Reid v Commonwealth Bank of Australia

1. [1]

   BELL CJ: I have had the benefit of reading in draft the reasons for judgment of Leeming JA and White JA. I agree with the orders proposed by White JA.

2. [2]

   Notwithstanding the obscurity attaching to much of the proposed amended statement of claim (which White JA has explained) and the misconceived nature of some of the claims sought to be agitated (including that for money had and received), for the reasons given by both Leeming JA and White JA, the proceedings ought not, in my view, have been summarily dismissed by the primary judge by reason of and reference to the Deed of Settlement of 13 February 2015.

3. [3]

   As Leeming JA’s scholarly judgment explains, equitable doctrine has always been rightly solicitous of the interests of those unintentionally giving up future unknown rights or releasing claims in ways that could not have been contemplated at the time of the compromise. It also guards against the unconscientious exercise of legal rights conferred by releases, whether secured by contract or under deed. While any deed of release or compromise should be interpreted consistently with the guidance supplied by the seminal decision in Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112; [1954] HCA 23, as the judgments of Leeming JA and White JA in this case both demonstrate, consistent with the recent decision of the Victorian Court of Appeal in Burness v Hill [2019] VSCA 94, this is one area in which evidence of the subjective intentions of the parties to a deed of (or contractual) release may legitimately inform the analysis of the operation and efficacy of any release.

4. [4]

   On a separate matter, I associate myself with White JA’s observations at [115] – [118] as to the baseless nature of the claim of denial of procedural fairness by the primary judge raised in the applicant’s summary of argument. The raising of such a complaint without a proper foundation is a serious matter which is not only inconsistent with s 56 of the Civil Procedure Act 2005 (NSW) but also with a practitioner’s professional obligations. I agree with White JA’s observation that the submission asserting a denial of procedural fairness should not have been made

5. [5]

   LEEMING JA: I agree with the orders proposed by White JA. His Honour’s reasons enable me to explain my own reasoning much more concisely than would otherwise be the case. What follows presupposes familiarity with the factual and procedural background.

6. [6]

   The District Court rightly dismissed many aspects of Mr Reid’s claim summarily. I agree with what White JA has said concerning the complaint of a denial of procedural fairness, the claim that the Bank could be liable for money had and received, the claim based on the National Credit Code, and the fact that any claim based on statutory unconscionability was barred by the release if the Bank was able to rely on the release.

7. [7]

   The real issues in this application were much narrower. They turned on the belated discovery by Mr Reid that an allowance of $370,000 had been made by the Bank to the purchasers following the vandalism of the mortgaged property, and whether the release given by Mr Reid earlier, in February 2015, was an answer to his claim that the Bank account for that allowance. There was no opposition from the Bank to Mr Reid reading, in support of the application for leave, an affidavit attesting to his not knowing of the damage to the property and his not intending when executing the deed to release any such liability (affidavit sworn 5 June 2021, paras 11-13).

8. [8]

   In oral submissions, the Bank sought to side-step needing to rely on the release. The Bank sought to establish that, even if it were liable to account for the $370,000, Mr Reid’s total indebtedness exceeded that amount such that he had suffered no loss. This was the first point raised by the Bank in response, and it was sought to be developed extensively, after which there was the following exchange:

9. [9]

   The following four points may be made about this submission.

   1. (1)

      First, the matter was set down as a concurrent hearing of the application for leave and the appeal. If the Bank wished to defend the decision on a basis other than as the primary judge had decided, it should have filed a notice of contention. It failed to do so.

   2. (2)

      Secondly, it is true that there was no finding that Mr Reid suffered loss. But there was likewise no finding that Mr Reid had not suffered loss. Such a finding was an essential element to the Bank’s submission in this Court.

   3. (3)

      Thirdly, the Bank had sought and obtained summary judgment based on the operation of the release. If the Bank had sought to rely upon a notice of contention to sustain the summary dismissal of Mr Reid’s complaint that it had to account for $370,000, then it is to be expected that very clear evidence would be adduced of his indebtedness.

   4. (4)

      Fourthly, the Bank’s oral submissions in this Court were based upon the proposition that the consent judgments obtained by the Bank and held by it in escrow as part of the separate compromises with each of Mrs Reid and Mr Reid reflected not the total indebtedness of each of them, but only half of that indebtedness. Thus it was put that:

10. [10]

    Separately from the above, the Bank contended that irrespective of the vandalism and the discount given to the purchasers, Mr Reid had suffered no loss because he had agreed to be paid only the relatively small amounts specified in the deed, with the Bank retaining the net sale proceeds. A sufficient answer to that submission is that if the Bank cannot rely upon the release in the deed, which expressly precludes Mr Reid’s claim, then it likewise cannot rely upon other provisions in the deed which impliedly preclude Mr Reid’s claims against it by confining his entitlements to the specified payments. Other problems may confront the Bank’s submission. There was limited debate during the hearing whether in substance this submission by the Bank amounted to a foreclosure other than by judicial order; cf Stern v McArthur (1988) 165 CLR 489 at 518; [1988] HCA 51. I express no view on this point.

11. [11]

    The Bank’s next point was that “if a party is coming to court to try to set aside an agreement or any part of it, it should seek relief to that effect”, and that it was not sufficient for Mr Reid in his reply to say that cl 5.1 of the release should be set to one side. This submission was, wisely, not taken any further. It was accepted that the Bank’s motion should be addressed in accordance with O’Brien v Bank of Western Australia Ltd [2013] NSWCA 71 at [3] based on whether there is an underlying cause of action or defence, rather than whether one is pleaded. There was no occasion for Mr Reid to seek relief against the release until the Bank had relied upon it in its defence. Thereafter, once Mr Reid’s reply was filed, it was clear that he denied the Bank’s entitlement to rely upon it in answer to his claims. There might, conceivably, be an exceptionally arid dispute as to whether the claim needed to be in a different document (the issue resembles whether a claimed entitlement to a discretionary statutory remedy such as s 87 of the Trade Practices Act 1974 (Cth) may be pleaded in defence or requires a cross-claim: see Bitannia Pty Ltd v Parkline Constructions Pty Ltd (2006) 67 NSWLR 9; [2006] NSWCA 238 at [80]), but on no view could the Bank’s motion turn on whether Mr Reid’s allegation that the Bank could not rely on the release in equity or under statute was made in a reply as opposed to a different pleading.

12. [12]

    Thus both sides raised issues lacking in merit. They distracted from the real issue in this proceeding, to which I now turn.

Did Mr Reid’s release entitle the Bank to summary judgment?

1. [13]

   Mr Reid gave the following release:

2. [14]

   Was the release an answer to Mr Reid’s claim insofar as he had not contemplated that the events giving rise to the cause of action might occur? This raises questions of principle which are of general application. The consequences of the admission into evidence of Mr Reid’s affidavit, and the Bank’s decision to proceed summarily, were that the issue falls to be determined upon the assumption that Mr Reid had not considered, when he executed the release, that any vandalism might occur after the Bank took possession of the property or that the Bank would give a discount of $370,000 to the purchasers, and thus did not know of the factual substratum to any cause of action that the Bank account for that amount.

3. [15]

   The High Court’s decision in Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112; [1954] HCA 23 was prominent in the parties’ submissions to the primary judge and in this Court. There are many parallels between that litigation and the present proceedings, some of which require an appreciation of procedure in the Supreme Court of New South Wales in the mid-twentieth century.

4. [16]

   Grant was an appeal from three judgments on demurrers to three replications made by the plaintiff company to Mr Grant’s plea based on a release. The litigation came from the Supreme Court of New South Wales, prior to the enactment of the Supreme Court Act 1970 (NSW), and can only be understood in light of an understanding of the pre-Judicature procedure which was involved.

