Commonwealth Bank of Australia v Terrey

[1999] NSWSC 417

CITATION:	COMMONWEALTH BANK OF AUSTRALIA v TERREY & ORS [1999] NSWSC 417
CURRENT JURISDICTION:	COMMON LAW
FILE NUMBER(S):	10080/1996
HEARING DATE(S):	28-29 April 1999
JUDGMENT DATE:	5 May 1999
PARTIES :	COMMONWEALTH BANK OF AUSTRALIA ACN 123123124 v ANDREW SCOTT TERREY, KATHLEEN PATRICIA TERREY, LISA REID AND RICHARD JOHN MCLEAN
JUDGMENT OF:	Master Malpass

COUNSEL :	PLAINTIFF: NO APPEARANCE FIRST DEFENDANT: MR T J MORAHAN FOURTH DEFENDANT: MR M B DUNCAN
SOLICITORS:	PLAINTIFF: NO APPEARANCE FIRST DEFENDANT: D'ANGELO FOURTH DEFENDANT: DEFENDANT IN PERSON
CATCHWORDS:	Indemnity under Deed; Duress or undue influence; Anshun estoppel; Failure to mitigate loss.
ACTS CITED:	District Court Rules, Pt. 1 r. 4, Pt. 12 r. 4C, 4C (2)
CASES CITED:	Macquarie Bank Ltd v National Mutual Life Assurance of Australia Limited & Ors (1996) 40 NSWLR 543. Port of Melbourne Authority v Anshun Pty Limited 147 CLR 589. Tanning Research Laboratories Inc v O’Brien 169 CLR 332.
DECISION:	SEE PARAGRAPH 29

THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

MASTER MALPASS

WEDNESDAY 5 MAY 1999

10080 of 1996 COMMONWEALTH BANK OF AUSTRALIA v ANDREW SCOTT TERREY AND ORS

JUDGMENT
1 These proceedings were commenced by the Commonwealth Bank of Australia (the Bank) against Andrew Scott Terrey, his mother (Kathleen Patricia Terrey), his wife (Lisa Reid) and Richard John McLean. The first three defendants were the registered proprietors of a property known as 9 Wyomee Avenue West Pymble. They had given a mortgage dated 31 May 1991 to the Bank for the purposes of securing financial accommodation advanced to McLean Terrey and Associates Pty Ltd (the Company). The first and fourth defendants had been directors of the Company. The Company had ceased trading in August 1992 and its affairs had been placed in the hands of some accountants. Some of the outstanding debts had been met by realisation of the Company assets. Some of the debts had been paid by the first defendant himself. There remained outstanding creditors (including the Deputy Commissioner of Taxation). The Deputy Commissioner was threatening to liquidate the Company. This situation led to the execution of a Deed made between the first and fourth defendants (the Deed). It was made on 25 June 1993. A copy of it is Exhibit 2.
2 The claim brought by the Bank was founded on default under the mortgage and certain guarantees. Default was not in issue. A demand had been made on about 3 February 1994. This demand led to the first defendant commencing proceedings against the fourth defendant in the District Court. A copy of the District Court pleadings comprise Exhibit 1. There is a Statement of Liquidated Claim issued on 21 February 1994. There is a Notice of Grounds of Defence filed on 26 May 1995. There is a Notice of Cross-claim filed on the same date. There was lack of prosecution of both the Claim and the Cross-claim which resulted in the proceedings being disposed of pursuant to Part 12 rule 4C of the District Court Rules.
3 Two Cross-claims were brought in these proceedings. The first of the two Cross-claims has no present significance. The Second Cross-claim was brought by the first defendant against the fourth defendant. It is the matter which is now being litigated before the Court.
4 Following the failure of the Company, there was a falling out between the first and fourth defendants. The first defendant ran his own business. The fourth defendant had a Private Investigator’s Licence (previously he had been in the Police Force for many years). The claim made by the Bank against the fourth defendant was settled. It appears that this took place in about 1997.
5 In the proceedings against the first, second and third defendants, the Bank was seeking both a judgment for possession and a judgment in a monetary sum. As a matter of fact, the first defendant has taken the position of assuming the liability for the three defendants (as a matter of law there was joint and several liability). At the time of the making of the initial demand, the first defendant was not in a position to pay the moneys then owing. Further, he took the stance that because of the contractual relationships existing between himself and the fourth defendant the fourth defendant had the responsibility for paying principal and interest falling due under the mortgage. At an early stage in the proceedings, the first defendant made an offer of $50,000.00 in settlement of the proceedings. This offer was rejected by the Bank. In 1997, he made an offer in the sum of $75,000.00. This offer was ignored by the Bank. The proceedings were fixed for hearing to take place on 1 and 2 March 1999. The sum then due and payable under the mortgage was $107,451.21 (there was also the potential liability for the Bank’s legal costs and disbursements). The first defendant made a further offer of $75,000.00. This offer was accepted by the Bank. The first defendant effected compliance with the Terms of Settlement by the payment of the sum of $75,000.00 from borrowed funds.
6 Although the proceedings brought by the Bank have been settled, the Second Cross-claim still remained for determination. As the fourth defendant was then inter alia unrepresented, the Second Cross-claim was stood over on his application for hearing at a later date. Thereafter, it was further fixed for hearing to take place on 28 April 1999. On that day, the fourth defendant was represented by counsel. Counsel had only recently received instructions in the matter. When the matter came on for hearing, it was in a state of some disarray. Ultimately, it was stood over to 29 April 1999.
7 This adjournment allowed amendment of pleadings, the furnishing of particulars, the preparation of further affidavits and it gave counsel for the fourth defendant further opportunity to prepare his client’s case. The hearing took place on 29 April 1999.
8 The first defendant proceeded on the Amended Second Cross-claim filed in Court on 29 April 1999. The fourth defendant proceeded on the Defence which was also filed in Court on that day. The first defendant relied on three affidavits. One was sworn by the first defendant himself. Two were sworn by his solicitor (Mr D’Angelo). The fourth defendant relied on an affidavit which he had sworn on 28 April 1999. He tendered two exhibits. Both parties were cross-examined. The oral evidence of the first defendant included material given by way of reply to the affidavit sworn by the fourth defendant.
9 The first defendant claims indemnity under the Deed. It contains inter alia the following provisions:-
“1. McLean agrees to assume responsibility for the paying of the principal and interest in respect of the mortgage secured over the premises owned by Terrey, Lisa Reid and Kathleen Terrey (hereinafter referred to as ‘the Owners’) in the sum of Fifty Two Thousand Dollars ($52,000.00) for and on behalf of McLean Terrey & Associates Pty Limited such premises being situate at 9 Wyomee Avenue West Pymble and will indemnify the Owners from and against all suits, claims actions and demands which may be made by the mortgagee against the Owners.

