Rowe v National Australia Bank Ltd
[2019] WASCA 140
•10 SEPTEMBER 2019
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: ROWE -v- NATIONAL AUSTRALIA BANK LIMITED [2019] WASCA 140
CORAM: QUINLAN CJ
MURPHY JA
SOFRONOFF AJA
HEARD: 18 JULY 2019
DELIVERED : 10 SEPTEMBER 2019
FILE NO/S: CACV 107 of 2018
BETWEEN: MICHAEL ANDREW ROWE
JEANINE PATRICA ROWE
Appellants
AND
NATIONAL AUSTRALIA BANK LIMITED
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram: VAUGHAN J
Citation: NATIONAL AUSTRALIA BANK LIMITED -v- ROWE [2018] WASC 330
File Number : CIV 1353 of 2017
Catchwords:
Practice and procedure - Pleadings - Whether counterclaim discloses reasonable cause of action
Account - Accounting in equity's auxiliary jurisdiction
Mortgages - Accounting - Circumstances in which an account can be ordered in mortgagor-mortgagee relationship
Legislation:
Rules of the Supreme Court 1971 (WA), O 20 r 8(1), O 20 r 19(1)(a), O 20 r 19(1)(c)
Result:
Leave to appeal granted
Appeal allowed in part
Category: A
Representation:
Counsel:
| Appellants | : | D H Solomon |
| Respondent | : | C P K Russell |
Solicitors:
| Appellants | : | Solomon Brothers |
| Respondent | : | Lavan |
Case(s) referred to in decision(s):
Adams v Bank of New South Wales (1984) 1 NSWLR 285
Agricultural Land Management Ltd v Jackson [No 2] [2014] WASC 102 (S)
Agricultural Land Management Ltd v Jackson [No 2] [2014] WASC 102; (2014) 48 WAR 1
Alati v Kruger [1955] HCA 64; (1955) 94 CLR 216
Allfox Building Pty Ltd v Bank of Melbourne (1992) NSW Conv R 55,625
Anonymous (1388/89) 12 Rich II (Jenk 66); 145 ER 47
Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd [2000] HCA 25; (2000) 202 CLR 588
Australian and New Zealand Banking Group Ltd v Bangadilly Pastoral Co Pty Ltd (1977) 139 CLR 195
Australian Securities and Investments Commission v GDK Financial Solutions Pty Ltd [2006] FCA 1415; (2006) 236 ALR 699
Batthyany v Walford (1887) 36 Ch D 269
Beaumont v Boultbee [1802] 7 Ves 599; (1802) 32 ER 241
Blundell v Associated Securities Ltd (1971) 19 FLR 17
Bofinger v Kingsway Group Ltd [2009] HCA 44; (2009) 239 CLR 269
C2C Developments Pty Ltd v Commonwealth Bank of Australia [2012] NSWSC 1162; (2012) 16 BPR 31,735
Carter v Wake [1877] 4 Ch Div 605
Challenge Bank Ltd v Hodgekiss (1995) 7 BPR 97,561
Cholmley v Countess Dowager of Oxford (1741) 2 Atk 267; (1741) 26 ER 565
Cityland and Property (Holdings) Ltd v Dabrah [1968] 1 Ch 166
Colin D Young Pty Ltd v Commercial & General Acceptance Ltd (1982) NSW Conv R 55‑097
Commercial and General Law (SA) Pty Ltd v Permanent Custodian Ltd (No 2) [2012] SASC 216; (2012) 273 FLR 247
Commonwealth Bank of Australia v Hadfield [2001] NSWCA 440; (2001) 53 NSWLR 614
Coroneo v Australian Provincial Assurance Association Ltd (1935) 35 SR (NSW) 391
Dawson v Dawson (1727) 1 Atk 1; (1737) 26 ER 1
Doss v Doss [1843] 3 Moo Ind App 175; (1843) 18 ER 464
Equus Financial Services v RMBL Investments Pty Ltd (1996) 22 ACSR 744
Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd [1999] HCA 20; (1999) 196 CLR 245
Fink v Robertson [1907] HCA 7; (1907) 4 CLR 864
Forsyth v Blundell [1973] HCA 20; (1973) 129 CLR 477
Frietas v Dos Santos [1827] 1 Y & J 574; (1827) 148 ER 800
Gardiner v Fitzgerald [1962] Qd R 29
General Credits Ltd v Wenham (1989) 18 NSWLR 570
General Steel Industries Inc v Commissioner for Railways (New South Wales) (1964) 112 CLR 125
Glazier Holdings Pty Ltd v Australian Men's Health Pty Ltd (No 2) [2001] NSWSC 6
Greenwood v Sutcliffe [1892] 1 Ch 1
Hancock v Rinehart [2015] NSWSC 646; (2015) 106 ACSR 207
