Abram, J. v Bank of New Zealand

[1993] FCA 274

JOSEPH ABRAM and JANETTE DAWN ABRAM v. BANK OF NEW ZEALAND; DAVID TIETJEN;
VANESSA DIKKENBERG and MICHAEL J FITZPATRICK
Nos. NG42 and NG90 of 1993
FED No. 274
Number of pages - 9
Practice and Procedure - Injunction

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Foster J(1)

CATCHWORDS

Practice and Procedure - pleadings - application for summary dismissal - substantive repetition of allegations made in statement of claim in earlier proceedings summarily dismissed - whether new material raised - whether statement of claim vexatious.

Injunction - Interlocutory Injunctions - injunction to restrain mortgagee's power of sale - discretion of Court.

Real Property Act 1900 (NSW) - s 57(2)(b)

Trade Practices Act 1974 (Cth) - s 52, s 52A

Credit Act 1984 (NSW)

HEARING

SYDNEY, 22 March 1993

#DATE 29:4:1993

The Applicants appeared in person.

Counsel for the first and third Mr B.A. Coles QC
Respondents Clayton Utz

Counsel for the fourth
Respondent In (G42 OF 1993) Mr T.H. Barrett
Instructed by Champion and Partners

ORDER

The Court orders that:

1. In proceedings G42 of 1993, these proceedings be stayed until the further order of the Court.

2. In proceedings G90 of 1993, the first respondent be restrained from exercising its powers under mortgage Y337025 until the further order of the Court.

3. Liberty to apply on two days' notice be granted to each party.

4. The costs of all parties in respect of these notices of motion be reserved.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

FOSTER J I heard an application for interlocutory relief in proceedings number G42 of 1993 in which the applicants sought an order restraining the first respondent ("BNZ") from exercising its powers under Registered Mortgage Y337025 pending the disposal of the proceedings. This application was opposed by all respondents. The first respondent and the fourth respondent ("Fitzpatrick") also sought, by notices of motion, that the applicants' proceedings be dismissed as vexatious or be stayed or that the statement of claim be struck out.

1. Associated with these proceedings and, by consent, heard at the same time, was an application brought by the same applicants against the same first, second and third respondents in proceedings number G90 of 1993. These proceedings are an appeal brought by the applicants from the dismissal by Einfeld J of an application brought by them against the same respondents and numbered G369 of 1992. His Honour, in a judgment given on 19 February 1993, had made orders on the application of BNZ for the summary dismissal of the applicants' proceedings. In the appeal, G90 of 1993, the present applicants sought, inter alia, an order restraining BNZ from exercising its powers under the same mortgage pending the disposition of the appeal. This notice of motion was also opposed.

2. The second and third respondents in both proceedings are bank officers of BNZ who had dealings with the applicants at allegedly relevant times. The fourth respondent in G42 of 1993 is a solicitor who acted for BNZ and also for the applicants in relation to the mortgage transaction.

3. Before dealing with the matters raised by the notices of motion before me, it is convenient to set out the relevant background and history of the matters as appears from the material placed before me.

4. The applicants are husband and wife and are the registered proprietors as joint tenants of a residential property situated at 10 Lexington Avenue St Clair (the "St Clair property"). BNZ holds a registered first mortgage over the St Clair property, Real Property Act Mortgage Y337025.

5. In or about August 1987 BNZ granted a credit facility with a limit of $10,000 to the first applicant. This facility was of a type referred to as a "Smarter Account". It bore the account number 37831700. It appears that the first applicant obtained it from BNZ as a replacement for an earlier line of credit made available to him by another bank. The Smarter Account facility thus provided was unsecured.

