Bank of Melbourne Ltd v Manicaros [1993] QSC 405

' '6 'd. ~ # IN THE SUPREME COURT OF QUEENSLAND Writ No. 1189 of 1993 Brisbane Before Mr. Justice Shepherdson [Bank of Melbourne and Manicaros] BETWEEN BANK OF MELBOURNE LTD A.C.N. 007 270 448 Plaintiff and LUCAS BRIAN MANICAROS Defendant JUDGMENT - SHEPHERDSON J. Judgment delivered 3 December 1993 CATCHWORDS: -application for summary judgment- dismissed- leave to defend given Counsel: Solicitors: Hearing Date: Bland for Applicant S. Derrington for Defendant Thompson King Connolly for Plaintiff Myles G Murphy for Defendant 15 and 17 November 1993 -- 1 of 12 -- IN THE SUPREME COURT OF QUEENSLAND Writ No. 1189 of 1993 BETWEEN BANK OF MELBOURNE.LTD A.C.N. 007 270 448 Plaintiff and LUCAS BRIAN MANICAROS Defendant JUDGMENT - SHEPHERDSON J. - CHAMBERS judgment Delivered 3 December 1993 On 4 August 1993 the Plaintiff issued its writ in this action against the Defendant claiming $525,993.60 together with interest at the rate of $218.32 per day from 28 May 1993 pursuant to an agreement in writing dated 12 December 1991. The writ was specially endorsed and it appears from paragraph seven of the Statement of Claim that the amount claimed namely $525,993.60 is said to be due and payable by the Defendant to the Plaintiff under an agreement in writing dated 12 December 1991 made between the Plaintiff and the Defendant. On 23 August 1993, the writ was served on the Defendant. The address of the Defendant shown in the writ is 187 Malawa Drive, Palm Beach. An appearance was entered and on 28 October 1993 a defence delivered. This document has been described by the -- 2 of 12 -- 2 Defendant as a holding defence. In truth it is nothing more than an admission that the Plaintiff is incorporated and, by not admitting them, puts in issue all other allegations in the Statement of Claim endorsed on the writ. As might well have been expected, that defence has produced the present application before me - an application for summary judgment and alternatively an order that the defence be struck out. The application inspired the Defendant and his legal advisers to "condescend upon particulars" of the defence (Wallingford v The Directors of the Mutual Society (1880) 5 App. Cas. 685 at 704). The Defendant has exhibited to one of his affidavits a document described as an amended defence and counterclaim which he seeks leave to deliver should he be granted leave to defend the proceedings. The Plaintiff's case as appearing from its affidavit evidence is:- (a) that it is duly incorporated; (b) that the action was commenced by a specially endorsed writ; (c) that the Defendant has entered an appearance; (d) that the Defendant .agreed to borrow $500,000 from the Plaintiff for a term of three years and to pay interest at 2.5% above the Plaintiff's three year fixed rate on the date of draw down; (e) that clause 11 of a Bill of Mortgage signed by the Defendant entitles the Plaintiff to accelerate payment of the debt in the event of default; (f) that the Plaintiff advanced the sum of $500,000 to or at the direction of the Defendant on 16 January 1992; (g) that the Plaintiff's three year fixed rate as at 16 January 1992 was 8.65%; -- 3 of 12 -- 3 (h) that the Defendant failed to pay the interest instalment due on 16 February 1993 and all subsequent instalments; (i) that on 28 May 1993 Plaintiff exercised its option to accelerate payment of all monies advanced; (j) that the balance owing in respect of that advance (including interest) on 16 October 1993 was $557,830.58; (k) that interest is accruing upon that amount at the rate of $227.18 per day; (1) that there is no defence to the action. The agreement to borrow on which the Plaintiff relies is described in the Statement of Claim on the specially endorsed writ in the following manner:- An agreement in writing dated 12th December [whereby] the Plaintiff and the Defendant agreed that:- (a) The Plaintiff would advance $500,000 to the Defendant; (b) The Defendant would pay interest upon the said amount by monthly instalments at the rate of 6.5% above the Plaintiff's three year fixed rate or, if payment was made by the due date at the rate of 2.5% above the three year fixed rate; (c) The Defendant would repay the said amount of $500,000 to the Plaintiff at the expiration of the term of three years. That agreement