Commonwealth Bank of Australia v Szczurek - [2006] WADC 150

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: COMMONWEALTH BANK OF AUSTRALIA -v- SZCZUREK & ANOR [2006] WADC 150

CORAM: MULLER DCJ

HEARD: 24 APRIL, 18 SEPTEMBER 2006

DELIVERED : 28 SEPTEMBER 2006

FILE NO/S: CIV 1463 of 2005

BETWEEN: COMMONWEALTH BANK OF AUSTRALIA (ABN 48 123 123 124)
Plaintiff
AND
JERZY EDMUND STANISLAW SZCZUREK
First Defendant
KAYE MARIE CROSS
Second Defendant

Catchwords:

Appeal against Registrar's decision entering summary judgment against first named defendant - Application to set aside entry of default judgment against second named defendant - Judgment against both defendants entered in respect of unpaid balances of two bank loans secured by mortgages over two properties - Sale of properties leading to discharge of mortgages - Proceeds from sale of properties only partly allocated to payment of loans and balance mistakenly paid to defendants - Estoppel - Section 125 Property Law Act - Misleading and deceptive conduct

Legislation:

Property Law Act 1969

Result:

Appeal by first named defendant dismissed

Application by second named defendant dismissed

Representation:

Counsel:

Plaintiff:     Mr D K J Skender
First Defendant             :     Mr T Derbyshire
Second Defendant         :     Mr A O Carstaedt

Solicitors:

Plaintiff:     Gadens Lawyers
First Defendant             :     Kott Gunning
Second Defendant         :     Colin Garber & Associates

Case(s) referred to in judgment(s):

Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332
Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485
Commonwealth v Verwayen (1990) 170 CLR 394
Equity Access Pty Ltd v Westpac Banking Corporation (1990) ATPR 40‑994
Grundy v Ley [1984] 2 NSWLR 467
Industrial Acceptance Corporation Ltd v Tarulli (1974) WAR 125
Murphy v Overton Investments Pty Ltd [2001] 112 FCR 182
Palmer v Prince [1980] WAR 61
Parker v Transfield Pty Ltd [2000] WASCA 382
Taco Company of Australia Inc and Another v Taco Bell Pty Ltd and Others (1982) 42 ALR 177
Western Australia v Rothmans of Pall Mall (Aust) Ltd [2001] WASCA 25
Yovich v Collyer [1972] WAR 143

Case(s) also cited:

Bank of Western Australia Ltd v Ponga [1998] WASC 126
Bank of Western Australia v Marsh [2000] WASC 208
Clarke v Union Bank of Australia Ltd (1917) 23 CLR 5
Cordinup Resorts Pty Ltd v Terana Holdings Pty Ltd (1997) 143 FLR 18
Dobbs v National Bank of Australasia (1935) 53 CLR 643
Eng Mee Yong v Letchumanan [1980] AC 331
Evans Deakin v Kaiser [1968] Qd R 379
Gomba Holdings (UK) Ltd v Minories Finance Ltd (No 2) [1993] Ch 171
Legione v Hateley (1983) 152 CLR 406
Macquarie Bank Limited v Lin [2005] QSC 221
Olga Investments Pty Ltd v Citipower Ltd [1998] 3 VR 485
Parkdale Custom Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191
Taco Co v Taco Bell Pty Ltd (1982) 42 ALR 177