6. In 1989 the applicants jointly applied for a loan from BNZ in the amount of $170,000. This loan was to discharge and replace existing credit facilities from another bank. It was to be secured by mortgage over the St Clair property. The loan was approved and BNZ instructed Fitzpatrick to act in the preparation of the mortgage documentation. The proposed mortgage arrangements had a distinctive feature. The mortgage account was to operate also as an ordinary overdraft account, under which the applicants were allowed to draw cheques up to the agreed limit. The mortgage was not for a fixed term but was said to operate in perpetuity subject to the applicants' making monthly deposits of interest in respect of amounts owing under the mortgage. The applicants signed the necessary mortgage documentation in Fitzpatrick's office under his guidance and supervision. The mortgage was thereafter registered with the Land Titles Office in the usual way. The account for legal fees subsequently rendered by Fitzpatrick indicates, at least prima facie, that he was acting for both sides in relation to the mortgage.

7. In the succeeding months the applicants made various drawings from and deposits into both the mortgage account and also the Smarter Account. For reasons not so far made clear the applicants have made no deposits to the mortgage account since 5 May 1992 and that account has since that time exceeded the agreed limit. Additionally, the first applicant has ceased making payments into the Smarter Account since 2 June 1992. According to the calculations of BNZ the amount owing on the mortgage account at 23 February 1993 was $185,760.26 whilst the amount owing on the Smarter Account, at the same date, was $11,382.25. BNZ expressed concern in the proceedings that, having regard to current valuations of the St Clair property, the margin between the amount owing and the realisable value of the security was being significantly eroded. It was, consequently, desirous of obtaining possession of the property so that it might exercise its power of sale under the mortgage.

8. It was in the context that BNZ was seeking to exercise its powers under the mortgage, apparently, that the applicants brought proceedings G369 of 1992. The applicants were and are not legally represented. The application and statement of claim in the proceedings before Einfeld J were, apparently, drafted by the first applicant, as was the statement of claim in proceedings G42 of 1993. This fact has been productive of very considerable difficulties in both proceedings.

9. The judgment of Einfeld J has been placed before me as an exhibit in these proceedings as it is contended, inter alia, by the respondents that the statement of claim in G42 of 1993 seeks, in large measure, merely to re-agitate issues that were decided adversely to the applicants by Einfeld J. It appears that those proceedings were from time to time subject to adjournment so that the statement of claim might undergo amendment. Einfeld J describes the original statement of claim as follows:-
   

"The statement of claim was 55 pages long and contained in addition annexures A to R amounting to more than 100 pages. The annexures included a number of newspaper and magazine articles, some extracts from the record of the Federal Parliament, some documents of banks other than BNZ, a number of letters of various kinds, and some documents or part documents whose authorship was not apparent. There was extensive reliance on and quotation of the Bible, especially the Old Testament, the Magna Carta and very old English statue law going back to the Middle Ages. Almost all of the statement of claim and all the annexures were irrelevant to and could not found any justiciable claim and to the relief sought. Whatever was left could not have made out any claim known to the law. There was no mention of the second respondent at all but serious allegations against the third respondent were made."

1. The form and content of this statement of claim provoked considerable discussion in circumstances where BNZ moved for summary dismissal or for the striking out of the whole of the statement of claim. The applicants were invited to consider amending the statement of claim by his Honour on the basis that, as is stated in the judgment, "an amendment was the only way to defeat BNZ's motion".

2. According to the judgment, the statement of claim underwent two further versions. The final version has been placed before me for the purpose of comparison being made between the issues raised by it and those raised in the statement of claim in G42 of 1993. Before I turn to matters arising from such a comparison, it is convenient to consider the further course of events, at least as it is alleged to have been by the applicants.

3. Although it is not entirely clear, I am prepared to accept for present purposes that during the period of time following upon the final hearing of the proceedings before his Honour and prior to his Honour's giving of a reserved judgment, certain things occurred which resulted in the applicants' taking the step of filing and serving yet another statement of claim, namely the one in proceedings G42 of 1993.