Harrington v Churchward 1860] 29 LJ Ch 521
Hartl v Cowen [1993] 2 Qd R 633
Harvey v McWatters (1948) 49 SR (NSW) 173
Hightime Investments Pty Ltd v Lungan [No 2] [2010] WASC 296
Holborow v MacDonald Rudder (a firm)[2001] WASCA 91
Hotel Terrigal Pty Ltd (in liq) v Latec Investments Ltd (No 3) [1969] 1 NSWR 687
House v The King [1936] HCA 40; (1936) 55 CLR 499
In re Tolman's Estate (1928) 23 Tas LR 29
Industrial Acceptance Corporation Ltd v Tarulli [1974] WAR 125
Inglis v Commonwealth Trading Bank of Australia [1972] HCA 74; (1972) 126 CLR 161
Inman v Wearing (1853) de G & Sn 729
Joyce v Palassis [No 4] [2008] WASC 45
Kendle v Melsom [1998] HCA 13; (1998) 193 CLR 46
Kennedy v General Credits Ltd (1982) 2 BPR 9456
Kravchenko v The Rock Building Society [2009] VSCA 292; (2009) 26 VR 400
Lang v Simon [1953] 53 SR (NSW) 508
Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) [1965] HCA 17; (1965) 113 CLR 265
Libertarian Investments Ltd v Hall [2013] HKCFA 93; (2013) 16 HKCFAR 681
London, Chatham and Dover Railway Company v South Eastern Railway Company [1892] 1 Ch 120
Mackenzie v Johnston [1819] 4 Madd 373; (1819) 56 ER 742
Maher v Maher [1961] Qd R 333
Maher v Network Finance Ltd (1982) 2 NSWLR 503
MCP Muswellbrook Pty Ltd v Deutsche Bank (Asia) AG (1988) 12 NSWLR 16
Meehan v Glazier Holdings Pty Ltd [2002] NSWCA 22; (2002) 54 NSWLR 146
Mellish v Royal African Co and Richard Edlin [1679] 2 Chan Cas 11; (1679) 22 ER 822
Mhanna v Sovereign Capital Ltd [2004] FCA 1040
Mijac Investments Pty Ltd v Graham (No 2) [2009] FCA 773; (2009) 72 ACSR 684
Milltec Australia Pty Ltd v Burnes [2006] NSWCA 13
M'Intosh v Great Western Railway Company [1850] 2 Mac & G 74; (1850) 42 ER 29
Mio Art Pty Ltd v Macequest Pty Ltd [2013] QSC 211; (2013) 95 ACSR 583
Mulherin v Quinn Villages Pty Ltd [2007] QSC 231
National Australia Bank Limited v Rowe [2018] WASC 330
National Bank of Australasia v United Hand‑in‑Hand and Band of Hope Company (1879) 4 AC 391
Nobarani v Mariconte [2018] HCA 36; (2018) 359 ALR 31
Noble Earth Technologies Pty Ltd v Hampic Pty Ltd [2017] NSWSC 502
North‑Eastern Railway Co v Martin (1848) 41 ER 1136; (1848) 2 Ph 758
O'Connor v Spaight [1804] 1 Sch & Lef 305
Padwick v Stanley [1852] 9 Hare 627; (1852) 68 ER 664
Palk v Lord Clinton (1805) 12 Ves 48; 33 ER 19
Pendlebury v Colonial Mutual Life Assurance Society Ltd [1912] HCA 9; (1912) 13 CLR 676
Perry v Rolfe [1948] VLR 297
Project Research Pty Ltd v Permanent Trustee of Australia (1990) 5 BPR 11,225
Rams Mortgage Corporation Ltd v Skipworth [2007] WASC 24
Re Australian & New Zealand Banking Corporation Ltd [1991] 2 Qd R 477
Re Forrest Trust; Trustees, Executors & Agency Co Ltd v Anson (1953) VLR 246
Re Sharpe [1992] FCA 616
Re Wrightson; Wrightson v Cook [1908] 1 Ch 789
Residential Housing Corporation v Esber [2011] NSWCA 25; (2011) 80 NSWLR 69
Riva NSW Pty Ltd v Key Nominees Pty Ltd [2014] NSWSC 301
Road Chalets Pty Ltd v Thornton Motors Pty Ltd (1986) 47 SASR 532
Robertson v Norris (1858) 1 Giff 421; (1858) 65 ER 983
Russian Commercial & Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 438
Sandgate Corporation Pty Ltd v Ionnou Nominees Pty Ltd [2000] WASC 91; (2000) 22 WAR 172
Scandinavian Pacific Ltd v Burke (1991) 5 BPR 11,846
Sibley v Grosvenor [1916] HCA 14; (1916) 21 CLR 469
Silven Properties Ltd v Royal Bank of Scotland plc [2003] ECWA Civ 1409; [2004] 1 WLR 997
Simpson v Forrester (1973) 132 CLR 499
Southern Equity Pty Ltd v Timevale Pty Ltd [2012] NSWSC 15
Squire v Rogers (1979) 39 FLR 106
Stead v State Government Insurance Commission [1986] HCA 54; (1986) 161 CLR 141
