Pezzano v Westpac Banking Corporation
[2002] WASC 31
PEZZANO & ANOR -v- WESTPAC BANKING CORPORATION & ORS [2002] WASC 31
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2002] WASC 31 | |
| Case No: | CIV:1151/2000 | 7 FEBRUARY 2002 | |
| Coram: | MASTER BREDMEYER | 1/03/02 | |
| 13 | Judgment Part: | 1 of 1 | |
| Result: | Application allowed | ||
| B | |||
| PDF Version |
| Parties: | ROCCO DOMENICO PEZZANO CONCETTA PEZZANO WESTPAC BANKING CORPORATION (ARBN 007 457 141) CERINO CUSTATO NOMINEES PTY LTD (ACN 009 427 874) ANGELO CUSATO NOMINEES PTY LTD (ACN 009 397 433) ANGELO CUSATO ANN CUSATO CERINO SALVATORE CUSATO |
Catchwords: | Application to strike out action as time-barred |
Legislation: | Limitation Act 1935 (WA), s 38(1)(c)(v) Rules of the Supreme Court, O 21 r 5(5) |
Case References: | Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514 Ankar Pty Ltd v National Westminster Finance (Australia) Pty Ltd (1987) 162 CLR 549 Bank of Nova Scotia v Neil (1968) 69 DLR (2d) 357 Commercial Bank of Australia v Amadio (1983) 151 CLR 447 Garcia v National Australia Ltd (1998) 155 ALR 614 Hancock v Williams (1942) SR (NSW) 252 Levi & Anor v Stirling Brass Founders Pty Ltd & Ors, unreported; SCT of WA; Library No 970209; 9 May 1997 Renowden v McMullin (1970) 123 CLR 584 Stone James v Pioneer Concrete (WA) Pty Ltd [1985] WAR 233 Town of Truro v Toronto General Insurance (1973) 38 DLR (3d) 1 Walton Stores (Interstate) v Maher (1988) 164 CLR 387 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- CONCETTA PEZZANO
Plaintiffs
AND
WESTPAC BANKING CORPORATION (ARBN 007 457 141)
First Defendant
CERINO CUSTATO NOMINEES PTY LTD (ACN 009 427 874)
ANGELO CUSATO NOMINEES PTY LTD (ACN 009 397 433)
ANGELO CUSATO
ANN CUSATO
CERINO SALVATORE CUSATO
Second Defendants
Catchwords:
Application to strike out action as time-barred
(Page 2)
Legislation:
Limitation Act 1935 (WA), s 38(1)(c)(v)
Rules of the Supreme Court, O 21 r 5(5)
Result:
Application allowed
Category: B
Representation:
Counsel:
Plaintiffs : Mr G R Dean
First Defendant : Mr K J de Kerloy
Second Defendants : Mr D L Smith
Solicitors:
Plaintiffs : Gary Dean & Associates
First Defendant : Freehills
Second Defendants : David Smith
Case(s) referred to in judgment(s):
Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514
Case(s) also cited:
Ankar Pty Ltd v National Westminster Finance (Australia) Pty Ltd (1987) 162 CLR 549
Bank of Nova Scotia v Neil (1968) 69 DLR (2d) 357
Commercial Bank of Australia v Amadio (1983) 151 CLR 447
Garcia v National Australia Ltd (1998) 155 ALR 614
Hancock v Williams (1942) SR (NSW) 252
Levi & Anor v Stirling Brass Founders Pty Ltd & Ors, unreported; SCT of WA; Library No 970209; 9 May 1997
(Page 3)
Renowden v McMullin (1970) 123 CLR 584
Stone James v Pioneer Concrete (WA) Pty Ltd [1985] WAR 233
Town of Truro v Toronto General Insurance (1973) 38 DLR (3d) 1
Walton Stores (Interstate) v Maher (1988) 164 CLR 387
(Page 4)
1 MASTER BREDMEYER: I have before me an application by the first defendant (Westpac or the Bank) to strike out the plaintiffs' claim. I have a similar application before me by the second defendants and I have an application by the plaintiffs to amend the indorsement on the writ. All three applications were heard together.
