been raised with sufficient clarity. It was held to be open on the evidence to find that the debit was unauthorised but that the plaintiff should have the opportunity further to address that issue. That question is also remitted to me for further determination.

- Unauthorised debit of $300.00 for "peace of mind feature"

A letter dated 15 September 1989 to the defendants had notified them of this deduction. It referred to a "request" pursuant to which that deduction was made. The defendants denied there was any such "request" from them. The plaintiff did not produce any record of any such request. It was suggested by the Full Court that the terms of the letter of 15 September 1989 may have been overlooked. In fact it was not. My reference was to the lack of any evidence to support the hearsay statement in that letter referring to a "request".

Nevertheless, the matter having been returned for further consideration, the parties have been invited to add any further material they might have available in order to enable the question as to whether there was such a request to be determined.

- Deposit of ANZ Bank cheque for $5,000.00

There was a claim that there had been $5,000.00 deposited by the defendants on 21 July 1989. The plaintiff's records disclosed no such deposit. It was not necessary as I then viewed the matter for that issue to be decided. However, it may now be necessary so to do in the light of the decision of the Full Court. Each party has been invited to adduce further material to assist in resolving the question.

- Compliance with the Covenant (Cl 1(ii)A)) to pay interest on the monies advanced up to $160,000.00, ie on the balance of the No. 1 account

Having regard to such amendments as may be necessary properly to reflect the amount due from the defendants to the plaintiff as at 23 March 1992, I am required now to calculate the sum for interest, if any, due as at that date, being the date of the issue of the writ seeking possession.

The parties have been invited generally to submit such further material as may assist to resolve any or all of the above issues.

I will now detail the response to that invitation.

The New Material

On 31 January 1997, Mr Sean Flynn, Accounts Manager for the plaintiff, provided an affidavit deposing to the state of the plaintiff's records concerning the "unexplained debit" of $5,000.00. He also verified the letter of approval of 9 November 1987 setting out the terms on which the "mortgage power" facility was granted.

Those documents revealed the following. Terminal Entry form 5016 evidenced the drawing of a bank cheque for $5,000.00 on behalf of "S & E Stergiou" on 11 April 1988. That was the reason for the debit entry on that day. It was accompanied by a photocopy of a cheque form for bank cheque no. 101685 answering that description. It is an internal bank document only. It contains no reference to or verification of any request by the defendants for such a cheque to be drawn.

There was also an extract of a record referred to as an "Inwards Clearing Report", dated 12 April 1988 provided by the National Australia Bank (NAB). That indicates that the proceeds of the cheque were credited to an unnamed and unidentified account with that bank.

The defendants tendered by consent a report from Mr P Lee, chartered accountant. He had, apparently, examined the records supplied by the plaintiff in these proceedings. Mr Lee identified $56,043.00 in principal and accrued interest overcharged for the period 13 April 1988 to 15 February 1994. That opinion was not directly challenged but the distinction between overcharges of principal and of interest was not made explicit. Nor did that opinion distinguish between the secured account (No. 1) and the unsecured account (No. 2). Further, it did not focus on the situation as at 23 March 1992.

The defendants also relied on an affidavit of 10 February 1997 sworn by the first defendant. That affidavit made unspecified and otherwise unsubstantiated allegations of fraud, corruption and conspiracy by a legal firm and the Registrar of this Court.

Although not expressly objected to, I reject that affidavit. It is irrelevant, scandalous and without any apparent substance or foundation. It demonstrates only the first defendant's tendency towards extravagant and unsubstantiated allegations of impropriety and misconduct which regrettably distract attention away from the real issues.

There was a further affidavit of the first defendant dated 20 February 1997. It contains much that is neither relevant nor helpful. However, it does assert in paragraph 13 that, as at the date of the drawing of the cheque in question, the defendants had no bank account with NAB. That assertion has not been challenged. It is surmised that the bank cheque may have been paid without the authority of the defendants into an inoperative account no. 767016983. However, there is, in truth, no evidence as to what use, if any, the NAB put the funds represented by that bank cheque.