dated 12 December 1991 is, in reality, a four page document on Plaintiff's letterhead entitled "Letter of terms and conditions" and dated 12 December 1991 to which is attached a separate page headed "AUTHORITY TO PROCEED" also dated 12 December 1991 and signed by the Defendant. These five pages constitute the agreement pleaded. That agreement does not contain any option for the Plaintiff to accelerate payment of the whole advance in the event of a default. -- 4 of 12 -- 4 The option to accelerate appears in clause 11 of a mortgage dated 27 November 1991 a true copy of which is exhibit "CBM2" to an affidavit of Carey lrene Backer-Mackie the Manager - Commercial Loans Administration of the Plaintiff. That mortgage is pleaded in paragraph 3 of the Statement of Claim and Gregory David Wheeldon a solicitor has deposed to his having seen the Defendant sign the mortgage on or about 12 December 1991 and his having witnessed the J?efendant's signature on the document. On 27 November 1991 the mortgage was executed by Saxonvale Pty Limited under its common s~al. Before I proceed further, I note that the specially endorsed writ in this matter, having been issued apparently under order 6 rule 7 appears to follow the general form of special endorsement appearing in forms 58 to 73 (inclusive) in the First Schedule to the Rules of the Supreme Court and makes it quite clear that the amount now claimed is said to be due and payable under the agreement in writing dated 12 December 1991. In the even~ which have happened, this claim is not strictly correct because, as Mr Bland for the Plaintiff concedes, that agreement does not contain any option to accelerate payment of the whole advance on default and to justify its claim for payment of an accelerated amount, Plaintiff must have recourse to the mortgage. In my view the pleading is insufficient to justify the claim made. The amount sought to be recovered, if due, is due because of the operation of the mortgage and the agreement dated 12 December 1991. Any judgment, if given now, must accord with the issues raised in the pleadings. The Defendant's affidavit evidence shows:- (a) He denies having received any advance from the Plaintiff pursuant to the loan agreement dated 12 December 1991; . . . -- 5 of 12 -- 5 (b) In November 1991 a man named Doyle, described by the Defendant as a business associate of his, spoke to the Defendant about "a deal he [Doyle] was trying to put together for a U.S. company with which he was interested ... "; (c) Doyle allegedly told the Defendant:- (i) that he had found an investor by the name of Muller who would be prepared to invest 2 million dollars if he (presumably Doyle) were able to arrange for a loan of approximately that amount; (ii) that Doyle and Muller had had discussions with Byron Lye and Brian Waters of the Plaintiff Bank in an attempt to negotiate a loan of 2 million dollars for Muller; (iii) that Lye and/or Waters had told Doyle and Muller that approval for a loan of that magnitude was not possible at state management level because of bank policy which limited the State Manager's lending discretion to $500,000; (iv) that Lye and/or Waters had suggested to Doyle that he attempt to find four "nominal" borrowers who would each be prepared to sign loan applications for $500,000 and any other associated documents. (d) Doyle asked the Defendant if he would be prepared to be one of the four nominal borrowers in return for which, coupled with 12 months of the Defendant's services to promote the U.S. company, the Defendant was to be paid a fee; (e) Doyle informed him and he verily believed that:- (i) the Plaintiff would require a mortgage and personal gtlarantees from · Muller and his wife. -- 6 of 12 -- 6 . (ii) the Plaintiff's solicitors would prepare all the relevant documentation for the transaction .. (iii) the Defendant would not be in any way liable for the repayment of the principal and interest but that the money borrowed would go straight to Muller who would be solely responsible for repayments under the loan. (f) That on the basis of what he had been told by Doyle, the Defendant agreed to become a party to the arrangement which included the four nominal borrowers each signing loan appUcations for $500,000 and other associated documents; (g) That Doyle arranged and paid for Defendant's flight