Taff Vale Railway Co v Nixon [1847] 1 HLC 111; (1847) 9 ER 695
Tannock v North Queensland Securities Ltd [1932] St R Qd 285
The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008) 39 WAR 1
Theories Pty Ltd v Holt [2012] NTSC 91
Tolonia v Wright [2016] NSWSC 1139
Toms v Kimble (No 2) (Unreported, NSWSC, 14 November 1991)
Tsatsoulis v Trigamist Holdings Pty Ltd [2000] NSWSC 900
Turner v Wright [1862] 2 NSW SCR Eq 9
Ultimate Property Group Pty Ltd v Lord [2004] NSWSC 114; (2004) 60 NSWLR 646
Van den Bosch v Australian Prevention Insurance Association [1968] 2 NSWR 550
Wenham v General Credits Ltd (Unreported, NSWSC, 1988) (McLelland J)
Westpoint Finance Pty Ltd v Chocolate Factory Apartments Pty Ltd [2002] NSWCA 287
Wilkins v Wilkins (1689) 1 Show KB 71
Woodward v Woodward [2015] NSWSC 1793
QUINLAN CJ:
I have had the considerable benefit of reading in draft the comprehensive reasons of Murphy JA and Sofronoff AJA. I agree with those reasons and, in particular, agree with their Honours' conclusions, at [163] to [165], in relation to the repleading of the appellant's defence and counterclaim.
I wish only to add a few brief observations of my own.
General account
The general principles identified by the learned primary judge in relation to the court's equitable jurisdiction to order an account, in a number of respects, involved an exegesis of Dr Lushington's observation, in Doss v Doss, on behalf of the Privy Council, that:[1]
A Decree for an account is not, as appears to have been assumed, a mere direction to inquire and report. It proceeds, and must always proceed, upon the assumption that the party calling for it is entitled to the sum found due. It is a Decree affirming his rights, only leaving it to be inquired into, how much is due to him from the party accounting.
[1] Doss v Doss [1843] 3 Moo Ind App 175; (1843) 18 ER 464 (472).
Put another way, an order for an account, to inquire and report in relation to a relationship between parties, is not an end in and of itself. An account is a means to an end; that ultimate end being the vindication of the applicant's legal or equitable rights.[2]
[2] National Australia Bank Limited v Rowe [2018] WASC 330 (primary decision) [59].
As the reasons of Murphy JA and Sofronoff AJA demonstrate, however, Dr Lushington's statement should not be taken to express a rigid rule that, in every case, the party calling for an account must establish an entitlement to some - albeit uncertain - amount. Particularly in circumstances in which the parties are in an established accounting relationship - or more correctly, where the defendant is clearly an accounting party - equity might well order an account even where it is unknown whether a credit sum will be found owing. In this sense, it is correct to say that the categories of case in which the court might exercise the jurisdiction to order an account are not closed.[3]
[3] North‑Eastern Railway Co v Martin (1848) 41 ER 1136; (1848) 2 Ph 758, 1138 (Lord Cottenham LC).
Nevertheless, as Murphy JA and Sofronoff AJA amply demonstrate in their reasons, this does not mean that the discretion to order an account is at large. It is necessary, in every case, that there be material facts that would justify the order for an account. In many cases, particularly those in which the defendant is not clearly an accounting party, the existence of an entitlement to some amount will be the critical material fact that justifies the order, and without which an account will not be ordered. Doss v Doss was such a case.
