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Federal Court of Australia |
CONTRACT - Duress - Unconscionable Dealing - element of "illegitimacy" of threat and pressure in duress - whether can be unconscionable dealing associated with antecedent transaction - foreign currency transaction - customers induced to enter into it by conduct of bank - bank's threat to appoint receiver and manager if customers do not sign release of any claim or cause of action against bank - customers sign - whether signature of release result of duress.
PRACTICE AND PROCEDURE - use to be made of admission made for purpose of hearing of separate question - construction of admission in sense different from that intended by admitting party who makes this clear - construction adopted different from that understood by parties - miscarriage of trial.
Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 (Considered)
Barton v Armstrong [1976] AC 104 (Considered)
Dimskal Shipping Co SA v International Transport Workers' Federation [1992] 2 AC 152 (Considered)
Universe Tankships Inc of Monrovia v International Transport Workers' Federation [1983] 1 AC 366 (Considered)
CTN Cash & Carry Ltd v Gallaher [1993] EWCA Civ 19; [1994] 4 All ER 714 (Considered)
Commercial Bank of Australia v Amadio [1983] HCA 14; (1983) 151 CLR 447 (Considered)
Pao On v Lau Yiu Long [1979] UKPC 2; [1980] AC 614 (Considered)
Smith v William Charlick Ltd [1924] HCA 13; (1924) 34 CLR 38 (Considered)
WESTPAC BANKING CORPORATION v GRAHAM DOUGLAS COCKERILL, ARTHUR THOMAS DINGLE and VALERIE DINGLE
No QG 13 of 1997
NORTHROP, LINDGREN, KIEFEL JJ
BRISBANE
6 FEBRUARY 1998
|
IN THE FEDERAL COURT OF AUSTRALIA | |
| QUEENSLAND DISTRICT REGISTRY | QG 13 of 1997 |
|
BETWEEN: | WESTPAC BANKING CORPORATION
APPELLANT |
|
AND: | GRAHAM DOUGLAS COCKERILL, ARTHUR THOMAS DINGLE and VALERIE DINGLE
RespondentS |
|
JUDGES: | NORTHROP, LINDGREN AND KIEFEL JJ |
| DATE OF ORDER: | 6 FEBRUARY 1998 |
| WHERE MADE: | BRISBANE |
THE COURT ORDERS THAT:
1. The appeal be allowed.
2. The declaration made on 20 December 1996 in proceeding NG 29 of 1991 be set aside.
3. The order of 28 June 1995 in proceeding NG 29 of 1991 be set aside.
4. The respondents to the appeal (applicants in proceeding NG 29 of 1991) have leave to amend further their further amended reply in proceeding NG 29 of 1991 as they may be advised, by 27 February 1998.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
|
IN THE FEDERAL COURT OF AUSTRALIA | |
| QUEENSLAND DISTRICT REGISTRY | QG 13 of 1997 |
CONSTITUTED BY A SINGLE JUDGE
|
BETWEEN: | WESTPAC BANKING CORPORATION
Appellant |
|
AND: | GRAhaM DOUGLAS COCKERILL, ARTHUR THOMAS DINGLE and VALERIE DINGLE
Respondents |
court:
NORTHROP, LINDGREN and kiefel jj DATE: 6 february 1998 PLACE: brisbane
NORTHROP J
The issue raised by this appeal is whether, pursuant to an accord and satisfaction, Westpac Banking Corporation ("the Bank") was released from obligations claimed against it by Graham Douglas Cockerill, Arthur David Thomas Dingle and Valerie Jean Dingle ("the Partners"). A simple description of an accord and satisfaction is given in Halsbury's Laws of England, Fourth Ed Vol 9 para 585:-
"Accord and satisfaction is the purchase of a release from an obligation, whether arising under contract or tort, by means of any valuable consideration, not being the performance of the obligation itself. The accord is the agreement by which the obligation is discharged. The satisfaction is the consideration which makes the agreement operative."
The facts giving rise to this appeal are very complex. The task of the trial Judge was made more difficult by reason of defects in the pleadings and uncertainties arising from an order of the Court and admissions made on behalf of the Bank. A summary of the essential features of the appeal will set the stage for what became a very confused matter.
In 1983 and 1984 the Partners were customers of the Bank. In 1984 they entered into an agreement with the Bank involving an offshore commercial loan denominated in Swiss francs. The venture failed dismally with the result that the Partners suffered severe financial losses. They were facing financial ruin. The loan was due to be repaid. The Partners could not repay the amounts owing. Securities over properties given by the Partners were in danger of being enforced by the Bank. Following protracted negotiations between the Bank and the Partners, an accord and satisfaction was entered into between them. In substance the accord and satisfaction was constituted by an agreement that in consideration of the Bank granting the Partners a loan of Australian dollars with concessional interest rates to pay out the Partners' offshore loan, the Partners agreed in writing to release the Bank from any claim or cause of action which they had or may have had against it arising out of or in connection with the offshore commercial loan or any foreign currency transaction. The accord and satisfaction was entered into in February 1988. The agreement constituting the accord and satisfaction was carried out. The Bank advanced the loan at the concessional rates of interest. The offshore loan was paid out. The partners paid the concessional rates of interest to the Bank. There were other terms of the agreement which need not be referred to at present.
The financial position of the Partners did not prosper. It is not necessary to refer to the detailed history of those events.
In January 1991, the Partners commenced a proceeding against the Bank in the Federal Court. This proceeding was identified as NG 29 of 1991 but was later transferred to the Queensland District Registry. The order the subject of this appeal was made in that proceeding. Following protracted procedural matters not presently relevant, the Partners filed a further amended statement of claim. In substance, the Partners claimed relief against the Bank. Paragraphs 1 to 35 of their further amended statement of claim dated 17 March 1995 made it clear that the relief sought related to loss and damage arising out of or in connection with the offshore loan. By way of defence, the Bank included in its amended defence dated 7 April 1995 a plea based on the accord and satisfaction entered into in February 1988. The plea, contained in paragraph 22 of the amended defence, is set out but it is noted that in the pleadings the word "applicants" or "partners" refer to the Partners while the word "respondent" refers to the Bank:-
"22. Further, as to paragraphs 1 to 35 of the further amended statement of claim, the respondent says that if, which is denied, the respondents have (sic respondent had) been negligent or have(sic had) breached section 52 of the Trade Practices Act as alleged, then:
(a) in consideration of the respondent granting the partners a loan of Australian dollars with concessional interest rates to pay out the partners' offshore loan, the partners agreed in writing, on 5th February or alternatively, on 9th February 1988, to release the respondent from any claim or cause of action which they had or may have had against it arising out of or in connection with the offshore commercial loan or any foreign currency transaction, which includes the causes of action sued on herein;
(b) in the premises the claims of the applicant (sic applicants) herein have been released and the applicant is (sic applicants are) not entitled to maintain such claims against the respondent."
This plea appears in a rolled up form. In reality it alleges an executory agreement. It does not allege that the terms of the agreement were carried out. In fact, however, they were carried out. To some extent, the allegation in para 22(b) appears to be based upon a release. Strictly speaking, at common law a release had to be under seal, but in equity a release, if supported by consideration, was effective. This is where the release forms part of the accord and satisfaction. In the present case, the parties and the trial Judge, appear to have treated para 22 as a plea of release even though there was no plea that the consideration given by the Bank for the release, the satisfaction, had been executed.
By a reply which was being amended up to the time of trial, the Partners appear to plead that the "release" had been given in circumstances which prevented the Bank from relying upon it. At the trial, the Partners sought to rely on the circumstances that the release was ineffective because they were induced to give it by conduct of the Bank in contravention of s 52 of the Trade Practices Act 1974 , by the negligence of the Bank, by breach of contract by the Bank, by illegitimate pressure exerted by the Bank or by duress by the Bank. The nature of paragraph 2 of the reply is not clear but it is set out in full in the form in which it existed at the trial even though not all aspects of the reply were relied upon by the Partners.
"2. As to paragraph 22 of the Amended Defence, the Applicants say:-
2.1 The Applicants repeat the Further Amended Statement of Claim.
2.2 In the period 17 August 1987 to 9 February, 1988 the Respondent by Mr Jack Allen, its offshore commercial loans Manager, represented to the Applicants in trade or commerce that:-
(a) there was no possibility that the Respondent had:-
(i) Engaged in conduct in contravention of Section 52 of the Trade Practices Act, 1974 (Comm);
(ii) Given negligent advice;
(iii) Breached its contractual duty to exercise due care, skill and diligence in the giving of advice to the Applicants; or had
(iv) Contravened Section 261(1) of the Income Tax Assessment Act, 1936, (Comm) in its dealing with the Applicants.
(b) the Applicants were liable to the Respondent for all payments of withholding tax, made by the Respondent in relation to the Applicant's Foreign Currency loan:
(c) the Respondent was owed the sums of money for withholding tax stated in the Foreign Currency loan statements issued periodically; and
(d) the Applicants were liable for the entirety of the capital loss sustained by the Applicants by reason of the Foreign Currency loan;
(e) the Respondent was entitled to appoint a Receiver/Manager over each of the businesses conducted by the Applicants and known as Rum City Motor[s], Cycle Spot and Moto Sales;
(f) the Respondent was entitled to sell each property of the Applicants over which it held a mortgage;
(g) the Applicants had no legal or commercial alternative other than to do what the bank required;
(h) the Respondent would appoint the Receiver/Manager over each business of the Applicants and commercially destroy the Applicants if they did not do what the Bank required.
