Maksacheff v Commonwealth Bank of Australia (No 2)

1. [1]

   The plaintiffs sue the defendants for what is said to be liquidated damages in the sum of $2.8 million, together with interest. The defendants have applied for the proceedings to be summarily dismissed under r 13.4 Uniform Civil Procedure Rules 2005.

2. [2]

   The plaintiffs were customers of the defendant Bank, who borrowed money from it secured by a mortgage over a property in the Orange region on the western slopes of New South Wales. As the plaintiffs now acknowledge, they defaulted on that loan. The Bank obtained judgment for possession and in debt by default in matter no. 2015/00158687 in this Court.

3. [3]

   The present proceedings relate to the plaintiffs’ claim that the judgment debt was satisfied and discharged by accord and satisfaction on 30 November 2015. The amount claimed is liquidated damages specified in the contract the plaintiffs say was made between them on the one hand, and the defendants on the other.

4. [4]

   There are in all five defendants to the proceedings being the Bank, four of its officers, and its solicitor acting in the former proceedings.

5. [5]

   In support of their applications the defendants read the affidavit of Richard Lewin, a solicitor with carriage of the matter, sworn on 3 June 2016. The documents exhibited to him at the time of swearing his affidavit were admitted separately into evidence, but marked consistently with the affidavit as Exhibit RL-1. To resist the application the plaintiffs read the affidavit of the first plaintiff sworn on 30 June 2016 together with attachments, and the original contracts and promissory note appended to it dated 27 November 2015 (Exhibit 2).

Relevant principles of law

1. [6]

   The principles of law informing the exercise of the Court’s power to summarily dismiss proceedings are well settled. The applicable test is generally articulated by reference to the decision of the High Court of Australia in General Steel Industries Inc. v Commissioner for Railways (NSW) [1964] HCA 69; 112 CLR 112. The Court will not readily deny a litigant his or her day in court therefore the power dismiss proceedings will only be exercised “in plain and obvious cases”. As Macfarlan JA pointed out in O’Brien v Bank of Western Australia Limited [2013] NSWCA 71; 16 BPR 31 at [3], the real question is whether there is an underlying claim that has a real, not fanciful, prospect of success. This question is distinct from the question of whether such a claim is actually pleaded; see also Ward JA to the same effect at [66] – [68]. To make good its claim for summary dismissal, the Bank must establish on the assumption that the material facts (as opposed to legal consequences) actually averred can be proved, that the outcome of the litigation is so certain that it would be an abuse of process to permit it to proceed to a full hearing on the merits. It will succeed only if it demonstrates that the plaintiffs’ claim is clearly untenable.

The plaintiffs’ case

1. [7]

   The Bank obtained judgment by default in the previous possession proceedings on 14 July 2015. At the same time, it also obtained a monetary judgment in the sum of $607,523.10. After judgment the plaintiffs sought to challenge the Bank’s title to possession in various ways. It is unnecessary for the purpose of this decision the difficulties experienced by the Bank in securing possession.

2. [8]

   On or about 30 November 2015, a number of documents were delivered to the Bank addressed to it and others, including the second to fifth defendants. The documents included:

3. [9]

   The document contained typed notes said to be terms of the contract to the effect that the Bank accepted the promissory note as “sufficient to discharge [the plaintiffs] liability to the Bank”. And that the Bank would discharge the mortgage and return the certificate of title to the plaintiffs. Other terms required the Bank to issue a statement “showing a zero balance as confirmation the account was settled in full”. Other mutual promises not presently material are set out. There are material terms under the heading “Default and Liability Clause and Notice”. Its essential feature was to provide for the payment of liquidated damages in the sum of $2.8 million upon default by any party of its obligations under the contract. It would seem to be calculated as “some four times the value of the original contract”, presumably a reference to the loan agreement and mortgage. $2.8 million is not four times the acknowledged $650,000; it is four times the sum of $700,000 appearing on the face of the promissory note tendered to discharge the mortgage.

4. [10]

   The defendant failed to return the promissory note as defective or insufficient within three days and failed to attend at the time and place notified on its face to redeem its value. The plaintiffs say by this conduct, the Bank accepted the tender of the promissory note in discharge of the plaintiff’s liability, and the other terms and conditions including the default provisions.

5. [11]

   On 8 December 2015, the plaintiffs demanded payment of the liquidated damages of $2.8 million. The demand stated in part the following:

6. [12]

   On the 18 of December 2015, the Bank’s solicitors wrote to the plaintiffs including in the following terms:

7. [13]

   Further demands were made by the plaintiffs before commencing proceedings on 12th April 2016.

Legal aspects of the plaintiffs’ case

1. [14]

   The plaintiffs’ case then is that the contract was made between the parties by the plaintiffs’ offer contained in the 30th November 2015 documentation and the Bank acceptance of that offer by its conduct. The Bank’s conduct is said to consist of failing to return, or reject, the documentation within the time allowed in the offer and failing to present the promissory note for payment in accordance with its terms. The plaintiffs say the Bank and other defendants are in breach of the contract by failing to respond to the plaintiffs’ demand for payment of the liquidated damages.