2 I will consider first the Bank's application to strike out the action as not disclosing a reasonable cause of action because of a limitation point. The application is wider than that, but I will concentrate on the limitation point first.
3 The writ was issued on 10 February 2000. The indorsement on it reads:
"THE PLAINTIFFS'CLAIMS ARISE FROM:
1 The purported execution of guarantees in favour of the First Defendant on or about 30 May 1991, guaranteeing the liabilities of the two first named Second Defendants to the First Defendant, and purported execution of a mortgage on or about 6 April 1992 over a term deposit with the First Defendant in the names of the Plaintiffs in respect of the said liabilities ('the securities'), in circumstances where the First Defendant acted unconscionably and in breach of its duty of care to the Plaintiffs by failing to advise them properly or at all of the true nature of the liability to be secured by the securities, of the nature and extent of the securities, of the need to obtain independent legal advice, and had induced in the Plaintiffs the belief that the securities related to liabilities of a company associated with them;
2, The First Defendant appropriating $200,000 held in the said term deposit on or about 14 February 1994 in purported realisation of the securities, and loss and damage to the Plaintiffs resulting therefrom;
3. The three last named Second Defendants' executing guarantees in favour of the First Defendant in respect of the same liability of the two first named Second Defendants as that of the Plaintiffs referred to in 1 above, but failing or refusing to pay any amount in respect of those guarantees.
(Page 5)
- THE PLAINTIFFS ACCORDINGLY CLAIM:
A. Against the First Defendant:
(1) A declaration that the securities and each of them are void;
(2) Payment of $ 200, 000 and interest thereon from 14 February 1994 to date of judgment pursuant to section 32 of the Supreme Court Act;
(3) Damages;
B. Alternatively, against the Second Defendants, jointly and severally, payment of $200,000 and interest thereon from 14 February 1994 to date of judgment pursuant to section 32 of the Supreme Court Act.
C. Further and/or alternative relief.
D. Costs."
4 There are two causes of action against the Bank referred to in the indorsement of claim. The first is for breach of duty of care by the first defendant towards the plaintiffs in failing to advise them:
- of the true nature of the liability secured by the securities;
- the nature and extent of the securities; and
- of the need to obtain independent legal advice on the securities.
- The second cause of action is for unconscionable conduct in respect of the same matters.
5 It is also said that the Bank appropriated $200,000 which the plaintiffs had placed on a term deposit secured to the Bank by way of mortgage. It is said the Bank appropriated this sum on 14 February 1994 in enforcement of the guarantees obtained from the plaintiffs. The guarantees given were to secure the liabilities of the two corporate second defendants to the Bank.
6 The bank says that these two causes of action against it were complete when the loss was suffered. That loss was suffered on 24 January 1994 and the unit was issued on 10 February 2000. The period
(Page 6)
- of limitation is six years for any action founded on any contract: Limitation Act 1935 (WA) s 38(1)(c)(v). Hence, the action is time-barred.
7 In considering whether a cause of action is time-barred, the High Court has warned that limitation questions should not normally be determined in interlocutory proceedings. I quote from the joint judgment of Mason CJ, Dawson, Gaudron and McHugh JJ in Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514:
"We should, however, state in the plainest of terms that we regard it as undesirable that limitation questions of the kind under consideration should be decided in interlocutory proceedings in advance of the hearing of the action, except in the clearest of cases. Generally speaking, in such proceedings, insufficient is known of the damage sustained by the plaintiff and of the circumstances in which it was sustained to justify a confident answer to the question. Magman International illustrates the problems which can arise, particularly in a case involving foreign loans."
8 The date given in the indorsement of claim for the appropriation of the $200,000 was 14 February 1994. As previously stated, the writ was issued on 10 February 2000. The claim would thus appear to be within time. However, it is conceded now that the date of appropriation was in fact 24 January 1994. That is the date for the appropriate given in the amended statement of claim of 26 October 2001 at par 19. I think what happened was this: when the writ was issued, the plaintiffs thought that the appropriation of the $200,000, which they had placed on deposit with the Bank, had occurred on 14 February 1994. However, after obtaining discovery of the Bank's documents it became clear that the appropriation had occurred on 24 January 1994 following a notice of demand.