2.3 In addition to the representations in paragraph 2.2, in the period to 22 January to 9 February, 1988, the Respondent by each of Messrs Allen, Murphy and Thomas represented in trade or commerce that:-
(a) the Applicants were indebted to the Respondent in the sum of approximately $5,750,000.00;
(b) the Respondent was entitled to appoint a Receiver/Manager over each of the businesses conducted by the Applicants and known as Rum City Motor[s], Cycle Spot and Moto Sales;
(c) the Respondent was entitled to sell each property of the Applicants over which it held a mortgage;
(d) the Applicants had no legal or commercial alternative other than to execute a letter in the form of the letter dated 1 February, 1988; and
(e) the Respondent would appoint a Receiver/Manager over each business of the Applicants and commercially destroy the Applicants if they did not execute a letter in the form of the letter dated 1 February 1988.
2.4 Each of the representations in paragraph 2.2 and 2.3 were [sic] false and/or misleading and/or deceptive and/or negligent and/or in breach of the obligation owed by the Respondent to the Applicant to exercise due care, skill and diligence when giving advice.
(a) The Respondent was liable in damages to the Applicants for a sum not less than the alleged indebtedness of the Applicants to the Respondent by reason of its contravention of Section 52 of the Trade Practices Act and/or negligence and/or breach of contract.
(b) Any liability for withholding tax to the Respondent by the Applicants was avoided by Section 261(1) of the Income Tax Assessment Act; and
(c) The Applicants could resist any attempt by the Respondent to realise any security over the Applicants' assets.
2.5 Each of the representations in paragraphs 2.2 and 2.3 were [sic] relied upon [sic] the Applicants when executing the letter dated 1 February 1988.
2.6 Each of the representations in paragraphs 2.2 and 2.3 constituted illegitimate pressure exerted by the Respondent on the Applicants.
2.7 In all the circumstances the Applicants executed the letter dated 1 February, 1988 on each of 5 and 9 February, 1988 under duress.
2.8 Further, the execution of the letter dated 1 February, 1988 on each of 5 and 9 February, 1988 resulted from:-
(a) a mistake on the part of the Applicants induced by the representations of the Respondent in paragraphs 2.2 and 2.3 above; and
(b) the misleading and/or deceptive conduct and/or advice and/or breach of its contractual obligations to exercise due care, skill and diligence when making the representations in paragraphs 2.2 and 2.3 to the Applicants.
2.9 By reason of the matters set out in this paragraph the Respondent is not entitled to rely on the letter dated 1 February 1988 which was signed by the Applicants on each of 5 and 9 February 1988.
2.10 Further and in addition the letter dated 1 February, 1988 is void as a collateral agreement within the meaning of Section 261(i) of The Income Tax Assessment Act, 1936 (Comm) as it purports to make the Applicants liable to the Respondent for payments of withholding tax arising from the Foreign Currency loan.
2.11 By commencing these proceedings against the Respondent in January 1991 and by maintaining their entitlement to the relief sought thereafter, the Applicants, by their conduct, rescinded the Agreement alleged by the Respondent in paragraph 22 of its Amended Defence.
2.12 Further, or in the alternative, by reason of the matter set out above, the Applicants are entitled to and do claim avoidance of the agreement alleged in paragraph 22 of the Amended Defence pursuant to Section 87(1) of the Trade Practices Act, 1974, (Comm).
3. In answer to paragraph 24 of the Amended Defence, the Applicants say that the Respondent is not entitled to set off the amounts stated or any amount by reason of the Deed of Composition entered into by the Applicants with their creditors on 7 October 1992 pursuant to Division 6 Part of IV The Bankruptcy Act, 1966."
Paragraph 2.9 appears to be the nub of the plea. It is noted that even at this stage there was no mention of the agreement between the parties nor the fact that the Bank had executed its obligations under the agreement by advancing the money to the Partners at the concessional rates of interest compared to the current market rates of interest. Paragraph 3 of the reply is directed to another issue.
Some more detail will need to be given later, but the two letters constituting the agreement or arrangement between the parties were each dated 1 February 1988 but the Partners signed the second letter on two different dates, 5 February and 9 February 1988 respectively.
The first letter was described by the trial Judge as "the letter of offer". It referred to the verbal acceptance of a refinance offer made to the Partners by the Bank and then set out the terms of the offer. It need not be set out in full. The amount of the loan was to be approximately AUD $5,750,000 and the basis of the calculation of that amount was set out. The term of the loan was three years to 28 February 1991, but was subject to renegotiation up to a total of 10 years "on normal interest rates". Interest only was to be paid for the initial three years but reductions of principal were to be made from proceeds of sale of property owned by the Partners as detailed in the letter. The letter contained the following paragraphs:-
"Should the above terms and conditions be as accepted verbally, would you all please sign and return the duplicate of this letter and the enclosed concessional interest rate letter.
The Bank has advised they wish to have this matter finalised as a matter of urgency and seeks your written acceptance by 3.2.88 at the latest with a view to refinance at next rollover 16.2.88.
Your urgent attention to this matter is requested."
The duplicate of this letter was signed by the Partners on 5 February 1988 and returned to the Bank. A duplicate of the concessional interest rate letter referred to in the letter of offer was signed by the Partners and returned to the Bank.
The second letter, described as the concessional interest rate letter, was as follows:-
"The Bank has, at your request, agreed to provide to you an Australian dollar domestic loan facility at a concessional rate of interest in lieu of your current offshore commercial loan, subject to documentation satisfactory to the Bank and to your acceptance of the following terms by signing and returning the accompanying duplicate of this letter:
1. You acknowledge that you have made your own decision to replace the offshore commercial loan with an Australian dollar domestic loan facility, that we have recommended that you take independent advice in making this decision and that you have not relied on the advice of the Bank or any employee of the Bank in this regard.
2. You acknowledge that as a result of exchange rate movements following the repayment of the offshore commercial loan, you may suffer greater exchange losses than may have been the case had the offshore commercial loan been repaid on its scheduled repayment date.
3. You release the Bank from any claim or cause of action you have or may have against it arising out of or in connection with the offshore commercial loan or any foreign currency transaction."
The duplicate of this letter was signed by the Partners on 5 February 1988 but subject to an objection. On 9 February the Partners, by writing, withdrew their objection and signed a form of the letter and returned it to the Bank.
These two letters constitute an executory contract between the parties. The offer by the Bank was accepted by the Partners signing the duplicates of the letters. This is a classical example of a contract coming into existence on the acceptance by the offeree of the offer in the manner specified by the offeror. Thereafter, without going into details, the obligations of the parties under the agreement were performed. Reference need be made to two matters only. The amount of approximately AUD$5,750,000 was advanced by the Bank to discharge the loan in Swiss francs owing by the Partners. The Partners paid interest to the Bank on the amount advanced at the concessional interest rates. As a result they received a substantial financial advantage, the saving being in excess of $900,000.
The Partners did not commence legal proceedings against the Bank to enforce their claims based on the events of 1984 until long after February 1988. The legal proceedings were not commenced until January 1991. By that time the Partners were insolvent. The principal of the loan advanced to the Partners by the Bank in February 1988 was due to be repaid in February 1991. The Partners were unable to pay that sum to the Bank.
On 28 June 1995 the Court, on the motion of the Bank and subject to an undertaking not presently relevant, made the following order:-
"THE COURT ORDERS THAT:
1. Pursuant to O.29, r.2 the issue of whether, in consideration of the respondent granting the applicants a loan of Australian dollars with concessional interest rates to pay out the applicants' offshore loan, the applicants agreed in writing, on 5 February, 1988 or, alternatively, on 9 February, 1988, to release the respondent from any claim or cause of action which the applicants had or may have had against it arising out of or in connection with the offshore commercial loan or any foreign currency transaction, which includes the causes of action sued or (sic) in proceedings number NG 29 of 1991 be tried separately and before the trial of any of the other issues in the action."
The issue as stated appears to be incomplete. The issue is not identified by reference to paragraphs in the pleadings. In reality it is stated to be an issue or question of whether, in February 1988, in consideration of the Bank granting the loan, the Partners agreed in writing to release the Bank from any claims the Partners may have had against it at that time. On any view of the letters signed by the Partners and returned to the Bank, the answer to the question set out in the order of the Court had to be in the affirmative.
What was in issue between the parties was whether one part of the agreement, the release, was a valid defence to the proceeding which had been brought by the Partners. This issue should have been raised clearly by the pleadings. It was clear that the parties to the agreement had performed their obligations under the agreement. The loan at concessional rates of interest had been advanced by the Bank to pay out the Partners' debts under the offshore loan. It is not necessary to determine here whether the Partners had performed their other obligations with respect to payments of principal from the proceeds of sale of their properties. It is sufficient to say that the Partners paid the interest on the new loan based on the concessional rates of interest. Nevertheless none of these facts were contained in any pleadings relating to the "issues" raised on the preliminary question.
Once the relevant issues are identified, an immediate question arises, namely whether, on the facts of this case, restitution is available to untangle the actions taken pursuant to the agreement. This would include an examination of the facts affecting the activities of the Partners including their bankruptcies on their own petitions, orders for the annulment of those bankruptcies, the effect of a Deed of Composition entered into by the Partners and their creditors on 7 October 1992 pursuant to Division 6 of Part IV of the Bankruptcy Act 1966 , and the question of whether the loan by the Bank to the Partners is a debt owed by the Partners to the Bank.
On any view the preliminary question appears to be based on the defence of accord and satisfaction in that it refers to an agreement, but it does not identify what questions are to be raised with respect to the rights and duties granted or imposed by the terms of the agreement and whether any of those rights and duties are vitiated.
The position is clouded further by a letter from the solicitors for the Bank to the solicitors for the Partners dated 26 June 1995 as follows:-
"We refer to your letter of 7 June 1995 and advise that our client will not object to the amendments contained in your clients' proposed further amended statement of claim.
Our client will seek from the court on Wednesday 28 June 1995 an order that the issue raised by paragraph 22 of its defence be heard as a preliminary issue.