On 4 April 1997, the NAB responded to a subpoena advising that it had no records relating to the bank cheque for $5,000.00 paid to it, according to the plaintiff's records, on 13 April 1988.

The ANZ Bank was also subpoenaed to produce records of the bank cheque no. 004816 dated 21 July 1989. The response was that there were no records. Any such records as may have existed, the ANZ Bank advised, were destroyed after seven years. It follows, of course, that had the plaintiff taken seriously at an earlier stage in this litigation, the defendants' assertion that a $5,000.00 deposit had been overlooked, some light might have been shed on the fate of such cheque and its proper description if, at any time before 21 July 1995, details had been requested. The allegation was deposed to by the defendants at least as early as September 1994. It was afforded no answer but a bland denial.

The matter was listed for further hearing on 16 April 1997. The defendants then produced a further affidavit bearing that date.

The plaintiff had attested to the existence of a Citibank form for debits to be cleared with National Australia Bank Limited. The first defendant saw this as evidence of some conspiratorial link between the two banks. It is, of course, nothing of the kind. No doubt each bank will have a variety of such forms available to facilitate cheque clearances.

There was also a "comment" annexed to the first defendant's affidavit. It purports to be a statement signed by the first defendant but, as he acknowledged, it was prepared by his accountant. That is apparent from the form in which it appears. The "comment" relates to a series of calculations which had been tendered on behalf of the plaintiff and provided to the defendants on 7 April 1997.

Some factual statements are made, however, in the course of that comment. For example, in relation to the allegedly misplaced cheque for $5,000.00, dated 21 July 1989, the first defendant claims "both my cheque butt and deposit slip date are 25.07.89". However, neither of those documents has been produced, even though the defendants were granted time expressly for the purpose of doing so.

Further, as to the $300.00 "capping fee" charged by the plaintiff, the first defendant acknowledges agreeing to one of them, on 5 July 1989, out of fear of closure of the overdraft facility. He asserts that an additional $300.00 was debited against his account on 16 August 1989. However, it is apparent from the plaintiff's records that the "capping fee" was first debited on 11 September 1989. There was a signed request for such a "capping", but not until 26 August 1991. No further "capping fee" appears to have been debited. On this issue, I consider the plaintiff's records to be the more reliable. They disclose that the debit of 11 September 1989 is not supported by any written request.

There is also annexed to that affidavit a list of payments made by the defendants between April 1988 and October 1991. However, those are payments for the No. 1 and No. 2 accounts combined and do not greatly assist. The more reliable records are the copies of the plaintiff's documents tendered by each party.

I dismiss from consideration as irrelevant, the complaints in paragraphs 7-15 inclusive of the first defendant's affidavit. They have no apparent substance.

In par 16, reference is made to an order of the Registrar of this Court winding up ACT General Cleaning Co Pty Ltd on the application of the Deputy Commissioner of Taxation. For no specified reason this is alleged to be "wrongful". I can see no relevance in this paragraph.

On the hearing, Mr Arthur, for the plaintiff, tendered calculations based on various scenarios,

- That the $5,000.00 debit on 8 April 1988 should not have been made - credit of interest of $3,327.52;

- That the $5,000.00 credit of 21 July 1989 had been made - credit of interest of $2,266.54;

- That the capping fee complained of had not been debited - credit of interest of $128.05;

- That interest had not been calculated on the interest component of the previous balances - credit of interest of $222.79.

Neither the basis for these calculations, nor their effect in any combination thereof, was explained, but I have no reason to reject these concessions.

Much then, depends on which of these scenarios, if any, may be regarded as operative. It should also be noted that the allegation of the plaintiff is that, as at 23 March 1992, the defendants had defaulted in the payment of interest up to the sum of $7,253.53. Subject to the maxim "de minimus non curat lex", if any substantive part of that sum was due and owing for interest on the secured sum as at 23 March 1992, the plaintiff is entitled to judgment for possession.