5. [17]

   The company had brought an action against Mr Grant to recover £5,480 2s 10d constituting ten amounts of money either received by him or else paid in relation to work done erecting his house at Seaforth. The significance of its description as an “action” was that it was brought on the common law “side” of the Court, in accordance with the procedure by the Common Law Procedure Act 1899 (NSW). In response, Mr Grant filed a plea. His plea relied upon a release in the following terms:

6. [18]

   Mr Reid’s proceeding was commenced in the District Court, a court of limited jurisdiction. The grants of equitable jurisdiction conferred upon that Court were discussed in Great Northern Developments Pty Ltd v Lane [2021] NSWCA 150 at [83]-[100], and the details need not be repeated here. The principal substantive grants are s 134 of the District Court Act 1973 (NSW) qualified by its various subject matters and limits, s 6 of the Law Reform (Law and Equity) Act 1972 (NSW) which authorises giving effect to equitable defences, and s 149 of the Civil Procedure Act 2005 (NSW) which applies when a proceeding is transferred to the District Court. As White JA points out, Mr Reid’s claim as a former mortgagee was explicitly for an account, which fell within s 134(1)(h). That provision confers jurisdiction in proceedings for certain equitable claims or demands for recovery of money or damages, whether liquidated or unliquidated, in an amount not exceeding the Court’s jurisdictional limit, and substantially expanded the equitable jurisdiction of the District Court. The District Court would formerly (prior to 1997, when s 134(1)(h) was enacted) have lacked jurisdiction to hear and determine Mr Reid’s complaint against his mortgagee, and indeed had Mr Reid proceeded by way of action in the Supreme Court prior to 1972, his action would have been dismissed no differently from that brought by Mr Coroneo in Coroneo v Australian Provincial Assurance Association Ltd (1935) 35 SR (NSW) 391.

7. [19]

   The Bank’s defence in the District Court based on Mr Reid’s release is comparable to Mr Grant’s plea to the company’s action.

8. [20]

   John Grant & Co Pty Ltd filed three replications to Mr Grant’s plea based on the release. The first and second identified contentions at common law why the release from, inter alia, all “civil actions, claims and demands” which any party to the deed “had or has at or prior to the completion” did not answer its claim. The first was that the release applied only to disputes involving groups of, not individual, family members, which had been listed in the recitals to the deed. The second was that there had not, at any relevant time, been a “dispute” between the company and Mr Grant concerning the ten payments made in relation to the Seaforth house. These gave rise to the reasons bearing upon the construction of a release. The third was based on equity. The facts pleaded in support of the third replication included that the company did not know that it had any cause of action against Mr Grant in respect of the ten payments and that it did not intend by its execution of the deed to release Mr Grant in respect of those payments.

9. [21]

   Section 97 of the Common Law Procedure Act 1899 (NSW) provided that “[t]he plaintiff may, in answer to any plea, reply facts avoiding such plea upon equitable grounds”. This permitted an equitable defence to a common law action, but only when a court of equity would have granted an absolute, perpetual and unconditional injunction (this requirement – a consequence of the role of juries in the trial of many actions – would shortly be relaxed by amendments made by the Supreme Court Procedure Act 1957 (NSW). This reform and the previous procedure are discussed in K Jacobs, “Law and Equity in New South Wales after the Supreme Court Procedure Act, 1957, Section 5” (1959) 3 Sydney Law Review 83). The 1899 Act was a consolidation, and the ability to rely on an equitable defence had been introduced by ss 48-51 of the Common Law Procedure Act 1857 (NSW), re-enacting ss 83-86 of the Common Law Procedure Act 1854 (UK).

10. [22]

    This third replication resembled the relevant part of paragraph 7 of Mr Reid’s reply filed in the District Court, which maintained that a court exercising equitable jurisdiction would prevent reliance upon the release as an answer to the claims against the releasee.

11. [23]

    Mr Grant demurred to each of the company’s replications. Mr Grant’s demurrers followed a procedure which, while it had long since been abolished in England, continued in New South Wales until 1972: see J Bryson, “Common law pleadings in New South Wales and how they got here” (2012) 86 ALJ 452. A demurrer was a mechanism whereby the Full Court could resolve a question of law arising on the pleadings. As summarised in Bullen & Leake, Precedents of Pleadings (3rd ed, Stevens & Sons, 1868) at pp 819 and 820:

12. [24]

    Mr Grant’s demurrers to the company’s replications were heard by a Full Court comprising Street CJ, Owen and Herron JJ. Judgment was delivered by Street CJ on 2 November 1953. The judgment is unreported. The Full Court found in Mr Grant’s favour on the first demurrer, but for the company in respect of the second and third. Street CJ reproduced the following passages from Pollock CB, Martin B and Wilde B in Lyall v Edwards (1861) 6 H & N 337 at 347, 348; 158 ER 139 at 143, 144, where, similarly, demurrers had been brought following a replication on equitable grounds to a plea of release. Pollock CB had said:

13. [25]

    Martin B had said:

14. [26]

    Wilde B had said:

15. [27]

    Street CJ continued:

16. [28]

    That reasoning, and the earlier decision to which he referred (coincidentally, of his father writing for the Full Court) in Board of Fire Commissioners of NSW v Dunlop (1930) 31 SR (NSW) 253, proceeded on the basis that ignorance of an obligation when a release was given was sufficient to engage the equitable jurisdiction to relieve against reliance upon the release.

17. [29]

    It may readily be seen why Street CJ regarded the procedural decision of the Court of Exchequer in 1861 as applicable to the demurrers filed by Mr Grant almost a century later. The Chief Justice’s reference to the “old Common Law Procedure Act” was to ss 83-86 of the English Common Law Procedure Act 1854 which had first permitted equitable pleas by way of defence, and equitable replications by way of reply, to a common law claim. Wilde B referred to this in the passage extracted from Lyall v Edwards when he said “we have now to act on that [scil equitable] doctrine in a Court of law”. (The Court of Exchequer had been purely a court of common law since its formerly flourishing equitable jurisdiction had been removed in 1841: see 5 Vict c 5, ss 1, 2 and 17.)

18. [30]

    The procedure in the Common Law Procedure Act 1854 (UK) (which was repealed with the enactment of the Judicature Acts of 1873 and 1875 (UK)) continued to be applied in New South Wales, until 1972, because ss 95 and 97 of the Common Law Procedure Act 1899 (NSW) which permitted pleas and replications on equitable grounds were to the same effect as ss 83 and 85 of the Common Law Procedure Act 1854. Most of the other provisions governing proceedings at common law were also faithfully re-enacted in the colony. Hence the utility of and Lord Diplock’s reference to the “famous third edition” (the last published before the enactment of the Judicature legislation) of Bullen & Leake in New South Wales for most of the 20th century: The Mutual Life & Citizens’ Assurance Company Ltd v Evatt (1970) 122 CLR 628 at 629. Indeed, the same is true today, in order to understand pre-1972 litigation. It is an aspect of the general proposition stated by Sir John Baker:

19. [31]

    Each side appealed or cross-appealed from the overruling or allowance of the demurrers. It is important to recognise two things about the High Court’s judgment. The first is that the High Court’s decision is somewhat narrower than that of the Full Court. The second is that the appeal arose on a demurrer, and the only issue was the adequacy of the pleading, although it is also true that very many rules of substantive law have in the past been determined in appeals on pleadings.

20. [32]

    The High Court distinguished the position at law from that in equity (this was natural in light of the appeals which had been brought from the judgments on each demurrer).

