Mueller v Que Capital Pty Ltd [No 2]
[2016] WASCA 157
•9/09/16
MUELLER -v- QUE CAPITAL PTY LTD [No 2] [2016] WASCA 157
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2016] WASCA 157 | |
| THE COURT OF APPEAL (WA) | |||
| Case No: | CACV:33/2015 | 24 AUGUST 2016 | |
| Coram: | NEWNES JA MURPHY JA MITCHELL JA | 9/09/16 | |
| 21 | Judgment Part: | 1 of 1 | |
| Result: | Appellant's application to adduce additional evidence dismissed Appeal dismissed Respondents' application for leave to cross-appeal out of time dismissed | ||
| B | |||
| PDF Version |
| Parties: | KARL PAUL MUELLER QUE CAPITAL PTY LTD SMARTCARD FINANCIAL SERVICES PTY LTD |
Catchwords: | Practice and procedure Application to adduce additional evidence on appeal Bias Alleged bias of trial judge Whether reasonable apprehension of bias by association Trial judge's brother had been a partner in an earlier emanation of the law firm which was acting for the plaintiffs at trial Earlier emanation of the law firm had drawn certain instruments on which the plaintiffs sued the defendant Whether waiver of any alleged bias Evidence Whether judge's findings supported by the evidence Findings based on credibility Deed of assignment of debt Agreement to assign contained in the recitals but not in the operative provisions of the document Principle that where in the recitals to a deed or agreement it is acknowledged that the parties have agreed to do, or will do, certain acts, a promise to do those acts will be read into the agreement in the absence of an express promise to that effect |
Legislation: | Nil |
Case References: | Ansett Transport Industries (Operations) Pty Limited v The Commonwealth of Australia [1977] HCA 71; (1977) 139 CLR 54 AVCO Financial Services Limited v The Commissioner of Taxation of the Commonwealth of Australia [1982] HCA 36; (1982) 150 CLR 510 AVCO Financial Services Ltd v Commissioner of Taxation [1979] 2 NSWLR 570 British American Tobacco Australia Services Limited v Laurie [2011] HCA 2; (2011) 242 CLR 283 Commissioner of Taxation of the Commonwealth of Australia v Sara Lee Household & Body Care (Australia) Pty Ltd [2000] HCA 35; (2000) 201 CLR 520 Ebner v Official Trustee in Bankruptcy [2000] HCA 63; 205 CLR 337 Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 George v Fletcher (Trustee) [2012] FCAFC 148 Goldsmith v Sandilands [2002] HCA 31; (2002) 76 ALJR 1024 Issa v Berisha [1981] 1 NSWLR 261 Johnson v Johnson [2000] HCA 48; (2000) 201 CLR 488 Livesey v The New South Wales Bar Association [1983] HCA 17; (1983) 151 CLR 288 Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; (2010) 41 WAR 353 Que Capital Pty Ltd v Mueller [2015] WADC 6 Saunders v The Public Trustee [2015] WASCA 203 Smits v Roach [2006] HCA 36; (2006) 227 CLR 423 Vakauta v Kelly [1989] HCA 44; (1989) 167 CLR 568 Webb v The Queen [1994] HCA 30; (1994) 181 CLR 41 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : MUELLER -v- QUE CAPITAL PTY LTD [No 2] [2016] WASCA 157 CORAM : NEWNES JA
- MURPHY JA
MITCHELL JA
- Appellant
AND
QUE CAPITAL PTY LTD
First Respondent
SMARTCARD FINANCIAL SERVICES PTY LTD
Second Respondent
ON APPEAL FROM:
Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA
Coram : SWEENEY DCJ
Citation : QUE CAPITAL PTY LTD -v- MUELLER [2015] WADC 6
File No : CIV 3634 of 2010
Catchwords:
Practice and procedure - Application to adduce additional evidence on appeal
Bias - Alleged bias of trial judge - Whether reasonable apprehension of bias by association - Trial judge's brother had been a partner in an earlier emanation of the law firm which was acting for the plaintiffs at trial - Earlier emanation of the law firm had drawn certain instruments on which the plaintiffs sued the defendant - Whether waiver of any alleged bias
Evidence - Whether judge's findings supported by the evidence - Findings based on credibility
Deed of assignment of debt - Agreement to assign contained in the recitals but not in the operative provisions of the document - Principle that where in the recitals to a deed or agreement it is acknowledged that the parties have agreed to do, or will do, certain acts, a promise to do those acts will be read into the agreement in the absence of an express promise to that effect
Legislation:
Nil
Result:
Appellant's application to adduce additional evidence dismissed
Appeal dismissed
Respondents' application for leave to cross-appeal out of time dismissed
Category: B
Representation:
Counsel:
Appellant : In person
First Respondent : Mr J Burke
Second Respondent : Mr J Burke
Solicitors:
Appellant : In person
First Respondent : MDS Legal
Second Respondent : MDS Legal
Case(s) referred to in judgment(s):
Ansett Transport Industries (Operations) Pty Limited v The Commonwealth of Australia [1977] HCA 71; (1977) 139 CLR 54
AVCO Financial Services Limited v The Commissioner of Taxation of the Commonwealth of Australia [1982] HCA 36; (1982) 150 CLR 510
AVCO Financial Services Ltd v Commissioner of Taxation [1979] 2 NSWLR 570
British American Tobacco Australia Services Limited v Laurie [2011] HCA 2; (2011) 242 CLR 283
Commissioner of Taxation of the Commonwealth of Australia v Sara Lee Household & Body Care (Australia) Pty Limited [2000] HCA 35; (2000) 201 CLR 520
Ebner v Official Trustee in Bankruptcy [2000] HCA 63; (2000) 205 CLR 337
Fox v Percy [2003] HCA 22; (2003) 214 CLR 118
George v Fletcher (Trustee) [2012] FCAFC 148
Goldsmith v Sandilands [2002] HCA 31; (2002) 76 ALJR 1024
Issa v Berisha [1981] 1 NSWLR 261
Johnson v Johnson [2000] HCA 48; (2000) 201 CLR 488
Livesey v The New South Wales Bar Association [1983] HCA 17; (1983) 151 CLR 288
Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; (2010) 41 WAR 353
Que Capital Pty Ltd v Mueller [2015] WADC 6