In the event that a hearing of the preliminary point is ordered by Drummond J our client will admit, for the purposes only of that preliminary hearing, the particulars to paragraph 2.6 of your clients' draft reply.
However, this admission will not be binding upon our client in the event that the preliminary question is not heard separately or in the event that the Bank is unsuccessful in the preliminary hearing. In either event, the Bank will contest those particulars at any trial of the proceedings."
It should be noted that this letter illustrates the fact that the pleadings had not been finalised even just before the order was made directing the preliminary question be tried. The reference to paragraph 2.6 of a draft reply was to an earlier form of that document. At the trial the paragraph was numbered 2.4: a direction having been given that the amended reply be filed and served by 7 July 1995.
The particulars to paragraph 2.4 of the reply have been set out earlier in these reasons. Paragraph 2.4(b) is not relevant and was not pursued. Paragraphs 2.4(a) and (c) of necessity must refer to conduct during the negotiations leading to the agreement of February 1988. This is made clear by paragraphs 2.2 and 2.3 of the reply. Those paragraphs refer to conduct occurring in the period 17 August 1987 to 9 February 1988 and 22 January 1988 to 9 February 1988 respectively. It is difficult to see the relevance of the particulars to the plea in paragraph 2.4. The particulars must relate to the enforceability by the Bank of the release contained in the agreement of 1988. Paragraph 22 of the amended defence relates to the offshore loan entered into in 1984 and a defence to the claim made in the application. The particulars to paragraph 2.4 do not relate to the allegations of conduct referred to in paragraph 2.4. Particular 2.4(a) appears to apply to a further plea, not expressed, that as a result of the conduct by the Bank, the Partners have suffered loss and damage. Paragraph 2.4(c) appears to apply with respect to the validity of securities given over the Partners' assets.
The nature of the admissions made in the letter of 26 June 1995 are not clear. This led to difficulties at the trial.
It would appear that what the parties intended to be tried as a separate question was whether the release signed by the Partners was enforceable against them. The matter was not helped by the fact that apparently no directions had been given relating to the conduct of the trial on the preliminary issue, whether pleadings or contentions of fact and of law should be exchanged and who should have the initial carriage of the question.
As a result the trial Judge did not have the advantage of the issues to be decided being clarified by interlocutory steps. The hearing involved complex questions of fact and of law and extended over five sitting days. The trial Judge made the following substantive order:-
"THE COURT DECLARES THAT:-
1. The matters pleaded in paragraph 22 of the amended defence do not operate to release Westpac from any claim or cause of action which the applicants had or may have had against Westpac arising out of or in connection with the offshore commercial loan or any foreign currency transaction which includes the causes of action sued on in proceedings NG 29 of 1991."
The declaration does not identify the status of the agreement at February 1988. The order does not refer to the agreement being declared unenforceable or being vitiated on any ground or to whether restitution was possible.
Despite the procedural problems, the trial on the preliminary question proceeded. The Bank has appealed from the judgment given. The task of the Full Court has been made more difficult by the lack of clearly defined issues between the parties. There is much to be said for the view that the appeal should be allowed because of the absence of procedural fairness, but, to a large extent, the Bank has brought this upon itself.
The issues between the parties could have been clarified by the adoption of pleadings keeping in mind the difference between a pleading and particulars. Paragraph 22 of the defence of the Bank does not comply with pleading practice. The defence sought to be relied upon was either a release or an agreement constituting an accord and satisfaction. A pleading must contain a statement in a summary form of the material facts on which the party relies but not the evidence by which those facts are to be proved. Irrespective of whether the Bank relied on a release or accord and satisfaction, the material facts giving rise to the plea should have been stated in the defence; O 11 r 10 of the Federal Court Rules. Particulars are not a pleading. Particulars are designed to fill in the picture of the party's plea with information sufficiently detailed to put the opposing party on guard as to the case to be met; c/f Bruce v Odhams Press Ltd [1936] 1 KB 697 per Scott LJ at 712.
Paragraph 2 of the reply by the Partners is based on deficiencies in the pleading contained in paragraph 22 of the defence. On the preliminary question, properly construed, the Bank was asserting an accord and satisfaction or a release. No allegation was made that the agreement constituting the accord and satisfaction had been performed by the parties. Nor was it asserted that the release had been perfected by the Partners and the Bank performing their obligations under the agreement.
The Partners appear to have raised matters in their reply not directed to any allegation of fact contained in the defence. In any event, if necessary, the Bank should have relied upon a rejoinder with respect to the matters raised by the reply alleging contravention of the Trade Practices Act 1974 , negligence, breach of contract, illegitimate pressure, duress, mistake and misrepresentation. None of these matters had been raised by pleadings between the parties except, possibly, by reference to paragraph 2 of the reply including paragraphs 2.11 and 2.12. Paragraph 3 refers to an aspect of the relationship between the Bank and the Partners involving the insolvency of the Partners and their bankruptcies. By letter dated 30 January 1996 from the solicitors for the Bank addressed to the solicitors for the Partners, the Bank gave notice of what, in reality, was a rejoinder, that with regard to paragraphs 2.11 and 2.12 of the reply, the Partners had affirmed the accord and satisfaction by accepting the loan and paying the concessional rates of interest and that they had no right to rescind the agreement in the absence of a plea that they could give restitution and that the Partners could not give restitution.
This long introduction has been given to show that if proper procedures are not followed, the conduct of litigation can become confused not only to the parties but to the Court also. The parties to litigation should ensure that the issues involved are raised by the pleadings. The confusion in the present case is illustrated by the repeated complaint by counsel for the Bank on the appeal that the Partners claim based on duress was unique because of a number of features including the facts that the Bank had given valuable consideration for the release, that the Bank had acted in good faith and that the alleged unfair pressure alleged against the Bank was in fact lawful pressure. This repeated complaint illustrates that the Bank had not considered, or argued, that the release was an aspect of the accord and satisfaction, being an agreement which had never been pleaded.
The substantive issues raised by the appeal have been discussed in the separate reasons of Lindgren and Kiefel JJ. I agree with the orders proposed by their Honours. I concur with their reasons. I have nothing further to add.
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I certify that this and the preceding twelve (12) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice
R M Northrop |
Associate:
Dated: 6 February 1998
|
Counsel for the Appellant: | Mr R Chesterman QC & Mr J Sheehan |
| Solicitor for the Appellant: | Allen Allen & Hemsley |
| Counsel for the Respondent: | Mr P Dutney QC & Mr G Moore |
| Solicitor for the Respondent: | Caruana Kay & Barry |
| Date of Hearing: | 3 and 4 November 1997 |
| Date of Judgment: | 6 February 1998 |
|
IN THE FEDERAL COURT OF AUSTRALIA | |
| QUEENSLAND DISTRICT REGISTRY | QG 13 of 1997 |
|
BETWEEN: | WESTPAC BANKING CORPORATION
AppELLANT |
|
AND: | GRAHAM DOUGLAS COCKERILL, ARTHUR THOMAS DINGLE and VALERIE DINGLE
Respondents |
|
JUDGEs: | NORTHROP, LINDGREN AND KIEFEL JJ |
| DATE: | 6 february 1998 |
| PLACE: | BRISBANE |
I have had the benefit of reading a draft of the Reasons for Judgment of Kiefel J. I gratefully adopt her Honour's account of the background facts, the pleadings, the making of the order for the determination of the separate question, and the relevant findings and conclusions of the trial Judge. I concur in the conclusions reached and the orders proposed by her Honour. As well, I agree in substance with her Honour's reasons but wish to add the observations below.
RELEVANT FINDINGS AND CONCLUSIONS OF THE TRIAL JUDGE
The agreement made in October 1984 was for a loan of $3,000,000 of which some $2,000,000 was taken in Swiss francs and $1,000,000 was taken in Australian dollars. The primary Judge, whose decision is reported at (1996) 142 ALR 227, found that there was a continuing threat by the appellant ("the Bank") that if the respondents ("the Customers") did not sell an office building of theirs, referred to as "Milton Place", Brisbane ("the Milton property") and bring the off shore part of the loan on shore, the Bank would sell that property and appoint a receiver and manager to the Customers' businesses, thereby ruining those businesses. His Honour held, on the admissions made by the Bank for the purpose only of the hearing of the separate question, that it was liable to the Customers on causes of action of the kinds pleaded by them against the Bank in connection with the original borrowing in Swiss francs; that the Customers' parlous financial circumstances, involving loss to them of approximately $5,750,000, had been caused by the Bank's conduct associated with that borrowing; and that the Bank was liable to the Customers for that loss.
His Honour found that on 5 February 1988 the Customers signed the agreement at the foot of the Bank's concessional interest rate letter to them dated 1 February 1988, adding the words "under duress" after their signatures, and that at the insistence of the Bank, on 9 February 1988 they signed the same form of agreement at the foot of a second identical letter of that date, this time without adding those words. The Bank made it clear on the second occasion that if the Customers did not sign without the qualification, the Bank would appoint a receiver and manager. His Honour found that they had no practical alternative,
"because of their parlous financial circumstances which, on the admissions made by Westpac for the purposes of determining this preliminary issue, was to the extent of a loss of $5,750,000, caused by the conduct of Westpac amounting to breach of contract and/or negligence and/or conduct in contravention of s 52 of the Trade Practices Act [the causes of action asserted in respect of the foreign currency loan] ... ."((1996) 142 ALR 227 at 275)
In discussing the question whether lawful pressure may qualify as "illegitimate" pressure for the purpose of supporting a grant of relief on the ground of duress, his Honour did not expressly hold that the pressure exerted by the Bank was "lawful", although he seems to have assumed that it was. Be this as it may, later, when discussing innocent misrepresentation, he held that the Customers were not entitled to the benefit of a set-off. It followed that they were indebted to the Bank, that they had defaulted, and that the Bank's remedies upon default were exercisable.