The entitlement to be paid some - albeit uncertain - amount cannot however be elevated to a pre-condition to the exercise of the court's jurisdiction to order an account. To the extent that the learned primary judge suggested that there was such a pre-condition, and only to that extent, his Honour, with respect, overstated the position.
Nevertheless, even accepting that to be the case, in the circumstances of the present case, for the reasons set out by Murphy JA and Sofronoff AJA at [152] there was no arguable basis pleaded by the appellants for a decree of a general account. There should be no leave to replead a case for such an account, particularly as it relates to dealings between the respondent and entities other than the appellants and in relation to guarantees under which there is no claim by the respondent.
Moreover, it is not the case (if it ever was) that a generalised claim of 'complexity' in the dealings between the parties is sufficient to support a claim for a general account, particularly where, as in the appellants' case, the complexity is a self-fulfilling prophecy wrought by the prolix and convoluted nature of the claimant's own pleading. The jurisdiction to order accounts in cases too complicated to settle at law, is very much an artefact of the pre-Judicature Acts administration of law and equity. Indeed, given the ready availability of pre-trial procedures, and case management practices in modern litigation, it is difficult to envisage circumstances in which an order for an account might today be made based on complexity alone.
Gawthorne Mortgage or Cherratta Road Mortgage
The pleadings struck out by the learned primary judge included pleadings in relation to two particular mortgages alleged to have been entered into by the appellants: the Gawthorne Mortgage[4] and the Cherratta Road Mortgage.[5] More specifically:
(a)the Gawthorne Mortgage is one of the instruments relied upon by the respondent in its claim against the appellants for the amounts it alleges are owing under the Gawthorne Loan Agreement.[6] The Gawthorne Mortgage was discharged following the exercise by the respondent of the power of sale, leaving the outstanding amounts alleged to be owing under the Gawthorne Loan Agreement; and
(b)the Cherratta Road Mortgage is alleged to have been registered, on 19 April 2012, over a property at Lot 2 Cherratta Road, Karratha (the Cherratta Road property) owned by the appellants, as security for certain loans to the appellants[7] and guarantees given by them.[8] The Cherratta Road property has since been sold.[9] While not pleaded, it may be inferred that the Cherratta Road property was sold in the exercise of the respondent's power of sale and that, accordingly, the Cherratta Road Mortgage has also been discharged.
[4] The Gawthorne Mortgage was defined in [11.1] of the re-amended defence and counterclaim dated 12 September 2018 (re-amended defence and counterclaim).
[5] Somewhat surprisingly (given the size of the pleading) the Charratta Road Mortgage is not defined in the re-amended defence and counterclaim, although [89] identifies it by reference to its registration number (L913105).
[6] The Gawthorne Loan Agreement is pleaded at [3] of the amended statement of claim.
[7] Re-amended defence and counterclaim [77].
[8] Re-amended defence and counterclaim [237.6.2], [307.8.7], [309.3.7], [314.10.7], [316.5.8].
[9] Primary reasons, Annexure 'A'.
The appellants had pleaded that each of the Gawthorne Mortgage and the Cherratta Road Mortgage were registered by fraud and should be set aside as void and unenforceable. The re-amended defence and counterclaim sought declarations to that effect.[10]
[10] Re-amended defence and counterclaim, Prayer for relief D and G.
The learned primary judge struck out those claims for declaratory relief in relation to the Gawthorne Mortgage and the Cherratta Road Mortgage. His Honour did so on the basis that those claims were an adjunct to the claim for a general account and therefore stood, or fell, with the latter claim.[11] The learned primary judge was correct to have done so.
[11] Primary reasons [17].
Nevertheless, the material facts originally pleaded in relation to the circumstances of the execution of the Gawthorne Mortgage[12] and the Cherratta Road Mortgage,[13] would, if established, provide a reasonably arguable basis for a declaration as to the validity of those mortgages. Given that those mortgages have, apparently, been discharged, however, the utility of such relief may be questionable in light of the underlying indebtedness arising under the related loan agreements.
[12] Re-amended defence and counterclaim [9]
[13] Re-amended defence and counterclaim [77] - [81].
Presently there is no claim for consequential relief in relation to the alleged invalidity of the Gawthorne Mortgage and the Cherratta Road Mortgage in relation to which such utility might be determined. Nevertheless, as Murphy JA and Sofronoff AJA have concluded, the appellants should not be shut out of the opportunity to replead any arguable claims in respect of the validity of the Gawthorne Mortgage and the Cherratta Road Mortgage. Whether any reasonably arguable consequential relief is available in that regard would need to await the proposed pleadings.