MULLER DCJ: In this matter the first named defendant has appealed against a decision of the learned Registrar entering summary judgment against the first named defendant in the sum of $372,911.76 together with interest and the costs of the action. The second named defendant has applied for an order that default judgment entered against her on 9 August 2005 be set aside. Default judgment was entered on the ground that the second named defendant had not filed a defence.
The plaintiff is the Commonwealth Bank of Australia as the successor in law of the Colonial Bank. The Colonial Bank provided the defendants with two loan facilities. The first was a Fixed Rate Home Loan Facility that was provided on 15 October 1998 for $100,000 secured by a mortgage over 28 Godwin Avenue in Manning. The second was a Rate Saver Home Loan provided to the defendants on 24 December 1999 for $315,000 secured by mortgages over both the Manning property already referred to and Lot 102, The Grove in Margaret River. The total amount of money loaned by the plaintiff to both defendants was $415,000.
On or about 4 October 2001 the defendants sold the Margaret River property. Settlement took place on or about 24 October 2001. The defendants' settlement agent negotiated the discharge of the mortgage over the Margaret River property with the plaintiff. Following these negotiations the plaintiff agreed to discharge the mortgage over the Margaret River property upon certain conditions being fulfilled. One of the conditions was that the Rate Saver Facility be reduced to a balance of $111,410. This amounted to a variation of the conditions of the loan but the change was never implemented. What actually happened was that the payment received by the bank from the sale of the Margaret River property was $97,964.45. This left a shortfall of $86,000 on the two loans. The payment of $97,964.45 was applied by the plaintiff to the Fixed Rate Facility. This meant the Fixed Rate Facility had then been paid in full. But the Rate Saver Facility remained outstanding except for those monthly payments that had been made by the defendants pursuant to the terms of the mortgage.
Due to a mistake made by the bank the mortgage over the Margaret River property was discharged when the bank received the payment of $97,964.45. This error was never fully explained. The mortgage should not have been discharged because the Margaret River property was part of the security for the Rate Saver Facility which remained unpaid.
The sale of the Margaret River property was followed on 5 October 2001 by the sale of the Manning property. At settlement a sum of $20,150 from the sale was applied to a line of credit account operated by both the first and second named defendants that was unconnected with these proceedings; but nothing at all was received by the plaintiff in reduction of the Rate Saver Facility which remained outstanding apart from the monthly mortgage payments that had already been made and two subsequent $1,900 payments made from the line of credit account I have already referred to. Once again, however, the plaintiff made an error for which there was no explanation. The mortgage over the Manning Road property was discharged by the bank even though no moneys received from the sale of that property had been credited to the loan and a substantial amount remained outstanding.

Settlement statements

In their affidavits both the first named and second named defendants acknowledged having received settlement statements relating to the sale of the Margaret River and Manning properties. The plaintiff placed considerable emphasis on these statements. The settlement statement relating to the sale of Margaret River was dated 24 October 2001. This statement revealed that upon settlement each of the defendants received a sum of $99,080.81. The statement also disclosed that a sum of $97,964.45 was paid to the bank. The settlement statement relating to the Manning property was dated 30 November 2001. This statement disclosed a payment from the proceeds of settlement of $170,567.79 to each of the defendants. It also disclosed the payment of $20,150 to the line of credit account operated by both defendants. But significantly the statement did not reveal any other payment to the bank. Specifically, there was no reference in the statement to any particular amount from the proceeds of the sale having been apportioned by the bank toward the payment of the balance of the moneys owed by the first and second named defendants on either the Fixed Rate or Rate Saver Facilities. While the events surrounding the two loan transactions may be rather confusing one thing is strikingly clear: as early as October/November 2001 both the first named and second named defendants had received settlement statements from the plaintiff showing exactly how the proceeds of the sale of the Manning and Margaret River properties had been disbursed. The most cursory examination of those statements would have revealed that, apart from the payment of $97,964.45 from the proceeds of the settlement towards the two loan accounts, no other payment at all was received by the bank in respect of either the Fixed Rate Facility or the Rate Saver Facility. What is more each defendant had received approximately $170,000 from the proceeds of the sale of the Margaret River property. From this it seems reasonable to assume that each would have realised that the bank had not been paid anywhere near the amount owed under the Fixed Rate and Rate Saver Loan agreements.

