Ridout Nominees Pty Ltd v Commonwealth Bank of Australia
[2003] WASCA 158
•22 JULY 2003
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE FULL COURT (WA)
CITATION: RIDOUT NOMINEES PTY LTD & ORS -v- COMMONWEALTH BANK OF AUSTRALIA [2003] WASCA 158
CORAM: MURRAY J
ROBERTS-SMITH J
PULLIN J
HEARD: 17 & 18 JUNE 2003
DELIVERED : 22 JULY 2003
FILE NO/S: FUL 65 of 2000
BETWEEN: RIDOUT NOMINEES PTY LTD
First Appellant
CLOVERDALE PTY LTD
Second AppellantRANLEIGH WARE PTY LTD
Third AppellantPETER ALLAN RIDOUT AND CHRISTOPEHR JOHN RIDOUT (As Executors of the Estate of GEORGE EDWARD RIDOUT)
Fourth AppellantsDOROTHY ELMA RIDOUT
Fifth AppellantPETER ALLAN RIDOUT
CHRISTOPHER JOHN RIDOUT
Sixth AppellantsJILLIAN RIDOUT
Seventh AppellantLYNETTE RIDOUT
Eighth AppellantVINERS SILVERWARE PTY LTD
ESTELLE GIFTS PTY LTD
WANATA HOLDINGS PTY LTD
KAMBEROO PTY LTD
KACANA PTY LTD
FERGAL PTY LTD
Ninth AppellantsAND
COMMONWEALTH BANK OF AUSTRALIA
Respondent
Catchwords:
Equity - Mortgages and guarantees - Claim set aside - Alleged disability of directors of mortgagor companies - Turns on own facts
Legislation:
Nil
Result:
Appeal dismissed
Category: B
Representation:
Counsel:
First Appellant : In person
Second Appellant : In person
Third Appellant : In person
Fourth Appellants : In person
Fifth Appellant : In person
Sixth Appellants : In person
Seventh Appellant : In person
Eighth Appellant : In person
Ninth Appellants : In person
Respondent: Mr C L Zelestis QC & Mr G H Murphy
Solicitors:
First Appellant : In person
Second Appellant : In person
Third Appellant : In person
Fourth Appellants : In person
Fifth Appellant : In person
Sixth Appellants : In person
Seventh Appellant : In person
Eighth Appellant : In person
Ninth Appellants : In person
Respondent: Corrs Chambers Westgarth
Case(s) referred to in judgment(s):
Bank of South Australia Ltd v Ferguson (1998) 192 CLR 248
Bridgewater v Leahy (1998) 194 CLR 457
Maguire v Makaronis (1997) 188 CLR 449
McKenzie v McKenzie [1971] P 33
Re Shaw (2001) 4 VR 103
Schagen v The Queen (1993) 8 WAR 410
Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102
Yerkey v Jones (1939) 63 CLR 649
Case(s) also cited:
A H McDonald & Co Pty Ltd v Wells (1931) 45 CLR 506
Birmingham Citizens Permanent Building Society v Caunt [1962] 1 Ch 883
Blomley v Ryan (1956) 99 CLR 362
Clough v London & North Western Railway Co (1871) LR 7 Ex 26
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447
Commonwealth Bank of Australia v Rekes, unreported; SCt of NSW; 11 May 1994
Drozd v Vaskas [1960] SASR 88
Gans v Riley (1913) 15 CLR 731
Garcia v National Australia Bank Ltd (1998) 194 CLR 395
Holder v Holder [1968] 1 Ch 353
Langman v Handover (1929) 43 CLR 334
Mayfair Trading Co Pty Ltd v Dreyer (1958) 101 CLR 428
Permanent Trustee Co Ltd v Elkofairi (2002) Aust Contract R 90-148
Swift v Westpac Banking Corporation (1995) ATPR 41-401
Tranchita v Retravision (WA) Pty Ltd [2001] WASCA 265
MURRAY J: I agree with the reasons and conclusion of Pullin J. I have nothing to add.