His Honour referred to cases which make it clear that lawful pressure may be "illegitimate" pressure for the purposes of duress: Universe Tankships Inc of Monrovia v International Transport Workers' Federation [1983] 1 AC 366 at 401; Shivas v Bank of New Zealand [1990] 2 NZLR 327 at 345; Caratti v Deputy Commissioner of Taxation (1993) 27 ATR 448 at 457; CTN Cash & Carry Ltd v Gallaher Ltd [1993] EWCA Civ 19; [1994] 4 All ER 714 (CA) at 718-9. His conclusion on the question of the illegitimacy of the pressure applied by the Bank is found in the following passage:
"In my view, the pressure exerted by Westpac was illegitimate pressure and it is irrelevant that Mr Allen or any other Westpac officer believed that Westpac was entitled to do what was threatened. I have reached that conclusion by assessing the conduct of Westpac and the position and choices available to the applicants against the known parlous financial state of the applicants. On the admissions, Westpac was responsible for that condition and had caused the applicants loss in an amount of approximately $5,750,000. Westpac knew that the applicants had no other practical option but to agree to the terms demanded by it to avoid the destruction of the applicants' businesses by the appointment of a receiver and manager and the sale of their assets. The applicants had no bargaining power. The so-called negotiation of the refinancing and the release of any claim or cause of action against Westpac was not at arm's length between persons at anything like free and equal negotiations. The huge disparity in bargaining position was, on the admissions made, created by and taken advantage of by Westpac to obtain the release in circumstances where at least some of the officers of Westpac directly concerned with the refinancing (Mr Murphy and Mr Cossart) were of the view that, notwithstanding the refinancing, the applicants would default on the new loan. The conduct of the relevant officers of Westpac went beyond driving a hard bargain as the price of obtaining a new loan at a concessional rate of interest. It was the use of a dominant position created by the conduct of Westpac to bring the offshore commercial loan onshore to protect Westpac from any further foreign exchange losses and to obtain the release of Westpac from any legal liability to the applicants in connection with the offshore commercial loan in consideration of a new loan at interest rates and on conditions which were, in the belief of the officers dealing with the loan, unlikely to enable the applicants to recover from, or work out of, their parlous financial position. To exploit the applicants' position of financial dependency on Westpac, a situation created by the misconduct of Westpac in the manner alleged and admitted, to obtain a real and substantial benefit (the release) which ordinarily formed no part of a loan by a bank to its customer and was not necessary to secure its position as lender, in exchange for a benefit of doubtful worth to the applicants in their parlous financial circumstances, was unconscionable in the sense used by McHugh JA in Crescendo and constituted illegitimate pressure: Equiticorp Finance [Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 (CA)] at ... 108-9, 149-50; P Birks, `The Travails of Duress' [1990] LMCLQ 342 at 346-7." ((1996) 142 ALR 225 at 278-9).
His Honour went on to reject the Bank's submission that if the agreement of release had resulted from duress, the Customers had nonetheless affirmed it.
I turn to the Customers' case based on innocent misrepresentation. His Honour observed that the Customers' submissions relied on innocent misrepresentation, although their further amended reply had also pleaded "mistake" in terms which might have suggested an intention to plead an independent cause of action. But closer analysis makes clear that what is alleged is no more than that the Customers believed the allegedly false representations and that their belief caused them to sign the agreement of release.
His Honour summarised the operative misrepresentations as being:
(a) that the Customers owed $5,750,000 to the Bank; and
(b) that the Bank was entitled to move under its securities.
He noted that the Customers' submission was that the falsity of both representations (a) and (b) was established by the Bank's admissions. It will be recalled that those admissions were, in substance: (1) that the Bank was liable in damages to the Customers for a sum of not less than the amount of their indebtedness to the Bank on the causes of action pleaded in the further amended statement of claim relating to the original borrowing in Swiss francs (particular 2.4(a)); and (2) that the Customers could resist any attempt by the Bank to realise any security over their assets (particular 2.4(c)). Particular 2.4(b) played no part in the case at first instance or on appeal; only particulars 2.4(a) and (c) did.
His Honour concluded that admission (1) did not falsify representation (a), because the Customers, on 5 and 9 February 1988, "did not have an enforceable equitable set-off, the operation of which was to extinguish the debt owing by them to [the Bank]" ((1996) 142 ALR 227 at 285). His Honour concluded, however, that admission (2) falsified representation (b).
The representations as pleaded which his Honour held were falsified by admission (2) were those found in subpars 2.2(e), 2.2(f), 2.3(b) and 2.3(c) of the further amended reply set out in the Reasons for Judgment of Kiefel J. The trial Judge reached his conclusion in favour of falsification by construing particular 2.4 (c) in the light of the representations which it was said to falsify, by construing the expression "attempt ... to realise any security" in that particular broadly, and by holding that the word "realise" included, in the context in which it appeared, the appointing of a receiver and manager.
His Honour held that the Customers were induced to enter into the agreement of release by the misrepresentations pleaded in subpars 2.3(b) and 2.3(c) of the further amended reply.
Finally, his Honour rejected a submission by the Bank that rescission was not available because of the impossibility of restitutio in integrum.
REASONING ON THE APPEAL
Duress
With respect, I agree with Kiefel J's discussion of the law in this area.
I do not think that the case of duress as pleaded and fought, relied upon the Bank's wrongful conduct in connection with the contract made in October 1984 for the off shore loan, for the purpose of the illegitimacy element of the duress of February 1988. The only pressure identified in the Customers' further amended reply was pressure arising from the representations preceding the making of the agreement for release and the Customers' belief that they were liable to the Bank and had no choice but to yield to its demands. The Customers' case that the Bank had misrepresented that they had no choice, was different from the case found by his Honour of wrongfulness constituted by unconscionable dealing. The Bank's admission of the matters alleged in particulars 2.4(a) and (c) could not widen the case of duress as pleaded and conducted and did not enable antecedent background facts of some years earlier to be taken into account to support an unpleaded case of unconscionable dealing.
I refrain from expressing an opinion whether or not the illegitimacy of the pressure at the heart of duress may be furnished by unconscionable dealing arising from earlier conduct of the kind supposedly present in this case. Rather, I would decide only that in the light of the pleading and the way in which the case was conducted before his Honour, illegitimacy could not be found to have been established in that way.
Innocent Misrepresentation
I do not find it necessary to deal with the Bank's submission, which his Honour rejected, that the pleaded representations were expressions of opinion and intention, and not misrepresentations of fact.
The representations of entitlement to appoint a receiver and manager and to sell mortgaged properties were pleaded as falsified, directly, only by the statement in particular 2.4(c): "[The Customers] could resist any attempt by [the Bank] to realise any security over [the Customers'] assets". The lack of exact correspondence between par 2.4(c) and the representations which it was said to falsify was the subject of extensive debate before his Honour. He construed the particular as extending to include legal entitlement to prevent the appointment of a receiver and manager and legal entitlement to prevent sale of mortgaged properties, and held that, by its admission of the matters alleged in the particular, the Bank must therefore be taken to have admitted that both representations were false.
Did the Bank's admission, fairly understood, falsify those two representations? The force of the competing views may be appreciated by considering two rhetorical questions. If an admission that the Customers could resist any attempt by the Bank to realise its securities does not embrace at least an admission that it was not entitled to sell properties mortgaged to it by the Customers, what other meaning did the Bank intend its admission of particular 2.4(c) to bear? On the other hand, if the Bank did intend its admission to bear that meaning, why did it make the admission, having regard to its evident desire to contend that particular 2.4(c) did not falsify any of the representations pleaded in pars 2.2 and 2.3?
The Bank's case is, perhaps, stronger in relation to the representation of entitlement to appoint a receiver and manager than in relation to the representation of entitlement to sell. On the appeal, the Bank referred to seven authorities in support of its submission that "realise" means "convert into cash" and therefore does not include the appointment of a receiver and manager: Board of Trade v Block (1888) 13 App Cas 570 at 579; In Re Oxford Benefit Building and Investment Society (1886) 35 Ch D 502 at 510; National Bank Ltd v Claffey [1917] 2 IR(Irish) 281; Braybrooks v Whaley [1919] 1 KB 435; Westminster Bank Ltd v Osler (Inspector of Taxes) [1933] AC 139 at 147-9; R v Deakin [1972] 1 WLR 1618 at 1624; Rose v Department of Social Security (1990) 21 FCR 241 (FC) at 244-5. As noted earlier, however, by reference to the word "attempt" in particular 2.4(c) and the stated purpose of par 2.4 of falsifying the pleaded representations, including the representation of an entitlement to appoint a receiver and manager, his Honour held that "attempt ...to realise any security" included "appointment of a receiver and manager." I need not form a final view as to whether this construction was correct, since the meaning "convert into cash" includes "sell each property of [the Customers] over which [the Bank] held a mortgage."
But the Customers' case, fairly understood, was not one of any lack of entitlement of the Bank to sell (or to appoint a receiver and manager). Rather, the basis for the allegation that the Customers could resist the Bank's taking either course can be seen to be only and specifically that as a result of the Bank's admission of particular 2.4(a) of the further amended reply, the Customers were not indebted to the Bank at all. This is shown by the transcript of several exchanges between his Honour and senior counsel appearing for the respective parties towards the end of the hearing.
The following exchange occurred (Mr P R Dutney QC appeared, with Mr G A Moore of counsel, for the Customers):
"MR DUTNEY: ... We go further and we say that it must follow, because there is no other basis for it, that the reason the applicants could resist any attempt by the bank to realise any security over their assets - which is the second relevant admission - is because of the first relevant admission: that is, that the bank owed the applicants as much as the applicants owed the bank and in those circumstances, then, any attempt to do anything, appoint receivers or whatever they tried to do under their securities would in the end result have been an unlawful act.
