Commonwealth Bank of Australia v Madden Nominees P/L & Ors [1999] QDC 286

DISTRICT COURT OF QUEENSLAND REGISTRY: BRISBANE NUMBER: D1177 OF 1999 Plaintiff: COMMONWEALTH BANK OF AUSTRALIA ACN 123 123 124 AND First Defendant: MADDEN NOMINEES PTY LTD ACN 009 940 701 AND Second Defendant: ADRIAN PAUL GUNDELACH AND Third Defendant: STEPHANIE EVELYN GUNDELACH JUDGMENT - McGILL D.C.J. Judgment Delivered: 3 December 1999 Catchwords: PRACTICE - separate decision on questions - whether questions appropriate - whether based on proper and relevant facts - Uniform Civil Procedure Rules Ch 13 Pt. 5 Bass v. Permanent Trustee Co Ltd (1999) 73 ALJR 522 - applied Counsel for the Plaintiff: M.M. Stewart Solicitors for the Plaintiff: Clarke and Kann Solicitors for the Defendant: Lynch and Co Hearing Dates: 29 November 1999 -- 1 of 10 -- DISTRICT COURT OF QUEENSLAND REGISTRY: BRISBANE NUMBER: D1177 OF 1999 Plaintiff: COMMONWEALTH BANK OF AUSTRALIA ACN 123 123 124 AND First Defendant: MADDEN NOMINEES PTY LTD ACN 009 940 701 AND Second Defendant: ADRIAN PAUL GUNDELACH AND Third Defendant: STEPHANIE EVELYN GUNDELACH JUDGMENT - McGILL D.C.J. Delivered the 3rd day of December 1999 By a plaint filed on 18 May 1995 the plaintiff claimed $119,804.60 from the first defendant as money lent, and from the second and third defendants as guarantors, and a further sum of $43,844.95 from the second defendant as money lent, and from the third defendant as guarantor. An Entry of Appearance and Defence of the three defendants was filed on 28 June 1995. The pleadings have evolved somewhat over the years since, amended plaints having been filed on 9 February 1996, 30 April 1998 and 22 June 1999, and amended defences on 12 July 1996 and 29 May 1998 and there was an application before me for leave to amend the defence further. There have been various applications to the court from time to time, including two applications to set -- 2 of 10 -- 3 the matter down on the callover list, but that has never occurred, and on 18 August 1999 the plaintiff applied to have five questions determined as questions in advance of the trial. An order to that effect was made by His Honour Judge Brabazon on 8 September 1999, and the hearing of those questions came on before me on 29 November 1999. At the beginning of the hearing counsel for the plaintiff drew attention to an error in the formulation of the questions, in that they referred to a date “1983”, when they should have referred to “1993", and there was a further omission from the wording. In order to accommodate this difficulty, both parties agreed to my setting aside His Honour’s order, or at least that part of it by which His Honour ordered that the particular questions be determined, and in lieu thereof I made a like order in respect of a new set of questions handed up, which became Exhibit 3. I think there is still some difficulty about the terms of these questions, a matter about which there was some debate during argument. In order to appreciate the significance of this, it is necessary for me to refer to the current pleadings, and to the evidence. Paragraph 3 of the current amended plaint alleges that by application in writing dated 20 October 1989, the first defendant applied to the plaintiff for financial accommodation as approved by the plaintiff on the plaintiff’s usual terms and conditions or such other terms and conditions as the plaintiff may from time to time impose. In para. 6 there is a similar allegation in respect of an application dated 28 November 1991, and in para. 19 there is a similar allegation in relation to an application dated 20 October 1989 by the second defendant. In respect of each of these allegations the current defence (in paras. 3A, 4A and 14) admits that the relevant defendant applied to the plaintiff for financial accommodation as approved by the plaintiff from time to time on the conditions alleged, but says that “the contract referred to” was an agreement by which the rate of interest with respect to the financial accommodation was fixed by the plaintiff and that in consequence such contract was void for uncertainty, or that it was a contract the provisions of which relating to the determination of the rate of interest constituted an agreement by which all the terms of the contract are able to be fixed by the plaintiff, so that the contract was void for uncertainty. -- 3 of 10 -- 4 By para. 4 of the current plaint, the plaintiff alleges that on 20 October 1998 it advanced $52,000 to the first defendant by way of a fully drawn loan account, and after that loan account was on 29 January 1991 transferred from the Paddington to the Queen Street branch of the plaintiff, on 4 December 1991 the plaintiff advanced a sum of $57,000 to the first defendant by way of a fully drawn loan which was debited to that account. It is alleged that the balance in that account as at 20 April 1995 was $119,804.60, and this is the amount sued for. It is also alleged that on 29 November 1991 the plaintiff advanced the sum of $78,000 to the second defendant by way of a fully drawn loan account, the balance of which as at 20 April 1995 was $43,844.95, which is the second amount sued for. In response the first defendant admits that advances were made to it in respect of a fully drawn loan account but says they were made by the plaintiff prior to 20 October 1989, and otherwise does not admit the facts alleged in para. 4 and denies the facts alleged in para. 9 of the current amended plaint. The second defendant admits that the plaintiff made advances to him in respect of a fully drawn loan account, but says they were made prior to 28 November 1991 and denies the amount. The allegations as to the amounts owing as at 20 April 1995 are not admitted. The questions in Exhibit 3 are in the following terms: “(a) At all material times until June 30, 1993 was it a term of the agreements referred to in paras. 