4. During the period of the adjournment between the end of argument and the delivery by his Honour of his judgment, the status quo in relation to the enforcement by BNZ of its rights under the mortgage over the St Clair property was preserved by undertakings given by BNZ that it would not exercise those rights. During that period it served notices on each of the applicants under s 57(2)(b) of the Real Property Act. The service of these notices was not, of course, a step in curial proceedings but was a necessary precursor to the taking of such proceedings. The first applicant took the view, however, that the service of these notices was in breach of the undertaking and was in contempt of court. Moreover, in his view, the matter went further than that. It appears that two notices were served, one in respect of the mortgage account itself and another in respect of the much smaller debt in the Smarter Account which was also in excess of agreed limits. The notice in respect of this account was served on each of the applicants, notwithstanding that the account had been in the name of the first applicant only. It was also an account which had not been, so far as the applicants knew, a secured account.

5. It would appear that the service of these notice put the applicants on an inquiry as a result of which they became aware, for the first time as they say, that part of the documentation executed by them in Fitzpatrick's office had had the effect of incorporating the Smarter Account within the mortgage security over the St Clair property. It is clear that the first applicant, and no doubt the second applicant, was deeply troubled at this discovery. His concern was not and has not been assuaged by fact that the notice in respect of the Smarter Account has been withdrawn by BNZ but in circumstances where no undertaking has been given that it will not at some stage be served again.

6. It is sufficiently clear from what has been placed before me that, prior to Einfeld J's delivery of his judgment, the applicants sought to raise these matters and to include them in their claim. This, they say, they were not permitted to do, with the result that they took independent and fresh proceedings in order to raise them. They did this by filing and serving their application and statement of claim in G42 of 1993. It appears that this was done more or less contemporaneously with their filing of the appeal G90 of 1993 against Einfeld J's dismissal of their final statement of claim in G369 of 1992.

7. In the fresh statement of claim, being the amended statement of claim filed on 4 March 1993 in G42 of 1993, the matter of the service of the s 57(2)(b) notice in respect of the Smarter Account was dealt with (paragraph 8) on the basis that its service amounted to "a malicious prosecution requiring a jury trial of the respondents". This cause of action is particularised in the following paragraph (paragraph 9). It is sufficient to say, at this point, that the material pleaded is quite incapable of sustaining an allegation that BNZ, alone or with other respondents, committed the tort of malicious prosecution against the applicants.

8. The matter of the notice in relation to the Smarter Account also resulted in the applicants joining Fitzpatrick as an additional party in the fresh proceedings. It became apparent to them, as a result of correspondence, that the inclusion of the Smarter Account within the ambit of the mortgage resulted from their having signed a document, amongst the other documentation signed in Fitzpatrick's office, which was productive of this result. This was Memorandum No. V617544 which was annexure V to the amended statement of claim. The allegation is made in the statement of claim that either as a result of failure on the part of the respondents to warn or advise the applicants or through breach of a fiduciary duty to them or through negligent advice and unconscionable conduct on the part of the respondents, the applicants executed this document without being aware of its contents or significance. This much, in my view, can be culled from paragraphs 10 and 11 of the statement of claim. Allegations are also made of breaches of the Trade Practices Act 1974 (Cth), in particular breaches of ss 52, 52A and others. The claims in this regard appear to be, at least to some extent, encapsulated in paragraph 11.11 which reads as follows:-
   

"Had the applicants known back on 6 April 1989, the truth of the situation into which the applicants were inveigled by the first respondent's officers, employees and agents and the fourth respondent in as aforementioned secretly securing an pre existing unsecured account and then continuing to charge the same high interest rate as an unsecured account, and sending out letters to the applicant to keep the illusion alive (ANNEXURE J), then the applicants would not have considered conducting any business with the respondents. And would in fact have cancelled the existing account."