21. [33]

    At law, if the release did not as a matter of construction extend to the particular claim, it could be no answer to that claim. The company’s first and second replications were to the effect that the terms of the release should not be construed so as to extend to the ten claims for payments of money or money’s worth to Mr Grant. Those replications invoked the “wide-ranging rule of the common law”, to which Kitto J referred in R W Miller & Co Pty Ltd v Australian Oil Refining Pty Ltd (1967) 117 CLR 288 at 294; [1967] HCA 50, that releases are to be construed narrowly, with general words confined to those things which were “specially in the contemplation of the parties at the time when the release was given”: Directors &c of London and South Western Railway Co v Blackmore (1870) LR 4 HL 610 at 623. Lord Westbury added that “a dispute that had not emerged, or a question which had not at all arisen, cannot be considered as bound and concluded by the anticipatory words of a general release.”

22. [34]

    Equity would intervene in broader circumstances. It was clear that equity would permit evidence being adduced of parties’ subjective understanding of “the existence, character and extent of the liability in question and the actual intention of the releasor”: Grant at 130.1. Nor was it necessary, in order to establish an entitlement to relief in equity, to establish that the release did not apply as a matter of construction at law. This is the force of the reasoning at 128.7-129.3 (“the Court of Chancery did not consider too nicely, before granting relief … whether in truth the court of law would interpret the release as [applying]”). This is an example of Chancery’s auxiliary jurisdiction not turning upon establishing the inadequacy of the remedies at law. It also reflects the fact, noted at 130.9, that equities are “not the products of completely rigid categories”.

23. [35]

    The contrasting approaches at law and in equity to the same problem of reliance upon a generally worded release are ancient. Lord Hardwicke had drawn a similar contrast two centuries earlier in Ramsden v Hylton (1751) 2 Ves Sen 304 at 309; 28 ER 196 at 200:

24. [36]

    However, and significantly, the High Court confirmed in Grant that it was possible for a release to extend to claims of which the releasor is unaware. Although equity presumes to the contrary, it was possible “upon a particular and solemn composition for peace persons” to “expressly agree to release uncertain demands”: at 126.6. This contrasts with the statements by Street CJ in the Full Court reproduced above, and with the generality of the principle stated by Lord Hardwicke.

25. [37]

    Two issues of some complexity emerge from the High Court’s reasoning in Grant v John Grant & Sons Pty Ltd. One is whether equity would construe a release differently and more narrowly than the same words would be construed at law. The second is as to the circumstances when, including by reference to the releasor’s subjective understanding, equity would prevent the releasee from relying on the release.

26. [38]

    The joint judgment of Dixon CJ, Fullagar, Kitto and Taylor JJ did not doubt the reasoning in Lyall v Edwards reproduced above. It also endorsed statements in the authorities to the effect that what equity did was to construe the release, doing so by reference to the parties’ subjective intentions. The joint judgment endorsed what had been said by Malins VC in Turner v Turner; Hall v Turner (1880) 14 Ch D 829 at 834 that the general words of a release did not extend to a matter not known when it was executed:

27. [39]

    The joint judgment also endorsed and reproduced what was said by Farwell LJ in Cloutte v Storey [1911] 1 Ch 18 at 34:

28. [40]

    The statements by Malins VC and Farwell LJ are difficult to read other than as statements of how a deed of release is construed. The statement by Wilde B from Lyall v Edwards reproduced above is to the same effect. On the other hand, the passage in Martin B’s reasons in Lyall v Edwards is differently framed: to “interfere and confine” a broadly worded release is suggestive of preventing the unconscientious exercise of a legal right. Pollock CB’s formulation of principle is ambiguous on this point.

29. [41]

    The passage in the joint judgment in Grant concludes with a reference to “the equity to have the general words of a release confined to the true purpose of the transaction ascertained from the scope of the instrument and the external circumstances”. The judgment concludes with the statement, “It is under that principle that the facts alleged in the third replication bring the case”: at 130.8. One view of the position is that the High Court’s careful language accommodates both ways of formulating equity’s approach to a release.

30. [42]

    One leading text says of this doctrine that “Although sometimes regarded as a principle of construction, it is not”: P Herzfeld and T Prince, Interpretation (2nd ed, Lawbook Co, 2020), p 632. The authors say that a plaintiff, against whom a release is pleaded by way of defence, has an equity to restrain a defendant’s unconscientious reliance on general words in a release”, picking up what the joint judgment stated at 129-130:

31. [43]

    There is an attraction to the idea that the equitable aspect of Grant was confined to the unconscientious exercise of legal rights, which could be informed by the subjective intentions of the parties, and that the approach to construction of the document is the same at law and in equity. That accords with the emphatic endorsement of the objective theory of contract in decisions such as Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52. The same point was made by Lord Nicholls, when dealing with releases, in Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251; [2001] UKHL 8 at [25]: “Today there is no question of a document having a legal interpretation as distinct from an equitable interpretation”. See also at [17] (Lord Bingham) and [79] (Lord Clyde). Doubtless it seems to twenty-first century eyes a strong thing to conclude that the same document would be construed differently, according to different rules and by reference to different evidence, by a common law court and an equitable court. Of course, that is a modern development. For example, bills and assignments were recognised by courts administering the law merchant but were ignored by common law courts, or else regard could only be taken of the document in a common law court if the defendant were recognised as a “trader” (see for example Witherley v Sarsfield (1689) Holt KB 112; 90 ER 960). Another example may be seen in the case of wills. Professor Polden wrote, speaking of around 1830 prior to the establishment of the Court of Probate, of the “widespread criticism of the inconvenience arising from the need for the validity of a will dealing with both personal and real property to be determined by different courts under different rules, occasionally leading to different conclusions”: Oxford History of the Laws of England (Oxford University Press, 2010), Vol XI, pp 703-704. Thirdly, prior to the Judicature legislation, equity treated releases and agreements to release very differently from common law, as is clear from Dixon J’s judgment in McDermott v Black (1940) 63 CLR 161 at 187-189; [1940] HCA 4 and as summarised in Scaffidi v Perpetual Trustees Victoria Ltd (2011) 42 WAR 59; [2011] WASCA 159 at [14]-[21]. Such differences may be one reason why Wilde B and Malin VC and Farwell LJ expressed themselves as they did.

32. [44]

    One way of reading Grant v John Grant & Sons Pty Ltd is that the High Court was carefully and cautiously, and no doubt conscious of the possibility of further appeal to the Privy Council between family members who had a demonstrated appetite for litigation, seeking to reconcile the divergent strands of authority, at a time when the judicature system had been in place for decades in all jurisdictions save for New South Wales. That way of reading the decision favours the views expressed in the second edition of Interpretation, as well as aligning with the result reached in Bank of Credit and Commerce International SA v Ali.

33. [45]

    However, the approach favoured in the second edition of Interpretation appears to be inconsistent with other appellate authority. In Torrens Aloha Pty Ltd v Citibank NA (1997) 72 FCR 581 at 600 a Full Court referred to a statement by Sir Frederick Pollock which had also been endorsed in Grant, namely, that “in equity ‘a release shall not be construed as applying to something of which the party executing it was ignorant’”. It is also inconsistent with the approach taken in Qantas Airways Ltd v Gubbins (1992) 28 NSWLR 26 at 44 and with what was said in Butler v St John of God Health Care Inc [2008] WASCA 174 at [3]-[4]. It also appears to be inconsistent with aspects of the most recent appellate consideration of the equitable principles in Grant in circumstances where a cause of action was not known when the release was executed. That is the unanimous decision of the Victorian Court of Appeal in Burness v Hill [2019] VSCA 94. Unfortunately, this was not addressed in the second edition of Interpretation, nor was the primary judge referred to it.

34. [46]

    The Victorian Court of Appeal was required to consider whether a release applied to one party’s right of marshalling. It did so on the basis that neither party was aware of a right of marshalling when the release was executed. The Court dealt carefully with submissions which distinguished between the legal and equitable principles articulated in Grant. Their Honours said at [78]:

35. [47]

    The passage from Grant reproduced at [74] to which their Honours referred was:

36. [48]

    It would seem that their Honours read Grant as permitting a party’s subjective intention to inform the construction of a release. The Court rejected the submission that the trial judge had “erred in taking Hill’s subjective intention into account in construing the words of the release”.