ROBERTS-SMITH J: I have had the benefit of reading in draft the reasons of Pullin J. I agree with those reasons and have nothing further to add.
PULLIN J: This is an appeal from the judgment of Wheeler J in favour of the respondent bank.
The learned trial Judge has set out the history of the appellant companies and individuals. The full details can be read in her Honour's judgment reported as [2000] WASC 37. I will relate only an abbreviated history of the main features of the dealings between the parties so that the issues raised by the grounds of appeal can be understood.
George Ridout ("Mr Ridout Snr") and Dorothy Ridout ("Mrs Ridout") were married in 1946. They embarked upon a business career which was successful over four decades but which came to grief in the 1990s. In the course of their career they incorporated several companies. Some were trustee companies. Mr Ridout Snr and Mrs Ridout had sons, Peter and Christopher, who worked as farmers on properties owned by Ridout companies. I will refer to the corporate group and the individuals collectively as the "Ridout Group". Companies within the Ridout Group acquired land at Boyup Brook known as Camballan, Marshalls, and Brantwood. The Ridout Group over several decades obtained finance facilities from various banks and financial institutions, including the ANZ Bank, Farrow Mortgage Services Pty Ltd ("Farrow"), Elderslie Finance Corporation Ltd ("Elderslie"), Westpac, and the respondent. The respondent became the preferred lender and eventually, as revealed below, it refinanced all of the other external borrowings.
The first facility made available by the respondent to the Ridout Group was an advance of a relatively small amount to Cloverdale Pty Ltd ("Cloverdale") in 1973. This facility was secured by Cloverdale granting a mortgage over Camballan. This was mortgage A687855. It secured repayment of the advance but it was an "all moneys" mortgage, which therefore secured not only the advance but all moneys which might thereafter be advanced by the respondent to Cloverdale.
In 1988, the respondent advanced further moneys, this time to Viners Silverware Pty Ltd ("Viners"), another member of the Ridout Group. The purpose of this advance was to pay out a debt owing to the ANZ Bank.
The respondent again took security from Cloverdale in the form of a mortgage over Camballan to secure all moneys owing by Viners. Viners guaranteed moneys owing by other members of the group – in particular Estelle Gifts Pty Ltd ("Estelle") and Ranleigh Ware Pty Ltd ("Ranleigh") – and so by the covenants in the mortgage, Cloverdale now became responsible for the debts of those other members of the Ridout Group, and in further consequence Camballan was now security for the moneys advanced by the respondent to these other members of the Ridout Group. On 21 August 1989, Cloverdale mortgaged Marshalls as further security. This was mortgage E813334.
By the end of 1989, the respondent had provided facilities totalling $2,650,000 to members of the Ridout Group.
At about the same time, the Ridout Group was indebted to Westpac in the sum of about $1.3 million. The Ridout Group asked the respondent to refinance this debt, which the respondent agreed to do providing Ridout Nominees Pty Ltd ("Ridout"), the owner of Brantwood, provided Brantwood as security. Ridout had earlier purchased Brantwood employing funds lent to it by Ranleigh, which had in turn borrowed the moneys from Westpac. The respondent agreed to refinance the Westpac debt. As a result, Westpac's debt was discharged. Ridout granted mortgage numbers E355681 and E355679 over Brantwood as security. At this time, the Ridout Group was still indebted to Farrow and Elderslie.
In 1991, the respondent was again approached by the Ridout Group to refinance the Farrow and Elderslie debts which were falling due for payment. The respondent agreed to do this, and the Farrow and Elderslie debts were therefore discharged using funds advanced by the respondent. There was also a further relatively small increase in the overall borrowings of the Ridout Group at this time. In return for this refinancing, further securities were obtained by the respondent in the form of a mortgage from Ridout over Brantwood, along with "all moneys" guarantees from members of the Ridout Group.