HIS HONOUR: Well, if you could resist it, it could only be on the basis that there was no default.
MR DUTNEY: Yes, no relevant default.
HIS HONOUR: No relevant default." (T 355)
Later, the following exchange occurred between his Honour and Mr R N Chesterman QC who appeared, with Mr J C Sheahan of counsel, for the Bank:
"HIS HONOUR: ... I was concerned that there is going to be a fight as to what it meant. You are contending that that only goes to them being entitled, as at the time, to go to the court to get an interlocutory injunction to restrain the sale of the properties pending trial of the action. Is that in your letter? Is that in your letter to them, as to what the issues were?
MR CHESTERMAN: I am sorry?
HIS HONOUR: Is that in - you know - - -
MR CHESTERMAN: Yes. No, not in terms. No, not in terms. I hope that I made clear this morning in our submissions that we draw a distinction between realising the security which means - the term is a technical one. It means converting property into cash and [not] appointment of receivers.
HIS HONOUR: Yes: but if that means that you could not exercise your rights to realise it, it can only mean because there was no basis in fact to exercise the rights. Now - I mean, other than that, you are exercising the right to exercise power of sale in order to convert the real property to - or to sell it to a money fund and to satisfy your indebtedness out of the money fund and to account for the balance, if any. Now, the concession - if the concession means that they had no basis to do that, then the only basis of the concession can be that there was no default under the mortgage that would have entitled you to realise it, putting aside the question of Receivers and Managers.
MR CHESTERMAN: Well, that is not the concession. I mean, if that means the proceedings cannot go very far I suppose it means [the] proceedings cannot go very far, but that is not the concession." (T 375-6)
A little later, the following exchange took place:
"HIS HONOUR: ... the core or one of the core issues relied upon by the applicants is that that concession properly construed means that there was no basis to ever realise the properties, the subject to the securities, and that can only be on the basis that there was no relevant default, that there was no relevant moneys payable that gave you a right to sell them up. And that is the basis you put it on, Mr Dutney?
MR DUTNEY: Yes, your Honour.
HIS HONOUR: I mean, that is the whole basis of his argument, that it comes out at nil - set off or no set off. Now, you say or submit that I should not construe it in that way.
MR CHESTERMAN: Yes. And that would be, with respect to my friend, just simply unrealistic." (T 378)
Finally, the following exchange occurred:
"HIS HONOUR: Are you saying for the purpose of this hearing, that concession means that there was no consideration given by your client for the compromise, therefore there was no benefit received? They paid a million dollars odd in interest which they were not obliged to pay. That, he submits, was not a benefit, it was a burden.
MR CHESTERMAN: Accepting that, as the position put by our friends - - -
HIS HONOUR: Yes.
MR CHESTERMAN: - - - it only is right if the damages claim can be set off. There is still a debt. In Alltran [a reference to Westpac Banking Corporation v Eltran Pty Ltd (1987) 14 FCR 541 (FC)] I should point out, your Honour, the question of the no set-off clause simply was not argued.
HIS HONOUR: Yes, I know that.
MR CHESTERMAN: It was said by our friend that the appointment of receivers would have been a trespass but that is not right. There would be no trespass in appointing receivers unless and until the borrowers could discharge the debt because there was not a set-off - we will get back to that point.
HIS HONOUR: We will get back to the set-off." (T 379)
I have given anxious consideration to the question of the proper construction and effect of the Bank's admission of the facts alleged in particular 2.4(c) for the purpose of the Bank's admission. The Bank submitted that its admission should not be construed as an admission that the Customers could, as at the time of the making of the representations, resist any attempt by the Bank to realise any security over their assets. Certain considerations support this submission: the exclusion from the admission of the opening words of particular 2.4; the understanding on the part of both parties that the basis of particular 2.4(c) was the availability of a set-off in respect of the damages referred to in particular 2.4(a); and the conclusory effect of the admission if understood in the manner posited.
In my respectful view, the Bank should not have been held to the admission construed as his Honour construed it, unless its meaning was clear (it was not), or his Honour rejected the Bank's assurance that it had not intended the admission in accordance with that construction (his Honour did not reject that assurance), or his Honour clearly informed the Bank that he intended to construe the admission in that way and gave the Bank an opportunity to apply for leave to withdraw it (his Honour did not do so).
Force is lent to the position so stated by the fact that his Honour held, in favour of the Bank, that there was no set-off, with the inevitable consequences that the Customers were indebted to the Bank, that they were in default, and that the Bank was entitled to exercise its powers consequential upon default. Once it is accepted that the parties contested the Bank's right to realise its securities by reason of the set-off of damages against debt, there emerges a discordance between, on the one hand, his Honour's holding that there was no set-off, and, on the other hand, his construction of the Bank's admission as applied to particular 2.4(c), to the effect that the Customers had been entitled, at the time of the making of the representations, to resist any attempt by the Bank to realise its securities.
I think that unfortunately the trial of the separate question miscarried and that the result reached by his Honour cannot stand.
CONCLUSION
As noted at the outset, I agree with the conclusions reached and orders proposed by Kiefel J.
The present case is one instance of an unfortunately not uncommon experience: the separate question procedure has an attraction but, as a result of unforeseen difficulties, it proves to be inappropriate. No doubt, the Bank considered that its release gave it an impregnable defence to the Customers' claim. It would have done well to accept that the Customers' further amended reply, ill pleaded as it was, raised complex issues of fact which would have to go to trial in the usual way. The Bank's clinging, perhaps understandably, to the possibility of a shorter, earlier and less expensive procedure, has in fact resulted in lengthier hearing time overall, a later final determination of the proceeding, and an increase in cost.
|
I certify that this and the preceding ten (10) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice
Lindgren |
Associate:
Dated: 6 February 1998
|
Counsel for the Appellant: | Mr R N Chesterman QC and Mr J C Sheahan |
| Solicitor for the Appellant: | Allen, Allen & Hemsley |
| Counsel for the Respondents: | Mr P R Dutney QC and Mr G Moore |
| Solicitor for the Respondents: | Caruana Kay & Barry |
| Date of Hearing: | 3, 4 November 1997 |
| Date of Judgment: | 6 February 1998 |
|
IN THE FEDERAL COURT OF AUSTRALIA | |
| QUEENSLAND DISTRICT REGISTRY | QG 13 of 1997 |
|
BETWEEN: | WESTPAC BANKING CORPORATION
Applicant |
|
AND: | GRAHAM DOUGLAS COCKERILL, ARTHUR THOMAS DINGLE and VALERIE DINGLE
Respondent |
constituted by a single judge
| JUDGE(S): | NORTHROP, LINDGREN AND KIEFEL JJ |
| DATE: | 6 February 1998 |
| PLACE: | BRISBANE |
Westpac Banking Corporation ("the bank") appeals from an order, made by way of declaration, that an agreement to release the bank from any claims or causes of action the applicants might have, arising in connection with an earlier foreign currency transaction, did not operate in its terms. His Honour the primary Judge had concluded that the bank had applied illegitimate pressure to the applicants, which induced them to execute the agreements and that the bank had misrepresented its entitlement to appoint receivers and managers, the applicants' liability to it and the course of action open to them to prevent the bank so acting.
Background
These proceedings concern agreements between the respondents to the appeal (referred to in these reasons as "the applicants") and the bank made in 1984 and in February 1986. The first agreement was for a loan of some $2M. That sum was taken in Swiss francs but was repayable in Australian dollars. By November 1987, when the principal sum advanced was repayable, the value of the Australian dollar had fallen considerably. As a result, the cost of repayment, together with arrears of interest payments, was in the order of $5.75M. The applicants were unable to pay. In February 1988 the applicants agreed with the bank to borrow sufficient to pay out the sum owed, but at a concessional rate of interest, several percentage points lower than that normally applying to commercial loans. The alternative course, which the bank had threatened to take, was the appointment of a receiver and manager and the sale of the applicants' businesses and assets. The appointment of a receiver and manager would have effectively ruined the businesses. Discussions about the course to be taken, and the terms upon which further advances would be made, took place over a period from at least October 1987 through to February 1988. During this period the prospect of the threatened course of action remained. In connection with the further borrowings the applicants were required by the bank to sign a "concessional interest rate letter" which contained acknowledgments as to their decision to convert the loan to Australian dollars and as to the losses which might follow from it. This appeal concerns the release which was also contained in the letter. It was in these terms:
"3. You release the bank from any claim or cause of action you have or may have against it arising out of or in connection with the off shore commercial loan or any foreign currency transaction."
The pleadings and order for determination of a separate issue
In the proceedings brought by them in 1991, the applicants claimed that their entry into the foreign currency loan was brought about by the conduct of the bank. Their case focused largely upon representations made and advices given by bank officers as to the likely changes to currencies, relative to the Australian dollar, during the proposed 5 year term of the loan and on their failure to warn of the risks inherent in such a facility at that time. The losses claimed included losses of assets sold/losses arising from sales of assets by the bank to meet what it alleged the applicants owed to it, including exchange losses. It was alleged that when the loan was brought "on shore" on 16 February 1988, for the purpose of repayment in Australian dollars, that conversion resulted in a capital loss of approximately $2.75m. There were references in the pleading to pressure exerted by the bank in 1987 and 1988 to bring the loan on-shore, and at the earlier time to sell property. In that respect the term "duress" was used. The relief sought by the applicants, in addition to declarations as to the bank's conduct and the securities taken and damages, included relief under s 87 Trade Practices Act (1974) (Cth) which, however, was not specified.