from Sydney to Brisbane. where he arrived on or about 12 December 1991, that he went to the Brisbane Office of the Plaintiff and on arrival was asked to sign certain documents of which he has no recollection and that nothing was said to him by anyone at the Plaintiff bank about the nature or effect of the documents he was being asked to sign; (h) That at some stage which he can not identify Defendant became aware that a mortgage was to be provided by Saxonvale Pty Ltd a company of which he swears Muller and his wife were directors and shareholders, that mortgage being over property in New South Wales; (i) That he had no interest in Saxonvale Pty Ltd and has never been a director or shareholder of that company; (j) That he had not met Muller until 12 December 1991; (k) That on 16 January 1992, Muller wrote to the Plaintiff's Brisbane Branch instructing the Plaintiff to deduct from his account total interest payments of the loans for the Defendant and another person named J ames Michie in the -- 7 of 12 -- 7 amount of $111,500 covering the monthly interest payments for each individual and further stating that he Muller accepted total responsibility for payment of the monthly interest amounts for the ensuring 12 months; (1) That subsequent to 16 January 1992, the Plaintiff commenced sending all statements relating to "the loan account" to Muliers' address at Carrara and that apart from "the initial six or seven statements which were sent to my sister's address at 187 Malawa Drive, Palm Beach", the Defendant never received from the Plaintiff any documents relating to the loan account. The Defendant has concluded his affidavit sworn 11 November 1993 by saying:- "It was my belief that the sum of $500,000 borrowed in my name was paid directly to Muller who was always to be responsible for repayment of the loan. The deal was orchestrated by the bank which was fully aware of the nature of the total transactions." I proposed to ignore the last sentence in that paragraph as it is opinion evidence. In that affidavit the Defendant has neither admitted nor denied that he signed the "authority to proceed" dated 12 December 1991 and the mortgage. In his proposed defence and counterclaim the Defendant has in some respects enlarged upon certain of his sworn allegations but basically his proposed defences and counterclaims are:- 1. Of alleged misrepresentations by Lye and/or Waters as servant or agents or the Plaintiff on which the Defendant allegedly relied in acting to his detriment in signing the authority to proceed dated 12 December 1991 and the mortgage; 2. That it is unconscionable for the Plaintiff to demand from him payment of the monies claimed; 3. An estoppel against the Plaintiff; -- 8 of 12 -- 8 4. A counterclaim, based on the Trade Practices Act 1974 for alleged misleading and deceptive representat,ions by Lye and/or Waters as servants or agents for the plaintiff; 5. A counterclaim for:- · (i) a declaration that the agreement dated 12 December 1991 is void ab initio; (ii) a declaration that the instrument of mortgage insofar as it refers to the defendant is void. The relevant principles applicable to an application for summary judgment such as the present are as follows:- 1. "The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried" (Fancourt v Mercantile Credits Limited (1983) 154 CLR 87 at 99); 2. If there is a serious or difficult question of law raised by a defendant the judge in chambers ought not to decide it but ought to give it unconditional leave to defend. (Bundock Bros. v Bergl & Co (1897) 8 QLJ 106 & Commonwealth Dairy Produce Equalisation Committee Limited v Hansen (1944) St.R.Qd. 95 at 98 (approved by Gibbs J. in Theseus Exploration N.L. v Foyster (1972) 126 CLR 507 at p.515); 3. In General Steel Industries Inc v Commissioner for Railways (NSW) 112 CLR 125 Barwick CJ ., in discussing the jurisdiction to summarily terminate an action said (at p.130):- -- 9 of 12 -- 9 "But once it appears there is a real question to be determined whether of fact or law and that-the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process." 