Saunders v The Public Trustee [2015] WASCA 203
Smits v Roach [2006] HCA 36; (2006) 227 CLR 423
Vakauta v Kelly [1989] HCA 44; (1989) 167 CLR 568
Webb v The Queen [1994] HCA 30; (1994) 181 CLR 41
1 REASONS OF THE COURT: This is an appeal by the appellant (Mr Mueller) against a decision of Sweeney DCJ in Que Capital Pty Ltd v Mueller (primary decision).1 In the primary proceedings, Mr Mueller was sued in debt by the first respondent (Que Capital) and the second respondent (Smartcard). Sweeney DCJ dismissed Que Capital's claim against Mr Mueller, but upheld Smartcard's claim against Mr Mueller. Her Honour gave judgment in favour of Smartcard in the sum of $505,198.92.
2 There are also two interlocutory applications for determination in connection with the appeal. The first is an application by the appellant to adduce additional evidence. In effect, the appellant has applied2 to adduce as evidence in the appeal an undated letter addressed to Jon Hemmingway of the Financial Ombudsman Service3 from Mr Melzer, the sole director of Que Capital.4 In his affidavit in support of the application, Mr Mueller said that he thought that the letter had been accepted by the primary judge as an exhibit; that Registrar Hewitt had 'ruled to admit' the letter; and that the respondents' solicitor had said that he would have no objections to the letter being admitted.5
3 The second interlocutory application is an application by the respondents for, amongst other things, an order to bring a cross-appeal out of time.6 The proposed cross-appeal is to the effect that the primary judge erred in law in dismissing Que Capital's claim against Mr Mueller. The cross-appeal is said to be brought in the alternative, in the event that Mr Mueller's appeal against the judgment in favour of Smartcard is upheld.
Background7
4 In 2008, Mr Mueller had eight properties. He already had significant borrowings, and his eight properties had been gradually acquired by borrowing money as the properties he owned increased in value, enabling him to purchase another property, and then another property 'and so on'.8 He decided to borrow $100,000 to renovate his café/restaurant in Midland. His plan was to increase the value of his restaurant property by means of the renovations and then refinance, borrowing more money on the anticipated increase in equity in the property.9
5 Mr Mueller approached his bank, but was refused finance. He then approached Mr Melzer of Que Capital. By written application dated 25 August 2008, Mr Mueller declared that the credit he was seeking was 'to be applied wholly or predominantly for business or investment purposes'.10 Also, in the loan application, Mr Mueller claimed that his net worth was $2,110,598 when, as a matter of simple mathematics based on the details entered, his net worth was precisely $1 million less than that claimed.11 He described himself as a restauranteur and a chef of 17 years' self-employment, which included the running of Café Mueller in Midland as a café/restaurant and art studio since 2001. He also said that his taxable income was $410,000 for both of the two previous years.12
6 On 2 September 2008, Mr Mueller entered into a loan agreement with Que Capital by which he borrowed $101,200 for three months at an interest rate of 6% of the outstanding principal sum per month (2008 loan agreement).13
7 The money advanced under the 2008 loan agreement (2008 loan) was secured by an unregistered second mortgage over three of Mr Mueller's properties, being the Midland café, a residence in Charles Street, Midland (Charles Street property) and a block of land in Vestia Walk, Stirling (Vestia Walk property). Que Capital also lodged a caveat over those properties.14
8 On 4 September 2008, Que Capital and Smartcard executed a deed of assignment, by which Que Capital purported to assign the debt under the 2008 loan agreement to Smartcard (2008 deed of assignment).15 This was communicated by letter to Mr Mueller on 5 September 2008 and Smartcard's bank details were provided to Mr Mueller for the purpose of making payments to that entity.16
9 The renovations took longer than expected and cost more than expected. Mr Mueller subsequently defaulted under the 2008 loan agreement. Mr Melzer, as loan manager, maintained contact with Mr Mueller. He sought progress reports on the steps Mr Mueller was taking to discharge the debt and encouraged him to sell properties or refinance in order to repay the 2008 loan. Interest was accruing at a rate of approximately $200 per day.17
10 On 14 October 2009, Que Capital entered into a second written loan agreement with Mr Mueller (2009 loan agreement). The trial judge said in respect of this agreement:18
On 14 October 2009, Que Capital entered into a second loan contract with Mr Mueller, purporting to loan him the amount he already owed which, by then, was $182,132, for a period of two months at interest of 3.34% per month. The fact that the debt had at least purportedly been assigned to Smartcard about a year earlier was overlooked by Mr Melzer. No money actually changed hands. The purpose of that further loan was to convert a loan significantly in default to a current loan, in order to give a more favourable impression to a prospective lender as Mr Mueller attempted to refinance. It neither reduced, nor increased, the debt he owed. And the reduction in interest was simply to avoid effectively charging him compound interest, because the outstanding interest as at that date had been converted into principal. The reduced rate meant interest continued to accrue at about $200 per day. It is not suggested that Mr Mueller believed he was paying less interest as a result of that agreement.
