Ozden & Anor v Commonwealth Bank of Australia

[2014] HCATrans 291

[2014] HCATrans 291

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M64 of 2014

B e t w e e n -

OZKAN OZDEN

First Applicant

NURAY OZDEN

Second Applicant

and

COMMONWEALTH BANK OF AUSTRALIA

Respondent

Application for special leave to appeal

CRENNAN J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 12 DECEMBER 2014, AT 11.35 AM

Copyright in the High Court of Australia

MR M.G.R. GRONOW:   If it please your Honours, I appear for the applicants.  (instructed by Christopher Bunnett, Solicitor)

MR P.W. COLLINSON, QC:   If your Honours please, I appear with my learned friend, MR B. CAREW, for the respondent.  (instructed by Gadens Lawyers)

CRENNAN J:   Yes, Mr Gronow.

MR GRONOW:   Thank you, your Honour.  If it is convenient to your Honours I might cut to the chase, which is, there are three principal points put against us by the respondent and I would like to address them each in turn.

CRENNAN J:   Well, do you agree the real question perhaps is what does impeachment mean in the context?

MR GRONOW:   Yes, I accept that is a very important question, your Honour, yes, and that, if I may say so, is something on which the authorities are not clear ‑ ‑ ‑

CRENNAN J:   So, do you accept or not accept that cross‑demands are not enough?

MR GRONOW:   I accept that – yes, I think I do, your Honour, but I say that particularly – you know, the authorities post the Judicature Acts about what impeachment means are – perhaps the expression “dog’s breakfast” would be inappropriate, but they are unclear.  They go every which way.  We have given you extracts from learned commentators saying that, including Meagher, Gummow and Lehane’s, a work whose authorship includes two former members of this Court, and they say it is unclear.  So does Dr Spry in Equitable Remedies ‑ ‑ ‑

CRENNAN J:   Well, we understand – perhaps I should speak for myself – that the steps in your argument are that applying Piggot v Williams:  step number one, the respondent’s wrongful retention of title to the marina berth contributed to the respondent’s demand in 2011.

MR GRONOW:   Yes, your Honour.

CRENNAN J:   Step number two, they thereby lost a chance to sell – the applicants, I mean, lost a chance to sell.  Step number three, they would have used the proceeds of sale to discharge the debt.

MR GRONOW:   Yes, your Honour.

CRENNAN J:   Now, if those are the steps in the argument, a question I would have certainly would be, is there any case where loss of a chance is enough?

MR GRONOW:   In my submission, I will put it higher than that, your Honour.  The short answer is I do not have one ‑ ‑ ‑

CRENNAN J:   No.

MR GRONOW:   ‑ ‑ ‑ but there are several other steps in my argument.

CRENNAN J:   Well, yes, please enlighten us.

MR GRONOW:   The first point is that everybody, including the Court of Appeal, appears to have proceeded on the misconception that this was not a case where the set‑off claim proceeded from a breach of the same contract.  In my submission, it was, and if you look at paragraph 150 of the trial judge’s reasons, which is at page 31 of the application book ‑ just going back to paragraph 149:

I find that the Ozdens did request the return of the berth title at least from September 2009 . . . The Ozdens have proved that the Bank breached the duty of co‑operation contained in the loan agreements and the mortgages at least from September 2009 by failing to return the berth title.  It is unnecessary to decide whether the Bank’s action also breached the duty to act reasonably and in good faith, but I see no reason why it would not have.

Now, in my submission, that is a finding that the failure to return the marina berth title from September 2009 onwards breached the very same contracts on which the Bank was suing, namely, the loan agreements and the mortgages, his Honour having in the preceding paragraphs found that those contracts contained the conditions to which he refers.  Now, the ‑ ‑ ‑

KIEFEL J:   Well, the breach is of the duty of co‑operation in those respective agreements.

MR GRONOW:   Yes, but his Honour found there were contractual duties, and he found they were breached by the Bank not handing back the marina berth title, and they are contractual duties in the same contract.  I accept that on the authorities, whether it is the same contract is not determinative, but it is relevant.

KIEFEL J:   The essential question, is it not, is whether or not your client had an equitable right to be protected from the Bank’s claim for the moneys that were due?

MR GRONOW:   Yes your Honour, and in my submission, the Bank should not have been allowed to assert that claim unless and until it had complied with its obligation to hand back the marina berth title.  I say it is, because it arises out of breach of conditions of the same agreements that makes it sufficiently closely connected.  If I may take you to the Court of Appeal, the ‑ ‑ ‑

CRENNAN J:   So you are going – you are saying, could not validly demand the outstanding amount in the circumstances?