Position of the first named defendant

In his affidavit sworn on 16 September 2005 the first named defendant described how he and the second named defendant purchased the Manning property in about September 1998 and obtained a loan of $100,000 through the plaintiff bank. This loan was described as a Fixed Rate Facility. The first named defendant said he believed he paid a substantial deposit of between $50,000‑$100,000 on the Manning property and subsequently made additional fortnightly mortgage repayments in order to increase his equity in the property. In late 1999 he said he and the second named defendant purchased the Margaret River property and obtained a loan of $315,000 from the plaintiff bank for this purpose. This loan was described as a Rate Saver Facility and was secured by a mortgage over both the Manning and Margaret River properties. In about October 2001 the first named and second named defendants separated and decided to sell both the Manning and Margaret River properties and divide the proceeds between them. The Margaret River property was sold first on 24 October 2001. The first named defendant asserted in his affidavit that he received $99,263.39 from the sale of that property. On or about 8 November 2001 he received a statement from the plaintiff bank indicating that $97,9645.45 had been apportioned to his home loan. The document did not specify whether the home loan referred to was the Rate Saver Facility or the Fixed Rate Facility. In his affidavit the first named defendant said he believed this payment had been allocated to the Rate Saver Facility and that it repaid the loan in full. But the sum of $97,964.45 was, in fact, applied to pay the Fixed Rate Facility in full as appears from the affidavit of Peter William Ficko who was an employee of the plaintiff bank. The Manning property was sold on 30 November 2001 and the first named defendant agreed he received $170,965.90 from the sale. He received another statement from the bank indicating that the Fixed Rate home loan had been paid in full. It was then his understanding that both loans had been paid in full and the two mortgages discharged. Believing this to be the situation he later applied for and obtained a loan from the plaintiff to purchase another property in Clydesdale Street in Como. It was emphasised by counsel for the first named defendant that the documentation relating to the new loan contained certain criteria including a stipulation that the borrower must have repaid any outstanding loans before qualifying for the additional loan. This document was said to reinforce and support the express belief of the first named defendant that he had completely cleared the two earlier Fixed Rate and Rate Saver Loans.

The position of the second named defendant

After the breakdown in her relationship with the first named defendant the second named defendant claimed she played no part in the finalisation of the loan arrangements with the plaintiff bank. According to the second named defendant all dealings in relation to the two loans were between the first named defendant and the plaintiff. She had no contact with the plaintiff and did not receive any correspondence exchanged between the plaintiff and the first defendant. Relying as she had to upon the first named defendant informing her of the relevant arrangements that had been made the second named defendant claimed she was unable to formulate and provide particulars of her defence until the first defendant had done so. While conceding that the plaintiff's solicitors had warned her by letter dated 2 August 2005 that judgment by default would be entered unless a defence was provided by 3 August 2005 the second named defendant claimed the facsimile of this letter was sent to the incorrect facsimile number and by the time it was received by her solicitors the plaintiff had already applied for default judgment. She claimed that her solicitors wrote to the plaintiff's solicitors on 4 August 2005 requesting additional time to file a defence and explaining that the letter from the plaintiff's solicitors dated 2 August 2005 putting her on notice to file her defence by 3 August 2005 had been sent to the incorrect facsimile number and had only been received on 4 August 2005. This letter was followed by an exchange of correspondence between the second named defendant's solicitors and the plaintiff's solicitors but to no avail and the judgment entered against the second named defendant remains in force to this day.
The second named defendant also claimed she believed the two loans had been paid in full and that the money she received from the proceeds of the sale of the two properties represented her share of the net proceeds after the bank loans had been paid. She also claimed she only learned in 2005 that moneys were still owed to the bank. She asserted that after her separation from the first named defendant she believed all debts had been paid and she had subsequently arranged her affairs and purchased another property in that belief.

Effect of discharge of mortgages on loan arrangements

I accept the plaintiff's submission that the personal liability of the first and second named defendants to pay the outstanding loans survives the discharge of both mortgages. While the discharge of the two mortgages over the Margaret River property and the Manning property divested the plaintiff of its security for the loans the personal obligation of both the first and second named defendants to repay the amount outstanding remained unchanged: Industrial Acceptance Corporation Ltd v Tarulli (1974) WAR 125 at 127. I do not believe it matters how the money received by the plaintiff from the first and second named defendants was allocated. If, as has been claimed, it was allocated to the payment of the Fixed Rate Loan then the Rate Saver Loan remains outstanding. If it ought to have applied to the Rate Saver Loan then both the balance of the Rate Saver Loan and the Fixed Rate Loan are outstanding. I also accept that the defendants' failure to pay the balance of the two loans rendered them in default of their contractual obligations and entitled the plaintiff to demand payment of the full amount outstanding. Grundy v Ley [1984] 2 NSWLR 467 at 473.