11 Mr Mueller subsequently sold a property in Boya, which allowed him to repay $59,000 to Que Capital.19 He then sold two more properties, including the Charles Street property. However, as a result of falls in property values, no excess funds were available from these sales to be paid to Que Capital.20 In 2010, Que Capital commenced proceedings against Mr Mueller to recover the balance of the debt said to be owed to it.
12 Whilst the proceedings were on foot, on 9 May 2013, Smartcard and Que Capital entered into a deed of rectification in respect of the 2008 deed of assignment (2013 deed of rectification).21
The primary proceedings
13 Que Capital commenced proceedings against Mr Mueller in the District Court on 24 November 2010. Smartcard was joined as a second plaintiff in 2012. The amended indorsement of claim alleged, in effect, that:22
(a) Mr Mueller breached the terms of the 2008 loan agreement by failing to repay the principal sum of $101,200 to Smartcard and Smartcard was entitled to call on that sum plus interest in arrears at a rate of 6% per month; or
(b) if for any reason the 2008 deed of assignment was invalid or ineffective, Mr Mueller breached the terms of the 2009 loan agreement by failing to repay the principal sum of $182,132 to Que Capital and Que Capital was entitled to call on that sum plus interest in arrears at a rate of 3.34% per month.
14 Mr Mueller was unrepresented at the trial. Nevertheless the primary judge considered that his defence involved allegations to the following effect:23
(a) Que Capital had deceived Mr Mueller in that Mr Melzer represented himself as a lender, when he was in fact a broker; Mr Melzer had failed to inform him (Mr Mueller) that he was planning to seek the funds from Smartcard; and Mr Melzer had failed to inform him (Mr Mueller) that he intended to assign the debt from Que Capital to Smartcard;
(b) Mr Mueller was not given notice of the assignment of the debt;
(c) Que Capital was not entitled to caveat the properties as the loan funds had been provided by Smartcard;
(d) Que Capital had failed to assert its rights as caveator in respect of the sale proceeds of the Vestia Walk property;
(e) Que Capital should not have advanced Mr Mueller any money in the first place;
(f) Mr Mueller was under 'economic duress' at the time that he entered into the 2009 loan agreement; and
(g) Que Capital engaged in 'predatory lending' which her Honour understood to be a claim of unconscionable conduct.
15 There was no counterclaim by Mr Mueller.
The primary judge's findings
16 The judge found that the moneys advanced by Que Capital to Mr Mueller under the 2008 loan agreement had been provided by Smartcard.24
17 The primary judge found that the 2008 deed of assignment was 'defective'.25 Her Honour said:26
The deed of purported assignment executed on 4 September 2008 between Que Capital and Smartcard was plainly defective because, while their objective intention to assign the debt was plain enough, and the evidence establishes that was their subjective intention as well, the purported assignment was merely described in the recitals to the deed and not in the operative clauses. Nor did the deed purport to assign the caveatable interest in the land the subject of the unregistered mortgage. (emphasis added)
18 However, her Honour considered that the 2013 deed of rectification had rectified the deficiency. Her Honour said:27
In any event … Smartcard and Que Capital executed a deed of rectification, rectifying the original deed so as to effectively assign the debt from Que Capital to Smartcard, including any interest owing pursuant to the loan agreement.
The deed of rectification also assigned the caveatable interest in the properties the subject of the unregistered mortgage. Little turns upon that, given that Que Capital always released each property from the caveat when necessary to enable a sale to go through, but Mr Mueller does complain that Que Capital should have asserted its rights as caveator in relation to the sale of one of his properties. I deal with that issue later.
The usual position at law is that rectification of a deed takes effect retrospectively from the date of the original deed: Issa v Berisha [1981] 1 NSWLR 261, 265. The two parties to the agreement having voluntarily and by agreement rectified the deed of assignment, the intervention of the court is unnecessary and no plea for rectification was required. In this case, financially, no third party is affected by the rectification of the agreement. It makes little difference to Mr Mueller which loan document is relied upon, either leading to equally ruinous results. There is no reason not to give effect to the deed of rectification.
As I commented to counsel during the trial, if it made a very significant difference and if Mr Mueller's position were considerably better under the later loan agreement, then issues of estoppel against Smartcard might have become relevant, such that it could not in fairness deny the existence of a later, less onerous contract entered into by Que Capital. On the facts and on the calculations in this case, however, there is no practical need to consider such an issue and it was not raised by the pleadings, such as they are.
19 The primary judge also found that Que Capital had given notice of the 2008 deed of assignment to Mr Mueller by reason of the letter dated 5 September 2008. Her Honour rejected Mr Mueller's evidence that he did not receive the 5 September 2008 letter,28 and found that even if he had not received it, notice had been given for the purposes of s 20 of the Property Law Act 1969 (WA) by proof of service in accordance with s 75(1) and s 76 of the Interpretation Act 1984 (WA).29 Her Honour also said:30
I have considered the fact that the second loan was written in the name of Que Capital and, indeed, the legal proceedings were initially instituted in the name of Que Capital. I accept Mr Melzer's evidence, however, that he simply overlooked the fact that this particular debt had been assigned when he wrote the second loan. When full instructions were taken by his lawyers following the issue being ventilated in the Ombudsman's investigation, Smartcard was added as a party to these proceedings (by leave of the court in September 2012).