1. A comparison of these parts of the statement of claim with portions of the earlier statement of claim in G369 of 1992 shows that at least a reasonable percentage of the allegations made in the later statement of claim were in fact relied upon in the earlier. There are allegations in paragraph 12 of the earlier document as follows:-
   

"12. The Applicants were induced to sign the alleged mortgage by oral representation made by the employees or agents of the First Respondent and the Respondents to the effect that the mortgage was only a formality and would never be called upon. 12.1. At various times Mr Michael Fitzpatrick Solicitor of the First Respondent, said to the Applicants words to the effect. 12.2 'Don't worry about all the fine print Mr Abram, I have explained to you all the important details,...... Mr Abram this is the best kind of mortgage you can have, it is for perpetuity, and the interest rate is very reasonable, in fact it is an excellent deal, signing this mortgage is just a formality and it will never be called upon,...... and all you have to do is pay the interest by the 20th of each month, I am sure you won't any problems doing that ...... I have looked at a lot of these mortgages and this one has no hidden fees like some of the other banks.... the document is just a formality to keep the bank happy, and it will never be used'. 12.3 Acting on the good faith and truth of the said representation and induced thereby and not otherwise, the Applicants signed the alleged mortgage. 12.4 The First Respondent's Solicitor made the said representation knowing the same to be false and untrue and/or recklessly and not caring whether they may be true or false. 12.5 The alleged mortgage documents were not properly executed and are therefore unenforceable."

1. It is to be noted that the allegations in the earlier document against Fitzpatrick were made against him on the basis that he was the agent or representative of BNZ. In the later statement of claim they are made on this basis, but also on the basis that, apparently, Fitzpatrick was acting as solicitor for the applicants and personally owed them duties in equity, contract and tort which were breached. I am satisfied that these are essentially new claims over and above the claims made in the earlier proceedings which were the subject of summary dismissal by his Honour.

2. It is clear, however, that the later statement of claim contains either in a slightly different form or in similar form with additional particulars, claims that were made in the earlier statement of claim and were the subject of summary dismissal by Einfeld J. Thus the allegation in paragraph 10 of the amended statement of claim in G369 of 1992 that "the Respondents deliberately and with malice afore-thought set out to ruin the Applicants to enable the First Respondent to sell the Applicant's property and matrimonial home at far beneath its real value to a party or parties working in profit sharing conjunction with the Respondents for their private gain and profit" is repeated verbatim in paragraph 12 of the later statement of claim. The particulars, however, are expanded to include allegations resulting from the service of the s 57(2)(b) notice and subsequent correspondence.

3. Similarly, allegations are made in each proceedings that the mortgage document was the subject of material alteration without the consent or knowledge of the applicants. This allegation was summarily dismissed by Einfeld J. In the new statement of claim some fresh particulars are provided, the details of which I do not need to consider.

4. Similarly claims of breaches of the Credit Act 1984 are made in both documents, in circumstances where the claim had been the subject of dismissal in the earlier proceedings.

5. It must also be said that the verbiage of the later statement of claim is, as it was in the earlier, productive of embarrassment in pleading, insofar as there are obvious difficulties in dealing with it from the point of view of an opponent's seeking to answer the allegations in a rational manner.

6. In this context the respondents assert that the later statement of claim is vexatious in that it seeks to raise matters which have already been the subject of decision and in respect of which the only relief that may be sought is by way of appeal. As I understand it, the applicants' response to this claim is that the matters have been raised again because there is fresh supporting material or arguments in respect of them that were not put to Einfeld J. If this be so, of course, this provides no basis for the bringing of fresh proceedings. The applicants, in their appeal, must seek to induce the Full Court to grant permission to them to adduce new material and new arguments on the appeal in relation to these issues which have already been decided against them at first instance.

7. So far as Fitzpatrick is concerned, it is submitted that the applicants should not now be permitted to join him as a party in fresh proceedings when serious allegations were made against him in the earlier proceedings, which allegations are repeated in the new proceedings. It is put that he should have been joined in the first proceedings and it is too late to seek to do so now in fresh proceedings. I see much force in this argument.

8. Undoubtedly, good grounds exist for the striking out of the second statement of claim. Questions would necessarily arise as to whether leave should or should not be granted in respect of parts of it, to re-plead the allegations. However, I have come to the conclusion that the matter should not, at this stage, be dealt with in this way.