MR GRONOW:   Yes, yes.  Before the Judicature Acts, the remedy would have been to get an injunction to stop the Bank from making the demands and suing until it had handed back the marina berth title.

KIEFEL J:   What is the point of principle in this case, that there is some lack of clarity in an area where there has always been a lack of clarity?

MR GRONOW:   It would be of assistance for this Court to resolve that.

KIEFEL J:   This is appropriate vehicle, with damages of $4000, $5000?

MR GRONOW:   Well, I will come to that, your Honour.

KIEFEL J:   You want us to reassess damages as well?

MR GRONOW:   No, but I say that – well, I think it would probably have to go back, because his Honour, in my submission, was completely in error on the assessment of damages at $5000.  That is a figure plucked from the air.  The Court of Appeal, I think, refers to it as being 12 per cent of the value because it seems to have been accepted by the Court of Appeal that the berth title was worth $200,000, and there was evidence about that.

KIEFEL J:   Well, when a trial judge has in mind something approaching nominal damages ‑ ‑ ‑

MR GRONOW:   Yes.

KIEFEL J:   ‑ ‑ ‑ but they are generally plucked from the air; of their nature, it is just a small figure.

MR GRONOW:   Yes, in my submission, he was in error in doing that because he found as a fact that had they been able to do so, my clients would have sold or refinanced it and used the money to clear the arrears and reduce their indebtedness.  I think at the time their arrears were about $44,000 so if they had sold it for $200,000 they would have easily cleared the arrears and reduced their indebtedness, and there would have not been a demand in the first place.

Now, his Honour the trial judge found that they would have defaulted again anyway but, in my submission, there is no basis for that finding.  I mean, it is true, my clients were in financial difficulties, that is why they were in trouble, but there is no basis for saying that if they had been able to clear the arrears in 2009 that they would have then defaulted again.  We just do not know.

So, in my submission, simply to say, well, you can have an allowance of the marina berth title, it is $5000, is simply something completely devoid of principle.  The evidence was there was an offer, his Honour accepted Mrs Ozden’s evidence and he, I think ‑ her evidence – her credibility was attacked at trial, but his Honour found that she was, generally speaking, someone trying to tell the truth, and he appears to have accepted the truth of what she said on most issues.

They would have either sold it or refinanced it, used it to clear the arrears and reduce the indebtedness.  That is what has given rise to the whole terrible chain of events, their inability to do that in September 2009 or some subsequent date.  They, in fact, did not get it back for ‑ his Honour found, I think, four and a half years after it should have been returned.  If I could just take your Honours to paragraph 86 of the Court of Appeal’s judgment, which is at pages 80 and 81 of the application book.  They say there:

The claims are distinct and not sufficiently closely related.  Although the parties are the same, like Eagle Star, the appellants have not brought themselves within the principle.  Each claim is independent and in no way mutual.  The Bank’s claim does not depend on and does not arise out of any right (whether legal or equitable) asserted by the appellants and the right to enforce its security and claim repayment of the loans is not impeachable by any equity to which the appellants can refer.  Rather, as pointed out they have and indeed agitated their own claim, which when sounding in money could be set off –

Now, in my submission, that ignores his Honour’s finding at paragraph 150 of the trial judgment that they were breaches of terms of the same contracts on which the Bank relied.  I accept that is highly relevant factor and, in my submission, at that point that does impeach the Bank’s claim and it is not entitled to assert it until it has made good the marina berth.

KIEFEL J:   There is certainly no legal impediment to the Bank pursuing its claim for moneys owing.  As to whether there is an equitable impediment, you say it is simply because there is a connection with the contracts, with the loan contracts.  That is sufficient ‑ ‑ ‑

MR GRONOW:   Not just that, your Honour.  There are other factors as well, but it appears that ‑ ‑ ‑

KIEFEL J:   Does it not have to be that there is, at root, the Bank’s right to claim is attended by the equity?  They have to have, at root, some common connection?

MR GRONOW:   Yes, I accept that, your Honour.  It has to be such – on the vague tests we have got, it has to be something that would make it inequitable for the Bank to claim without first doing equity by restoring the title.

CRENNAN J:   Does it not go like this?  It is as I put to you, it is a contribution point, in a sense, and what you are saying is that by retaining the title, they reduce the chance that the applicant would not be in arrears.  That is how it goes really, does it not?