…
I find that it was Mr Melzer's intention to assign the debt, he saw no difficulty or impediment in assigning the debt, he believed he had done so by the deed of assignment executed between Que Capital and Smartcard and he saw no reason not to notify the customer of the correct bank details to which the loan repayment should be made. Given that he plainly prepared the letter of assignment and its attached notice of assignment, I find he then posted them to Mr Mueller. There has never been any advantage to Mr Melzer or Que Capital to hide the fact of the assignment. If the assignment was valid, then Smartcard was owed the debt. If it was not, then Que Capital was owed the debt.
20 Her Honour accordingly concluded that the debt owing to Que Capital under the 2008 loan agreement was assigned to Smartcard 'as of 4 September 2008', by reason of the 2008 deed of assignment as rectified by the 2013 deed of rectification.31
21 Her Honour dismissed Mr Mueller's allegations in opposition to the claims in debt. In relation to the question of unconscionable conduct, her Honour considered the position both in equity and, to the extent relevant, under the Australian Securities and Investment Commission Act 2001 (Cth).32 In this regard, her Honour made findings to the following effect:
(a) Mr Mueller was under no special disadvantage;33
(b) his lack of income was entirely voluntary;34
(c) his English was excellent;35
(d) he gave no evidence of any infirmity bearing on his dealings with Mr Melzer;36
(e) there was no urgent need to enter the 2008 loan agreement;37
(f) it was irrelevant that Mr Mueller had been turned down by his bank;38
(g) the 2008 loan agreement was not difficult to understand and Mr Mueller did not suggest that he did not understand it;39
(h) there was no relationship between Mr Mueller and Mr Melzer which lead to any hint of undue influence;40
(i) there was no basis for concluding that Mr Mueller was under any duress or pressure from Mr Melzer, or any external party, when entering the loan;41
(j) it would be unreasonable to shift responsibility to Mr Melzer for the fact that the renovations ended up costing more than anticipated and took longer than anticipated;42
(k) there was no suggestion that Mr Melzer was responsible for, or complicit in, misleading information in Mr Mueller's loan application in the form of overstated income;43
(l) there is no obligation on a lender to verify the information provided by a prospective borrower;44
(m) this was not a case of pure asset lending;45
(n) there was nothing to suggest that Mr Mueller was prevented from seeking legal advice and there was no basis for finding that Mr Melzer discouraged or prevented Mr Mueller from seeking legal advice;46
(o) the risk encompassed in the 2008 loan agreement was obvious and Mr Mueller understood and appreciated the risk involved;47 and
(p) the 2008 loan agreement also gave rise to risk for the lender.48
22 Following these findings, her Honour concluded:49
However unfortunate [Mr Mueller's] current position is, the fact that his decision to take up this loan will have ruinous consequences does not mean that the contract was unconscionable at the time it was entered into. I reject the claim that Mr Melzer was guilty of unconscionable conduct.
Grounds of appeal
23 The amended appellant's case contains 11 grounds of appeal. Grounds 1 - 4 and 6 - 11 are to the effect set out below. Ground 5 is reproduced verbatim.
1. The judge was guilty of apprehended or actual bias.
2. The judge erred in accepting Que Capital's evidence that it had given notice to Mr Mueller in September 2008 of the purported assignment of the 2008 loan agreement, and in not finding that the purported assignment of the 2008 loan had been deliberately concealed from Mr Mueller, and was a 'scam … done to hide the truth'.50
3. The judge erred in finding that Mr Melzer had mistakenly overlooked the assignment in 2008, when the 2009 loan agreement was entered into.
4. The judge erred 'in not recognising the importance of a $ 1 million error made in the appellant's statement of assets and liabilities'.
5. '[The judge] erred in saying in paragraph 78 that it matters little to the plaintiffs' case that as per paragraph 77 the second contract was entered by the wrong party. It matters a lot to the appellant and his accusation of deliberate fraud by the first respondent. It again shows a clear rejection of the facts and a bias towards the plaintiffs'.
6. The judge erred in stating that Que Capital provided withdrawal of caveats.
7. The judge erred at [88] in not recognising the importance of the statement from Mr Smith (of Smartcard) that he had no dealings with Mr Mueller.
8. The judge erred at [186] 'in making excuses for the respondents claiming the possibilities why the appellant may not have read the notices given [by] the first respondent'.
9. The judge erred at [159] - [160] in finding, in effect, that it did not matter to the appellant, in September 2008, whether the 2008 loan was advanced to him by Que Capital or by Smartcard.
10. The judge erred in failing to find that Mr Melzer's failure to point out Mr Mueller's mathematical error in overstating his net wealth by $1 million constituted unconscionable conduct.
11. The judge erred in 'readmitting a Deed of Rectification done 3 years after the start of the proceedings in the District Court and rejected by the Registrar'.