The total of the facilities made available to the Ridout Group by the respondent after this transaction was $4,995,000. Particulars are set out in [149] of her Honour's reasons for decision. This was a slight reduction in the total overall borrowings which existed at the end of 1989. Particulars of the position as it stood in 1989 are set out in [98] of her Honour's reasons.
On 19 April 1995, the respondent alleged that the Ridout Group was indebted to the respondent in the sum of just over $4,000,000. The respondent made demand for payment from the principal debtors and the guarantors within the Ridout Group. In breach of covenants in the security documents, the moneys demanded were not paid. Certain property was then sold by the respondent which reduced the debt slightly, and the respondent then sued seeking a determination of the amount due and judgment for that amount and a declaration as to its entitlement to possession. The respondent was entitled to possession under the mortgages, but in view of the appellants' contention that some of the security documents should be set aside, a declaration of the respondent's right to possession was sought from the Court.
The appellants counterclaimed, seeking a decree setting aside some of the mortgages and guarantees on various grounds. One of the grounds related to the alleged disability of Mr Ridout Snr, who became ill about the time of, or just before, the 1990 and 1991 refinancing transactions.
The respondent succeeded in its action. Judgment was entered in favour of the respondent against certain members of the Ridout Group in the sum of $4,041,822.25 plus interest, and it was declared that the respondent was entitled to possession of Brantwood, Camballan, and Marshalls. The counterclaim was dismissed.
This appeal was then instituted.
At the commencement of the hearing of this appeal, the fourth and sixth appellants, Mr P Ridout and Mr C Ridout, were the only appellants who appeared. Mr P Ridout told the Court that they wanted a "McKenzie advocate" to appear for them. This person was identified as Mr B W Shaw. Mr Shaw was eventually granted leave to address the Court on their behalf. It is necessary to explain a little of the background leading to this grant of leave.
When the case was conducted at trial before Wheeler J, the appellants were represented by solicitors and experienced senior counsel. When the appeal was instituted on 17 April 2000, the appellants were represented by a solicitor, Mr Robert Lashansky, and he was involved in the preparation of the appeal book index. The appeal books prepared in accordance with that index consisted of 17 volumes. On 27 November 2000, Mr Lashansky was suspended from practice by the Legal Practice Board. Even though Mr Lashansky could then no longer act, he remained on the court record. As a result, the respondent filed a motion for directions, which came on for hearing before Murray J on 24 May 2003. Shortly before that, on 8 May 2003, a document entitled "Appellants' Outline of Submissions", signed by Mr P Ridout and Mr C Ridout, was sent to the Court. The submissions bore little or no relationship to the grounds of appeal, cross‑appeal, or notice of contention.
On 24 May 2003, Murray J made orders that:
·Peter Ridout or such other person as may be approved have leave to address the court at the hearing of the appeal on behalf of the first to eighth appellants inclusive and on behalf of the second‑named and sixth‑named ninth appellants.
·Peter Ridout file and serve an outline of submissions, not exceeding 10 pages, within 14 days of the date listed for the commencement of the appeal, and the respondent file and serve its outline of submissions within 7 days thereafter.
·The written outlines of submissions and oral submissions on the appeal be confined to the notice of appeal and the notice of cross‑appeal (as amended) and notice of contention.
On the morning of the hearing of the appeal, Mr P Ridout and Mr C Ridout sought leave of the Court to allow Mr Shaw to address the Court on the behalf of the appellants. This request was not opposed by the respondent, providing Mr Shaw was limited to addressing the grounds of appeal and the cross‑contention (the cross‑appeal was abandoned). The Court asked for information about Mr Shaw, who indicated he was experienced as a litigant in person and who also said, referring to himself and the Ridouts:
"Effectively we are farmers … We're not legally trained, so we're heavily handicapped relative to process and procedure …"
Leave was then granted to the appellants to allow Mr Shaw to address the Court in relation to an application to amend the grounds of appeal.