Notice of default

The plaintiff sent the defendants notices of default in accordance with the terms of the contract. The notices were sent by both ordinary and registered mail to various addresses stipulated by the defendants under the loan agreements with the bank. Notices of default were followed by notices of demand which, once again, were sent both by ordinary and registered mail to the addresses which the defendants had agreed would be the addresses for service. I accept that both the notices of default and the notices of demand must be deemed to have been duly given and received by both defendants. This observation applies, not only to the first named defendant, but also to the second named defendant who had since separated from the first named defendant and moved to another address. In terms of the loan arrangements both defendants were required to notify the plaintiff of any change of address or intention to do so. The second named defendant failed to do so when she moved from Salter Point to her current residence in Como. Notwithstanding her claim that following her separation she played no part in any dealings with the plaintiff and relied entirely upon information given to her by the first named defendant I accept that she must be deemed to have been duly served with the notices sent by the plaintiff both to her and the first named defendant.

General principles applicable to summary judgment (first named defendant)

I am satisfied that the plaintiff's affidavit meets the requirements of O 14 of the Rules of the Supreme Court. Once that finding is made the first named defendant assumes an evidentiary onus to satisfy the Court why judgment should not be entered. The first named defendant must establish that there is some triable issue either of fact or law or that he has an arguable defence or a defence on the merits or, for some other reason, there ought to be a trial of the matter (O 14, r 3 and 4). The Court is bound to consider whether, without full argument or further investigation of the facts, there is real uncertainty as to the plaintiff's right to judgment. Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332 at 335. Summary judgment should be entered if the facts are undisputed and the case is clear. Western Australia v Rothmans of Pall Mall (Aust) Ltd [2001] WASCA 25.

Application to set aside judgment (second named defendant)

Where judgment in default has been regularly entered it should not be set aside unless the Court is satisfied that there is a defence on the merits. Seaman (13.10.6). The applicant must satisfy the Court on affidavit that he or she has a defence on the merits and should explain the failure to comply with the rules and the delay, if any, in making the application. Palmer v Prince [1980] WAR 61. The material before the Court must show that the defendant has a credible defence and that if the matter were argued on its merits the defendant would have a real prospect of success. Parker v Transfield Pty Ltd [2000] WASCA 382.

Estoppel

The first named defendant alleges that there is a triable issue as to whether the plaintiff is estopped from asserting that it is entitled to repayment of the moneys said to be outstanding. In support of this submission the first named defendant relies upon the principles expressed by Brennan J in Commonwealth v Verwayen (1990) 170 CLR 394 at 422:
"Estoppel by representation of fact (estoppel in pais) precludes a party, who, by his representation, has induced another party to adopt or accept the fact and thereby to act to the other party's detriment from asserting a right inconsistent with the fact on which the other party acted."
The first named defendant has argued that he assumed the two loans to the bank had been fully discharged at settlement and, on the basis of that allegedly justified assumption, subsequently spent the money he received from the proceeds of the sale. He has said he would suffer a detriment if the plaintiff's claims were now allowed. This position, the first named defendant has argued, was brought about by the plaintiff's representation that the Fixed Rate and Rate Saver Loans had been paid in full and later in making another secured loan to the first named defendant without notifying him of any outstanding amounts still owed under the two earlier loans. As a consequence of the conduct of the plaintiff the first named defendant claimed that his assumption that the loans had been repaid in full from the proceeds of the sale of the two properties was not unreasonable and that there is material before the Court that gives rise to a triable issue in relation to this issue. As I understand the first named defendant's argument the misrepresentation made by the plaintiff was contained in the two documents marked "B" and "D" annexed to his affidavit. The first of these documents dated 8 November 2001 was a statement from the bank purporting to show that the defendants' home loan had been repaid in full by the deposit of $97,964.45. This was clearly a reference to the proceeds obtained from the sale of the Margaret River property. In his affidavit the first named defendant claimed he believed this payment repaid the Rate Saver Facility rather than the Fixed Rate Facility. I will indicate later how it is difficult to understand he could possibly have held this belief. The second document he relied upon as constituting a misrepresentation was the document marked "D" in the Annexure to his affidavit. This document related specifically to the Fixed Rate Facility and showed that the opening balance of $96,926.11, excluding bank fees and other items, had been paid in full. Relying on these two documents the first named defendant said he genuinely believed the two home loans had been extinguished.

