Commonwealth Bank v Muirhead

[1995] QSC 105

IN THE SUPREME COURT

OF QUEENSLAND

BRISBANE  No. 1452 of 1994

[Commonwealth Bank v. Muirhead]

BETWEEN:
  COMMONWEALTH BANK OF AUSTRALIA
  ACN 123 123 124
  Plaintiff

AND:
  GEORGE ARTHUR ROBERT MUIRHEAD
  AND STEPHANIE SUSAN MUIRHEAD
  Defendants

REASONS FOR JUDGMENT - THOMAS J.

Delivered 5 June 1995

CATCHWORDS:     BILLS OF EXCHANGE - bill discount facility - whether signature of A "for and on behalf of A and B" satisfies s.97(1) of Bills of Exchange Act - whether authority for signature "of either of us . . to draw . . bills" sufficient - whether notice of dishonour necessary under s.54 - loan arrangements entitling bank to debit account upon non-payment of bill.

PRACTICE - summary judgment - whether triable issue.

Counsel:P.D. McMurdo QC for the plaintiff

R.W.R. Parker QC for the defendants

Solicitors:Gadens Ridgeway for the plaintiff

Walsh Halligan Douglas for the defendants

Hearing Date:   25 May 1995  

IN THE SUPREME COURT

OF QUEENSLAND

BRISBANE  No. 1452 of 1994

[Commonwealth Bank v. Muirhead]

BETWEEN:
  COMMONWEALTH BANK OF AUSTRALIA
  ACN 123 123 124
  Plaintiff
AND:
  GEORGE ARTHUR ROBERT MUIRHEAD
  AND STEPHANIE SUSAN MUIRHEAD
  Defendants

REASONS FOR JUDGMENT - THOMAS J.

Delivered the 5th day of June 1995

This is an application for summary judgment in which the Bank claims $1,722,984.49 for money lent.  The claim is for the balance due after crediting proceeds of a receiver's sale of the defendants' properties.
           The defendants have filed affidavits with a view to showing that there are questions in dispute which ought to be tried.  Their counsel, Mr Parker QC, relied on three points which he submitted demonstrate this.  Two of them are directed at the alleged inadequacy of proof of liability for that part of the loan which is said to have been advanced by means of a bill discount facility.  The other point is that the sale by the receiver of property securing the defendants' loan was at undervalue and it is asserted that rights are thereby raised in the defendants to resist the present claim.
           The material, both from the plaintiff and the defendants, shows that in June 1990 the Bank advanced money to the defendants, made payments at their request and provided credit totalling $4.025 million.  This was granted, pursuant to the defendants' application, in the following way: 

(a)       fixed rate bill discount facility gross amount	3,000,000
(b)       bill discount facility limited	100,000
(c)       fully drawn loan	675,000
(d)       overdraft limit	250,000
TOTAL:	$4,025,000

As already observed, the main focus of submissions on behalf of the defendants relates to the validity of the bill discount facility.  The parties also bound themselves, with respect to these advances, to the terms of certain bills of mortgage (which enabled a receiver to be appointed upon default), and an authority respecting the joint account of the defendants with the Bank.
           The advances pursuant to the bill facilities are established, inter alia, by exhibits 1 and 2 to the affidavit of Ms Crowther.  The Bank's letter of 15 June 1990 confirms that

". . . the following loans were fully funded into your cheque account:-

•          CBFC Limited Lease Finance	$    105,098.34
•          Fully Drawn Loan 4710 26-6223	$    675,000.00
•          Bills Discounted Facility No. 1	$ 2,875,701.23
•          Bills Discounted Facility No. 2	$     92,024.32
$ 3,747,823.89
"

Bank statements also confirm these credits to have been made available, and show that the credits were promptly used by the defendants to pay their existing debts including the debt owed to the national Bank of Australia ($3.373 million), and a further $538,821 to another creditor of the defendants.
           The amounts credited to the defendants with respect to the bill facilities were net amounts paid after provision for interest and fees, covering the initial maturity period of 95 days (7 September 1990) with respect to "Facility No. 1" (which was for the gross sum of $3 million), and covering the initial maturity period of 183 days with respect to "Facility No. 2".  For the moment, attention will be directed to what the correspondence described as "Facility No. 1".
           One of the verifying affidavits sworn by the plaintiff's solicitor, Mr Demack, on the basis of information and belief, contains the following statement:

"On 18 June 1992 a bill was rolled over for the sum of $3 million.  The said bill matured on 24 July 1992, the defendants did not meet the interest costs to enable the bill to be rolled over for another period and the defendants thereby became in default under the said Bill Discount Facility."