9 I consider that both causes of action, the breach of duty of care and unconscionable conduct, are complete on the incurring of loss and that both are time-barred. I would say that both are clearly time-barred. But that is an opening comment. The proposed amended indorsement of writ and the amended statement of claim plead some new facts and some new causes of action which the plaintiffs say mean that all causes of action arose on or about 12 January 1995 and, hence, are not time-barred. I need to examine that claim.
10 The four causes of action in the minute of proposed amended writ of summons are negligence, unconscionable conduct, estoppel and breach of
(Page 7)
- collateral contract. They are spelt out in some detail in the amended statement of claim. The salient facts to support these causes of action are summarised in Mr Dean's submissions at pars 6.1 to 6.16 which I quote:
"6. However, the Plaintiffs' case contains much more than that. To summarise, the Plaintiffs assert that:
6.1 they originally banked with ANZ; (ASOC 4.7.1)
6.2 the Cusatos were customers of Westpac; (ASOC 5.1)
6.3 Westpac was well informed of the Cusato's finances;
6.4 the Cusatos persuaded the Pezzanos to switch banks from ANZ to Westpac (ASOC 5.1) ;
6.5 the consequent refinancing linked the Cusatos financial position and securities to that of the Pezzanos;
6.6 Westpac would not be entitled to make any call on the Westpac Term Deposit Security or otherwise unless and until it had exhausted all of its remedies against the Cusatos pursuant to their securities; (ASOC 6.7)
6.7 Westpac had undertaken to the Pezzanos that any extension or change to the Cusato's facilities with the bank would not take place without the written consent of the Pezzanos (ASOC 11.4);
6.8 the interlinked nature of the Cusato and Pezzano securities, Westpac's undertaking and the obligation to call on the Pezzano's last fixed Westpac with a duty to ensure that Westpac acted fairly vis-a-vis the Pezzanos (ASOC 11.5);
6.9 as part of these commercial transactions Westpac induced the Plaintiffs to execute personal guarantees (ASOC 9);
(Page 8)
- 6.10 between 01.03.91 and 30.06.93, Westpac without reference to the Pezzanos, made changes to the Cusatos facilities with the bank (ASOC 12);
6.11 these changes were to the advantage of the Cusatos (by increasing their financial accommodation and indebtedness to Westpac) and the detriment of the Pezzanos (by increasing the risk of Westpac having recourse to them) (ASOC 13);
6.12 Westpac knew of the deterioration of the Cusato's financial position until it reached "crisis point" (ASOC 17.8);
6.13 Westpac failed to pursue its remedies against the Cusatos and:
6.13.1 appropriated the sum of $200,000 on 24.01.94;
6.13.2 negotiated a refinancing with the Cusatos;
6.13.3 entered into a deed with the Cusatos dated 12 January 1995 which completed the refinancing;
6.14 Westpac's conduct was continuing conduct which was not completed until 12 January 1995;
6.15 after 12 January 1995 Westpac had released the Cusatos and had abandoned any opportunity to require, as part of the Cusato refinancing, payment by the Cusatos to the Pezzanos of the sum of $200,000. Once Westpac had been paid out by the Commonwealth Development Bank any opportunity to treat the Pezzanos fairly was lost;
6.16 the end point of the Pezzano's loss and damage was 12 January 1995 and the writ was issued within time;"
11 Although the causes of action have multiplied from two to four in the new pleading, they arise out of the same facts. The additional facts in the
(Page 9)
- new pleading, which the plaintiffs say save them from the limitation point, are that in January 1995 the Cusatos negotiated a refinancing deal with Westpac. They obtained finance from another bank sufficient to pay out their obligations to Westpac and the Cusatos entered into a deed of consent with Westpac dated 12 January 1995. I need to consider the impact of that deed. The deed of consent produced to me is between Westpac, Angelo and Ann Cusato (called the Cusatos in the deed) and Angelo Cusato Nominees Pty Ltd. That is a deed involving three of the Cusato second defendants. It is highly likely that a similar deed was entered into between Westpac, Cerino Cusato and his company, Cerino Cusato Nominees Pty Ltd.