2. ……
3. ……
4. McLean shall indemnify and keep indemnified Terrey against any suits, actions, claims, demands and debts which shall arise out of the company debts as and when they fall due, such indemnity applying to the proportion which Terrey has paid as being his share of the debt.”
10 The Defence raises a number of matters. Not all of them were argued. It suffices to refer to the principal matters argued in general terms. It is said that the fourth defendant was forced to sign the Deed by the duress or undue influence of the first defendant. It is said that the first defendant is estopped from bringing the present Claim. It is said that there was no entitlement to indemnity under the Deed. It is said that there has been a failure to mitigate loss.
11 The first and fourth defendants have given evidence that is in conflict. I closely observed the demeanour of both defendants during the giving of evidence. In assessing credibility I have had regard to both demeanour and evidence.
12 I accept the evidence of the first defendant. He was an impressive witness. I formed the impression that he did his best to give honest and reliable evidence. Where there is conflict, I prefer his evidence to that given by the fourth defendant.
13 The defence of duress or undue influence is very much dependent on the evidence given by the fourth defendant himself.
14 In his affidavit, the fourth defendant deposed inter alia to the following:-
“2. On the day the deed the subject of these proceedings was signed, Scott Terry came to me and said words to the effect:
The tax office has to be paid by 4 pm today. If it is not, it will wind the company [McLean Terry and Associates Pty Limited ACN 003 261 550] up. I don’t care because I’ve got the money to repay my loan accounts to the company. If you don’t – you have no choice but to sign this deed.
3. At the time I was afraid of the stigma of going bankrupt and believed that, If I did go bankrupt, I would lose my Private Investigator’s licence and be unable to work. (I have held a licence for the last 12 years). Accordingly, I desperately wanted to avoid bankruptcy. The company had ceased to trade on 21 August 1992, my car had been repossessed, the bank had taken my house and my de facto relationship of 10 years was breaking up under the financial stress. I was in an extremely emotionally stressed state.
4. At the time I signed the deed, I did not have an opportunity to seek legal or financial advice and I signed because I felt I had no choice but to accede to his request otherwise he would stand by and watch me go bankrupt.”
During the cross-examination, this version was somewhat watered down. The version was in conflict with what was said by the first defendant in significant respects.
15 It appears that the Deed had been prepared by the solicitor for the first defendant. It was probably signed following some arrangement to meet made between the defendants. It was signed in the foyer of premises where the fourth defendant’s office was then located. It was signed in circumstances where the Deputy Commissioner of Taxation was pressing for payment and there was a threat of the commencement of winding-up proceedings if payment was not made. There was urgency. The first defendant was concerned that some equality of contribution to inter alia the meeting of company liabilities was secured. The fourth defendant had not made any contribution. The first defendant was prepared to pay the tax liability so long as the fourth defendant entered into the Deed (it was necessary for him to borrow moneys to meet that liability). The tax liability is the subject of clause 3 of Exhibit 2. The fourth defendant’s demeanour, at the time of signing, has been described as being cool and collected. He was a man of experience who was not labouring under any disability.
16 The questions of duress and undue influence were the subjects of limited argument. I am not satisfied that an acceptance of the version appearing in the fourth defendant’s affidavit would make out the defence of duress or undue influence. In any event, I do not accept that version in significant respects. It may be that the fourth defendant’s life was then beset with some personal problems. In signing the Deed, he achieved the object of staving off a forced liquidation of the Company. He wanted a voluntary liquidation as opposed to a compulsory winding up. There is no evidence of any threat in the sense required by the authorities (the affidavit speaks only of a “request”). I am not satisfied that the fourth defendant signed the Deed otherwise than of his own free will. I find that the defence of duress or undue influence is not made out.