3, 6 and 19 of the further further amended plaint (“the agreements”) that the borrower pay interest on monies advanced at a rate determined from time to time by the applicant calculated on a daily basis but charged quarterly in March, June, September and December? (2) At all material times from July 1, 1993, was it a term of the agreements that the borrower pay interest on monies advanced at a rate determined from time to time by the applicant calculated on a daily basis but charged monthly in arrears? (3) If the answer to (a) is “yes”, is the term in each of the agreements providing that the borrower pay interest on monies advanced void for uncertainty as alleged in paras. 3A(b), 4A(b) and 14(b) of the further amended entry of appearance and defence? (4) If the answer to (b) is “yes”, is the term in each of the agreements providing that the borrower pay interest on monies advanced void for uncertainty as alleged in -- 4 of 10 -- 5 para. 3A(b), 4A(b) and 14(b) of the further amended entry of appearance and defence? (5) Are the agreements void for uncertainty as alleged in paras. 3A(c), 4A(c) and 14(c) of the further amended entry of appearance and defence?” My immediate difficulty is that questions (a) and (b) refer to terms of “the agreements” referred to in paras. 3, 6 and 19 of the further further amended plaint, but those paragraphs do not refer to “agreements”. They refer to applications in writing. This is not some error on the part of the pleader; copies of the applications dated 20 October 1989 referred to in paras. 3 and 19 are documents 6 and 2 respectively in the bundle of documents which was handed up and made Exhibit 2, and a copy of the application referred to in para. 6 is document 3 in Exhibit 2. Plainly these documents do not amount to agreements; apart from anything else, they do not contain anything which purports to an agreement on the part of the plaintiff to do anything. It is, I think, even difficult to characterise them as offers, since they do not amount to an offer by the relevant defendant to borrow any particular sum in any particular form. They contemplate that they may apply to accommodation “by way of overdraft, excepting endorsing or discounting bills of exchange or other engagements drawn by the applicant or in the applicant’s favour or other accommodation approved by the bank from time to time” (clause 1) which is potentially extraordinarily wide, and it is, I think, difficult to characterise them as an agreement to borrow money on any particular terms. There are difficulties even in characterising them as offers which, if accepted, would give rise to contracts as to the terms which would apply to any subsequent loan offered by the plaintiff and accepted by the defendant. The first is that there is no pleading that the application, viewed as an offer, was ever accepted, nor does that appear in fact to have occurred; it appears from the affidavit of Mr. Marszalek read before me, and in particular Exhibits RZN4 and RZN5 thereto, that, in relation to the advance referred to in para. 9 of the current plaint, a “terms sheet”, Exhibit RZN4, was prepared by the plaintiff and forwarded to the defendant, and signed by the second and third defendants, presumably on behalf of the first defendant. This document described itself as “this offer” and it is signed under statement “We hereby acknowledge and accept the above mentioned terms and conditions”, and I must say it looks to me rather like an offer of a loan which was accepted by the second and third defendants on behalf of the first defendant. -- 5 of 10 -- 6 Exhibit RZN5 is said to relate to a loan of $78,000 made on a particular account on 29 November 1991, which appears to correspond to the advance alleged in para. 20 of the current plaint, although it describes the borrower as both the second and third defendants, but it appears from Exhibit RZN3 that that sum of $78,000 was in fact advanced only to the second defendant. Again, the document is expressed as an offer, but this time does not appear to have been signed. It does appear, however, from para. 10 and Exhibit RZN 7 that the intention was that these would be signed, although I must say that letter does not speak of these documents as if they were contractual documents. There was said to be a terms sheet or the equivalent in the case of the third advance also. It may be that what happened in each of the relevant occasions is that there was an agreement between the parties as to how an existing debt was to be dealt with. That can, of course, still be the subject of a contract, although it may give rise to different questions of consideration, particularly if no additional money is to be advanced in consideration of any promises made by the borrower. There can be a contract between parties under which there is no promise to advance any particular sum or to borrow any particular sum, but there is agreement between them as to the terms upon which any borrowing is to take place, if it takes place, or as to particular financial consequences which are to follow if such a borrowing occurs. See, for example, the Bill Facility letter of offer considered