Commonwealth Bank of Australia v Perrin (No 2) [2012] QSC 78

SUPREME COURT OF QUEENSLAND CITATION: Commonwealth Bank of Australia v Perrin [No 2] [2012] QSC 78 PARTIES: COMMONWEALTH BANK OF AUSTRALIA ACN 123 123 124 (Plaintiff) v NICOLE KATHLEEN PERRIN (Defendant) FILE NO/S: BS 4192 of 2009 and BS 4246 of 2009 DIVISION: Trial Division PROCEEDING: Costs determination ORIGINATING COURT: Supreme Court DELIVERED ON: 30 March 2012 DELIVERED AT: Brisbane HEARING DATE: 14 December 2011 JUDGE: McMurdo J ORDER: The plaintiff pay the defendant’s costs of the proceedings numbered BS 4246/09 and BS 4192/09 including reserved costs if any, assessed on the standard basis, save for the costs of the 14 December 2011 for which the defendant will pay the plaintiff’s costs. CATCHWORDS: Mitchell Morgan Nominees Pty Ltd v Vella [2011] NSWCA 390, considered Solak v Bank of Western Australia Ltd [2009] VSC 82, considered COUNSEL: KE Downes SC with SB Hooper for the plaintiff W Sofronoff QC with J O’Regan for the defendant SOLICITORS: Henry Davis York for the plaintiff Shand Taylor for the defendant [1] This judgment concerns the costs of this case in which the plaintiff’s claim was dismissed.1 The plaintiff concedes that it should pay the defendant’s costs. But she seeks them upon the indemnity basis which the plaintiff opposes. 1 Commonwealth Bank of Australia v Perrin [2011] QSC 274. -- 1 of 5 -- 2 [2] The proceeding was to enforce two mortgages and to recover an amount which was claimed to be secured by them. In the principal judgment, I wrote that the plaintiff bore the onus of proving that the guarantee was signed by the defendant or with her authority, whilst she bore the onus in relation to the mortgages.2 The defendant now submits that there was no possibility that the plaintiff would discharge the onus upon it, as it must have known at least well before the trial. Indeed it is submitted that there was no basis for the plaintiff to plead that any of these documents was signed by the defendant or with her authority. [3] As to the onus of proof, at the trial the plaintiff did not concede that it bore the onus in respect of the guarantee. It then cited Solak v Bank of Western Australia Ltd,3 although at the same time submitting that the outcome would not turn upon the question of onus and that any onus had been discharged by it. Similarly on this application, the plaintiff submitted that absent any authority in Queensland, it was at least arguable that “the mortgages remained indefeasible and secured the amounts stated by the guarantees, even if the guarantees had themselves been forged”. But as Solak and a series of cases in New South Wales demonstrate, this question of onus turns upon the terms of the particular mortgage in question: see, most recently, Mitchell Morgan Nominees Pty Ltd v Vella.4 The mortgages here included a term which obliged the mortgagor to pay any amount owing under any agreement between the mortgagee and mortgagor. But the alleged debt of the defendant had its legal basis in the guarantee. That was reflected in the plaintiff’s pleading. In the prayer for relief, the plaintiff claimed to recover possession of the mortgaged property and the alleged debt “pursuant to a guarantee dated 16 June 2008”. [4] I go then to the argument that the plaintiff had no prospect of success. On the question of whether the defendant’s signature was forged, it is submitted that there was no evidence which was tendered, or which could have been tendered, to prove that the defendant did sign any of the critical documents. The purported witness to her signature, Fraser Perrin, was called in the plaintiff’s case and said that his signature had been forged and that he had not seen the defendant sign the documents. No-one else was called to say that she had signed them. She had made no admission of signing them. And no handwriting expert was called to say that the documents bore her signatures. [5] It is said that not only was there no evidence for the plaintiff’s case, but that, as the plaintiff must have understood, there was abundant evidence for the defendant’s case that her signature had been forged. In 2009, solicitors for the defendant sent to the plaintiff’s solicitors the report of Mr Heath, in which he said that there was very strong support for a finding of forgery. Again in 2009, the plaintiff received an affidavit sworn by the defendant’s solicitor, deposing that he had been informed by Fraser Perrin that his signature as a witness had been forged. There was a statutory declaration by Fraser Perrin to that effect in September 2009, which was disclosed by the State of Queensland in its List of Documents. In March 2010, Fraser Perrin gave evidence under oath, when examined by Matthew Perrin’s trustee in bankruptcy, to the same effect. In December 2010, the plaintiff received a 2 [2011] QSC 274 at[70]. 3 [2009] VSC 82. 4 [2011] NSWCA 390 at [16] per Giles JA. -- 2 of 5 -- 3 statement signed by Matthew Perrin, confessing to the forgeries. Then in April 2011, there was a further report from Mr Heath as well as the reports from Mr Marheine also supporting the defendant’s case. [6] It is true that the plaintiff had no direct evidence that the defendant signed the documents. But that is not to say that there was no evidence from which that fact could be inferred. A particular submission for the plaintiff at the trial was that, more probably than not, the defendant signed these documents without questioning her husband about them and later came to think in her own mind that she had not signed them. That case had support in the evidence of the relationship between the couple, especially in her heavy reliance upon him in relation to financial matters. That case was not made hopeless by the evidence in favour of the defendant. For example, the evidence of the handwriting experts certainly assisted her case but it did not make it plainly correct. What I found to be the forgeries of her signature still bore to some extent a resemblance to her true signature. [7] Alternatively, it was open