17 The defence of estoppel looks to the decision of the High Court in Port of Melbourne Authority v Anshun Pty Limited 147 CLR 589 in the context of the dismissal of the District Court proceedings.
18 Part 12 rule 4C makes provision for the dismissal of dormant actions commenced in the District Court before 1 January 1996. Sub-rule (2) provides that if in an action to which this rule applies no Praecipe for Trial has been filed before 1 January 1998, the action is on that date deemed to be dismissed.
19 Rule 4C forms part of the case management system of the District Court to give effect to its published Strategic Plan. The objective was to bring about inter alia expeditious disposition of civil actions. Actions disposed of pursuant to the rule are deemed to be dismissed. The term “dismiss” is defined in the rules (Part 1 rule 4). Although it is defined to mean a final disposition of the proceedings, it is for present purposes a dismissal “without prejudice to any right to commence fresh proceedings seeking the same, or substantially the same, relief”.
20 Accordingly, the dismissal of the District Court proceedings in this case does not give rise to any estoppel (issue or otherwise). The scope of Anshun remains a matter of some debate ( Tanning Research Laboratories Inc v O’Brien 169 CLR 332 at p.355). It may be that Anshun is a case of mere issue estoppel (at p.345). It has been said that one thing that is clear about Anshun is that there is much that is unclear 71 ALJ 934 at p.942).
21 It is a creature of the inherent jurisdiction of the Court. It may be founded on estoppel from the bringing of an action which, if it succeeds, will result in a judgment which conflicts with an earlier judgment. In Macquarie Bank Ltd v National Mutual Life Assurance of Australia Limited & Ors (1996) 40 NSWLR 543 at p.558 Clarke JA (with whom Priestley J agreed) observed that the appropriate order is a stay of proceedings and that the Court retains a discretion not to grant a stay if special circumstances exist.
22 The Second Cross-claim appears to have been brought in about September 1996. Thereafter, there would seem to be a case for expediency in disposing of all disputes in the proceedings in this Court. There may have been a case for a stay whilst both the Second Cross-claim and the District Court proceedings remained on foot. However, the possibility of the granting of such a remedy passed with the dismissal of the District Court proceedings.
23 The application of Anshun was not fully argued. But fortunately, it is not necessary to further pursue its intricacies. I am not satisfied that it has application in the circumstances of this case. In my view, this defence is also not made out.
24 I am not satisfied that the mitigation arguments have any substance. The evidence falls well short of even making them arguable. No purpose is served by dwelling on other matters raised during argument.
25 In my view, all of the defences pleaded fail. Whilst they are reflective of enthusiasm and imagination, I consider that each of them is devoid of merit.
26 The evidence reveals a situation where the first defendant effected a good settlement of the action brought by the Bank. I am satisfied that the present claim for indemnity falls within the indemnity provisions of the Deed.
27 For completeness, I should mention a matter which was not traversed during argument. It would seem that the fourth defendant’s failure to assume responsibility for the payment of principal and interest under the mortgage was a breach of the provisions of the Deed and itself actionable in damages.
28 Indemnity is sought in respect of the sum of $75,000.00 together with a sum of $30,160.00 for costs and disbursements. There is also a claim for interest. It was neither formulated nor quantified.
29 The second cross-claimant (first defendant) is entitled to judgment against the named cross-defendant (fourth defendant) on the Second Cross-claim. The amount of the judgment is yet to be quantified. If there is no consensus as to quantum, this question may be the subject of further argument. The named cross-defendant is to pay the costs of the Second Cross-claim. Exhibits may be returned.

Last Modified: 05/07/1999