Mr Mueller's application to adduce additional evidence
24 As noted earlier, Mr Mueller applied to adduce in evidence on the appeal an undated letter from Mr Melzer of Que Capital to Jon Hemmingway of the Financial Ombudsman Service. Mr Mueller's affidavit in support of the application annexed the transcript of the trial which referred to the letter. An examination of the transcript indicates that Mr Mueller regarded the penultimate paragraph of the letter as significant.51 The penultimate paragraph said:52
Currently neither Smartcard Financial Services or Que Capital are litigating against Mr Mueller.
25 Mr Mueller evidently regarded this statement by Mr Melzer in the letter as misleading, and reflecting adversely on his credit.53 Her Honour observed that she was not bound by any earlier 'ruling' by a registrar that the letter was admissible in evidence at the trial.54 Nevertheless, her Honour permitted Mr Mueller to, and Mr Mueller did, cross-examine Mr Melzer on the letter on the basis asserted by Mr Mueller, ie, that the penultimate paragraph was misleading.55 There was no application by Mr Mueller at the end of the cross-examination to tender the letter and, in any event, the use to which it was intended to be put related only to a collateral matter: Goldsmith v Sandilands.56
26 In these circumstances, there was no error by the primary judge in not admitting the letter into evidence at the trial. Nor, having regard to the relevant principles,57 is there any basis upon which the court could properly exercise its discretion to allow Mr Mueller to adduce the letter as evidence in the appeal. Accordingly, Mr Mueller's application should be dismissed.
27 However, even if the letter were admitted as evidence in the appeal, it would not affect the proper disposition of the grounds of appeal, referred to below.
Disposition of grounds 1 - 4 and 6 - 11 of the appeal
28 Grounds 1 - 4 and 6 - 11 should not be upheld for the reasons set out below. Ground 5 is addressed separately, later in these reasons.
29 Ground 1 alleges, in effect, that the primary judge was guilty of actual or apprehended bias. The contention is made in the following context. The trial commenced on 10 February 2014. A firm known as 'MDS Legal' acted for Que Capital and Smartcard. Mr Burke appeared as counsel for Que Capital and Smartcard. Shortly after the case was called on for hearing, after some preliminary exchanges, including concerning the trial process, the judge made a disclosure to the parties, and in particular to Mr Mueller. She said, in effect that her brother had previously, up to about early 2011, been a partner in the law firm McCallum Donovan Sweeney, which was an earlier emanation of the firm MDS Legal. Her Honour informed Mr Mueller that as far as she was aware, her brother 'had nothing to do with this matter' and she had certainly 'never discussed it' with him.58 She also informed him that she had never met Mr Burke. Her Honour gave Mr Mueller the opportunity to consider whether he objected to her Honour hearing the case. Mr Mueller said he had 'no problems with that'.59 There was evidence to the effect that the 2008 loan agreement, and the 2008 deed of assignment, had been drawn by the firm previously known as McCallum Donovan Sweeney,60 but there was no evidence or suggestion that they had been drawn by the judge's brother.
30 There was plainly no actual bias. Nor, in the circumstances, could it be said that there was a reasonable apprehension of bias. The test to be applied in Australia in determining whether a judge is disqualified by reason of the appearance of bias is well established. The test is whether a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question the judge is required to decide: see, eg, Johnson v Johnson;61Ebner v Official Trustee in Bankruptcy;62Livesey v The New South Wales Bar Association.63
31 In Webb v The Queen,64 Deane J identified four distinct, but sometimes overlapping, main categories of case in which an appearance of bias is generally found: interest; conduct; association; and extraneous information. Deane J described disqualification by association as consisting of cases where the apprehension of prejudgment or other bias arises from some direct or indirect relationship, experience or contact with a person interested in, or otherwise involved in, the proceedings. These main categories were described in Ebner as providing a convenient frame of reference, albeit not necessarily a comprehensive taxonomy.65
32 In Ebner, the joint reasons of four members of the High Court stated:66
The apprehension of bias principle … [in its] application requires two steps. First, it requires the identification of what it is said might lead a judge (or juror) to decide a case other than on its legal and factual merits. The second step is no less important. There must be an articulation of the logical connection between the matter and the feared deviation from the course of deciding the case on its merits. The bare assertion that a judge (or juror) has an 'interest' in litigation, or an interest in a party to it, will be of no assistance until the nature of the interest, and the asserted connection with the possibility of departure from impartial decision making, is articulated. Only then can the reasonableness of the asserted apprehension of bias be assessed.
33 The same observations apply where the basis of the assertion is association with somebody who is said to have an interest in the litigation: Smits v Roach.67
34 The fact that the judge's brother had, some three years prior to the commencement of the trial, been a partner of the predecessor firm of MDS Legal, and that the predecessor firm had, several years before that, drawn two of the instruments in relation to which Mr Mueller was sued, provide no logical connection with any feared deviation from impartial decision-making by the judge. It could not be said, for example, that the brother had either a financial or even a reputational interest in the outcome of the litigation.68 In any event, Mr Mueller had the opportunity to object but did not take it and cannot be heard to complain about the matter now.69
35 Grounds 2 and 3 concern the judge's finding that Que Capital had sent the alleged assignment notice to Mr Mueller in September 2008. As explained by Mr Mueller at the hearing of the appeal,70 grounds 2 and 3 are, in substance, to the effect that the judge erred in:
(a) rejecting his (Mr Mueller's) evidence that he had not received the 5 September 2008 assignment letter in 2008, and that he did not know of its existence until his complaint to the Financial Ombudsman Service;
(b) accepting Mr Melzer's evidence that the 5 September 2008 letter had been sent; and
(c) not finding that the assignment had been deliberately concealed from him (Mr Mueller), and that Mr Melzer had practiced a deception in that regard.