12 To return to the deed I have before me, it recites that in May 1991 Westpac agreed to provide a facility, the facility was secured by the securities, Nominees failed to repay the facility in accordance with the terms of a demand dated 14 January 1994 sent by Westpac to Nominees. Westpac demanded payment of the facility from the Pezzanos by notices of demand dated 18 January 1994 sent by Westpac to the Pezzanos. When the Pezzanos failed to pay in accordance with the terms of the demand, Westpac enforced the security over the deposit [i.e. it seized the $200,000 standing on deposit]. The balance of the money owing to Westpac by Nominees is about to be paid. Westpac has agreed to release the securities provided the Cusatos consent to those releases. I should add that the loan to Angelo Cusato Nominees Pty Ltd was $110,000 plus interest. A similar loan for a similar sum was given to Cerino Cusato Nominees Pty Ltd. So, the appropriation of the $200,000 from the Pezzanos held on a term deposit, did not satisfy the debts totally.
13 The operative part of the deed, cl 3, reads as follows:
"The Cusatos:
(a) consent to Westpac releasing the Pezzano Securities from all moneys secured by the Pezzano Securities including, without limitation, the Facility;
(b) acknowledge that their obligations under the Cusato Securities continue in full force and effect in all respects notwithstanding the discharge and release of the Pezzano Securities; and
(c) acknowledge that this Document may be pleaded in bar to any action, suit, proceeding, claim or demand of any nature brought or made by the Cusatos against Westpac
(Page 10)
- arising out of or in connection with the Securities or the Facility."
- The "Cusato Securities" is defined in cl 1 as meaning the guarantee dated 31 May 1991 granted by the Cusatos in favour of Westpac.
14 How, then, does this deed defer the accrual of the four causes of action to 12 January 1995 to bring the writ issued on 10 February 2000 within time?
15 One of the matters pleaded in the amended statement of claim at par 6.7, which, incidentally, was also in the former statement of claim, is that it was a condition of the Westpac refinancing that Westpac would not be entitled to make any call on the Westpac term deposit security pursuant to the IBD mortgage, or otherwise, unless and until it had exhausted all of its remedies against the Cusatos pursuant to their personal guarantees and mortgages. That term was breached on 24 January 1994 when the $200,000 deposit was appropriated, which was before any of the Cusato securities were called upon. That term was not breached on 12 January 1995. The deed of 12 January 1995 was not a release of the Cusato securities. On the contrary, it was an acknowledgement that the Cusato securities, meaning the Cusatos' personal guarantee, continued in force.
16 I ask, how were the plaintiffs harmed by the deed of January 1995? The answer is - not at all. A year before then, the Pezzanos had lost their $200,000 deposit. As one of several guarantors, they have rights against their co-guarantors for contribution. Those rights remain. Those Cusato guarantees were not released by Westpac in January 1995. In fact, they were specifically kept in force.
17 This is one of those clearest of cases referred to in Wardley. The plaintiffs' claim against the Bank is inexorably time-barred. The amendments to the writ would not help. The causes of action were all completed on 24 January 1994. The writ was filed on 10 February 2000, over six years later. The action against the first defendant should be dismissed and no leave to amend should be given.
18 I now turn to the claim against the Cusatos, the second defendants. The originally indorsed claim against the Cusatos is that the plaintiffs had their $200,000 deposit appropriated by the Bank. The three personal Cusatos were also guarantors of that debt. The claim is that all the second defendants jointly and severally pay $200,000 and interest to the plaintiffs.
(Page 11)
19 The indorsement is unchanged in the proposed amended indorsement. The three individual Cusatos were co-guarantors with the plaintiffs to the extent of $200,000 of the debts of the two Cusato companies to the Bank. It does not follow from the facts pleaded in the indorsement of claim that the two Cusato companies are jointly and severally liable to pay the $200,000 to the plaintiffs. They were not guarantors.