by the Court of Appeal in Queensland Cement Limited v. Commissioner of Stamp Duties (Appeal 24/95, 1.8.95, unreported) which was held in that case not to amount to a debenture because there was no obligation on the part of the borrower to take advantage of the finance facility referred to in that letter. That particular letter identified some matters with some precision, such as certain fees payable in particular circumstances, and an obligation to pay interest: see p.3. It was an example of a contract which is not a contract to lend and borrow a particular amount of money but a contract which provides certain terms upon which any such lending and borrowing of money is to occur. Where there is such a contract, any subsequent lending and borrowing which takes place will be on the terms so agreed, subject to any agreement in a particular case to the contrary. One difficulty in applying that approach in the present case is that, unlike the document in -- 6 of 10 -- 7 Queensland Cement Limited, the application in the present case seems to go out of its way not to fix anything. On any construction it gives the plaintiff a wide discretion as to the terms of any loan made in response to that application. There was some argument before me as to whether on its true construction the agreement was to the effect that any such loan would be on the plaintiff’s usual terms and conditions, and that the provisions for variation were inserted in order to reflect the plaintiff’s capacity to change its “usual terms and conditions”, rather than reflecting a capacity to impose terms and conditions other than such as were usual. Clause 2(a) of each application does refer to the accommodation being granted “on the bank’s usual terms and conditions”, but it does go on to provide “and on such other terms and conditions as the bank may from time to time impose”. Reference is also made to clause 2(c) which provides that “the bank may from time to time at its pleasure cancel or vary the limit of accommodation granted to the applicant(s) and/or vary the rate of interest and/or rate of discount and the charge for accepting or endorsing Bills of Exchange or other engagements applicable to the accommodation granted to the applicant(s).” Clause 2(e) goes on to provide that the applicant “will pay to the bank the bank’s fees and charges ... which the bank shall charge ... in connection with the establishment and continuance of the accommodation ... ”. Far from fixing fees and charges, this leaves the obligation entirely general. This on its face is not limited to the usual fees and charges, but extends to an obligation to pay whatever fees and charges the bank does in fact charge. I think therefore that it is difficult to construe these applications as being confined to such terms and conditions as are usual, acknowledging that that may change from time to time. I think that this document does not on its face confine the bank to its usual terms and conditions in respect of any accommodation which is provided. That, I think, would be inconsistent with the plain terms of clause 2(a), and the fact that various other clauses do not purport to confine the bank to anything which is usual. The difficulty which I have is that this “application” does not serve to define anything in the way of contractual terms. It does not define or even provide a mechanism from which can be ascertained the contractual obligation in respect of any particular financial accommodation which is subsequently made, purportedly “pursuant to” that application. For example, since clause 2(a) contemplates that the accommodation shall be granted “on the bank’s usual terms and conditions ... and such other terms and conditions as the bank may from time to time impose” it is necessary -- 7 of 10 -- 8 to look elsewhere to ascertain whether for a particular accommodation the former or the latter apply. In the same way, the document does not fix a rate of interest or even provide a mechanism to fix a rate of interest, and it is therefore necessary to look elsewhere to determine what the rate of interest is. In the same way it is necessary to look elsewhere to determine what fees and charges are payable. It seems to me very difficult with respect to treat the application as capable of contractual force, that is to say as an offer capable of acceptance by the plaintiff merely by making an advance of money. Perhaps the matter can be tested in this way. Suppose the first defendant signed this application and handed it over to the plaintiff, and in response the appropriate agent of the plaintiff handed the representative of the first defendant the sum of $52,000 in cash. I think it could be safely concluded that it was a loan rather than a gift, but it seems to me that in that situation the bank would not have defined in any way the terms upon which that money was lent. There would be an obligation on the first defendant to repay the money, because such an obligation arises merely from the making of a loan even in the absence of any contract. In such a situation the plaintiff would have an action in debt arising out of the fact that the money was advanced by way of a loan. It would, I think, be impossible to say that that money was advanced on the terms set out in the application, because the application does not set out any particular terms. In fact, of course, this is not what occurred. As Mr. Marszalek makes clear in his affidavit, something would have been done at the time of the advance to define the terms upon