In its amended defence, and in response to the allegations that its conduct in connection with the applicants' entry into the original foreign currency loan transaction was negligent and in contravention of s 52 of the Trade Practices Act, the bank alleged (by par 22):
"(a) In consideration of the respondent granting the partners a loan of $A with concessional interest rates to pay out the partners' off shore loan, the partners agreed in writing, on 5 February or alternatively on 9 February 1988, to release the respondent from any claim or cause of action which they had or may have had against it arising out of or in connection with the off shore commercial loan or any foreign currency transaction, which includes the causes of action sued on herein;
(b) In the premises the claims of the applicant herein have been released and the applicant is not entitled to maintain such claims against the respondent."
The bank sought to have the question thereby raised determined as a separate and preliminary issue. When that application came on for hearing in June 1995, a reply had been foreshadowed by the applicants in which they would allege that, in the period from mid-August 1987 to the date the release was signed, in 9 February 1988, the bank misrepresented its entitlement to appoint receivers and managers and to sell property, the liability of the applicants to the bank and the lack of alternatives open to them. Alternatively, it was to be alleged that the bank was negligent or in breach of its duty.
Paragraphs 2.2, 2.3 and 2.4 of the reply, as later filed, alleged:
"2.2 In the period 17 August 1987 to 9 February, 1988 the Respondent by Mr Jack Allen, its offshore commercial loans Manager, represented to the Applicants in trade or commerce that:-
(a) there was no possibility that the Respondent had: -
(i) Engaged in conduct in contravention of Section 52 of the Trade Practices Act, 1974 (Comm);
(ii) Given negligent advice;
(iii) Breached its contractual duty to exercise due care, skill and diligence in the giving of advice to the Applicants; or had
(iv) Contravened Section 261(1) of the Income Tax Assessment Act, 1936, (Comm) in its dealing with the Applicants.
(b) the Applicants were liable to the Respondents for all payments of withholding tax, made by the Respondent in relation to the Applicant's Foreign Currency loan;
(c) the Respondent was owed the sums of money for withholding tax stated in the Foreign Currency loan statements issued periodically; and
(d) the Applicants were liable for the entirety of the capital loss sustained by the Applicants by reason of the Foreign Currency loan;
(e) the Respondent was entitled to appoint a Receiver/Manager over each of the businesses conducted by the Applicants and known as Rum City Motor[s], Cycle Spot and Moto Sales;
(f) the Respondent was entitled to sell each property of the Applicants over which it held a mortgage;
(g) the Applicants had no legal or commercial alternative other than to do what the bank required;
(h) the Respondent would appoint the Receiver/Manager over each business of the Applicants and commercially destroy the Applicants if they did not do what the Bank required.
2.3 In addition to the representations in paragraph 2.2, in the period 22 January to 9 February, 1988, the Respondent by each of Messrs Allen, Murphy and Thomas represented in trade or commerce that:-
(a) the Applicants were indebted to the Respondent in the sum of approximately $5,750,000.00;
(b) the Respondent was entitled to appoint a Receiver/Manager over each of the businesses conducted by the Applicants and known as Rum City Motors[s], Cycle Spot and Moto Sales;
(c) the Respondent was entitled to sell each property of the Applicants over which it held a mortgage;
(d) the Applicants had no legal or commercial alternative other than to execute a letter in the form of the letter dated 1 February 1988; and
(e) the Respondent would appoint a Receiver/Manager over each business of the Applicants and commercially destroy the Applicants if they did not execute a letter in the form of the letter dated 1 February, 1988."
"2.4 Each of the representations in paragraph 2.2 and 2.3 were false and/or misleading and/or deceptive and/or negligent and/or in breach of the obligation owed by the Respondent to the Applicant to exercise due care, skill and diligence when giving advice.
(a) The Respondent was liable in damages to the Applicants for a sum not less than the alleged indebtedness of the Applicants to the Respondent by reason of its contravention of Section 52 of the Trade Practices Act and/or negligence and/or breach of contract.
(b) Any liability for withholding tax to the Respondent by the Applicants was avoided by Section 261(1) of the Income Tax Assessment Act; and
(c) The Applicants could resist any attempt by the Respondent to release [sic - realise] any security over the Applicants' assets."
Paragraph 2.4 above, in particular, was important on the appeal. The reply went on to allege:
"2.5 Each of the representations in paragraphs 2.2 and 2.3 were [sic - was] relied upon by the Applicants when executing the letter dated 1 February 1988.
2.6 Each of the representations in paragraphs 2.2 and 2.3 constituted illegitimate pressure exerted by the Respondent on the Applicants.
2.7 In all the circumstances the Applicants executed the letter dated 1 February 1988 on each of 5 and 9 February 1988 under duress.
2.8 Further, the execution of the letter dated 1 February 1988 on each of 5 and 9 February 1988 resulted from:-
(a) mistake on the part of the Applicants induced by the representations of the Respondent in paragraphs 2.2 and 2.3 above; and
(b) the misleading and/or deceptive conduct and/or advice and/or breach of its contractual obligations to exercise due care, skill and diligence when making the representations in paragraphs 2.2 and 2.3 to the Applicants.
2.9 By reason of the matters set out in this paragraph the Respondent is not entitled to rely on the letter dated 1 February, 1988 which was signed by the Applicants on each of 5 and 9 February 1988." (emphasis supplied)
The reference in paragraph 2.6 to "illegitimate" pressure had earlier been to "unlawful" pressure. The matters pleaded at paragraph 2.8 were not taken up on the hearing.
It was submitted to the judge hearing the application that the question raised, as to whether the applicants were bound by the release was one proper for trial as a separate question, there being no dispute about the making of the agreement itself. In those circumstances, the bank submitted, unless an order was made setting aside the agreement, it would stand as a complete defence to the applicants' claim. The reply, however, had raised, in connection with the alleged representations made by the bank prior to the February 1988 transaction, questions of fact which were not admitted - as to whether they were made, whether there were reasonable grounds for the making of the representations as to the courses said to be available to the bank, and whether the applicants were affected by them in the manner alleged. It was conceded that this would necessitate the calling of evidence. In order to facilitate the desired separate hearing the bank then offered an admission. It was in these terms:
"The bank will admit for the purposes of the hearing and determination of the separate question, the facts alleged in the particulars to paragraph 2.6 of the reply (ie - the facts said to make the bank's conduct misleading)".
(Paragraph 2.6 there referred to is paragraph 2.4 above).
The order made by his Honour was that:
"Pursuant to O 29 r 2 the issue of whether, in consideration of the respondent granting the applicants a loan of $A with concessional interest rates to pay out the applicants' off shore loan, the applicants agreed in writing, on 5 February 1988 or, alternatively, on 9 February 1988, to release the respondent from any claim or cause of action which the applicants had or may have had against it arising out of or in connection with the off shore commercial loan or any foreign currency transaction, which includes the causes of action sued in proceedings number NG 29 of 1991 be tried separately and before the trial of any of the other issues in the action."
Although the order, which followed the terms of the bank's application, did not clearly specify it, it is common ground that the parties understood that the issues to be determined pursuant to the order, were those raised in the reply to the bank's claim of release from action. Even so, it seems that not all matters referred to in the reply were pursued on the hearing. Only the defences based on duress and innocent misrepresentation were.
Both cases are founded upon the misrepresentations, the effect of which may be summarised: that it was not true, as the bank had represented, that the applicants owed the bank the sums claimed and that there was no alternative to the appointment of receivers and managers, to which the bank was entitled. In each of these respects the central allegation is that the bank was liable to the applicants in an amount not less than that which it was alleged they owed. That allegation rendered all the representations, as to the bank's position false. With respect to the representation relating to the appointment of receivers and managers (assuming for present purposes that that is what paragraph 2.4(c) also speaks of), the bank was not to be taken as entitled because no monies were owed to it. As submissions were developed before his Honour, reliance in this connection, was placed on a right to set-off. It would follow that the applicants might have been able to obtain orders restraining the bank taking such steps. This, in my view, must be what paragraph 2.4(c) refers to in context and in the absence of any other explanation as to why the representations as to the bank's rights were said to be false. The case founded upon duress was also pleaded in a way which relied entirely upon the representations, as constituting the necessary pressure. The bank's liability by way of damages to the applicants was in each case put forward to falsify the representation. It was not itself pleaded as an independent ground of defence. Its true relevance, as pleaded, was that the amount alleged to be owed by the applicants under the loan was to be seen as negated or subject to a set-off.
The result claimed (by paragraph 2.9) for both the duress and the misrepresentations was simply that the bank was not entitled to rely on the letter containing the release. The basis for that result was not further explained. The Court was not asked to set aside the agreement for release or to grant the applicants relief, in whole or in part, from its operation. This omission assumed particular importance with respect to the case based on innocent misrepresentations. Rather than seek relief from the Court, the applicants alleged rescission by act of the parties in paragraph 2.11:
"2.11 By commencing these proceedings against the Respondent in January 1991 and by maintaining their entitlement to the relief sought thereafter, the Applicants, by their conduct, rescinded the Agreement alleged by the Respondent in paragraph 22 of its Amended Defence."
(Paragraph 2.12 went on to claim "further, or in the alternative" avoidance under s 87(1) of the Trade Practices Act, but this ground was not further explained and was not, apparently, relied upon on the hearing).
His Honour the primary Judge recorded in his reasons that the applicants did not press the unenforceability of any agreement constituted by the letters on any ground other than duress and innocent misrepresentation. And, as earlier observed, the way in which the case of duress was pleaded, did not take it beyond one at the common law. In particular, there was no pleading of an equitable case of unconscionable dealing.