36 Mr Mueller indicated that he was not challenging the effectiveness of the 2008 deed of assignment, but that the assignment had been concealed from him.71
37 These grounds have not been established.
38 Que Capital and Smartcard alleged that the notice of assignment was sent by letter dated 5 September 2008. A copy of the letter was tendered. The address on the letter was the post office box address provided by Mr Mueller to Que Capital, and was the address referred to in the 2008 loan agreement. Mr Melzer said that he had posted the letter. Mr Melzer said that he had mistakenly overlooked the 2008 deed of assignment when executing the 2009 loan agreement. It was open to the judge to accept Mr Melzer's evidence and to reject Mr Mueller's evidence that he had not received the letter.72 Her Honour evidently regarded Mr Melzer as a credible witness, and formed an unfavourable view as to Mr Mueller's credibility.73 Mr Melzer's evidence as to the despatch of the letter was not inconsistent with the facts incontrovertibly established by the evidence; nor was it glaringly improbable or contrary to compelling inferences: Fox v Percy.74
39 In relation to ground 4, Mr Mueller's loan application included a declaration that the particulars provided were true and correct to the best of his knowledge, information and belief.75 He stated that his total assets were $3,242,000 and his total liabilities were $2,131,402. The difference is in fact $1,110,598, but Mr Mueller put the net figure as $2,110,598.76 Mr Mueller said that this appeared to be a 'mathematical' error on his part.77 It was noticed by Mr Melzer, but he was 'unfazed' by it.78 The error had no significance other than that Mr Mueller misstated his net assets in the loan application form, but the underlying figures plainly revealed what Mr Mueller declared to be the true position.
40 In relation to ground 6, the appellant contends that the judge erred in finding79 that Que Capital had withdrawn caveats to allow certain properties to be sold. The complaint is not that Que Capital had not withdrawn the caveats, but that the judge had failed to recognise that she had also found that the 2008 loan had been assigned to Smartcard under the 2013 deed of rectification. The two findings are not inconsistent. No error is disclosed.
41 Ground 7 alleges that the judge failed to consider the importance of Mr Smith's evidence that he had no dealings with Mr Mueller. It is said that this supports Mr Mueller's evidence that he did not know about the assignment and his contention that the 2008 loan agreement was 'based on fraud'.80 This ground is not established. The judge found that Smartcard was the source of the funds which Que Capital lent to Mr Mueller under the 2008 loan agreement, and that even after the purported assignment in 2008, Mr Melzer remained the loan manager and point of contact for the customer.81 The judge's findings were open on the evidence and provided the explanation as to why Mr Smith himself did not have direct dealings with Mr Mueller. The judge evidently accepted Mr Smith's evidence that Smartcard took a 'passive role' in relation to these matters.82
42 Ground 8 is without merit. The judge did not make 'excuses', at [186] of her reasons, for the respondents. Rather, after finding that Mr Mueller had received a letter informing him of the 2008 deed of assignment, her Honour merely explained why Mr Mueller might not have recalled receiving that letter.
43 Ground 9 concerns whether it mattered to Mr Mueller whether the money advanced came from Que Capital or Smartcard. In this regard, the judge said:83
Given that his key complaint is that the loan was assigned to Smartcard and Mr Melzer did not tell him that was going to happen, the obvious question is: what difference did it make where the money came from? Mr Mueller objected to being asked such a question, insisted he could not understand such a question and provided no meaningful answer, apart from an insistence that he was deceived. He similarly objected to questions designed to test his claim that he wanted the loan from Mr Melzer because he understood him to be the lender, and not because Mr Melzer's loan came with lower fees than another similar loan. (original emphasis)
44 There is no error in the judge's reasons. Her Honour found, in effect, that Mr Mueller could not adequately explain why the source of the funds would have made any difference to him. In the appeal, Mr Mueller sought to explain that it did matter to him because there 'is a matter of law to adhere to and the appellant has a right to that'.84 However, the submission fails to recognise that the legal effect of the 2008 loan agreement between Que Capital and Mr Mueller was not impaired or rendered fraudulent either by Que Capital obtaining funds from Smartcard, or by an assignment of the 2008 loan to Smartcard. Ground 9 should be dismissed.
45 Ground 10 is without merit. Any failure on the part of Mr Melzer to bring to Mr Mueller's attention the mathematical error in his loan application could not, in itself, amount to unconscionable conduct. The object of the doctrine of unconscionable conduct is not to protect people from the consequences of their own mistakes.85 In any event, the grounds of appeal do not challenge the specific findings made by the judge supporting the ultimate conclusion that there was no unconscionable conduct referred to in [21] above.
46 Ground 11 should be dismissed. The deed of rectification was relevant to the pleaded issues and, in that regard, admissible in evidence.
Ground 5 - disposition
47 The passages of the primary judge's reasons to which ground 5 refers were expressed as follows,86 after her Honour's reference to the 2009 loan agreement:
What Mr Melzer had lost sight of was the fact that the original debt had been assigned to Smartcard and was therefore no longer owed to Que Capital. The second loan contract was entered into by the wrong party. He said it was a pure oversight because at that time Que Capital had written about six loans that it had funded and about 17 that other financiers had financed.