The proposed new grounds were 25 in number and raised various alleged constitutional points, a ground relating to the standing of the bank to sue, several grounds about freemasonry, Masonic oaths, the Knights of St John, the monarch's allegiance, a point about whether the Victorian Constitution received the royal "accent", and for good measure a ground consisting entirely of a quote from the Old Testament. Leave to amend was refused by the Court. Some reasons were given orally at the time leave was refused, with an indication that reasons may be supplemented in written form. In my opinion, none of the proposed grounds disclosed any arguable ground of appeal or in some cases no arguable ground of appeal given the issues raised in the pleadings and the way the case was conducted. Some of the proposed grounds dealt with points already covered in the notice of appeal.
Having refused leave to amend the grounds of appeal, the Court then asked Mr P Ridout if he and Mr C Ridout still sought the leave of the Court to allow Mr Shaw to address the extant grounds of appeal. Mr P Ridout said that he and his brother wanted such leave but asked for an adjournment to consider this and to consult other members of his family by telephone. That adjournment was granted. On return, he informed the Court that he had contacted some members of the family and they wanted Mr Shaw to address the Court concerning the grounds of appeal. Leave was then granted to allow Mr Shaw to address the Court concerning the grounds of appeal. This was a considerable indulgence. It was an indulgence which went beyond what is normally allowed in a case of a "McKenzie friend". In McKenzie v McKenzie [1971] P 33, it was said:
"Any person, whether he be a professional man or not, may attend as a friend of either party, may take notes, may quietly make suggestions, and give advice: but no one can demand to take part in the proceedings as an advocate, contrary to the regulations of the court as settled by the discretion of the justices."
In Schagen v The Queen (1993) 8 WAR 410 at 412, Malcolm CJ said:
"It would be a rare and exceptional case … in which a person other than a duly qualified legal practitioner would be permitted to address the court or otherwise take an active part in proceedings."
In that case, the Court was prepared to go further and allow a person to address the Court on behalf of the party because of difficulties which arose on the facts in that case.
Only after the Court reserved its decision did I become aware of the decision of Re Shaw (2001) 4 VR 103. I infer that Mr Shaw is the same person who was the applicant in Re Shaw. In that case, in the Victorian Court of Appeal, Mr Shaw tried unsuccessfully to run arguments similar to several of those which appeared in the proposed amended grounds of appeal. This case provides a good example of why courts have to be very careful in allowing unqualified persons to seek to participate in proceedings. The danger is that such persons may have undisclosed motives for introducing their own arguments in the guise of assisting the litigants in the case.
Having become aware of the case of Re Shaw, I formed the view that I should consider whether there was any injustice arising from the grant of leave to Mr Shaw to participate in the proceedings. On a careful consideration of the matter, I am satisfied that there was no injustice, for these reasons. First, the points which were contained in the proposed amended grounds of appeal were grounds which had been adopted by Mr P Ridout and Mr C Ridout. They signed the outline of submissions dated 8 May 2003 which first raised these points. So, even if these points were the brainchild of Mr Shaw, the appellants adopted them and sought to advance them as their own. Secondly, Mr P Ridout and Mr C Ridout asked for an adjournment after leave to amend the grounds of appeal was refused. They informed the Court that they had consulted family members during the adjournment and as a result requested the Court to grant leave to allow Mr Shaw to address the Court on their behalf in relation to the existing grounds of appeal. Thirdly, Mr P Ridout and Mr C Ridout gave every appearance of listening closely to all Mr Shaw had to say in the submissions made on their behalf. Fourthly, Mr Shaw was observed to take instructions from them during the course of his submissions. They sat next to him at the Bar table. Fifthly, Mr C Ridout had no hesitation in rising to make submissions in reply, to supplement what had been said by Mr Shaw. I am therefore satisfied that the submissions made to the Court by Mr Shaw were the submissions the appellants wanted to make.
I now turn to deal with the grounds of appeal.
Ground 1
The first ground of appeal is a complaint about the amount adjudged to be payable by the appellants.
It is alleged by the appellants that there was no sufficient evidence to establish the amount of the debt, and that the learned trial Judge should have ordered an accounting or an enquiry to establish the amount due to the respondent, or alternatively should have allowed the appellants an adjournment to allow them to re‑open their case to deal with the amount, if any, which was due by them.