The second named defendant raised an argument along similar lines. She also asserted that the bank discharged both mortgages securing the two loans at settlement. By its conduct it represented that the obligation secured by the mortgages had also been discharged. It is claimed the second named defendant relied on this. It was also emphasised by the second named defendant that she had no dealings with the bank and relied entirely on the first named defendant to finalise any outstanding issues. She claims that when the settlement agent paid her the proceeds from the sale of the two properties she was entitled to believe that matters had been correctly attended to and that the money she received represented her share of the net proceeds of the sale after the bank loans had been repaid. The second named defendant claimed she had spent the money she received at settlement and would suffer detriment if the judgment were allowed to stand. She also argued that, had the bank done what it should have done and ensured that the loans were fully paid at settlement, she and the first named defendant would each have paid only half the amounts owing to the bank. As a consequence of the plaintiff's alleged failure to allocate the proceeds of sale of the Manning property to the payment of the outstanding loan the second named defendant maintains she is now prejudiced by being required to pay the full amount of the debt. Having rearranged her affairs and spent the proceeds of the sale in purchasing another property she maintains that it would be unconscionable to expect her to repay the money when her assumption that the loans had been fully paid was reasonably based on the bank's own errors and its failure to raise the issue of breach or default until three years after settlement of the properties. In this regard reliance was placed on the decision in Commonwealth v Verwayen (supra) where Deane J said at 190‑340 that the question whether the departure from an assumption would be unconscionable:
"…must be resolved not by reference to some preconceived formula framed to serve as a universal yardstick but by reference to all the circumstances of the case, including the reasonableness of the conduct of the other party in acting upon the assumption and the nature and extent of the detriment which he would sustain by acting upon the assumption if departure from the assumed state of affairs were permitted."
It was submitted that this issue of unconscionability, and the reasonableness of the second named defendant's assumption, were triable issues that could only be resolved after hearing evidence.