That fact matters little to the plaintiffs' substantive case. From both plaintiffs' point of view the debt is owing to Smartcard and always has been and the only reason Que Capital is a party to this action is because of the doubt that was occasioned by the creation of that second contract. Legal proceedings were originally instituted by Que Capital on the basis that the loan agreement of 14 October 2009 was the operative contract. Leave was later given to add Smartcard once, no doubt, more accurate instructions were taken. For reasons detailed later in this judgment, I find the debt was assigned to Smartcard and, in those circumstances, the plaintiffs do not seek to rely on the second agreement and Mr Mueller is not prejudiced by that position.
48 The primary judge later observed that the 2008 deed of assignment was defective, because 'while their objective intention to assign the debt was plain enough', the purported assignment was described in the recitals to the deed and not the operative clauses.87 The judge said:88
Had it been in issue, it is arguable that, notwithstanding the defects, an objective bystander could only have concluded that the parties agreed that the debt the subject of the loan agreement of 2 September 2008 was assigned to Smartcard. In any event, however, on 9 May 2013 Smartcard and Que Capital executed a deed of rectification, rectifying the original deed so as to effectively assign the debt from Que Capital to Smartcard, including any interest owing pursuant to the loan agreement.
49 Although on its face the scope and meaning of ground 5 is not entirely clear, and may be susceptible to different interpretations, at the hearing of the appeal Mr Mueller said, in effect, that this ground was a further expression of the complaint made under grounds 2 and 3. The contention, in effect, as explained by Mr Mueller was that the judge erred in failing to appreciate that, on his case, the execution of the 2009 loan agreement by Que Capital (and not Smartcard) was a manifestation of the deceit practised upon him involving the concealment of the assignment of the debt to Smartcard.89 Mr Mueller also said that the judge's failure to appreciate this, signified evidence of her bias. Mr Mueller did not contend at the hearing of the appeal that ground 5 involved any complaint to the effect that the judge should have found that the 2008 loan had not been validly assigned to Smartcard.
50 On this basis, ground 5 adds nothing of substance to grounds 2 and 3. Her Honour found that the 2009 loan agreement had been entered into with Que Capital as a result of Mr Melzer overlooking the earlier 2008 deed of assignment. The finding was open and is inconsistent with Mr Mueller's contention in the appeal that the 2009 loan agreement was part of a deceit perpetrated by Mr Melzer. Further, the judge's findings do not disclose any bias on the part of her Honour.
51 For these reasons, ground 5 should be dismissed. For completeness, however, two further observations may be made. First, the judge's conclusion that, if the 2008 deed of assignment did not effectively assign the 2008 loan to Smartcard, the 2013 deed of rectification could have salvaged the assignment, is not, with respect, correct. Although the 2009 loan agreement did not involve the 'formal repayment [of the 2008 loan] and redrawing of funds',90 the manifest intention of the parties was to rescind the earlier 2008 loan agreement so that the debtor/creditor relationship between the parties would be governed by the new, written, 2009 loan agreement, the terms of which were comprehensive and entirely inconsistent with any continuing obligation under the 2008 loan agreement.91 Accordingly, on the hypothesis that the 2008 deed of assignment had been ineffective in the first place, the 2013 deed of rectification could not have retrospectively worked an assignment of the 2008 loan, binding on Mr Mueller, because that loan had been discharged on 14 October 2009 and replaced with the new loan. Issa v Berisha,92 which concerned rectification in equity, and on which the judge relied, has nothing to do with the proper construction and application of the 2013 deed of rectification in those circumstances.
52 Secondly, however, although the judge's conclusion in that regard was erroneous, the ultimate conclusion that the 2008 loan had been validly assigned is undoubtedly correct. That is because, contrary to her Honour's view, the 2008 deed of assignment was effective to assign the debt, notwithstanding that the intention to assign was expressed in the recitals, rather than in the operative part of the deed. The general principle is that where in the recitals to a deed or agreement it is acknowledged that the parties have agreed to do, or will do, certain acts, a promise to do those acts will be read into the agreement in the absence of an express promise to that effect: Ansett Transport Industries (Operations) Pty Limited v The Commonwealth of Australia.93
The cross-appeal
53 On 11 August 2015, the respondents filed an application for, amongst other things, an order that they have leave to bring a cross-appeal out of time.94 The respondents seek to raise one ground in their cross-appeal, namely:95
Her Honour Sweeney DCJ erred in law in dismissing [Que Capital's] claim against [Mr Mueller] for a debt owed by [Mr Mueller] to [Que Capital] pursuant to the terms of the loan agreement between [Que Capital] and [Mr Mueller] dated 14 October 2009.
54 The respondents' cross-appeal is brought in the alternative, and their primary response to the appeal is that the judge was correct in entering judgment for Smartcard.96 As Mr Mueller's appeal has failed, and the respondents only seek to pursue their cross-appeal if his appeal succeeds, there is no utility in granting the respondents leave to cross-appeal out of time.
Orders
55 For the above reasons:
1. The appellant's application to adduce additional evidence in the appeal should be dismissed.
2. The appeal should be dismissed.
3. The respondents' application for leave to cross-appeal out of time should be dismissed.
1Que Capital Pty Ltd v Mueller [2015] WADC 6.