MR GRONOW:   Yes, your Honour, and more than that because his Honour found what they would have done.  He accepts that had they been able to do so, they would have sold or refinanced it.  There was evidence of at least one offer to buy it, which subsequently went off.  We also know that with the Bank’s agreement they sold the Safety Beach property as soon as they could, and in fact they have subsequently sold the marina berth title.

KIEFEL J:   But this is to say, it sounds more like set‑off based in fairness, notions of fairness, and I do not think that has ever been suggested as being sufficient.

MR GRONOW:   No, I accept that, your Honour.  That, if I may say so, is why the tests are so hard to apply, because it really says you should be allowed to claim it ‑ ‑ ‑

KIEFEL J:   Well, it is why true set‑offs are so hard to find.

MR GRONOW:   Yes, your Honour, I accept that, and that is why, in my submission, the principle requires clarification from this Court.

KIEFEL J:   By that you mean a bit of loosening.

MR GRONOW:   Sorry?

KIEFEL J:   Somewhat of a loosening, I think, is probably what you mean.

MR GRONOW:   Well, that would assist my clients, but it would assist the law in general to know what the real law is – whether my clients win or lose.  Obviously, my clients would be urging the Court to adopt, as your Honour says, a loosening, but even if your Honours felt differently it would still be a benefit to know what the law really is.  Probably the closest we have got is the summary by Justice Woodward in the Galambos v McIntyre case, where he extracts, I think, four principles, and they are repeated by Justice Giles more recently in the AWA v Exicom case.  That is the closest we would go.

In my submission, even Justice Woodward, particularly if you go back and look at his recitation of the previous authorities, the test is all over the place.  I would not quite say it is like the Lord Chancellor’s foot, but it gets close to that.  It is hard to ascertain from these authorities any clear principle about when it will and will not apply.  There are some cases it will and some where it will not.

In my submission, here the relevant factors are, firstly, it is terms of the same contract, as his Honour found.  Secondly, it disabled the applicants from clearing the arrears and fixing the breaches in respect of which they were being sued, so there is a direct connection between the withholding of the berth and my client’s inability to fix the problem that had arisen where they were, I think, $44,000 in arrears with the Bank and they are getting demands and threats to sell them up.

Now, the first point put against us is that there are insufficient differences of opinion.  In my submission, that is just not right.  If you look at the authorities, and we have referred to them in our outline, there are plainly differences and learned writers have said so.  The next point is that the Court of Appeal decision is clearly correct or not attended by sufficient doubt.  In my submission, for the reasons I have said, the Court of Appeal appears to have ignored the fact that his Honour found that it was the self‑same contractual – the self‑same contracts, the loan agreements and the mortgages that were breached by the Bank wrongfully withholding the marina berth title without explanation.

Also, as a matter of causation, it disabled my clients from being able to clear the arrears, fix the problems and get themselves back on track.  That did more than just even cause them interest, I think it was accepted that had they been allowed to get the interest, it would have been $43,000 or something, but in fact more than that because they were in arrears which they could not clear, precisely because they could not get hold of this asset and use it either by refinance or sale to clear the arrears.

Lastly, there is the issue that your Honours have already adverted to about the valuation of the cross‑claim.  In my submission – as I have said before – there is no basis for putting it at $5,000.  If, as the Court of Appeal said, what his Honour did was estimate it at 12 per cent, then he should have said so.  The $5,000 appears to be the same as, on the evidence, my clients were able to attain for leasing it to someone for six months.  Now, whether that is coincidence or not, I cannot say because it is not clear, but there is no logical or factual basis put forward for that and, in my submission, the real losses were much greater.  They were basically the inability to satisfy their obligations to the Bank and get refinancing.

So, in my submission, if we are right and my clients are entitled to claim the settlement, it has a much greater consequence than a relatively minor allowance off the claim.  It should actually impeach – and when I say impeach the Bank’s claim, it means it should have disabled the Bank from suing on it unless and until it had made good its obligation to return the berth, and I say that is what impeach means, although I accept it is by no means clear on the modern authorities.  Now, unless there is something I can assist your Honours with, I otherwise just rely on the outline and the reply.

CRENNAN J:   Thank you, Mr Gronow.  We will not trouble you, Mr Collinson.

Assuming there to be a point of legal principle raised by the applicant, we regard this as an inappropriate vehicle for its consideration.  Accordingly, special leave to appeal is refused with costs.

The Court will adjourn briefly to reconstitute.

AT 11.51 AM THE MATTER WAS CONCLUDED