2. [15]

   It may also be the plaintiffs’ case that the tender of the promissory note is sufficient tender to discharge their indebtedness to the Bank. However, no remedy in this regard is sought in the original or amended Statement of Claim. Nor is there any averment that the promissory note is sufficient of itself to discharge the plaintiff’s indebtedness to the Bank. Rather, it is alleged that the Bank (and other defendants) “agreed … to accept promissory note in full and final satisfaction against the plaintiff’s liability to it such that the liability is discharged”: (amended Statement of Claim, paragraph 5(a).

Decision

1. [16]

   I am satisfied in the requisite degree that the defendants have discharged the heavy onus of demonstrating that the plaintiffs’ claim could not possibly succeed and should not be allowed to proceed to a hearing on the merits.

2. [17]

   In the course of his clear, succinct and helpful argument, Mr J Hynes of Counsel, who appeared for the defendants, referred me to Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523. At 534 McHugh JA (as his Honour then was), with whom Samuels JA agreed, said (citations omitted):

3. [18]

   Kirby P wrote to the same effect at 527 – 8. His identified the rationale for this rule in the following terms:

4. [19]

   Their Honours accepted that silence in conjunction with other circumstances “may indicate that [the offeree] has accepted the offer” (per McHugh JA at 534). However, that is not this case; no positive or affirmative conduct on the part of the Bank is alleged. The plaintiffs’ whole case depends upon the Bank’s silence and omission to act. Taken at its highest and on the assumption that each averment in the statement of claim will be proved at a hearing, the plaintiffs’ case clearly and unambiguously engages the principle discussed in Empirnall Holdings.

5. [20]

   In an attempt to answer Mr Hynes very telling point, Mr Andrew, who I gave leave to appear for the Plaintiffs at their request, (see [2016] NSWSC 1108) pointed out that “the agreement” carried the Bank’s trademarks and logos and that this was equivalent to it either signing the contract or affixing its common seal to it. With respect, this argument must be rejected. Those insignia had been printed on the bank’s stationery issued to the plaintiffs as a prior statement of account, before the plaintiffs adapted it for their own purposes when drafting their proposed contract.

6. [21]

   Mr Andrews also relied upon the various provisions of the Bills of Exchange Act 1909 (Cth). However, not only is there no averment that the tender of the promissory note was of itself sufficient to discharge the liability of the plaintiffs to the Bank, but also, no relief is sought in the initiating process based upon that matter. The Court’s judgment of 15th July 2016 is no way called into question, impugned or sought to be set aside in the pleading on ground premised on the tender of the promissory note, or otherwise. The judgment could hardly be called into question by a circumstance which occurred more than four months after its entry.

7. [22]

   Moreover, it seems to me that the plaintiffs delivery of the promissory note to the Bank could not of itself discharge any liability of them as borrowers under the mortgage and loan agreement. It is not shown that in accordance with its terms the mortgage could be discharged by tender of a promissory note, especially one as heavily conditioned as that which forms part of Exhibit 2. If anything, the promissory note created a new obligation to pay had the Bank presented the note on the date and at time and place it specified. The Bank’s failure to present the note for payment discharged the plaintiffs from any liability on the note: ss 89 and 93 Bills of Exchange Act 1909 (Cth). It did not discharge the plaintiffs from their liability on the mortgage or loan agreement, the latter of which doubtless specified the required mode of payment to effect a discharge.

8. [23]

   I am satisfied that the plaintiffs claim has no prospects of success whatsoever and that the proceedings must be summarily dismissed.

9. [24]

   Before pronouncing final orders there are two points I should mention. First, the plaintiffs’ evidence included (as DJM 13; Court Book BP 19 to 62) an affidavit of a person named Michael Carrigan who describes himself as a certified mortgage securitisation auditor and a subscriber of the Bloomberg Professional Service. His evidence, which I suppose was put forward as expert evidence, went to the question whether the plaintiffs’ mortgage debt to the Bank had been securitised, which I take to be a reference to its assignment by the Bank to another.

10. [25]

    Mr Andrews accepted that there was no case pleaded based on this concept. He went further and acknowledged that the relevance of securitisation, if any, was to the Bank’s claim in the previous proceedings (28.5 – 29.10T). The point is no longer available to them, given the judgment: Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; 147 CLR 589. But in any event Mr Carrigan’s “evidence” does not establish that the mortgage loan was securitised. At page 13 of his affidavit Mr Carrigan said he researched the Bloomberg online data base which “did not reveal matching characteristics based on the original” mortgage loan agreement. At page 39, he referred to a possibility that the loan “may have been sold and transferred” but said “there is no record of assignments”. There is no factual basis in the evidence before me for supposing that the plaintiffs may possibly have a case against the bank they are entitled to advance based upon the concept of securitisation.

11. [26]

    Secondly, the so-called liquidated damages provision is self-evidently unenforceable as a penalty: Legione v Hateley [1983] HCA 11; 152 CLR 406 at 445. As this was not argued it does not form a basis of my decision.

12. [27]

    My orders are:

    1. (1)

       Under Rule 13.4 Uniform Civil Procedure Rules 2005 the proceedings are dismissed generally.

    2. (2)

       The plaintiffs are to pay the defendants’ costs.