The reference to "a bill" for $3 million seems to be in error, as the affidavit of Mr & Mrs Muirhead has exhibited relevant bills which may be inferred to be replacement rollover bills approximately two years after the original credits.  The last six of the bills exhibited by the defendants are dated 18 June 1992.  Each is for $500,000 and states the due date as 24 July 1992.  Mr Parker is probably correct in his submission that the $3 million facility was exercised by means of six bills rather than one.  However Mr Demack's reference to a bill being rolled over for the sum of $3 million instead of six bills being rolled over each for the sum of $500,000 hardly raises any serious question.
           Objection was taken to the admissibility of paragraph 7 of Mr Demack's affidavit, and I reserved the question of its admissibility.  The basis of the objection was not clearly focussed.  I do not understand the objection to be based on hearsay, and note that in any event O.18 r.2(2) permits statements of information or belief with the sources and grounds thereof, unless the Judge otherwise directs.  I understand the objection to be based in part upon alleged unreliability which is to be inferred from the fact that it alleges a bill for $3 million when better evidence suggests that there were six separate bills.  The objection also encompasses a submission that there is insufficient evidence to demonstrate the nature of the bill discount facility.  It is true that the provision of a bill facility was a component of the loan, but the evidence in this matter (quite apart from Mr Demack's verification) demonstrates clearly that the defendants received the benefit of that component at least to the extent of the net benefit mentioned above.  In other words the defendants plainly received the benefit of the gross amount of the bill discount facility less interest and charges.  This has not been denied, and it is not suggested that it has been repaid.  The relevance of the dealings in relation to the bill discount facility seems to lie in the questions whether default occurred so as to trigger the bank's right to recoup the advances, and whether the defendants or either of them ever became liable pursuant to the various bills that were drawn.
           I would uphold the objection to the extent that any question of law is involved in the assertion that "the defendants thereby became in default under the said Bill Discount facility".  Otherwise Mr Parker might be precluded from submitting that the defendants were not parties to the bills or otherwise liable under them.  I discern that the thrust of the objection was to permit counsel's three legal arguments to be fairly aired.  The statement must therefore be taken as subject to any valid legal argument that will falsify it, but if otherwise uncontradicted it may be acted on as a statement of fact.  Subject to what has already been said, paragraph 7 of Mr Demack's affidavit is consistent with the original material that has been placed in evidence.  It is a statement based on the information of a person familiar with the facts and it verifies material parts of the statement of claim.  I am not prepared to rule paragraph 7 inadmissible.  The effect to be given to it is a matter of weight, and of course primary materials will be given primary weight.  Ultimately it can be considered along with the evidence supplied by the defendants in deciding if there are questions in dispute that ought to be tried.
           Objection was also taken to the reception of an exhibit to an affidavit of Ms Crowther.  What purports to be a copy of a contract is exhibited, but some schedules seem to be missing.  Although this makes the effect of the contract rather dubious, I do not know whether this is a true copy of a contract containing omissions and which therefore needs to be construed to take account of this, or whether it is a defective copy.  Once again I think it is admissible although its true meaning is arguable.  In any event this seems to relate to a somewhat peripheral matter, and even if excluded it is difficult to see how the plaintiff's entitlement to judgment, if otherwise established, is impaired.
           I turn to the principal submissions of Mr Parker.  The first submission is that the relevant bills were signed only by Mrs Muirhead.  In each instance the signature "S. Muirhead" appears immediately underneath the printed or typed words "For and on behalf of G.A.R. and S.S. Muirhead".  The authority signed by both defendants with respect to their account with the bank includes the following:

"Authority is hereby given for either of us whose signatures . . . are at the foot hereof in our names . . . and on our behalf to . . draw make accept negotiate or discount bills of exchange".

Section 97(1) of the Bills of Exchange Act provides:

"97.(1)   Where, by this Act, any instrument or writing is required to be signed by any person, it is not necessary that he should sign it with his own hand, but it is sufficient if his signature is written thereon by some other person by or under his authority."

Mr Parker submitted that neither the authority nor s.97(1) aided the bank in establishing that Mr Muirhead was in these circumstances bound by his wife's signature.  He submitted that something that purports to be Mr Muirhead's signature is necessary.  According to the submission his signature was not written thereon by anyone and that that is fatal.
           It is to be noted that the defendants' affidavit, although pointing out that Mr Muirhead did not sign, did not suggest that Mrs Muirhead's signature "For and on behalf of G.A.R. and S.S. Muirhead" was without Mr Muirhead's authority.
           In my view the authority, signed by both defendants, gave Mrs Muirhead the authority to sign a bill of exchange in the names of them both, and that she did so when she gave her signature "For and on behalf of G.A.R. and S.S. Muirhead".
           I am similarly of the view, although no authority was cited to me with respect to the construction of s.97(1) of the Bills of Exchange Act, that Mr Muirhead's signature was "written thereon by some other person by or under his authority".  The position would, I think, be the same whether or not Mrs Muirhead had prefixed "per pro" before her signature.  The unambiguous nature of her act was a signature for and on behalf of them both, and she was authorised to do this.
           The next submission is that there is no evidence of any notice of dishonour under s.54 of the Bills of Exchange Act.  Counsel for the bank, Mr McMurdo QC, advanced a number of answers to this submission.  In the first place the evidence includes an Application for Accommodation in which both defendants agreed as follows:

"2(d)Where the accommodation granted to the applicant(s) by the Bank includes the acceptance, endorsement and/or discounting of bills of exchange or other engagements the applicant(s) hereby undertake in consideration of the Bank accepting, endorsing or discounting such bills of exchange or other engagements to pay in the Bank the amount of such bills or other engagements on the due dates thereof or following dishonour as the case may be.

. . .

2(f)The Bank may debit any account of the applicant(s) with all interest in respect of the accommodation, the amounts of any bills or other engagements due or dishonoured and all costs, charges and expenses as aforesaid."

The evidence is that upon default on 24 July the bank debited against the defendants the amount of the bills.  Secondly Mr McMurdo submitted that no notice of dishonour was required in the circumstances.  This particular system of advancing and recovering credit was considered by the New South Wales Court of Appeal in Rigg v. Commonwealth Bank (1989) 97 F.L.R. 261. Under the arrangement between the parties no notice of dishonour is required before the liability of the defendants arises to pay the amount of the bills, or before the bank may debit their account with the amount of the bills.
           Mr Parker's submission is that no valid or effectual notice of dishonour was given to the defendants in accordance with s.54 of the Act, and that accordingly the drawer is discharged from any obligation to pay the amount of the bills.  The plaintiff's response is that it was not required to follow the regime of s.54, because the plaintiff does not sue on the bills.  The consequence of the defendant's failure to meet the interest on or before 24 July 1992 meant that the bills could not be rolled over for another period and that the defendants were in default under the arrangement for the bill discount facility.  In that event the bank became entitled to debit the customer's account with the amount of the unpaid bill.
           The question then is whether there is evidence of such default.  Mr Demack's affidavit verifies that there was, and the defendants have not denied the existence of default, or suggested that any payment was made.  Their defence consists of the legal points which have been discussed namely the allegation that Mr Muirhead was not bound by any of the bills, and that Mrs Muirhead was discharged because no notice of dishonour was given with respect to the bills.  In my opinion notice of dishonour did not need to be given in these circumstances.  It is not an ingredient of the plaintiff's cause of action.  The failure on the part of the defendants to pay the necessary interest or to pay to the bank the amount of the bills on the due dates simply triggered the bank's right to debit the account in those amounts.  Consistently with Rigg's case there was no need for acceptance or for the negotiation of the bills in the commercial marketplace.
           In this matter the making of the loan and the advancing of it are well established.  The points argued on behalf of the defendants go to the question of proof of default that made the loan repayable.  There is sufficient evidence that such default occurred and it is not denied.  I do not consider that there is any substance in the legal points raised or that such points are sufficient to require a trial.
           I turn to the third point concerning adequacy of the realisation effected by the receivers.  A defence was delivered which alleges that the receiver acted in breach of his duty and sold the properties at prices substantially below their real value, and that this was done with the knowledge and acquiescence of the plaintiff.  There is however no verification by affidavit of the allegation of knowledge or acquiescence on the part of the plaintiff.  Assuming without deciding that mere knowledge and acquiescence on the part of a secured creditor would make it liable for the defaults of a receiver, there is no evidence by which knowledge or acquiescence can be inferred.  The bank is entitled to take advantage of the somewhat artificial, but well-known legal consequence that a receiver pursuant to instruments such as those signed in this case must be treated as the agent of the defendants (Visbord v. F.C.T. (1943) 68 C.L.R. 354, 376).
           Clause 15 of the relevant mortgage documents provides that a statement signed by an authorised officer shall be prima facie evidence of the amount owing, without the necessity of producing or vouchers to verify the same.  In the absence of evidence to the contrary Mr Stone's statement exhibited to Ms Crowther's affidavit is sufficient evidence of the present state of the account.
           Finally it should be mentioned that the defendants instituted proceedings in the Federal Court and these were recently removed into this Court.  Those proceedings raised the same bills of exchange points as those raised before me, and they also raised other issues.  However it was not submitted that any of those issues are such as to raise triable issues with respect to the present claim for summary judgment.  They include points under The Currency Act 1965, The Reserve Bank Act 1959 and The Commonwealth Bank Act 1959, but they were not pressed before me.
           There will be judgment for the plaintiff for $1,722,984.49 with costs of the action to be taxed.