Unexplained debit of $5,000.00 on 8 April 1988

I am satisfied that, on that date, for some reason, the plaintiff drew a bank cheque for $5,000.00 and paid it to the NAB. It was so drawn that it would have required the NAB to credit it to an account in the name of "S & E Stergiou", that is, the defendants. However, the defendants depose and, despite having every opportunity to do so, the plaintiff cannot dispute the fact that the defendants at that time had no account with the NAB. Of course, it is possible that there was some dormant account into which the sum was credited. Nevertheless, there is no indication of any authority express or implied being given to the plaintiff from the defendants, as one would otherwise expect, explaining why the cheque was drawn. There is no indication, despite the passage of time since the attention of the parties focused on this debit, of what it was for, or how the defendants benefited, if at all, from the disbursement.

It is true that until 1991, when, for some reason the defendants became dissatisfied and demanded, in general terms, an accounting from the plaintiff, no issue had previously arisen as to the correctness of any debits made. However, the accounts sent by the plaintiff from time to time were not transparently self-explanatory.

Whilst the lack of previous complaint must raise a question mark, as does the first defendant's fondness for extravagant and unsubstantiated allegations, the fact is that a commercial institution such as the plaintiff is, ought to have records to explain such an entry. It certainly should have sought records from the NAB as soon as it appeared that the debit was in question.

The plaintiff's records, unfortunately, have not been shown to be so accurate as to inspire any unquestioning confidence in them beyond their mere accounting accuracy.

In the result, I am not satisfied that the debit referred to was authorised by the defendants.

"Unauthorised debit" of $300.00 for "peace of mind feature"

The response of the defendants deposes to a denial that any "request" was made to activate the debit on 8 September 1989. There was a request signed 26 August 1991. That seems to be the request which the first defendant claims to have reluctantly executed out of fear of retaliatory action. However, as it does not seem to have been acted upon, at least in relation to the secured account, nothing turns on this.

An issue is raised as to the debit of 8 September 1989.

Despite the further opportunity to produce any substantiation of the reference to a "request" in the letter from the plaintiff to the defendants of 15 September 1989, none was forthcoming. The form and content of that letter does not persuade me that it was anything other than an advertising or "marketing" ploy, no doubt composed in the belief that customers would welcome the offered benefit. The lack of any note or other substantiation in writing of the "request" confirms this view to me. After all, there was produced a record of the request signed 26 August 1991. It is unlikely, if the plaintiff had considered that a request needed to be express before debiting a customer's account with a hitherto unauthorised charge, that such request would not have been in writing, signed by the customer and held in the plaintiff's records relating to that customer, as were other relevant documents.

Authority for this debit has not been shown. Indeed, I am positively satisfied it was unauthorised.

Deposit of ANZ bank cheque no. 004816 drawn 21 July 1989

It is clear that if there was such a cheque deposited it has not been credited to the defendants' account.

The first defendant asserted in annexure B to his affidavit of 16 April 1997, that the cheque butt and deposit slip relating to the transaction were dated 25.07.89. Presumably, that reflects the date on which the defendants claim to have deposited funds with the ANZ Bank in exchange for the bank cheque.

It may be, therefore, that "21 July 1989" being the originally stated date should have been 25 July 1989 or some date shortly thereafter. Even so, the records of the plaintiff acknowledge no such cheque as having been deposited. Nor is there any other deposit with which such a cheque or its proceeds could be identified.

No party, before 26 February 1997, sought to require the ANZ Bank to produce its records in relation to the bank cheque allegedly issued. No relevant records are now in existence. They were destroyed after seven years.

Though more reliable than the defendants' records, the plaintiff's records have not proved to be free from error. Further, the plaintiff has failed, since it became aware of the defendants' contentions in this respect, to obtain and preserve records that would have clarified this question. It is, therefore, impossible for me to be satisfied that the cheque referred to was not deposited but overlooked by the plaintiff.

On the other hand, the defendants have been aware, since 1992, of the need to preserve and produce records. If, as at 14 April 1997, the first defendant could refer to a cheque butt and deposit slip dated 25.07.89 as relevant, the Court is entitled to question why they, or a copy of them, are not produced.