20 I am not clear on how the cause of action is pleaded against the two Cusato companies. They were principal debtors of the ANZ loan. Each of them borrowed $110,000 from ANZ in order to purchase units in the Rocco Pezzano Unit Trust. However, it is not pleaded that they were principal debtors to Westpac when Westpac refinanced the ANZ loans , although that is implied in par 6.4. If they were principal debtors, then a guarantor who pays the debt is normally entitled to an indemnity from the principal debtors. If they are principal debtors to Westpac, then the plaintiffs are entitled to an indemnity against them for the debt and for a contribution from the three individual Cusato defendants who were co-guarantors. So, in those ways the plaintiffs have a cause of action against all of the second defendants. The right of a guarantor, who has paid the debt in full, to claim an indemnity from the principal debtor is an implied contract of indemnity or an implied term in the contract of guarantee. See Phillips and O'Donovan, The Modern Contract of Guarantee (2nd ed) at page 501. Hence, it is a common law right and the limitation period is six years. The right of a guarantor, who has paid the debt, to claim a contribution from his co-guarantors is best seen as an equitable right, although it is also recognised as a common law right. See Phillips and O'Donovan ibid at 526, 527 and 541. Equity follows the law in matters of limitations and the limitation period is, I consider, six years.
21 Mr Dean, for the plaintiffs, argued that the plaintiffs are suing on or under the deed where the limitation period is 12 years. The plaintiffs are not suing on the deed. They are suing under their equitable and/or common law rights, as discussed earlier. Their cause of action is not dependent on the deed. Their cause of action would be the same whether the deed existed or not, although the prayers for relief to repay the $200,000 are against all second defendants, the case as pleaded is only against the three individual Cusatos, who are sued as co-guarantors. The plaintiffs obtained that right of action as at 24 January 1994, when the $200,000 was appropriated. I quote from Phillips and O'Donovan ibid at page 534:
(Page 12)
- "As soon as the guarantor has paid more than his fair share of the principal debt, as between himself and his co-sureties, he is entitled to demand contribution from them in proportion to their respective liabilities."
22 Paragraph 32 of the amended statement of claim reads:
"32. Further and alternatively, by reason of.
32.1 the payment of $200,000 to Westpac held in the Westpac Term Deposit Security referred to at paragraph 8.1 above;
32.2 the Cusatos acknowledgement by deed entered into with Westpac dated 12 January 1995 that the Term Deposit Security had been utilised by Westpac to reduce their indebtedness to the bank,
32.3 The Cusatos failure to repay the sum of $200,000 to Mr and Mrs Pezzano since 12 January 1995 or at all;
the Cusatos are jointly and severally liable to:
32.4 indemnify the Plaintiffs in respect to the payment of the sum of $200,000 to Westpac;
32.5 pay the sum of $200,000 to the Plaintiffs together with interest thereon from 12 January 1995."
24 The plaintiffs' causes of action against both defendants are hopelessly time-barred. They are not cured by the proposed amended writ of summons. The problems cannot be cured by a repleading, so I will not give leave to do that. The action will be dismissed.
(Page 13)
25 In view of my conclusions on the limitation points, it is not necessary for me to rule on the other aspects of the first defendant's applications - that the pleading is bad as embarrassing, etcetera.
26 It is also not necessary for me to rule on the second defendants' application, but I do so on one matter to say that I agree fully with the second defendants' submissions on another limitation point. As outlined above, the plaintiffs' claim against the second defendants for an indemnity for, or contribution towards, the $200,000 it forfeited, arose on 24 January 1994, so the action is time-barred. It did not accrue when the deed of 12 January 1995 was signed. But if, contrary to my views, the cause of action did accrue on that date, that deed is not mentioned in the original indorsement of claim. It is only mentioned in the minute of proposed amended writ of summons dated 23 November 2001. The chamber summons for leave to amend the writ in terms of that minute is also dated 23 November 2001. That application to amend is more than six years after the cause of action arose in this scenario on 12 January 1995. So, the application to amend is out of time. I would not grant that amendment under O 21 r 5(5). I do not consider that the new cause of action arises out of substantially the same facts as the old.
27 I will allow the first defendant's application to strike out the plaintiffs' claim against the first defendant. I will also allow the second defendants' application to strike out the plaintiffs' claim against the second defendants. I will dismiss the plaintiffs' action. I will not grant leave to replead.
28 I will dismiss the plaintiffs' application for leave to amend the writ of summons and the statement of claim.
29 I will hear counsel on costs.
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