2 By application dated 4 December 2015.
3 Amended Affidavit, sworn by Karl Paul Mueller on 4 December 2015, par 7; annexure A; YB 4, 8.
4 Primary decision [243].
5 Amended affidavit, sworn by Karl Paul Mueller on 4 December 2015, pars 3 - 5; YB 4.
6 The application is dated 11 August 2015. In the application as filed, the respondents also sought certain orders in relation to a property seizure and sale order dated 13 February 2015, but these were not pressed at the hearing of the appeal.
7 The following background is derived from the primary decision, unless otherwise indicated.
8 Primary decision [2].
9 Primary decision [1] - [2].
10 Primary decision [33].
11 Primary decision [49] - [50].
12 Primary decision [46] - [47].
13 Primary decision [4]; GB 24.
14 Primary decision [5]; GB 26, 28.
15 Primary decision [6], [170].
16 Primary decision [176]; Mr Mueller at the trial, however, disputed that he had received notice.
17 Primary decision [7].
18 Primary decision [8].
19 Primary decision [137].
20 Primary decision [138].
21 Primary decision [171].
22 BB 69.
23 Primary decision [16] - [26], [149] - [151], [191], [250], [266].
24 Primary decision [6].
25 Primary decision [6].
26 Primary decision [170].
27 Primary decision [171] - [174].
28 Primary reasons [179].
29 Primary reasons [187] - [189].
30 Primary decision [183], [185].
31 Primary decision [171], [190], [285].
32 Primary decision [192] - [197].
33 Primary decision [204].
34 Primary decision [205].
35 Primary decision [206].
36 Primary decision [207].
37 Primary decision [208].
38 Primary decision [209].
39 Primary decision [210], [232].
40 Primary decision [214].
41 Primary decision [216].
42 Primary decision [218].
43 Primary decision [219].
44 Primary decision [222].
45 Primary decision [225] - [227].
46 Primary decision [228], [230].
47 Primary decision [234], [238].
48 Primary decision [235].
49 Primary decision [241].
50 Appellant's written submissions, par 2(f); WB 12.
51 Amended affidavit in support of application in a case, sworn by Mr Mueller on 4 December 2015; annexure C, page 22; ts 133.
52 Amended affidavit in support of application in a case, sworn by Mr Mueller on 4 December 2015; annexure A, page 8.
53 Amended affidavit in support of application in a case, sworn by Mr Mueller on 4 December 2015; annexure C, pages 22, 27 - 30; ts 133, 138 - 141.
54 Amended affidavit in support of application in a case, sworn by Mr Mueller on 4 December 2015; annexure C, pages 14, 17; ts 125, 128.
55 Amended affidavit in support of application in a case, sworn by Mr Mueller on 4 December 2015; annexure C, pages 28 - 30; ts 139 - 141.
56Goldsmith v Sandilands [2002] HCA 31; (2002) 76 ALJR 1024 [3], [13], [32], [95].
57 See Saunders v The Public Trustee [2015] WASCA 203 [83] - [90].
58 ts 10.
59 ts 11.
60 ts 56, 167.
61Johnson v Johnson[2000] HCA 48; (2000) 201 CLR 488 [11].
62Ebner v Official Trustee in Bankruptcy [2000] HCA 63; (2000) 205 CLR 337 [6].
63Livesey v The New South Wales Bar Association [1983] HCA 17; (1983) 151 CLR 288, 293 - 294.
64Webb v The Queen [1994] HCA 30; (1994) 181 CLR 41, 74.
65Ebner [24]; see also British American Tobacco Australia Services Limited v Laurie [2011] HCA 2; (2011) 242 CLR 283 [38].
66Ebner [8].
67Smits v Roach [2006] HCA 36; (2006) 227 CLR 423 [54].
68 cf Australian Institute of Judicial Administration Incorporated, Guide to Judicial Conduct (2nd ed, 2007).
69Vakauta v Kelly [1989] HCA 44; (1989) 167 CLR 568, 587; George v Fletcher (Trustee) [2012] FCAFC 148 [97].
70 Appeal ts 41 - 44.
71 Appeal ts 43 - 44.
72 Primary decision [176].
73 Primary decision [155], [164].
74Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 [29].
75 GB 8.
76 GB 5.
77 Primary decision [105].
78 Primary decision [50].
79 Primary decision [81] - [82].
80 Amended appellant's case submissions in CACV 33 of 2015, par 7; WB 16.
81 Primary decision [6].
82 Primary decision [87].
83 Primary decision [160].
84 Appellant's written submissions, par 9(a); WB 17.
85Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; (2010) 41 WAR 353 [228].
86 Primary reasons [77] - [78].
87 Primary reasons [170].
88 Primary reasons [171].
89 Appeal ts 44 - 45.
90 cf AVCO Financial Services Ltd v Commissioner of Taxation [1979] 2 NSWLR 570, 576; AVCO Financial Services Limited v The Commissioner of Taxation of the Commonwealth of Australia [1982] HCA 36; (1982) 150 CLR 510, 523.
91Commissioner of Taxation of the Commonwealth of Australia v Sara Lee Household & Body Care (Australia) Pty Limited [2000] HCA 35; (2000) 201 CLR 520 [22] - [23].
92Issa v Berisha [1981] 1 NSWLR 261, 265
93Ansett Transport Industries (Operations) Pty Limited v The Commonwealth of Australia [1977] HCA 71; (1977) 139 CLR 54, 72.
94 WB 35.
95 WB 40.
96 WB 40.
4