Accordingly, given also the unreliability of the first defendant's evidence, as indicated by his extravagant and sometimes preposterous allegations, I cannot be satisfied that the cheque referred to was deposited.

The defendants bear the onus of proving that the payment in question was made, see Young v Queensland Trustees Ltd [1956] HCA 51; (1956) 99 CLR 560; Crimean v Fabian [1968] 1 CCR Vic 176; Seldon v Davidson [1968] 2 All ER 755. They have not discharged that onus. I, therefore, do not conclude that a failure by the plaintiffs to give credit for the $5,000.00 payment alleged to have been made by the defendants in or about July 1989 has been established.

Calculation of interest upon interest charges

Until end October 1991, when the first defendant decided to cease payments, apparently aggrieved that the plaintiff had declined to explain its accounts, the sums debited and charged out by the plaintiff as interest charges were duly paid by the defendants on or before the "due date" shown on the monthly statements.

Before September 1989, the plaintiff apparently accepted that interest would accrue on the interest charge only if not paid by the due date. However, from September 1989, though it did not advise the defendants of its change of policy, the plaintiff charged interest between date of accrual of the interest charge and its payment. The days so taken into account varied in number from seven to 17. It was not noticed that there had been such a change until the matter was before the Full Court.

The plaintiff contends that it was always entitled to charge interest from accrual till payment of interest charges. It asserts that the practice adopted until September 1989 was, in truth, an indulgence granted to the defendants.

There are provisions of the mortgage relevant to the accrual of interest and the application of monies paid. Clause 4.1 provides,

If default is made in the payment upon the due date of any sum payable by the Mortgagor to the Mortgagee whether in respect of principal or interest the Mortgagee shall be entitled to charge simple interest on that sum from the date of default until the sum is paid at the rate or the higher rate if there shall be one as set out in the Particulars of Mortgage.

The Particulars of Mortgage contain no provision specifying the interest to be charged. The mortgage merely states (Clause 1(i)),

The Mortgagor shall pay to the Mortgagee the monies hereby secured together with interest thereon ... as notified and directed by the Mortgagee.

The latter provision relates to the mode and manner of payment. It does not specify the source of, or the extent of, the obligation to pay interest.

Clause 1(ii) refers to a "Relevant Credit Contract" and obliges the mortgagor to pay,

... all monies ... mentioned ... or ... secured by the Relevant Credit Contract ... at the times and places and in the manner as may now or hereafter be provided by the Relevant Credit Contract ... and all such monies shall be and be deemed to be a part of the monies hereby secured.

It is relevant also to note cl 4.2,

All payments made by the Mortgagor shall be attributed first towards interest outstanding under this mortgage at the date of payment and then only in satisfaction of the principal sum.

The default provision, cl 16, merely requires "default under this Mortgage" to activate the power to take possession under that clause. The mortgage, dated and signed 8 April 1988, contains no definition of the term "Relevant Credit Contract".

There had, on 9 November 1987, been an offer of an advance described as "Mortgage Power (Credit Line) Facility". It offered $100,000.00, repayable subject to "Mortgage Power standard terms and conditions (attached)". The interest payable was variable, but at that time was 15.40%.

The "Repayment Schedule" forming part of the terms of that offer provided for,

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

There is reference therein to an "Annexure". That document contained what were described as "Additional Terms/Conditions of Approval". Those provisions, in turn, refer to and include, per cl 5(a) thereof "... Citibank Mortgage Power standard terms and conditions, a copy of which is attached".

According to Mr Sean Flynn in his affidavit of 31 January 1997, that latter attachment was in the form of a glossy pamphlet so entitled. That is not disputed by the defendants although the particular document produced bears no initial or signature to link it with the documents previously mentioned, which other documents are signed by the defendants.

Nevertheless, I am satisfied that the pamphlet contains relevantly further terms of the agreement constituted by acceptance of the plaintiff's offer of credit.