37. [49]

    The Court of Appeal said at [81]:

38. [50]

    Burness v Hill holds that, for the release in that case, the ignorance of both parties of Mr Hill’s right to marshall, coupled with the ambit of the dispute which was the subject of the release, made it unconscientious for Mr Love to rely on the general words of the release. It is to be borne steadily in mind that Burness v Hill was an appeal following a trial, when findings had been made as to the construction of the release and the parties’ intentions when it was executed.

39. [51]

    That is not inconsistent with the statement in Grant that it is possible to draft a release which extends to claims which are unknown. There is a stream of authority to that effect. One decision which is often cited to that end, and was relied on by the primary judge, is Doggett v Commonwealth Bank of Australia (2015) 47 VR 302; [2015] VSCA 351, where Whelan JA said at [63] that Grant:

40. [52]

    Those passages confirm that there are circumstances in which parties may release unknown claims, falling outside the scope for equitable intervention. That the exception exists is undoubted. But identifying in advance of a trial precisely when one can confidently conclude that there is no scope for equitable intervention is problematic, to say the least, in cases where a release is sought to apply to facts not present in existence and of which it is alleged that one party has not disclosed what occurred to the other.

41. [53]

    In the present case, the question is not whether Mr Reid can evade the operation of the release. Nor does this appeal raise for determination the proper construction of the release, which may be informed by contextual considerations not presently in evidence and which may be controversial. The only question is whether the Bank’s case based on the release is so strong that Mr Reid should not be permitted to go to trial. That question falls to be determined on the basis that Mr Reid did not contemplate that the vandalism might occur or the $370,000 allowance be given, and had no intention to release the Bank from a claim in respect of such matters.

42. [54]

    It may readily be seen that that question is not amenable to summary dismissal. The allowance of $370,000 is large – considerably more than 10% of the selling price. It arose out of what may be taken to be highly unusual circumstances – claims of serious vandalism to the property while the Bank was in possession and after contracts had been exchanged. The circumstances in which that occurred are not known and may be contentious. The deed does not expressly mandate a sale, although it is plain that that is its intent, and it is arguable that when it is construed in context a substantial allowance made without notice to Mr Reid for the vandalism may be outside its proper construction. Alternatively, if not, it is also arguable that it would be unconscionable for the Bank to rely upon the release. The basis upon which the release came to be executed, and what the Bank thereafter did, will be the subject of evidence at trial. It cannot confidently be concluded, in advance of trial, that facts could never emerge in light of which it would be unconscientious for the Bank to rely on the release.

43. [55]

    That is sufficient to resolve the interlocutory appeal which has been brought by Mr Reid. I am also conscious that there may be a trial of the issues mentioned above, which suggests caution in expressing views about the parties’ conduct at this stage.

44. [56]

    It will be necessary for Mr Reid to amend his pleadings in light of this Court’s reasons. However, it is best for further procedural steps to be governed by the District Court. The orders proposed by White JA should be made.

45. [57]

    WHITE JA: The applicant, Mr Colin Reid, seeks leave to appeal from orders of the District Court of 27 May 2021 by which his proceeding in that court was summarily dismissed (Reid v Commonwealth Bank of Australia [2021] NSWDC 225 (Abadee DCJ)).

46. [58]

    Mr Reid’s claim arose from steps taken by the respondent, the Commonwealth Bank of Australia (“the Bank”), to enforce securities for loans provided by the Bank to three companies, Fundola Pty Ltd, Fretilla Enterprises Pty Ltd, and Gorama Holdings Pty Ltd (together, “the Companies”). The advances were guaranteed by Mr Reid and his then wife, Mrs Reid, albeit on different terms as to the extent of their liability under their guarantees.

47. [59]

    Mr and Mrs Reid gave separate guarantees by deeds of guarantee both dated 28 October 2003. Both deeds of guarantee provided that the maximum amount for which each guarantor was liable was $4,050,000 plus enforcement expenses. Notwithstanding this, it appears that Mrs Reid’s agreement with the Bank was that her liability was limited to a maximum amount of $2,146,750 plus enforcement expenses. The Bank so alleged in proceedings it brought in the Common Law Division on 24 January 2012 seeking judgment against Mr and Mrs Reid in the sum of $1,225,291.11 referred to below at [64].

48. [60]

    On 28 October 2003, Mr and Mrs Reid also executed a mortgage over a property they owned at Menangle to secure their liability as guarantors. The mortgage named Mr and Mrs Reid as both Mortgagor and Debtor.

49. [61]

    Mr and Mrs Reid covenanted to pay the “Secured Moneys”. (Memorandum E212677 cl 1). Secured Moneys was defined to include:

50. [62]

    Clause 12(c)(vi) provided that:

51. [63]

    Thus, although separate guarantees were given, the effect of the memorandum of mortgage was that the liability of Mr and Mrs Reid to pay the Secured Moneys, which included advances they had guaranteed, was joint and several.

52. [64]

    On 24 January 2012, the Bank brought proceedings (2012/23914) in the Common Law Division seeking judgment against Mr and Mrs Reid in the sum of $1,225,291.11. It sought judgment for possession of the Menangle property. It pleaded that Mr Reid guaranteed the due and punctual performance by the Companies of their obligations to the Bank up to a maximum amount of $4,050,000 plus enforcement expenses and Mrs Reid did likewise up to a maximum amount of $2,146,750 plus enforcement expenses.

53. [65]

    The Bank pleaded that the Companies had failed to pay the sum of $1,496,750 due and payable on 30 November 2010 and that, as at 17 January 2012, the total amount unpaid in relation to the Companies’ debt was $1,216,027.94.

54. [66]

    On 23 May 2012 Mr Reid and the Companies commenced proceedings (2012/164364) against the Bank. [1] The plaintiffs alleged, and the Bank admitted that on 12 January 2011 the Bank sent letters of demand to each of the Companies requiring repayment of the sum of $3,413,803.73. The demand was not met. The plaintiffs alleged that on or about 17 February 2011 the Bank appointed receivers and managers to take possession of a property defined as the Mortgaged Industrial Property. The Bank pleaded that on 16 February 2011 it appointed receivers and managers to the Companies.

55. [67]

    Mr Reid had alleged, and the Bank admitted that on 28 October 2003 the Companies entered into bill facilities with the Bank to assist with the purchase and development of an industrial property in Ingleburn (“the Mortgaged Industrial Property”). It was admitted on the pleadings that the Companies mortgaged that property to the Bank to secure their obligations under the bill facilities. The Bank admitted that the Mortgaged Industrial Property was sold by the receivers on or about 16 August 2011 for $3,050,000. Mr Reid alleged that the Mortgaged Industrial Property had been sold at an undervalue and he sought relief in respect of his guarantee and the mortgage of the Menangle property.

56. [68]

    The Bank’s claim against Mr and Mrs Reid on their guarantees and its claim for possession of the Menangle property pursuant to the mortgage given by Mr and Mrs Reid to secure their liability under their guarantees were compromised by separate deeds of settlement entered into by the Bank with Mrs Reid on 10 October 2013 and with Mr Reid on 13 February 2015.

57. [69]

    It is clear from the deeds of settlement that proceedings had been instituted in the Family Court of Australia between Mrs Reid and Mr Reid to which the Bank became a party on 8 May 2012 (Mrs Reid’s Deed of Settlement cl 1.11). The settlement between Mrs Reid and the Bank provided that the parties would instruct their respective legal representatives to execute a document entitled “Consent Judgment” and provide the document to the Bank’s solicitors to be held by the Bank’s solicitors “…in escrow until the conclusion of … Proceedings [2012/23914] as against Mr Reid or until there is a default under this Document by Mrs Reid” (cl 2.2). The document entitled “Consent Judgment” provided for judgment to be given for the Bank against Mrs Reid in the sum of $1,225,291.11 and judgment to be given for the Bank against her for possession of the Menangle property. It also provided for the dismissal of a cross-claim brought by her against the Bank.