The learned trial Judge found that the appellants' indebtedness should be calculated in accordance with a supplementary statement of a Mr O'Brien, a bank officer. That evidence was tendered by consent, and Mr O'Brien was not cross‑examined on his statement. After reasons for decision were published, further opportunity was given to the appellants to make further submissions about the quantum of the amount due. The Court was not shown any information which suggested that any application was made by the appellants to re‑open their case. However, even if such an application had been made and refused, that must have been the correct outcome because, as I have mentioned, there was no challenge to Mr O'Brien's statement of evidence which showed the basis for the calculation of the amount due. Ground 1 therefore fails.
Ground 2
This ground alleges that three guarantees given by Mr Ridout Snr should be set aside because he was in a position of special disability in 1990. The special disability was said to arise from the following facts; he was diagnosed as suffering from inoperable prostrate cancer in March 1990; he commenced a course of female hormone treatment in March 1990 and suffered side effects from this treatment; he was in pain as a result of the cancer; he had a heart attack in early November 1990 and he was distressed, indecisive, lacking energy and vague; he was on occasions unable to conduct his business affairs; his business interests had been experiencing difficulties, and he was involved in the stressful exercise of refinancing them; he had been given the prognosis that he had only six months to two years to live; he was facing the likelihood of undergoing treatment; that he was visibly and obviously changed; and he displayed other irrational behaviour.
If this ground is to be made out, it has to be established that the respondent, through its officers, was aware of these disabilities and that it was therefore unconscionable of the respondent to take advantage of Mr Ridout Snr by inviting him to enter into the impugned transactions. The learned trial Judge found that she was not persuaded that any of the respondent's officers were in a position to notice, or did notice, any outward changes in Mr Ridout Snr's demeanour. The ground of appeal is that her Honour "should have found that by reason of the facts (referred to above) the (respondent) would have and did realise that he was or was likely to be in a position of special disability". That contention in the notice of appeal was not amplified in any significant way during oral submissions. The oral submissions involved a repetition of the allegations about Mr Ridout Snr's condition. In my opinion, there is no basis whatever for disturbing her Honour's conclusion that the respondent's officers were not put on notice about the alleged disability. Ground 2 therefore fails.
Ground 3
This ground reads:
"The learned trial judge for the reasons set out below erred in finding that as against (Ridout) the (respondent) is entitled to hold the property known as Brantwood as security for the full amount of principal and interest set out in paragraph 1 of the judgment upon the security of the mortgage E566035 (the 'Ridout Mortgage'…) by reason of …"
There then follows a list of facts as found and a list of facts which the appellants say should have been found. I agree with the respondent's submission that this ground is unclear in its meaning. The respondent's written submissions stated that the respondent assumed that the ground was an attempt to rely upon:
(1)an alleged breach of the trust instrument by Ridout Nominees Pty Ltd as trustee for the Cloverdale trust;
(2)the alleged special disability relating to Mr Ridout Snr in 1990 to support an allegation of unconscionable conduct (which I have dismissed above);
(3)an allegation of undue influence and
(4)an allegation of misleading and deceptive conduct.
I agree with that analysis. The appellants did not contend otherwise in their submissions, and so I will deal with the listed issues.
As to the allegation about a breach of trust, the circumstances were as follows. The learned trial Judge found, [2000] WASC 37 at [181], that the trust deed in its original form did not permit the trustee to guarantee a third party debt or to secure such a guarantee by mortgage. At [182], however, her Honour held that a deed of 27 March 1985 amended the original deed to permit the giving of such a guarantee and such a mortgage. That finding is not challenged. That aspect of the ground must therefore fail.
The contention that there was unconscionable conduct based upon Mr Ridout Snr's ill health must fail for the reasons I gave in relation to ground 2.