to the plaintiff to argue that she had signed these documents, well understanding their effect. Again, there was the circumstance that she left to her husband all of the decision making on financial matters, from which there was an arguable probability that if she had been told by him that money needed to be borrowed upon the security of the house, in order to salvage the fortune upon which the Perrin family lived, she would have agreed to do so. Of course, after the extensive factual inquiry of the trial, I concluded otherwise. But that is not to say that upon the facts known or reasonably available to the plaintiff, it should have thought that there was no prospect of another outcome. [8] Obviously the plaintiff’s case was made more difficult by the evidence of Fraser Perrin that his signature had been forged. Once that evidence was accepted, then the plaintiff had to explain how that might be consistent with the defendant having signed the documents. That problem was not specifically addressed within the 184 pages of written submissions for the plaintiff at the trial, although it was addressed briefly by counsel in their oral submissions, in response to a question by me. It is likely that counsel made a forensic decision not to address the problem of Fraser Perrin’s evidence, knowing that it was a weakness in their argument. But that is not to say that they or their client believed that Fraser Perrin’s evidence provided some fatal bar to its case. [9] The statement made by Matthew Perrin was not admitted as evidence of the facts asserted within it. In my view, it was not unreasonable for the plaintiff to advance a case which was inconsistent with that statement. The plaintiff was not obliged to accept its truth, and in making it, Matthew Perrin may well have been motivated by many things, not the least being a wish to keep what had been the family home from the reach of the plaintiff. [10] The plaintiff’s case was not entirely dependent upon the documents having been signed by the defendant. The plaintiff made several alternative arguments. The defendant now says that each of them was always bound to fail, either on the facts or on the law. That submission, which is made by different counsel from those who -- 3 of 5 -- 4 appeared for the defendant at the trial, owes much to hindsight. In particular, the case of implied authority was arguable and did not involve any allegation of fact which the plaintiff must have known to be untrue. Again, it was an argument focussing upon the relationship between the defendant and her husband, where necessarily the plaintiff was an outsider with an imperfect knowledge of all of the facts and circumstances. But that disadvantage did not mean that the plaintiff was precluded from attempting to establish this implied authority. It is now submitted that the implied authority argument was irreconcilable with the fact of the forgery of her signature, although the argument was relevant only upon that premise. In the judgment, I said that the forgery was a powerful indication of Matthew Perrin’s own state of mind and of the lack of a relationship from which he had implied authority.5 But it goes too far to say that the argument was hopeless and must have been thought to be so. There was no legal flaw in this part of the plaintiff’s case. The defendant’s reliance upon s 11 of the Property Law Act, in response to this implied authority argument, did not apply to the case brought upon the guarantee.6 [11] The defendant’s submissions are strongly critical of the plaintiff’s case that there was a power of attorney in favour of Matthew Perrin. In April 2010, the plaintiff amended its pleading to rely upon a document which, on its face, was a power of attorney dated 10 May 2001 signed by the defendant. The authenticity of the document was immediately disputed. At about the same time, the plaintiff received the expert report of Mr Heath, where he concluded this power of attorney was produced by means of a “cut and paste”. The defendant points to a number of things which then occurred prior to the trial which, it is said, should have made it clear to the plaintiff that this power of attorney was a forgery. Then at the trial, the plaintiff called the purported witness to the defendant’s signature of this document, who said that she did not sign it or witness the defendant’s signature. Ultimately, the plaintiff abandoned any reliance upon the document, but only on the seventh day of the trial. In my view, this case should have been abandoned earlier. That is because the plaintiff’s solicitors should have inspected the true file of Allens Arthur Robinson which was made available in November 2010. They did not request a copy of that file until March 2011. And at least once Ms King gave her evidence, there was effectively no prospect of relying upon this fabricated power of attorney. It would have been preferable for the bank to then abandon this part of its case, rather than leaving it until the seventh day of the trial. However this did not significantly contribute to the costs of the case. Overall, the plaintiff’s preparation of this part of the case was not ideal. But originally it did have a basis for the allegation and the criticism that can be fairly made of the plaintiff is only that it should have abandoned the case somewhat earlier. [12] Ultimately, I am not persuaded that there is something so exceptional about this case that the plaintiff should be visited with indemnity costs. In particular, I am not persuaded to find that the plaintiff prosecuted a case which it knew could not succeed. With the benefit of a trial, it can now be seen that its case lacked merit. It could also be said that by the commencement of the trial, the plaintiff’s prospects were apparently poor. But that is not to say that it had no prospects. The order 5 [2011] QSC 274 at [139]. 6 [2011] QSC 274 at [121]. -- 4 of 5 -- 5 should be that the plaintiff pay the defendant’s costs of the proceeding, including reserved costs if any, assessed on the standard basis. -- 5 of 5 --