58. [70]

    The Deed of Settlement with Mrs Reid also provided that she would do everything necessary to assist with a sale of the Menangle property at the earliest possible time, whether it be by the Bank’s enforcing the judgment and a judgment for possession against Mr Reid, or by Mr and Mrs Reid selling the property following a resolution of the Family Court Proceedings (cl 3.1). The Bank agreed to accept a proportion of the proceeds of sale that would be payable to Mrs Reid from the sale of the Menangle property in satisfaction of its judgment against her. That proportion differed according to what the Family Court determined to be the proportion of the Sale Proceeds to which Mrs Reid was entitled, vis a vis Mr Reid (cl 3.3; definition of “Mrs Reid’s Interest”). If Mrs Reid’s interest were determined to be less than or equal to 50% of the Sale Proceeds then Mrs Reid would receive 30% and the Bank 70% of her Interest. The Bank agreed to accept that payment in satisfaction of the “Judgment” (cll 3.3(a) and 3.4).

59. [71]

    The Deed of Settlement of 13 February 2015 was made between the Bank, Mr Reid, Fundola Pty Ltd, Fretilla Enterprises Pty Ltd and Dorgal Holdings Pty Ltd. In that deed, “Judgment” was defined to mean “the consent judgment to be executed by the Bank and Mr Reid as set out in Annexure A to this Document”. Annexure A was a form of consent judgment in proceedings 2012/23914 that provided for:

60. [72]

    Annexure B to the deed was a form of notice of discontinuance of the Bank of proceedings 2012/23914.

61. [73]

    Annexure C was a form of consent orders in proceedings 2012/164364 for those proceedings to be dismissed with no order as to costs.

62. [74]

    Clause 3 of the Deed of Settlement between Mr Reid, Fundola Pty Ltd, Fretilla Enterprises Pty Ltd and Dorgal Holdings Pty Ltd and the Bank relevantly provided:

63. [75]

    The Deed also provided:

64. [76]

    “Loans” was defined to mean the bill facilities and an overdraft account made available to the Companies (Fundola and Fretilla Enterprises). “Loan Agreements” was defined to mean agreements between the Bank and the Companies. The “Property” was the Menangle property. “Sale” was defined to mean “the sale of the Property”. “Mortgage” was the mortgage dated 28 October 2003 provided by Mr and Mrs Reid in favour of the Bank over the Menangle property as security for the Secured Moneys as defined. The “Guarantee” meant the deed of guarantee given by Mr Reid dated 28 October 2003. The “Bank Proceedings” meant proceedings 2012/23914. The “Companies Proceedings” meant proceedings 2012/164364.

65. [77]

    The Deed contained no express provision that the Bank would sell the Menangle property in the exercise of its power of sale pursuant to the Mortgage. But it is clear that that was what was intended.

66. [78]

    On 12 June 2015 the Bank took possession of the Menangle property (J [29]).

67. [79]

    On 9 September 2015 the Bank’s solicitors, HWL Ebsworth, advised Mrs Reid’s solicitor that the Menangle Park property had been sold at auction on 5 September 2015 for $2.201 million. HWL Ebsworth stated that the total amount owing to the Bank was then $2,131,339.88. They stated that Mrs Reid would be entitled to 15% of the net sale proceeds of the property at settlement in accordance with cl 3.3(a) of her Deed of Settlement with the Bank and stated that it did not appear that there would be surplus funds resulting from the sale of the property once the Bank, Mr Reid and Mrs Reid had been paid their entitlements.

68. [80]

    This appears to have assumed that the Bank was entitled to recover from the sale of the Menangle property the full amount said to be owed by the Companies to the Bank which, with interest, was said to be $2,131,339.88 even though, in respect of the guarantors’ liability to the Bank for which they were jointly as well as severally liable, the Bank had agreed to the execution of a document entitled “Consent Judgment” for $1,268,512.22 against Mr Reid and $1,225,291.11 against Mrs Reid.

69. [81]

    After the Bank took possession of the Menangle property, the property was vandalised causing substantial damage to the property (J [4]).

70. [82]

    Settlement of the sale occurred on 25 July 2016. The result of the property’s having been damaged by vandals whilst the Bank was mortgagee in possession was that the Bank allowed the purchaser a discount of $370,000 on the sale price.

71. [83]

    The settlement statement enclosed with HWL Ebsworth’s letter of 29 June 2016 to the solicitors for Mrs Reid showed that the Bank had provided the purchaser with an allowance of $370,000 on account of damages to the property.

72. [84]

    On 25 July 2018 solicitors for Mr Reid, Delaney Lawyers, pressed the Bank to provide an accounting in respect of the sale of the Menangle Property. On 10 October 2018 HWL Ebsworth gave a breakdown of the distribution of the proceeds of sale including a distribution of $20,000 to Mr Reid, $320,672.62 to Mrs Reid and $1,427,144.84 to the Bank.

73. [85]

    Delaney Lawyers replied on 25 October 2018 noting that the breakdown of the proceeds of sale did not appear accurately to reflect the sale price. The primary judge found that Mr Reid only discovered the discount of $370,000 on the sale price in June 2019, that is almost three years after the settlement of the sale (J [4] and [5]).

Mr Reid’s claims in the District Court

1. [86]

   Mr Reid commenced proceedings in the District Court on 21 December 2019. He sought:

2. [87]

   On 28 November 2020 he filed a notice of motion seeking leave to amend the statement of claim. The proposed amended statement of claim included a claim for:

3. [88]

   On 2 February 2021 the Bank filed a notice of motion seeking an order that the proceeding be summarily dismissed. Both notices of motion were listed for hearing before the primary judge on 26 May 2021. His Honour dealt with the Bank’s notice of motion for summary dismissal. His Honour said that he would deal with the summary dismissal application “…on the basis of Mr Reid’s claim as he would want it to be – that is, on the assumption that he was permitted to rely upon his proposed amended pleading” (at [15] and [39]).

4. [89]

   The primary judge cited and applied the decision of this court in O’Brien v Bank of Western Australia Ltd [2013] NSWCA 71 where Macfarlan JA, with the concurrence of Beazley P and Ward JA, observed that on a summary judgment application the real issue is whether there is an underlying cause of action or defence, not simply whether one is pleaded. Consistently with that approach, his Honour had regard also to further proposed amendments to the statement of claim indicated by Mr King of counsel, who appeared for Mr Reid, in the course of argument.

5. [90]

   Mr Reid’s proposed amended statement of claim pleaded that the allowance the Bank made to the vendor of $370,000 in respect of damages to the property was a sum payable to it as moneys had and received by the Bank to Mr Reid’s use (para 23). Alternatively, he pleaded that it was an implied term of the mortgage (described as “any agreement comprising the security by which the Bank purported to enter into possession as mortgagee or otherwise”) that the Bank would account to him for moneys it received as mortgagee (para 24). Mr Reid also pleaded that this was an implied term of the Deed (para 25). He alleged that it was also an implied term of the Deed that the Bank would maintain the Menangle property in repair after taking vacant possession pending sale as mortgagee in possession (para 25A). He pleaded that the Bank had failed to account to him for all moneys received by it as mortgagee (para 26A). He also pleaded that the Bank’s failure to maintain the Menangle property in repair pending sale as mortgagee in possession caused him loss and damage (para 28A).