The Decision appealed from - Duress
His Honour the primary Judge found that a bank officer had told the applicants, at a meeting in October 1987, that if a particular asset was not sold and the loan not brought on-shore, the bank would appoint a receiver and manager to the businesses and property of the applicants and sell the property and that the businesses would be ruined by the appointment. The threat of the appointment of a receiver and manager continued. His Honour did not, however, consider that that officer was influenced by the possibility of action being brought by the applicants against the bank; rather his Honour thought that the officer believed, at all relevant times, that the bank could successfully defend any proceedings brought by the applicants in connection with the foreign currency loan. There was no evidence as to the state of mind of other officers. His Honour found that the applicants had no further assets to offer as security. All their assets were secured beyond acceptable lending margins and their income was insufficient to service the interest on the existing loans, let alone new loans at higher interest rates. His Honour held, on the admissions made by the bank, that the applicants' parlous financial circumstances, involving loss and damage of approximately $5.75M, had been caused by the bank, and that it was liable to the applicants for such loss.
The proposals which were then prepared by the bank officers sought, in his Honour's view, to minimise the risk of loss to the bank and to remove the threat of litigation. By 5 January 1988 the bank had decided, his Honour found, to bring the applicants' loan on-shore and to offer them finance at concessional rates of interest in return for a release from liability from any action the applicants had or may have had against the bank in connection with the off shore loan. At that time, the only option available to the applicants, in his Honour's view, was negotiation of a rate of interest sufficiently low and for such a period as might enable the businesses to survive and avoid a sale of assets other than a certain building which the bank required to be sold. Proposals by the applicants were rejected by the bank. The rejection was accompanied by a threat that legal action would be commenced by the bank for recovery. His Honour appears to have been of the view that after this the applicants were in a position where they could do no more than make the best of a bad situation. His Honour found that the applicants signed the first concessional interest rate letter of 5 February 1988 (we need not discuss the factual complexity concerning the existence of two concessional interest rate letters) containing the release because they had no practical alternative. That was so, in his Honour's view:
"because of their parlous financial circumstances which, on the admissions made by Westpac for the purposes of determining this preliminary issue, was to the extent of a loss of $5,750,000, caused by the conduct of Westpac amounting to breach of contract and/or negligence and/or conduct in contravention of s 52 of the Trade Practices Act and by the unjust enrichment of Westpac wrongly charging and retaining withholding tax in connection with the off shore commercial loan".
The applicants, in his Honour's view, were then unable to obtain other finance; they were unable to litigate their rights; and although legal advice was clearly available to them, it could not have altered the situation which confronted them. They were unable to obtain interlocutory relief to restrain the appointment of a receiver and manager because they could not give any worthwhile undertaking as to damages. In this respect, his Honour was also unable to conclude that they would have been able to persuade a court as to the strength of their substantive claim for damages. The evidence, which did not extend to the applicants' substantive claim for damages, did not enable his Honour to form a view as to whether a court would have been persuaded to exercise any discretion to restrain the appointment. He was, however, able to conclude that the appointment of a receiver and manager would have had the effect of destroying the businesses.
The applicants had signed the first concessional interest rate letter on 5 February 1988 with the notation "under duress" and his Honour considered that nothing had changed by 9 February 1988, when the letter was presented to them again, and they signed it without the notation. It was then made clear to them that if they did not sign it, without the qualification, a receiver and manager would be appointed.
His Honour approached the question whether there had been "economic" duress, in the manner suggested by McHugh JA in Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 at 45-6, namely by enquiries, first, whether the pressure which had been applied was such that it operated as an inducement to enter into the contract; and, secondly, determining whether that pressure went beyond what the law is prepared to countenance as "legitimate". McHugh JA held that pressure would be illegitimate if it consisted of unlawful threats or amounted to unconscionable conduct. In Barton v Armstrong [1976] AC 104 at 118, 121 the Privy Council had expressed a similar view, namely that there must be shown that some "illegitimate means of persuasion" was used.
His Honour, the primary Judge, found the requirement of inducement to have been satisfied. In doing so his Honour adopted the higher standard set by Lord Goff in Dimskal Shipping Co SA v International Transport Workers Federation [1992] 2 AC 152 at 165, namely, that the pressure applied was a "significant" cause of the consent. In his view, the facts of this case enabled that conclusion. A test which required that the pressure applied be one of the reasons or a reason for entry into the agreement, had been proposed in each of Crescendo (at 46) and Barton v Armstrong [1976] AC 104 at 121 which were cited by Lord Goff in Dimskal as authority for the view expressed in it. The trial Judge thought that the test formulated in Dimskal was "higher" than that which had been expressed in Barton v Armstrong and Crescendo but that the difference was inconsequential in the present case because he was "satisfied that the pressure applied to the applicants by [the bank] was a significant or the substantial cause of inducing them to enter into the relevant contract" (judgment transcript p 71).
His Honour then turned to consider whether the pressure was illegitimate and concluded that it was, on an assessment of the conduct of the bank, the position in which the applicants were placed, and the resultant choices available to them. The fact that their financial state was "parlous" was reiterated by his Honour. He held that the admissions made by the bank for the purpose of determination of the separate question that a loss to the extent of $5.75M had been caused by its conduct, permitted the conclusion that it had brought about that position. In those circumstances the applicants had no bargaining power. The "huge disparity in bargaining position" between the applicants and the bank was, in his Honour's view, created by the bank and taken advantage of by it to obtain the releases in question, in circumstances where some of the bank officers concerned were of the view that, notwithstanding the refinancing, the applicants would default on the new loan. In his Honour's view, the bank's conduct went beyond driving a hard bargain in negotiating the price of a new loan. Rather, the bank used its dominant position which it had created by its conduct to protect it from further losses. His Honour went on:
"... to exploit the applicants' position of financial dependency on Westpac, a situation created by the misconduct of Westpac in the manner alleged and admitted, to obtain a real and substantial benefit (the release) which ordinarily formed no part of a loan by a bank to its customer and was not necessary to secure its position as lender, in exchange for a benefit of doubtful worth to the applicants in their then parlous financial circumstances, was unconscionable in the sense used by McHugh JA in Crescendo and constituted illegitimate pressure ..."
The bank submitted that, given the presence of three features, there could not be a finding of economic duress. It pointed to the substantial valuable consideration for the release, by way of the interest rate reduction worth something in the order of $980,000, to the bank's having acted in good faith, and to the lawfulness of the threat or pressure applied by the bank.
With respect to the lower rate of interest charged by the bank, his Honour considered that it was no answer to a case of economic duress, otherwise made out, that some benefit was received, particularly since it followed, from the bank's admission as to liability, that the applicants were giving up a claim for $5.75M. But it is not necessary to discuss further this matter or the question of good faith. His Honour discussed the question whether lawful pressure may qualify as "illegitimate" pressure for the purpose of supporting a grant of relief at law on the ground of duress.
Cases to which his Honour referred in his reasons make clear that the answer is in the affirmative: Universe Tankships Inc of Monrovia v International Transport Workers' Federation [1983] 1 AC 366 at 400-401; Shivas v Bank of New Zealand [1990] 2 NZLR 327 at 345; Caratti v Deputy Commissioner of Taxation (1993) 27 ATR 448 at 457; CTN Cash and Carry Ltd v Gallaher Ltd [1993] EWCA Civ 19; [1994] 4 All ER 714 at 718-9. In the CTN case, Steyn LJ had referred to Professor Birks' observations that, while there were inherent difficulties in courts supplying notions of morality, nevertheless they appeared willing to apply, in the context of economic duress, "a standard of impropriety rather than technical unlawfulness" (at 718h). In Barton v Armstrong, supra, both the majority and minority judgments noted that the modern conception of duress, as applying where a person had been "subjected to an improper motive for action", was a development under equity's influence (at 118, 121), particularly, it might be added, through the equitable doctrine of undue influence. In Williston on Contract (3rd ed, vol 13, at 1606) it is said that both lawful and non-tortious conduct may be within the scope of the doctrine of duress, for what is required is that the pressure be wrongful (see also Mason and Carter, Restitution Law in Australia [508] [519]). In my view, his Honour was correct to hold that lawful pressure might operate as duress. The question which then arises is whether the pressure supposedly applied in this case was illegitimate.
In Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 McHugh JA, with whom Samuels and Mahoney JJA agreed, said (at 46B):
"Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct. But the categories are not closed. Even overwhelming pressure, not amounting to unconscionable or unlawful conduct, however, will not necessarily constitute economic duress".
I do not think that his Honour was intending in this passage to refer to the equitable doctrine of unconscionable dealing which is recognised as affording an independent ground on which a court exercising equitable jurisdiction can relieve from a contract.
The point of distinction which is relevant for present purposes is that duress, like undue influence, focuses upon the effect of pressure, upon the quality of the consent or assent of the pressured party, rather than the quality of the conduct of the party against which relief is sought - a distinction pointed to in Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447 at 474, and referred to by his Honour, the primary Judge, in the present case. The cases, apart from Crescendo Management, which recognise the possibility of "economic" duress, such as Barton v Armstrong and Pao On v Lau Yiu Long [1979] UKPC 2; [1980] AC 614, emphasise the feature that the pressure applied is so coercive of the will that consent is treated as vitiated. In Smith v William Charlick Ltd [1924] HCA 13; (1924) 34 CLR 38 Isaacs J said (at 56):
"It is conceded that the only ground on which the promise to repay could be implied is `compulsion.' The payment is said by the respondent not to have been `voluntary' but `forced' from it within the contemplation of the law. Leaving aside, for the present, the question whether in law the payment was `forced' from the respondent by some undue advantage taken of its situation having regard to the Wheat Harvest legislation, the point is whether the Board's insistence was what is regarded as `compulsion' from the simple standpoint of common law. `Compulsion' in relation to a payment of which refund is sought, and whether it is also variously called `coercion,' `extortion,' `exaction,' or `force,' includes every species of duress or conduct analogous to duress, actual or threatened, exerted by or on behalf of the payee and applied to the person or the property or any right of the person who pays or, in some cases, of a person related to or in affinity with him. Such compulsion is a legal wrong, and the law provides a remedy by raising a fictional promise to repay. Apart from any additional feature presented by the relevant legislation, it is plain that a mere abstention from selling goods to a man except on condition of his making a stated payment cannot, in the absence of some special relation, answer the description of `compulsion,' however serious his situation arising from other circumstances may be ..."