As to the point about undue influence, it arises because ground 3.1.5 of the notice of appeal asserts that the learned trial Judge erred in fact and in law:
"In not finding that [Ridout] suffered special disability at the time it executed the Ridout Mortgage by reason of the special disability of [Mrs Ridout] … having regard to … her age … her lack of education … her lack of knowledge of financial matters … the fact that she was unduly influenced by [Mr Ridout Snr] …"
Her Honour considered whether or not principles such as "Amadio" unconscionability or the principles in Yerkey v Jones (1939) 63 CLR 649 might apply in the circumstances. Her Honour said at [61] that she was prepared to assume that "what might in shorthand be referred to as 'Amadio' unconscionability will be available in respect of a corporation in some circumstances". However, her Honour then went on to hold that Mrs Ridout did not suffer any relevant special disadvantage which should be imputed to Cloverdale (see [61]) and then at [103] repeated this conclusion in relation to the allegation of special disability on the part of Mrs Ridout in relation to Mr Ridout Snr.
Further, her Honour found that Mr Ridout Snr was the decision‑maker for Ridout in relation to financial affairs and indeed the "directing mind and will" of all of the companies in the Ridout Group. The will of Ridout was therefore that of Mr Ridout Snr, and so allegations about Mrs Ridout being unduly influenced by Mr Ridout Snr, or allegations that Mrs Ridout was under a disability, were irrelevant. In any event, the trial Judge found that there was no undue influence of the kind alleged, and further that in any event such alleged undue influence was not apparent to the respondent. See [77]‑[80] of the reasons for decision. This Court was not directed to any evidence which would suggest any error in her Honour's reasons in relation to these latter findings of fact. This aspect of ground 3 must therefore fail.
The allegation that there was misleading and deceptive conduct is asserted in the notice of appeal but not amplified in oral submissions. If the ground is a repetition of the assertions advanced by the appellants at trial and recorded by her Honour at [44], then, for the reasons given by her Honour at [46], I hold that these assertions cannot be sustained.
As a result, this ground must fail.
Ground 4
This is a complaint which attacks mortgage A687855, the Cloverdale mortgage, and mortgage E813334. These mortgages were executed, as I have indicated above, in 1973 and August 1989. The complaint seems to be that the respondent should not be entitled to rely upon these mortgages because they were taken as security in relation to smaller advances by the respondent. This ignores the fact that these mortgages were "all moneys" securities. The ground of appeal further complains that because the relevant appellants were not aware of these earlier mortgages, that they could not be relied upon by the respondent. The ground of appeal alleges that the silence and inaction of the respondent in failing to point out that these mortgages could be relied upon amounted to unconscionable conduct and was misleading and deceptive conduct. There is no merit in that contention, for the reasons mentioned at the end of my discussion in relation to ground 3. I would therefore dismiss this ground.
Ground 5
This ground reads:
"The learned trial judge for the reasons set out below erred in finding that as against [Cloverdale] the [respondent] is entitled to hold the property known as Camballan and Marshalls as security for the full amount of principal and interest set out in paragraph 3 of the judgment upon the security of the mortgage D777666 … by reason of …"
The paragraphs which follow then relate facts, many of which are not in dispute and some of which again assert that the respondent was guilty of unconscionable conduct.
One of the paragraphs contains a contention that the learned trial Judge erred in failing to find that Mrs Ridout did not consent to Cloverdale entering into mortgage D777666 because she did not authorise the use of the company seal for the purpose of executing the mortgage and in consequence the mortgage was not enforceable. In fact, at [93] of her Honour's reasons, her Honour concluded that there was no reason to find that Mrs Ridout did not authorise the use of the company seal for the purpose of executing the mortgage. This aspect of ground 5 therefore has no merit.