6. [91]

   In argument before the primary judge and before this court, Mr King submitted that the Bank was liable to pay him the $370,000 adjustment it allowed the purchaser in an action for money had and received.

7. [92]

   In the proposed amended statement of claim, Mr Reid made a further claim under the National Credit Code, being the schedule to the National Consumer Credit Protection Act 2009 (Cth). The Code was said to apply to a credit facility “supplied by the Bank to or for the Plaintiff [Mr Reid] under the credit contract comprising account number 06 2185 10587333”.

8. [93]

   This was a reference to one of the bill facilities made available by the Bank to the Companies. (Definition of “Loans” in Deed of Settlement of 13 February 2015).

9. [94]

   Mr Reid pleaded that this was a credit contract that the Bank changed in and after June 2015 without his agreement, and the changes [sic] were unjust such that the transaction should be reopened. He pleaded that the Bank deducted amounts without his consent or authority from that account and allocated to that account sums totalling $251,976.26 from the sale of the Menangle property without his authority.

10. [95]

    These allegations are obscure. The Bank statements for account 06 2185 10587333 after June 2015 record the debiting of monthly amounts against the heading “Debit Interest” as well as other amounts whose explanation is unclear, such as “CMU DE Trace Acc Deed of Settlement” of 13 July 2015 of $70,000 and other smaller, but not insignificant, debits against the heading “CMU DE Trace Acc” ranging from $101.48 to $6,039.49. The statement for the period 6 July to 18 August 2016 records a credit for a repayment of $1,427,144.84 and a further credit for repayment of $246,512 and $1,654.95. According to the Bank statements after these credits the outstanding balance in the account was $768,171.89 and that debt was written off.

11. [96]

    Mr Reid pleaded (para 30 of the proposed amended statement of claim) that the court should reopen the account (account number 06 2185 10587333) “…including going behind any settlement or deed of compromise as an unjust credit transaction within the meaning of the National Credit Code”.

12. [97]

    Mr Reid also pleaded that the account should be reopened:

13. [98]

    He pleaded that:

14. [99]

    An alternative claim was made that the Bank engaged in conduct that was unconscionable in connection with the supply of financial services to Mr Reid in contravention of s 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) (“the ASIC Act”) (paras 35 and 36). The so-called particulars of this allegation are that Mr Reid, through the conduct of the Bank:

15. [100]

    To all these allegations the Bank pleaded the release in cl 5.1 of the Deed of Settlement. (Defence paras 6 and 32(a)).

16. [101]

    The Bank admitted that there was an adjustment to the moneys payable by the purchaser on the sale of the property of $370,000 on account of damages to the property (para 21). It pleaded (at para 32):

17. [102]

    In his reply Mr Reid pleaded:

18. [103]

    Contrary to the assertion in para 32(b) of the Bank’s defence, there was no definition of “Debt” in the Deed.

19. [104]

    It is difficult to identify with precision the claims pleaded by Mr Reid in his proposed amended statement of claim. In his summary of argument in this court Mr King identified the claims as follows:

20. [105]

    In relation to the first claim as there identified, the Bank does not dispute that there is a triable issue that it failed to comply with its obligation as mortgagee in possession by not taking reasonable care to protect the Menangle property from damage by vandals. It relies upon the release given by Mr Reid in cl 5.1 of the Deed of Settlement of 13 February 2015. The Bank also contends that it made no difference to Mr Reid that it allowed the purchaser an adjustment of $370,000 against the purchase price. This is because, so the Bank contends:

21. [106]

    By the second claim, Mr Reid seeks to reopen his and the Companies’ claims in proceedings 2012/164364 ([67] above). He did not seek rescission of the Deed of Settlement. He did not offer to repay the $100,000 paid to him pursuant to cl 4.3(i) or (j). Rather, he contended that the release in cl 5.1 was ineffective or should not be enforced (the third claim).

Primary Judge’s Reasons

1. [107]

   The primary judge correctly stated:

2. [108]

   The primary judge said:

3. [109]

   But his Honour held that any such claim was barred by the release in cl 5.1 of the Deed of Settlement. His Honour also held that it was not arguable that Mr Reid could overcome the release by recourse to s 76 in the National Credit Code. In this respect, his Honour said:

4. [110]

   In addressing the claim for relief on the ground of unconscionable conduct in contravention of s 12CB of the ASIC Act, the primary judge said:

5. [111]

   Subject to the effect of the release in cl 5.1 of the Deed, the Bank as mortgagee in possession would be liable if it failed to take reasonable steps to protect the premises from damage against vandals (Edward Tyler, the Hon Peter Young and Clyde Croft, Fisher and Lightwood’s Law of Mortgage, 3rd Australian Edition para 19.37; Brendan Edgeworth, Butt’s Land Law, 7th ed, para 11.880; Norwich General Trust v Grierson 24 June 1983 noted in Current Law Year Book 1984, at [2306]). The liability would not be a liability in restitution for money had and received. The Bank received nothing. The Bank’s liability as mortgagee would be determined on the taking of an account and not as a common law action in restitution for money had and received nor as an action at law for damages for negligence (Fisher and Lightwood’s Law of Mortgage para 19.37; Coroneo v Australian Provincial Assurance Association Ltd (1935) 35 SR (NSW) 391, applied in relation to Torrens Land in Commonwealth Bank of Australia v Hadfield (2001) 53 NSWLR 614; [2001] NSWCA 440 at [4]), where this Court held that an account is the appropriate form of relief where a mortgagee is alleged to have sold mortgaged property in breach of its duty (at [41], [48]). Commonwealth Bank of Australia v Hadfield is also authority that s 134(1)(h) of the District Court Act 1973 confers jurisdiction on the District Court, up to the monetary limit of its jurisdiction, for an account against the mortgagee (at [56]-[66]).

6. [112]

   Leaving aside the release in cl 5.1 of the Deed, it is arguable that the Bank would be liable to account to the mortgagors for the $370,000 adjustment allowed to the purchaser arising from the damage to the property caused by vandals.

7. [113]

   The primary judge held that the release in cl 5.1 of the Deed was an unarguable answer to this claim. His Honour said:

8. [114]

   Earlier in his reasons the primary judge had addressed the construction of releases and said:

Denial of procedural fairness?

1. [115]

   Although not a draft ground of appeal, Mr Reid contended that the primary judge had not afforded him procedural fairness by summarily dismissing his motion to amend the statement of claim before deciding the Bank’s motion for summary dismissal, and by refusing an application for an adjournment.

2. [116]

   A submission that a judge has denied a party procedural fairness is serious. It should not be made lightly (Daley v Donaldson [2022] NSWCA 96 at [52], Leeming JA). The judge made it clear that he addressed the Bank’s application for summary dismissal on the basis that he would consider Mr Reid’s claim as it was pleaded in the proposed amended statement of claim and as elaborated in Mr King’s submissions. He did not dismiss Mr Reid’s application to amend before deciding the summary dismissal case. He dealt with the Bank’s summary dismissal application on the basis that if Mr Reid could demonstrate an arguable claim, either from the statement of claim as filed, or from the proposed amendments, or as his counsel sought to articulate his claim in argument, the Bank’s application would fail. This was favourable to Mr Reid.

3. [117]

   No submission was advanced on appeal that the primary judge was bound to grant an adjournment. The statement of claim had been filed on 12 December 2019. Mr Reid had had more than ample opportunity to plead a coherent and triable claim.

4. [118]

   Mr Reid’s submission that he was denied procedural fairness is baseless. It should not have been made.