The terms relied on by the plaintiff for present purposes include the following,

6. The Borrower shall be obliged to pay to Citibank (which the Borrower hereby agrees to pay as evidenced by signing the Citibank Letter of Approval/Agreement and/or drawing on the credit line facility referred therein) the following amounts: (a) the aggregate of all drawings; and (b) all other amounts (including credit charges and other Citibank fees, expenses and charges debited or applied by Citibank and contained in monthly statements of amount [sic] sent to the Borrower) payable under these terms and conditions or the mortgage to the extent permitted by law.

7. The Borrower shall be allocated a monthly billing date for issuance of statements of account. A statement of account will specify billing date, together with all other relevant details.

8. Notwithstanding the generality of Clause 6 above (and without affecting the Borrower's obligations thereunder) the Borrower shall, within 15 days of the date of a statement of account, pay to Citibank an interest only (credit charges and other charges) monthly repayment as set out in such statement. The Borrower may also elect at any time to pay the whole or part of the balance outstanding (includes principal [sic] sum) under the Citibank Mortgage Power Account at that time.

...

13. Citibank shall apply a credit charge (interest rate) to the outstanding balance due by the Borrower from time to time to the Citibank Mortgage Power Account calculated on a daily basis at the annual percentage rate (the effective rate) disclosed and notified to the Borrower from time to time in writing. The credit charge shall be billed monthly to the Borrower and shall be payable as provided in these terms and conditions.

These documents, in my view, may be accepted as constituting the "Relevant Credit Contract" referred to in the Mortgage. It may be that one of the payments made by the defendants was made after expiry of the time permitted under cl 8. However, that would depend on whether the fifteenth day fell on a banking day. If not, it may have been within the credit terms. In any event, it would make only a minimal difference. No such point is taken by the plaintiff. It accepts that payments up to end October 1991 were all within the credit terms.

It will be apparent that nothing in these terms enables the plaintiff to charge interest on credit charges due but not yet payable according to the terms of the billing statement. That statement had to allow 15 days for payment under cl 8. It would, however, have been open to the plaintiff to grant further time if it had chosen so to specify it in the "billing statement" sent.

In my view, the change of billing policy was a breach of the terms of acceptance of the credit facility secured by the mortgage.

Interest was, therefore, overcharged accordingly.

What are the consequences?

The plaintiff concedes that, as at 23 March 1992, the making of the unauthorised debit of $5,000.00 on 8 April 1988 resulted in an overcharge for interest of $3,327.52.

It also concedes that the making of the unauthorised debit of $300.00 resulted in an overcharge for interest of $128.05.

The interest overcharged from September 1989 on interest instalments billed but not then payable was a further $222.79.

The total of those sums is $3,678.36.

However, as at 23 March 1992, the unauthorised debit of $5,000.00 had the effect of concealing from the defendants the fact that they should have had a credit available to them of $5,300.00 plus the interest overcharged. That sum represents the total of the unauthorised debits of $5,000.00 and $300.00 referred to above.

Mr Arthur, for the plaintiff, acknowledged that fact but submitted that, even so, it was not open to the defendants to have any sum other than the interest overcharged credited to the sum otherwise outstanding for interest as at 23 March 1992. In other words, the notional further credit of $5,300.00 should be ignored.

It should be noted that the term "interest" is defined in the "Relevant Credit Contract" to include not only credit charges but also "other charges".

On the face of it, therefore, the $300.00 wrongly debited for the "peace of mind feature" should be recredited against interest otherwise due.

The total of "interest" charges wrongfully debited to the No. 1 account as at the date of issue of the writ was therefore not less than $3,978.36.

As at 23 March 1992, a statement dated 15 March 1992 had been dispatched by the plaintiff. However, its due date for payment was 30 March 1992. Thus the relevant credit charges, if any, were those accumulated in the previous statement despatched on and dated 15 February 1992 after credit had been made for the sums relevantly identified as being overcharges.

The last payment had been $1,979.60 due on 30 October 1991.