Findings on issue of estoppel and reasonableness of defendants' belief

I am not satisfied that there is a triable issue on the basis of estoppel in the case of the first named defendant. The conduct of the plaintiff relied upon by the first named defendant was the delivery of the documents that are annexed to the first named defendant's affidavit and marked "B" and "D". The first named defendant asserted that the letters and figures in the bank's reference at the top of the letterhead in the annexure marked "B" related expressly to the Rate Saver Facility. That may be true. But everything else in the document pointed towards the payment of $97,964.45 having been allocated to the Fixed Rate Facility. That, after all, was almost the precise amount of that loan account. In any event I do not believe the bank's reference is a sufficiently clear and unambiguous representation as to ground an estoppel.
Then there is the representation by the bank based upon the discharge of the two mortgages. In some circumstances it is understandable that such conduct could lead to the assumption that the loan secured by those mortgages had been fully paid. But that certainly was not the case here. There was abundant evidence available to the first named defendant that the two loans originally secured by the discharged mortgages had not been paid in full.
Even if the representation or conduct by the bank led to the impression or assumption that the plaintiff had been repaid it was clearly unreasonable for the first named defendant to have relied upon such a representation. The law appears settled that for estoppel to operate the relevant assumption by the party claiming the estoppel must be reasonable, or, at the very least, that reasonableness is a significant consideration: Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 at 406; Murphy v Overton Investments Pty Ltd [2001] 112 FCR 182; Commonwealth v Verwayen (supra). It was unreasonable for both defendants to rely upon such an assumption. Both defendants knew what the two properties had been sold for. They also knew they had borrowed $415,000 from the plaintiff. The settlement statements they had received disclosed exactly what had been paid to the bank in respect of both secured loans. Each also knew what he or she had received from the proceeds of the sale. Each must have known that something was amiss. The simplest of calculations would have revealed that both defendants had received substantially more than they were entitled to. The settlement statements demonstrated unequivocally that the bank had not been paid all that it was owed. The only possible explanation in all the circumstances was that the bank loan had not been extinguished in full. In short, neither defendant could reasonably have believed that a payment to the bank of $97,964.45 could have extinguished the original total loan of $415,000.
I am satisfied there is other compelling evidence of the first and second named defendants' knowledge that the loans had not been repaid in full. The defendants had a joint line of credit account with the bank. Each defendant is said to have received a series of statements covering transactions relating to the line of credit account between September 2001 and January 2002. These line of credit statements disclose two payments of $1,900 each from the joint line of credit account to the Rate Saver Facility. One of these payments was made on 11 January 2002. This was after both mortgages had been discharged. The second named defendant withdrew $5,000 from this line of credit account on 9 January 2002. She made a second withdrawal of $2,000 from the same account on 15 January 2002. This was three days after the $1,900 loan repayment had been made from the same account to the Rate Saver Facility. I am satisfied that the more probable inference is that she must have become aware of this $1,900 payment when she made the $2,000 withdrawal on 15 January 2002. But she did nothing about it. There is no evidence that she queried this payment with the bank. The amount of $1,900 was not insignificant. It was not an amount that could reasonably be overlooked. I believe the second named defendant most probably knew of it.
The first named defendant acknowledged that payments in respect of the two bank loans were made from the joint line of credit account but denied he authorised or had any knowledge of the two $1,900 payments revealed in the bank statements produced in court. He also denied receiving bank statements revealing these payments. But there was evidence showing that he also accessed this account. He made the final withdrawal of $369.37 which led to the closure of the line of credit account. Once again I am satisfied that when he accessed this account to close it, it is more probable than not he would have found out about the $1,900 payments. There was other evidence of the first defendant's knowledge. Bank statements showing the outstanding amounts under the Rate Saver Facility were sent to his address after the discharge of both mortgages. The first defendant denied having received those bank statements, although he was living at 69 Clydesdale Street at the time and the statements were sent to that address.
I have already mentioned that the first named defendant relied on the documents marked "B" and "D" in his affidavit sworn 16 September 2005. What is significant about these documents is that they would have been received by the first named defendant at the same time after the sale of the Margaret River property. The sale of the Manning property had not been completed when the two statements were received. The first named defendant said he relied on these documents for his belief that his total indebtedness to the bank had been extinguished. But he could not possibly have done so. At the very least he must have known the two documents only related to the one loan facility because he received them after only one of the properties had been sold. When annexures "B" and "D" were received the Manning property had not been sold and the plaintiff still had a mortgage over that property. In his affidavit the first named defendant admitted that the Manning property settlement took place over three weeks after he had received annexure "B" and annexure "D". In the circumstances he can hardly claim he believed that the discharge of only one of the mortgages by the plaintiff meant that all money owing to the plaintiff had been repaid.
There are other factors that point to the unreasonableness of the expressed belief of both defendants. Each must have known the plaintiff had not been repaid because they received twice as much money as they should have received after settlement of both properties. Both properties were sold within three years of their purchase for a total sum of $685,000. Each defendant knew $415,000 had been borrowed from the plaintiff to purchase the two properties. The difference between the combined sale price and the total loan is $270,000 which is the maximum the defendants could have received from the transaction. But the affidavit sworn on 16 September 2005 by the first named defendant reveals the defendants received a total of $539,297.20 from the sale of the two properties. This was approximately twice the maximum possible amount they could have received from the two sales.
The unreasonableness of any assumption arising from the plaintiff's conduct that the bank loans had been paid in full applies with equal force to the case of the second named defendant. I have already dealt with some of the grounds upon which her assumption or belief was, in my view, totally unreasonable. It is significant that she had severed her lines of communication with the plaintiff by not informing the bank of her change of address as she was required to do. The most telling feature of all is that, like the first named defendant, she must have realised when she received her share of the net proceeds of sale that what she had been paid was substantially in excess of what she was entitled to. That fact alone would have alerted her to the overwhelming probability that the bank had not been paid all that was owed to it.
I am not convinced that either defendant has suffered detriment as a consequence of their alleged reliance on the plaintiff's conduct to arrange their affairs. I accept the plaintiff's submission that material detriment must be proved. Yovich v Collyer [1972] WAR 143 at 146. Of the $270,000 received by the first named defendant $100,000 was invested in another property and a similar amount paid to his wife. A substantial portion of what remained was spent on various items referred to in the first named defendant's affidavit. I am unable to find that he suffered any material detriment.
The same can be said for the second named defendant. She used the money to purchase another property which has increased significantly in value and, like the first named defendant, has had the benefit of money belonging to the plaintiff for a period of four years without having had to pay interest.
Finally, I agree with the plaintiff's observation that there is nothing unconscionable or unfair in requiring the first and second named defendants to relinquish a windfall gain which should never have been kept by them in the first place.