Consideration: the first claim

1. [119]

   In Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112; [1954] HCA 23 the plaintiff sued to recover moneys alleged to be payable as a result of work done or money spent for the benefit of the defendant between September 1948 and August 1950. The defendant pleaded a release contained in a deed dated 5 December 1951 arising from any claims which any of the parties to the deed at any time had against any other of the parties in respect of any act, cause, matter or thing (at 115). The defendant pleaded the release as an answer to the plaintiff’s claim. By the first and second replications, the plaintiff denied that at any material time there had been a dispute between the family groups concerning the money claimed in the action. By the third replication the plaintiff pleaded that when it executed the deed of release it did not know that any of the moneys it now claimed in the action were owed by the defendant and did not know that it had any claim or cause of action against the defendant in respect of such moneys (at 115-116). The plurality (Dixon CJ, Fullagar, Kitto and Taylor JJ) observed that the first and second replications were pleaded on the footing that at law, as distinguished from equity, the general words of the release did not apply to the claim. The third replication was based on equitable grounds (at 121).

2. [120]

   In relation to the third replication the plurality said (at 129):

3. [121]

   Speaking in relation to the release of existing claims, the plurality in Grant v John Grant and Sons Pty Ltd, did not say that a plaintiff, against whom a release is pleaded by way of defence, has an equity to restrain the defendant’s unconscientious reliance upon the general words of a release. To the contrary, but speaking in the context of the release of existing claims, their Honours said (at 129-130):

4. [122]

   In Burness v Hill [2019] VSCA 94 the Victorian Court of Appeal observed (at [81]) that the equitable principle against enforcement of a release contrary to the knowledge and intent of the releasor does not depend on proof of unconscientious conduct by the releasee. The primary judge was not referred to Burness v Hill.

5. [123]

   Mr Reid gave evidence that when he entered into the Deed of Settlement he did not know nor agree to the Bank’s damaging his land whilst it was in possession of it, that he did not contemplate or agree to forgive or release the Bank from liability in respect of future eventualities “save and except as specifically referenced in the Deed”.

6. [124]

   It may be assumed that Mr Reid would have expected that the Bank would exercise its responsibilities as mortgagee in possession properly. There is a triable issue as to his actual intentions as to the width of the release.

7. [125]

   Nonetheless, the equitable principle does not apply where, as it was described in Salkeld v Vernon (1758) 1 Eden 64 at pp 67, 68; 28 ER 608 at 609):

8. [126]

   In Perry Herzfeld and Thomas Prince, Interpretation (2 ed, 2020,Thomson Reuters) para [30.80], the learned authors say that the equitable principle has no application where the parties have clearly released unknown or future claims.

9. [127]

   The Bank relies upon the release as covering all claims which Mr Reid at any time in the future may have against the Bank for, or by reason, or in respect of any act, cause, matter or thing in connection with, or incidental to, the sale of the Menangle Property (cl 5.1).

10. [128]

    The words “in connection with or incidental to” are undoubtedly wide. But the conduct of the Bank about which Mr Reid complains had no direct or necessary relation to the Bank’s exercise of its power of sale. Prima facie, the release of claims in respect of the future sale of the property would cover matters such as an alleged failure by the Bank to take proper steps to market the property for sale, or otherwise not taking reasonable care to sell the property for its market value or the best price reasonably obtainable having regard to the circumstances existing when the property is sold (Corporations Act 2001 (Cth) s 420A). Possibly, although this might be contentious, the release might extend to a failure to exercise the power of sale in good faith.

11. [129]

    A mortgagee’s obligation to take reasonable steps to keep in repair the mortgagor’s property of which it has taken possession, arises independently of the mortgagee’s intention to sell the mortgaged property. Thus it applies if the mortgagee does not sell but collects the rents and profits from the land.

12. [130]

    Nor is it clear that the damage by vandals occurred before contracts for the sale of the property were exchanged. One would not expect the purchase price to be reduced on account of damage to the property before exchange unless, perhaps, the damage occurred after the purchaser had inspected the property and the Bank failed to disclose the damage before exchange.

13. [131]

    Contrary to the view of the primary judge there is a triable issue as to whether the release in cl 5.1 does apply to Mr Reid’s claim that the Bank is liable to account for the $370,000 adjustment allowed to the purchaser on settlement as a result of the damage to the property whilst the Bank was mortgagee in possession.

14. [132]

    The Bank submits that, as pleaded in para 32 of its defence (as quoted at [101] above), it would make no difference to Mr Reid’s rights against the Bank if it were required to account for the adjustment of $370,000 because the “Debt” at the time of the settlement of the sale of the Menangle property was in excess of $2,131,339.88 and, but for the adjustment, the net sale proceeds would have been $1,687,094.80 which was less than the “Debt”. As I observe above at [102], the Deed of Settlement did not use or define the term “Debt”. The “Debt” referred to by the Bank is the debt the Bank claims the Companies owed. The mortgage of the Menangle property was not direct security for the Companies’ liability to the Bank for the moneys advanced to them. Rather, it was security for Mr and Mrs Reid’s liability as guarantors of the Companies’ debt.

15. [133]

    By the deeds of settlement, the parties arguably compromised the Bank’s claims against Mr and Mrs Reid to provide that Mrs Reid’s liability under her guarantee would be in the sum of $1,225,291.11 and the liability of Mr Reid under his guarantee would be in the sum of $1,268,512.22. These are the figures contained in the documents called “Consent Judgment” annexed to the deeds of settlement.

16. [134]

    The Bank agreed not to file the consent judgments so that they became judgments of the court if Mr and Mrs Reid complied with the terms of the Deed of Settlement. There was no restriction on Mr or Mrs Reid themselves filing the documents with the court so that their liability under their guarantees would merge in the judgments. In any event, the Bank agreed to accept moneys from the proceeds of sale of the Menangle property in satisfaction of its claims for the compromised figures under the guarantees if Mr and Mrs Reid complied with the terms of the settlements.

17. [135]

    Arguably, because Mr and Mrs Reid’s liabilities were joint as well as several, the Bank could not retain from the proceeds of sale of the Menangle property more than $1,268,512.22.

18. [136]

    The Bank submitted that Mr and Mrs Reid were individually liable, having consented to judgments, in amounts of $1,268,512.22 and $1,225,291.11 and the Bank was entitled to apply the net proceeds of sale to the aggregate of those sums by way of satisfaction of those liabilities. But the underlying obligations of Mr and Mrs Reid were joint and several, not merely several, so that prima facie, at least, satisfaction or reduction of the debt by one of Mr or Mrs Reid would, pro tanto, discharge the other from his or her liability to the Bank (without affecting rights of contribution between Mr and Mrs Reid).

19. [137]

    Further, as at 9 September 2015, after the execution of both deeds, HWL Ebsworth advised that the total amount owing to the Bank was then $2,131,339.88. This was the amount of the principal debt the Bank contended was then owed to it by the Companies. It was substantially below the sum of the two amounts for which Mr and Mrs Reid had consented to judgment in their deeds of settlement. It is seriously arguable that pursuant to the deeds of settlement, the Bank was entitled to recover from the proceeds of sale of the Menangle property, no more than $1,268,512.22.

20. [138]

    This possibility was not adverted to in the proceedings before the primary judge and was not a claim pleaded by Mr Reid. But, as the primary judge rightly accepted, on a summary dismissal application, the question is whether there is an arguable underlying cause of action, not simply whether one is pleaded.

21. [139]

    Clause 4.3(k) of Mr Reid’s Deed of Settlement provided that the net sale proceeds of the sale of the Menangle property would be paid to the Bank and that the Bank would account to Mr Reid in accordance with cl 4.1(j) if applicable and would account to Mrs Reid in accordance with her Deed of Settlement. At para [66] of the primary judge’s reasons (quoted at [108] above) his Honour took the view that, after paying Mr Reid his entitlement under cl 4.3(i) and (j), the Bank could deal with the proceeds of sale as it liked.