Although the conclusion in that case was that money had been paid as a result of commercial pressure not duress in the eye of the law, the passage set out above usefully emphasises that duress focuses attention on the quality of assent.
An approach which enquires whether, in all the circumstances, it is unconscientious to retain a benefit wrongfully procured might be thought to encompass the situation where improper pressure is brought to bear on one party, since it would have regard to that conduct and its relationship to the advantage obtained (see Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583 at 620-1; Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137 at 147-8; Louth v Diprose [1992] HCA 61; (1992) 175 CLR 621 at 627). Relief will not be granted, however, only on the basis of an inequality, even a great inequality, of bargaining position. Relief may, however, be appropriate when the disparity was substantially brought about by the other party's antecedent conduct. The exploitation of the inequality could then be described as "unconscientious". Amadio and Louth v Diprose, in my opinion, may be viewed in this way. And, it seems to me, this was in large part the approach taken by his Honour.
It has been observed that the boundaries between common law duress, undue influence recognised in equity, and unconscionable pressure or "equitable duress", are becoming blurred (see Dr I J Hardingham "Unconscionable Dealing" in P D Finn, Essays in Equity (1985) at 21-24); that the importance of common law duress and undue influence as distinct categories recognised in equity is diminishing (Sir Anthony Mason, "The Place of Equity and Equitable Remedies in the Contemporary Common Law World" (1994) 110 LQR 238 at 249); and that the two jurisdictions may be said to be concerned, essentially, with exploitation or victimisation (Louth v Diprose, 627-9 (Brennan J), Tony Duggan, "Unconscientious Dealing" in Parkinson, The Principles of Equity (LBC Information Services, 1996) at 122). Nevertheless the distinction remains and, in the pleadings in the present case, resort was had to the common law doctrine, which necessitates a conclusion as to the quality and effect of both the threat made and the pressure applied.
His Honour the primary Judge ultimately made the following declaration:
"The matters pleaded in paragraph 22 of the amended defence do not operate to release Westpac from any claim or cause of action which the applicants had or may have had against Westpac arising out of or in connection with the off shore commercial loan or any foreign currency transaction which includes the causes of action sued on in proceedings number NH 29 of 1991".
I have referred above to the distinction to be drawn between the common law approach and that of equity (and see Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362 at 401; Amadio at 461, 474; Louth v Diprose, at 627), although on one view resort to the common law might not, in most cases be necessary. In this case however the applicants' reply relies on a case of duress at common law and not one of unconscionable dealing. In my respectful view, however, it was unconscionable dealing which his Honour found made out. This is to an extent confirmed by the applicants' reliance, on the appeal, on cases such as The Commonwealth v Verwayen (1990) 170 CLR 394 and Louth v Diprose, as supporting the conclusion reached by his Honour.
In the present case the focus of his Honour's findings was the position of disadvantage in which the applicants found themselves. At a number of places in the judgment, his Honour refers to their parlous financial circumstances, and states that it resulted from the admission made by the bank that it accepted it had brought those circumstances about. Given the way in which the matter was pleaded and the terms of the admission, it was always likely that difficulties would be encountered. His Honour referred, at an early point in the proceedings, to lack of clarity. This, however, was not resolved. The process undertaken by his Honour, against the background of what he described as some "controversy" concerning the extent of the admission, was to construe the admission in light of the pleadings.
His Honour concluded that the admission made by the bank extended to embrace its liability in damages to the applicants as at February 1988 and that that liability arose by reason of its wrongful conduct in connection with the earlier off-shore commercial loan. I am, with respect, however, unable to agree that the case of duress pleaded by the applicants relied upon the bank's conduct in the negotiation of the earlier loan. The only pressure identified in the reply was said to arise from the representations themselves and the applicants' belief that they were liable to the bank and had no choice but to accede to the bank's demands as otherwise it was entitled to appoint receivers and managers. The case put forward was that the bank misrepresented that the applicants had no choice, whereas in truth they had, although they were not aware of it. That is a distinctly different case from that found by his Honour. Further, in my view, the bank's admission could not operate to widen the applicants' pleaded case of duress. The admission must be understood in the context of the case as pleaded by the applicants. So understood, it can be said to extend fairly to a case of misrepresentation operating as outlined above, but not one where antecedent background facts are to be taken and applied to achieve a different legal result.
On the hearing of the appeal, this Court was not referred to any part of the hearing before his Honour which showed that, despite the pleadings, a case of unconscionability was conducted with the bank's consent. At most there had been some elliptical references to such a case by senior counsel for the applicants on the hearing, but it was not suggested to this Court that the bank had so conducted itself as to acquiesce.
As the matter was pleaded, a case of duress could not in my view have been found by the trial Judge. And, with respect, the facts as applied by his Honour could not establish such a case. In most instances where duress is established the party coerced has had little choice. It is not, however, that inequality of bargaining position, or the reason for its creation, which is the essence of the action - it is the pressure brought to bear and its wrongfulness: "There must be pressure the practical effect of which is compulsion or the absence of choice": Universal Tankships Inc of Monrovia v International Transport Workers' Federation [1983] 1 AC 366 at 400 (Lord Scarman), cited in Crescendo Management at 45 (see also North Ocean Shipping Co Ltd v Hyundia Construction Co Ltd [1979] QB 705 at 717). Putting to one side the limitations imposed by the pleading referred to above, in my respectful opinion, neither the threats of appointment and sale nor the demand for release were themselves wrongful nor could they have operated as coercive. The critical matter was the applicants' lack of choice. The essence of the wrong identified by his Honour was in the creation of that position.
The Decision appealed from - Innocent Misrepresentation
His Honour the primary Judge observed that the case conducted by the applicants relied on innocent misrepresentation, although the reply had also pleaded "mistake". The operative misrepresentations were summarised by his Honour as being:
(a) that the applicants owed $5.75M to the bank; and
(b) that the bank was entitled to move under its securities.
The critical representation was the second, since his Honour concluded that the admission of liability to the applicants in a sum not less than their indebtedness to the bank, did not falsify the mentioned representation. There could not, in his Honour's view, have been any set-off. His Honour found, however, that the bank had misrepresented its entitlements, by statements made by two of its officers, to the effect that the bank could and would appoint receivers and managers and sell the property. And his Honour found that the statements induced compliance by the applicants and their executing the letters.
The representations made out were those pleaded in paragraphs 2.2 and 2.3 of the reply. The bank submitted that those statements were mere expressions of opinion and intention, and could not therefore qualify as representations of fact. His Honour determined that point against the bank on the basis that they were representations as to the bank's rights, which might qualify as representations of fact. It is not, however, necessary to express a concluded view upon this matter, for this aspect of the appeal also turns upon a consideration of the pleading.
The representations of entitlement to appoint and to sell were pleaded as falsified, in paragraph 2.4(c) of the reply, because "the Applicants could resist any attempt by the Respondent to realise any security over the Applicants' assets". The lack of correspondence between that allegation and the representations to which it was said to refer was the subject of some debate before his Honour. He decided, however, that the particular extended to include appointment and sale as steps involved in any realisation of securities, and that by its admission, the bank ought be taken to have accepted that. In my respectful view, a party cannot be held to the contents of an admission, arrived at by a process of construction, unless the matter is clear and unless the party's submission, that it was taken by surprise, cannot be accepted. His Honour did not make such a finding.
That the question could not be determined on the basis of the reply and the admission, is further reinforced in my view by the fact that the applicants' case, fairly understood, was not of any lack of entitlement on the part of the bank. As I have explained earlier, the basis for the allegation that the applicants could resist the bank's taking action can be seen only to arise from the allegation that no monies should be taken as owed to the bank. That was the central feature of the applicants' case. And both the transcript of the hearing and his Honour's reasons confirm that the right to set-off was the point desired to be reached by the applicants in their case. His Honour, however, had held that there was no such entitlement. That finding, in my view, negatived the foundation of the applicants' case as pleaded.
Orders
In my view the declarations made must be set aside. It is not, however, appropriate to make orders in the bank's favour on the questions the subject of the separate determination. While the applicants have not pleaded proper cases and their reply might be liable to be struck out, they ought to be given a final opportunity to put their case in response. The pleadings ought to have been put in order before the matter was sent for determination on the separate issues. His Honour's reasons disclose the possibility of another answer to the bank's claim for release, arising from the facts on the applicants' substantive case.
As to the question of costs of the hearing below, while the reply might be identified as having caused a substantial difficulty, it was the bank which determined to pursue a procedure which was inappropriate in light of that pleading. The admission made by it compounded that problem. As to the costs of the appeal however, a different view might be taken. The applicants, as respondents to the appeal, continued to support the course taken incircumstances where it had miscarried. The parties ought then to bear their own costs of the appeal.
|
I certify that this and the preceding seventeen pages are a true copy of the Reasons for Judgment herein of the Honourable Justice
Kiefel |
Associate:
Dated: 6 February 1998
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Counsel for the Appellants: | Mr R Chesterman QC and Mr J Sheahan |
| Solicitor for the Appellant: | Allen Allen & Hemsley |
| Counsel for the Respondents: | Mr P Dutney QC and Mr G Moore |
| Solicitor for the Respondents: | Caruana Kay & Barry |
| Date of Hearing: | 3,4 November 1997 |
| Date of Judgment: | 6 February 1998 |
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URL: http://www.austlii.edu.au/au/cases/cth/FCA/1998/43.html