which the money was being lent, so far as the bank was concerned. That, I think, really amounts to an offer to lend on those terms, which is accepted by the borrower taking the loan. The plaintiff has put in evidence the documents which define the terms in relation to the “advances” of $57,000 on 4 December 1991 and $78,000 on 29 November 1991, although what it appears really occurred is that the bank offered to treat existing debts which were immediately repayable to the bank as being subject to those new or perhaps additional terms, giving the borrower the choice of accepting those terms or repaying the debt. If as I suspect is the case the bank was under no obligation to continue to lend the money, and could have simply demanded repayment of the amounts of the “advances”, the bank was entitled to specify the terms upon which it would refrain from doing so, even if it was not obliged to continue to refrain from calling up the debt for any particular length of time. -- 8 of 10 -- 9 The difficulty however is that this analysis does not correspond with the pleading or the questions in Exhibit 3. All that the pleading alleges is the somewhat artificial factual situation referred to earlier, the making of the application in writing and the advancing of the money. The point of that analysis merely serves to demonstrate that the pleading in this case is inadequate. The plaintiff’s true case does not depend upon whether any or what meaning can be given to the applications alone, and it is therefore irrelevant whether they, viewed alone, would be void for uncertainty. So far as the rate of interest is concerned, Exhibit RZN4 and RZN5 identify a particular rate, which it is said “may vary during the term of the advance without notice”. The contractual effect of this is not an issue raised by any of the questions in Exhibit 3. Put at its narrowest, the difficulty with questions (a) and (b) in Exhibit 3 is that they ask whether there was a particular “term of the agreements” identified by reference to particular paragraphs in the pleading which do not identify agreements. The matters referred to in those questions were necessarily not terms of those agreements because there were no such agreements. If the difficulty was simply one of inelegant formulation of the question, if for example the documents identified in those paragraphs were offers which became agreements as a result of events identified in other paragraphs in the pleading, the difficulty could, I think, be overcome by recasting the questions, but in the present case the evidence led by the plaintiff seems to me to indicate that the documents in those paragraphs are not the source of the contractual obligations of the defendants, which in fact was sourced in other documents. In those circumstances it is not a matter of recasting the questions. There is no agreement between the parties as to what the terms of the contract between them was, nor even identifying the place where those terms may be found. No such agreement emerges in my opinion from the pleadings, and there has been no such agreement for the purposes of answering these questions, nor does the plaintiff’s evidence demonstrate what the source of those terms is in such a way as to enable me to make a finding consistent with the plaintiff’s pleading, or indeed any other finding. The question does not raise a general factual inquiry as to the terms of the contract or contracts between the parties, so it would be unfair for me to make findings on the basis that I have all of the material relevant to that issue. The High Court has recently warned against the answering of preliminary questions which are not securely based on facts which are either agreed or have been judicially determined, or at best -- 9 of 10 -- 10 can be assumed for the purposes of answering the questions: Bass v. Permanent Trustee Co Ltd (1999) 73 ALJR 522. The third of these courses can be dangerous because it runs the risk of answering questions which are really hypothetical. It seems to me that the questions (a) and (b) in Exhibit 3 are at best hypothetical and probably entirely inappropriate to the true matters in dispute between the parties, and are not clearly founded on appropriate facts. In my opinion, it is not appropriate for me to answer such questions, and with the benefit of further consideration it was wrong of me to order as I did at the beginning of the hearing that such questions be answered. Questions (c), (d) and (e) are all dependent upon the same proposition, namely that there were “agreements” referred to in particular paragraphs of the current plaint. In addition, questions (c) and (d) are dependent upon particular answers to questions (a) and (b). I think that the same difficulty applies also to these questions. In my opinion, it is not appropriate to answer any of these questions, and indeed it was not appropriate to ask them. My order having been made on 29 November, and not having been taken out, it is open to me to revoke it (r.667(1)) which I do. I decline to answer any questions. I think that that procedure is not appropriate in the circumstances of this case given the nature of the dispute between the parties. I shall hear submissions as to costs, and as to what directions I should make to progress this action, which seems to be taking too long to come to trial. Counsel for the plaintiff: M.M. Stewart Solicitors for the plaintiff: Clarke and Kann Solicitors for the defendant: Lynch & Co Date of Hearing: 29 November 1999 -- 10 of 10 --