The allegation of unconscionable conduct is that the transaction was an improvident transaction so far as Ridout was concerned; that Mr Ridout Snr negotiated the transaction and then persuaded Mrs Ridout to join with him in executing the mortgage as a result of undue influence on his part; that Mr Ridout Snr was the agent of the respondent for the purpose of obtaining execution of the mortgage by Mrs Ridout, and that because of undue influence and misrepresentations and implied representations made by Mr Ridout Snr to Mrs Ridout which were false, the mortgage should be set aside. The oral submissions did no more than repeat the grounds of appeal. Her Honour dealt with these allegations in detail between [47] and [94] of her reasons for decision, and I can see no error in those reasons. I would therefore dismiss this first part of ground 5.
The second part of ground 5, which is set out in par 5.2, complains again that Cloverdale suffered special disability at the time this mortgage was executed, by reason of the special disability of Mrs Ridout referred to above. As to this point, I repeat what I have said about that subject in relation to ground 3. Ground 5 must therefore be dismissed.
Ground 6
This ground complains that the learned trial Judge erred "in fact and in law in failing to hold" that the guarantees executed by Cloverdale, Ranleigh, Viners, and Estelle should be set aside. The ground alleges that these should have been set aside because of the disability said to have been suffered by Mr Ridout Snr and Mrs Ridout as mentioned above. I have already held that there is no error revealed in her Honour's rejection of these allegations, and this ground must also fail.
Ground 7
Ground 7 is entirely dependent upon the appellants succeeding in gaining a decree that the various mortgages referred to in that ground be set aside. The ground reads "In the event that the first or second appellants are successful in setting aside" the mortgages executed by them "then the learned trial judge erred in law in ordering … that the defendants who occupy the property the subject thereof should deliver up to the plaintiff vacant possession thereof." The first and second appellants have not been successful in setting aside these mortgages and therefore ground 7 fails.
The Respondent's Notice of Contention
This reads:
"The Respondent wishes to contend that the decision of the Court below should be affirmed on grounds other than those relied upon (by) the learned trial judge, namely, that a necessary condition for the setting aside or the grant of other relief in relation to the instruments which Her Honour found to be binding on the Appellants would have been to accord the Respondent restitution in integrum, and the Appellants failed to make any proper offer of restitution, and failed to establish any capacity to effect restitution, and accordingly the said instruments should not have been set aside in any event."
There can be no doubt that even if the appellants succeeded on any grounds, they could not be relieved of the burden imposed by the securities and the respondent left not only unsecured but with an irrecoverable loan: Bank of South Australia Ltd v Ferguson (1998) 192 CLR 248 at [20]; Bridgewater v Leahy (1998) 194 CLR 457 at 472‑473 and 493‑496; Maguire v Makaronis (1997) 188 CLR 449 at 474‑475; Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102 at 110‑116.
In my view, however, if the appellants had established grounds for setting aside the various documents they attacked, then they would have been entitled to a decree setting them aside but on condition that the respondent be restored to the position it was in before the security was taken. This would involve the appellants at least repaying the moneys advanced in relation to each of the impugned transactions. An example of the form of order which would be made in those circumstances can be seen in Maguire v Makaronis (supra) at 500.
In my opinion, the respondent's contention that the action should have been dismissed because the appellants did not "offer" restitution and did not demonstrate "capacity" to make restitution, confuses the situation which applies where a party by its own action rescinds a contract, with the situation where the party asks the court to decree rescission of a contract. In the former situation, the party must offer restitution and have the capacity to do so. So, for example, a person who purchases a vehicle under the influence of a misrepresentation may by his or her own action rescind the contract and ask for a return of the moneys paid. At the time of rescission, however, that party must take the vehicle back and offer to return it. It is obvious that the party cannot demand return of the purchase moneys and keep the vehicle.
In this case, however, the appellants approached the Court seeking a decree setting aside the security documents. In those circumstances, if the decree is made, then it will be made subject to restitution in the form that the Court requires. As I have indicated, the order in Maguire v Makaronis (supra) is an example of the way in which the Court may fashion orders to return the parties to the status quo prior to the contract which has been set aside.
I therefore conclude that the respondent's notice of contention has no merit, but it does not alter the outcome because I would dismiss the appellants' appeal. The respondent's cross‑appeal was abandoned.
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