Payments made under mistake

Both the first and second named defendants have relied upon s 125(1) of the Property Law Act 1969 (WA) which provides as follows:
"125.Payments made under mistake of law or fact not always recoverable
(1)Relief, whether under section 124 or in equity or otherwise, in respect of any payment made under mistake, whether of law or fact, shall be denied wholly or in part if the person from whom relief is sought received the payment in good faith and has so altered his position in reliance on the validity of the payment that in the opinion of the Court, having regard to all possible implications in respect of the parties (other than the plaintiff or claimant) to the payment and of other persons acquiring rights or interests through them, it is inequitable to grant relief, or to grant relief in full."
The short answer to this submission is that no payment was made by mistake by the plaintiff to either defendant. It was submitted on behalf of both defendants that the section is not confined to the situation where it is the plaintiff who has made the payment. It was argued that the provision is wide enough to include a situation where a payment was mistakenly made by a third party and where the plaintiff claims relief in respect of that payment. Following this argument to its logical conclusion the plaintiff has submitted that at the settlement of the sales of the Manning and Margaret River properties moneys paid by the purchasers which should have been paid to the bank were mistakenly paid to the defendants. Those payments, it is argued, fall within the scope of s 125 of the Property Law Act. I do not accept that argument at all. In my view the only reasonable interpretation that can be placed on s 125 is that the protection afforded is limited to a situation where relief is sought from the person who actually made the payment under mistake and led the person to whom it was paid to alter his position in the way the section contemplates.
The first named defendant also purported to rely upon the equitable defence available to a claim to recover money paid under mistake when the borrower had adversely changed his position in reliance on the payment and honestly believed that he was entitled to receive and retain the money. I take the view that the observations I have already made in relation to the Property Law Act apply to this defence as well. In the absence of authority to the contrary I believe the defence is limited to money actually handed over by the payer to the payee and not to payments made by some third party to the payee.

Misleading and deceptive conduct

Reliance was place by both defendants on a possible defence of misleading or deceptive conduct under s 52 as read with s 87 of the Trade Practices Act. The principles applicable to s 52 are described in Equity Access Pty Ltd v Westpac Banking Corporation (1990) ATPR 40‑994 at 50950. The test to be applied is an objective one and the nature of the misleading or deceptive conduct relied upon must in all the circumstances amount to a misrepresentation. I find it difficult to identify what conduct of the bank can be regarded as deceptive or misleading. If it is the bank reference in the annexure marked "B" to the first named defendant's affidavit, this circumstance, on its own, would not be sufficient to constitute misleading or deceptive conduct when the overwhelming preponderance of circumstances point to the second named defendant having known at all times that the loans had not been repaid in full: Taco Company of Australia Inc and Another v Taco Bell Pty Ltd and Others (1982) 42 ALR 177 at 199. Once again the possible application of s 52 of the Act involves an examination of all the circumstances in which the two mortgages were discharged. The arguments and issues raised in relation to the question of estoppel seem to apply here as well. Even if the discharge by the bank of the two mortgages could be construed as an indication that the loans had been repaid in full the conduct relied upon by both defendants could hardly be described as misleading or deceptive when both knew $415,000 had been borrowed from the plaintiff but that, on the basis of the settlement statements received, only $98,000 had been paid. Again, the bank statements relating to the Bank Saver Facility received by the first named defendant made it absolutely clear that a very large sum was still outstanding.
The second defendant's position is no different. Even though she claims her situation was different because, unlike the first named defendant, she was unaware from bank statements of what the situation was, the fact remains that the notices were sent to the appropriate address for service and she must be deemed to have received them. Far more significantly, however, she must have realised when she received her share of the net proceeds of the sale that what she had been paid was far in excess of what she was entitled to. The glaring discrepancy between what had been repaid to the bank and what was received from the sale of the two properties was so obvious that it would be totally unreasonable to assume the second named defendant relied upon any misrepresentation by the bank to her ultimate disadvantage.