9. Regard must be had to the fact that the decision of Einfeld J is subject to appeal. It is clear that the major thrust of the applicants' claim in statement of claim G369 of 1992 was that the mortgage was invalid because it was not based upon a true loan. It was asserted that the bank had not lent real money but merely created credit out of thin air. This proposition was put in various ways ad nauseam in the earlier statement of claim. The statement of claim was typical of a number which have been brought in the Courts in recent times. Such claims have been dismissed by individual judges of this Court and by Full Courts. The argument has been finally laid to rest by a decision of the High Court of Australia. It is unnecessary for me to further expand on this matter. Insofar as the appeal from Einfeld J relates to the dismissal by his Honour of these arguments, it is clearly doomed. However, other matters are raised in the appeal. These include matters which, as I have already indicated, overlap at least to some extent with issues raised in the later statement of claim in proceedings G90 of 1993. Although there are quite obviously considerable problems for the applicants in the appeal, I do not consider that I should, in determining the matter before me, conclude that they have no prospect of success. In particular, matters surrounding the execution by the applicants of the lengthy mortgage documentation in what appears to have been a short period of time may contain the glimmer of a claim which the appellate court may consider that the applicants should have the opportunity of raising.

1. There are, however, other matters which, according to the notice of appeal and supplementary notice, the applicants wish to raise. Regrettably, because of the course which argument took before me, these matters were not ventilated. However, I cannot ignore them in determining what course I should take in respect of the notices of motion before me. It is clear that the applicants wish to assert that, in broad terms, they were not accorded procedural fairness in relation to the earlier hearing. Lengthy and somewhat difficult and repetitious complaints are made in this regard in the notices. I have not been taken by either side to any portions of the transcript of the hearing in the earlier case which may bear on these contentions. No doubt, however, the matter will be fully debated before the Full Court. It is not for me to predict the outcome of that debate. Should the applicants be successful then the result, presumably, would be that the earlier decision would be set aside and the matter remitted for re-hearing. If this were to be the outcome of the appeal, then the opportunity would be presented to the applicants to seek to amend the previous statement of claim by the addition of material which they now seek to raise in the later statement of claim. I have come to the conclusion, not without considerable hesitation and some regret, that I should not pre-empt the possible taking of this course by, at this stage, striking out in whole or in part the later statement of claim.

2. Quite obviously, every step should be taken to ensure that the present appeal is heard and disposed of as quickly as possible. There does not appear to be any reason why the appeal cannot be quickly prepared for hearing. Although the applicants' inability to bring the amount of the debt into Court, provides, on ordinary principles, strong reason for not restraining BNZ from exercising its rights as mortgagee, I have come to the conclusion that it should be so restrained, providing that the appeal can be heard expeditiously. The amount of the mortgage debt is not large in comparison with mortgage debts that frequently come before this Court. There is currently some surplus of security value over the amount of the debt. The mortgage itself is under attack. If that attack is successful then considerable hardship would be inflicted on the applicants if, in the mean time, their home had been sold and they were thus deprived of it. On the other hand, it would be quite unreasonable if BNZ were to be kept out of their rights for an unreasonable length of time through failure by the applicants to have their appeal heard promptly.

3. I have come to the conclusion that I can best do justice between the parties in relation to the issues raised by these notices of motion by, on the one hand, staying until the further order of the Court all proceedings brought by the applicants in application G42 of 1993, whilst at the same time restraining BNZ, until the further order of the Court, from exercising any rights under mortgage Y337025. I should, in my view, also grant liberty to apply to each party on two days' notice so that should unreasonable delay occur or unexpected events supervene, an expeditious alteration of these orders may be sought.

4. I further consider that, in all the circumstances of this case, I should reserve the costs of these motions until the outcome of the appeal is known.

5. Accordingly, I make the following orders:-
   

1. In proceedings G42 of 1993, that these proceedings be stayed until the further order of the Court.

2. In proceedings G90 of 1993, that the first respondent be restrained from exercising its powers under mortgage Y337025 until the further order of the Court.

3. That liberty to apply on two days' notice be granted to each party.

4. That the costs of all parties in respect of these notices of motion be reserved.