22. [140]

    However, there is a triable issue as to whether the Bank could retain more than the debt secured by the guarantees, as that amount was compromised by the deeds of settlement. The deeds of settlement allowed the Bank to exercise its power of sale as mortgagee. It would be a large question whether, consistently with equity’s recognition of the equity of redemption, the deeds of settlement would be construed so as to allow the Bank to retain more than it could recover under its mortgage, that is, whether it could retain more than the amount for which the liability of the guarantors was compromised.

23. [141]

    If, on the proper construction of Mr Reid’s Deed of Settlement, that could be done, the question would then arise as to whether Mr Reid was entitled to statutory relief under s12GM(7) of the ASIC Act or under the Contracts Review Act 1980 (NSW) against such an operation of cl 4.3(k).

24. [142]

    For these reasons the primary judge erred in holding that Mr Reid did not have a triable cause of action in respect of the alleged breach by the Bank of its duty as mortgagee to take reasonable care to prevent damage to the Menangle property. Oral argument in this court revealed that he may have a further cause of action, not yet pleaded, as to the amount the Bank is entitled to recoup from the proceeds of sale of that property.

Consideration: the second claim

1. [143]

   In his pleading of claims under the National Credit Code and the ASIC Act, Mr Reid sought to reopen his and the Companies’ claims in proceeding 2012/164364 that were the subject of the release in cl 5.1 of the Deed of Settlement. He did not seek rescission of that Deed. He did not offer to repay the $100,000 paid to him pursuant to cl 4.3(i) and (j). The primary judge noted that at one point Mr Reid submitted that the settlement deed itself constituted a credit contract. The primary judge rejected that argument (at [76]).

2. [144]

   The proposed amended statement of claim identified the contract between the Companies and the Bank pursuant to which credit was advanced on account 06 2815 1058733 as a relevant credit contract in respect of which relief was sought under the National Credit Code. The primary judge rejected Mr Reid’s standing to apply for such relief as he was not the “debtor” under that contract (see his Honour’s reasons at [79] quoted at [109] above).

3. [145]

   The contrary is arguable. But this is of no moment unless the release in cl 5.1 of Mr Reid’s Deed of Settlement can be set aside.

4. [146]

   Mr Reid invokes s 76(1) of the National Credit Code. That section provides:

5. [147]

   If it is open to Mr Reid to avoid the effect of the release in cl 5.1 of the Deed of Settlement by seeking to reopen the terms, or the Bank’s conduct, of the bill facility the subject of account 06 2185 10587333 then I do not accept that it is unarguable that Mr Reid would not have standing to apply for the reopening of that contract under s 76(1). It is not self evident that where, for example, a debtor under a relevant credit contract is wound up and the liquidator who is without funds declines to seek to reopen a transaction that a guarantor would not have standing to do so: (see James v Australia and New Zealand Banking Group [2018] NSWCA 41 at [22], [68] as to a guarantor’s right to rely on a breach of a duty owed by the creditor to the principal debtor in realising a security as reducing or discharging the guarantor’s liability to the creditor).

6. [148]

   But this is of no avail to Mr Reid in this case. The Deed of Settlement was not itself a credit contract. Section 4 of the Code provides:

7. [149]

   No credit was provided under the Deed of Settlement. Nor was the credit provided by the Bank to the Companies’ credit to which the Code applies. Section 5(1) of the Code provides:

8. [150]

   The debtors under the bill facilities provided by the Bank were not natural persons. Nor was the credit provided wholly or predominantly for any of the purposes referred to in s 5(1)(b).

9. [151]

   The primary judge was correct to reject Mr Reid’s invocation of the National Credit Code as misconceived.

10. [152]

    In his proposed amended statement of claim and in his reply to the Bank’s defence to the statement of claim, Mr Reid alleged that the Bank engaged in conduct in connection with the supply of financial services that was, in all the circumstances, unconscionable, in contravention of s 12CB of the ASIC Act. Whereas the National Credit Code applies to the provision of credit to natural persons (or a strata corporation) where the credit is for one or more of the purposes specified in s 5(1)(b) of the Code, s 12CB applies to unconscionable conduct engaged in “in connection with” the supply of financial services. It is arguable that Mr Reid’s Deed of Settlement was entered into in connection with the Bank’s supply of financial services to the Companies.

11. [153]

    Section 12GM of the ASIC Act relevantly provides:

12. [154]

    Mr Reid seeks to revive his complaint in proceeding 2012/164364 that the receivers appointed by the Bank failed to obtain a proper price for the sale of the Mortgaged Industrial Property at Ingleburn in 2010. He seeks to set aside the release in cl 5.1 of those claims. But the release was part of a deed of settlement which provided benefits to Mr Reid including the payment of $100,000 and the compromise of his liability as a guarantor of the Companies’ debts to the Bank.

13. [155]

    The primary judge held (at paras [90] to [92] of his reasons quoted at [110] above) that Mr Reid’s claim to reopen his claim that the receivers breached their duties to the Companies failed because he did not have standing to make that claim. I doubt that that is so. If Mr Reid, as guarantor, suffered loss by the Bank’s having engaged in unconscionable conduct in connection with the supply of financial services to the Companies, including unconscionable conduct in the sale of the Mortgaged Industrial Property, it is at least arguable that he would have standing to seek relief under s 12GM(1). It is not obvious why he would need to have recourse to ss 12CB and 12GM of the ASIC Act (James v Australia and New Zealand Banking Group at [22], [68]).

14. [156]

    But the release in cl 5.1 would apply to such claims.

15. [157]

    Mr Reid does not plead any facts as to why the Bank, in obtaining the release in cl 5.1 of the Deed of Settlement of those claims, engaged in unconscionable conduct, or why, in its application to those claims, the release would be unjust. (See Mr Reid’s reply quoted at [102].) He does not seek rescission of the Deed of Settlement.

16. [158]

    As pleaded, the allegations in respect of what counsel for Mr Reid characterised as the second claim would be liable to be struck out. The Bank’s notice of motion filed 2 February 2021 sought only the summary dismissal of the proceeding. It did not seek in the alternative that parts of the statement of claim be struck out.

Conclusion

1. [159]

   For these reasons Mr Reid should have leave to appeal and the appeal from the order for summary dismissal of his proceeding should be allowed. He has an arguable claim for relief in respect of his claim that on the taking of accounts in respect of the Bank’s sale of the Menangle property the Bank is required to account for the adjustment of $370,000 allowed to the purchaser. He also has an arguable claim, that has not yet been pleaded, that the Bank is not entitled to retain from the proceeds of sale more than the compromised debt of $1,268,512.22.

2. [160]

   On the materials before this court Mr Reid does not have an arguable claim to reopen his claim in proceeding 2012/164364. But that does not warrant the summary dismissal of his proceeding.

3. [161]

   The primary judge did not err in dismissing with costs Mr Reid’s notice of motion seeking leave to amend his statement of claim in accordance with the proposed amended statement of claim. Parts of that pleading are untenable. The pleading is diffuse. Mr Reid’s statement of claim requires amendment, but not in accordance with the document propounded before the primary judge.

4. [162]

   I propose the following orders:

   1. (1)

      Grant the applicant leave to appeal from the orders of the District Court made on 27 May 2021.

   2. (2)

      Order that within seven days the applicant file a notice of appeal in the form of the draft notice of appeal behind Tab 5 of the White Book and dispense with service of the notice of appeal.

   3. (3)

      Allow the appeal with costs.

   4. (4)

      Set aside the orders of the District Court of 27 May 2021, save for the order dismissing the appellant’s notice of motion dated 28 November 2020 with costs.

   5. (5)

      In lieu thereof order that the respondent’s notice of motion filed in the District Court dated 2 February 2021 be dismissed with costs.

   6. (6)

      Remit the proceedings to the District Court.

   7. (7)

      Order that within 28 days the appellant file and serve in the District Court any proposed notice of motion seeking leave to amend the statement of claim.