The amounts claimed

The first named defendant has queried the amount claimed by the plaintiff as outstanding. This submission is based upon an alleged discrepancy in the notice of default and notices of demand. Reference is made by the first named defendant to a notice of default on 16 December 2004 which claimed $153,125.33 still outstanding. This has to be compared with notices of demand issued two months later alleging that the debt was no less than $362,362.07. The answer to this is that the larger amount referred to in the notices of demand was calculated after the defendants failed to reduce the deficit under the Rate Saver Facility or, alternatively, the Rate Saver Facility and the Fixed Rate Facility upon settlement of the Margaret River property. In any event the certificate of the amount due and payable is conclusive evidence of the amount owing.

Application to set aside default judgment

While I have already found that the second named defendant has no credible defence I also believe she has not given any adequate or reasonable explanation for her failure to comply with the rules. The affidavit material before the Court shows that the plaintiff's solicitors telephoned the second named defendant's solicitors to enquire whether a defence would be filed. Apparently a message was left but the call was never returned. Following this the facsimile letter I have already referred to was sent by the plaintiff's solicitors to the second named defendant's solicitors. Notwithstanding the second named defendant's claim that the facsimile letter was sent to the wrong fax number it was sent to the number noted on the second named defendant's Memorandum of Appearance. I really do not know what else the plaintiff's solicitors could have done.
Any assertion that the second named defendant was unable to file a defence because she was completely dependent upon the first named defendant's dealings with the plaintiff, and had no precise knowledge of what had occurred between the first named defendant and the bank until such time as she became aware of his defence, is without foundation. If that were the situation there is no reason why she could not have communicated with the first named defendant's solicitors at a much earlier point in time and obtained whatever details were necessary to enable her to prepare her defence. Alternatively, as the plaintiff has submitted, it was always open to her to apply for an extension of time within which to file a defence. That, at least, is what she could reasonably be expected to have done.
I also agree with the plaintiff's submission that, apart from the second named defendant's inadequate explanation for her failure to comply with the rules, she has also failed to explain adequately the delay in bringing this application. Upon judgment being entered against the second named defendant the plaintiff deliberately refrained from taking further action and allowed her approximately two months within which to demonstrate any credible defence. It was only when she simply relied on the alleged defence of the first named defendant, which the plaintiff quite understandably had rejected, that the plaintiff put the second named defendant on terms to apply to set aside the judgment. Even then the application to set aside the judgment was not filed until 19 December 2005 which was two months outside the time the plaintiff had given the second named defendant. Her reason for not making the application earlier was that it would be a waste of her money and the Court's time to prepare an application before the outcome of the application made by the first named defendant was known. I accept this is not a valid reason for the delay. She was put on terms to comply with the rules and she manifestly failed to do so. She was not entitled to wait for the result of an application pending against her co‑defendant before giving her reasons as to why the judgment should be set aside.

Conclusion

I am satisfied that the first named defendant has not succeeded in establishing some triable issue or arguable defence to warrant the judgment entered against him to be set aside. In his case I would dismiss the appeal.
Likewise I am not satisfied that the second named defendant has established she has a defence on the merits. I also find there has been no adequate explanation for the delay in not filing a defence within time or in bringing the current application. I would dismiss the second named defendant's appeal.