The subsequent charges as billed by the plaintiff were,

Billing Date	Amount	Due Date
15.11.91	$1,884.80	30.11.91
15.12.91	$1,774.38	30.12.91
15.01.92	$1,819.33	30.01.92
15.02.92	$1,774.83	01.03.92

Note: There was a debit on 17 January 1992 of $350.00 and 11 February 1992 of $50.00. They are described merely as "Journal DR". It is not clear that they are, nor do they seem to be credit charges.

The claimed total for credit charges at 23 March 1992 was, therefore, $7,253.34.

Clearly, had the relevant overcharges so far identified, including the debit of $5,000.00, been credited to the accumulated charge for unpaid credit charges, the defendants would have been in credit to the extent of $1,725.02 as at 23 March 1992.

The plaintiff argues, as I have noted, that the debit of $5,000.00 should be disregarded in calculating the sum due for interest as at the date of the issue of the writ claiming possession. His argument was that even if the credit had been notionally made, the defendants were precluded from drawing upon a credit balance to pay an outstanding interest charge.

Clause 16 of the terms and conditions contained in the pamphlet previously referred to was referred to. It provides,

The Borrower shall be entitled to draw upon the Bank Account solely by use of cheque forms supplied by Citibank and shall not withdraw any funds except by this method. The Borrower is not entitled to use such cheques for the purpose of paying amounts due under the credit facility but shall use other cheques drawn on the Borrower's other accounts (if any) with Citibank or at other banks. All cheques must be marked "not negotiable" or crossed with two parallel lines as required by Cheques and Payment Orders Act 1986 and completed clearly, specifying a person to whom the cheque is payable, the amount of the cheque and signed and dated personally by the Borrower or his authorised signatory. ...

However, the apparent stringency of that provision is ameliorated by two considerations. First, whilst cl 11 states,

All payments due to Citibank under the credit facility shall be made by the Borrower by cheque to Citibank at the place and in the manner specified in the Schedule hereto.

cl 12 provides,

All cheques, promissory notes, bills of exchange or money orders received by Citibank for any amount payable hereunder shall not be credited to the Borrower's account until duly met on presentation.

Thus, the limitation on mode of payment was, obviously, not to be taken literally. Clause 11 merely prescribes how, if payment is made by cheque, those cheques should be drawn. It does not exclude payment by any other method. Nor would it be commercially rational to forbid payment by any means other than a cheque. It does forbid the drawing of a cheque on the account in respect of which the payment is to be made.

The second consideration is that, on the plaintiff's own admission, the defendants had two accounts with the plaintiff. Had the debit balance been corrected on the No. 1 account, that is, the account secured by the mortgage before issue of these proceedings, it would have been open to the defendants to withdraw up to $7,025.02.

Even accepting the statements issued on the No. 2 account at face value, and they have been, generally, impugned by Mr Lee's report, the minimum payment due on that account, as at 23 March 1992, was $1,812.92. It would have been open to the defendants to pay that sum out of the No. 1 account, plus enough to cover all outstanding credit charges then claimed by the plaintiff to be due on the No. 2 account. On clearance of that payment, it would have been open to the defendants then to draw upon the No. 2 account a cheque for any outstanding credit charges remaining due on the No. 1 account, that is the adjusted sum due for interest, and pay that amount by that cheque.

Indeed, the accounts show, on the plaintiff's own records that, from time to time, the defendants had paid monies into the No. 1 account by drawing on the No. 2 account.

Thus if, as the plaintiff's counsel accepted, the defendants are now entitled to be put back in the position they would have been if the wrongful debits now identified had not been made, it seems to me to follow that there would not have been, as at 23 March 1992, any sum due to the plaintiff on account of outstanding interest charges unpaid. To conclude otherwise is to permit the plaintiff to benefit from its own breach of agreement and to deny to the defendants the benefit of the proper performance of the contractual obligations breached by the plaintiff.

It follows that the plaintiff has failed to demonstrate that, as at 23 March 1992, there had been a default in payment of credit charges, that is, interest, justifying the issue of a writ of possession.

There will be judgment for the defendants, with costs.