4. In Australia and New Zealand Banking Group Limited v Barry ( 1992) 2 Qd.R 12 at p. 14 Macrossan Cj ., dealing with an appeal against the grant of summary judgment said:- "The judge should not have ordered as he did unless he was fully persuaded that there was no real question to be tried, that is that there were no facts shown such as would lead to the inference that at the trial of the action the ... defendants might be able to establish a defence to the plaintiff's claim. A complete defence does not have to be shown by a defendant at this stage when summary judgment is sought." Mr Bland has submitted that this is a proper case for judgment to be entered against the Defendant. He has argued that the Defendant's material now before me shows that before the Defendant signed the agreement and the mortgage, Doyle had made him aware that:- (a) Muller was seeking to borrow a total of 2 million dollars from the Plaintiff; (b) Lye and/or Waters had said that the lending discretion allowed by the Plaintiff to his State Management was limited to $500,000; -- 10 of 12 -- 10 (c) For that reason Lye and/or Waters had suggested to Doyle that he attempt to find four nominal borrowers who would each be prepared to sign loan applications for $500,000 and any associated documents. He further argued that when the Defendant entered into the arrangements with the Plaintiff bank he must have known and understood that:- 1. The true nature of the transaction was a loan of 2 million dollars to Muller; 2. That Lye and/or Waters did not have the Plaintiff's authority to agree to a loan of that amount on its behalf; 3. The purpose of the arrangement proposed by Lye and/or Waters was to deceive the Plaintiff as to the true nature of the transaction; 4. That therefore in proposing that arrangement, Lye and/or Waters were not purporting to act on behalf of the Plaintiff. Alternatively, Mr Bland has argued the statements made by Lye and/or Waters were contrary to the Plaintiff's interests and one cannot assume that they were acting with the Plaintiff's authority. He cited the unreported decision of McPherson SPJ in Nippon Shinpan Co Ltd v Ointex Limited & Anor (No. 4010 of 1989) - judgment delivered 2 November 1990. It seems to me that in the present case, one of the important issues will be, assuming that Lye and/or Waters had made the statements attributed to them, whether or not they were acting as servants or agents of the Plaintiff at the material time. The resolution of this issue must in my vie'Y involve a question of fact.and a question of law. The answers to the questions cannot be determined at this stage. Further, a matter of unconscionability is raised against the Plaintiff. Although on the present material it appears tenuous, it may well be that by the time of trial further -- 11 of 12 -- 11 investigation will show that this claim is strengthened (cf the comments of M_acrossan Cj in Barry's case (supra) at p.14). It is unnecessary for me to deal with other matters raised by Mrs Derrington who appeared for the Defendant ·e.g. the admissibility of the computer printout showing the statement of the account with the Plaintiff in the name of the defendant and an apparent error in the mortgage in which the date of the agreement between Plaintiff and Defendant is shown as 16 December 1991 instead of 12 December '1991. I am not satisfied that this is such a clear case that summary judgment should be ordered. I therefore dismiss the application for summary judgment and give the Defendant unconditional leave to defend. I order that he deliver his defence and counterclaim within seven (7) days. I find no need to make an order dismissing the "holding defence". On the matter of costs, Mrs Derrington has argued that these should be reserved. However, I take a different view given the manner in which the Defendant has chosen to I present the particulars of his defence. In certain respects his affidavit evidence has not been as frank as one would have liked and I have mentioned areas where he has failed to address the issues of whether he did sign the authority to proceed on 12 December 1991 and the mortgage. Further, had the first defence been in the form of the proposed amended defence and counterclaim it is more than likely that the Plaintiff would not have sought summary judgment. The "holding defence" invited the application for summary judgment and in my view the proper order for costs is that the costs of and incidental to the application for summary judgment be the Plaintiff's costs in the cause. -- 12 of 12 --