Re-pleading the counterclaim generally
Finally, as Murphy JA and Sofronoff AJA have noted, the observations made by the learned primary judge with respect to the pleadings generally (at primary reasons, [1] to [7]) are to be endorsed.
Indeed, those observations bear repetition by this Court.
The task before the learned primary judge, and before this Court on appeal, was hindered, rather than aided, by the appellants' pleading. The re-amended defence and counterclaim was prolix and replete with references to evidence and unnecessary particulars, much of which was, as the learned primary judge said, irrelevant and foreign to fulfilment of the function that a pleading is intended to serve. Such an approach to pleading serves only to obscure the true issues for determination by the court and contributes significantly to the cost of litigation.
In the present case, the learned primary judge and this Court have undertaken the onerous task of analysis required to distil the re‑amended defence and counterclaim to its essence, so as to determine whether it discloses a reasonable cause of action. Such a munificent approach should not necessarily be assumed in future. As the learned
primary judge indicated, the failure to adhere to the requirements of O 20 r 8(1) of the Rules of the Supreme Court may henceforth be met with a more blunt response, in which the pleading as a whole may be struck out on the basis that it may prejudice, embarrass or delay the fair trial of the action.
MURPHY JA & SOFRONOFF AJA:
Introduction
This appeal is against an interlocutory decision of Vaughan J in National Australia Bank Limited v Rowe[14] (primary decision). The primary decision concerned the respondent's (NAB's) application to strike out the entirety of the appellants' counterclaim in the primary proceedings, pursuant to O 20 r 19 of the Rules of the Supreme Court 1971 (WA) (Rules).
[14] National Australia Bank Limited v Rowe [2018] WASC 330.
The appellants (Mr and Mrs Rowe) appeal against order 2 of the orders made on 1 November 2018, by which the judge struck out almost all of their counterclaim.
Leave to appeal is required pursuant to s 60(1)(f) of the Supreme Court Act 1935 (WA).
Background
The pleadings are discussed in detail later. In general terms, in the primary proceedings, NAB seeks repayment of money lent under two home loan facilities (the 'Gawthorne Loan Agreement' and the 'Yallingup Loan Agreement'). The money the subject of the Gawthorne Loan Agreement is said to have been advanced on 28 August 2012. The money the subject of the Yallingup Loan Agreement is said to have been advanced on 6 May 2015. The amount said to be due under the two Loan Agreements is approximately $1.6 million.[15]
[15] Primary decision [11] - [12].
NAB also seeks delivery up of possession of the 'Yallingup Property', which is said to be subject to a registered mortgage (the 'Yallingup Mortgage') granted by Mr and Mrs Rowe to NAB and registered on 7 May 2015, to secure the money due under the two Loan Agreements.[16]
[16] Primary decision [11] - [12].
In broad terms, by their defence, Mr and Mrs Rowe (1) deny that they signed the Gawthorne Loan Agreement, the Yallingup Loan Agreement, and the Yallingup Mortgage, (2) allege that the Yallingup Mortgage and the Gawthorne Mortgage are defeasible for fraud and should be set aside, (3) allege 'irregularities' as to the accounts in relation to the two Loan Agreements, and (4) seek to set off their alleged entitlement to 'damages and other compensation and remedies' as pleaded in the counterclaim, in extinction or diminution of any liability they have to NAB.[17]
[17] Primary decision [13] - [14].
By their counterclaim, which exceeded 290 paragraphs, Mr and Mrs Rowe pleaded, in effect (1) various business and other dealings, both directly and through their associated companies (whose names may be abbreviated to KTEQ and GCT), (2) the voluntary administration and subsequent liquidation of KTEQ and GCT, and (3) the credit arrangements in relation to those business and other dealings, including with NAB and other financiers, going back some 17 years to 2002. At the conclusion of the counterclaim, the first prayer for relief is for a 'general account' covering this period as to (1) the accounts between NAB and Mr and Mrs Rowe, (2) the accounts between NAB and KTEQ, and (3) the accounts between NAB and GCT.[18]
[18] Primary decision [19] - [20].
NAB's strike‑out application was focused on Mr and Mrs Rowe's claim for a general account in par A of the prayer for relief in the counterclaim. The grounds for the strike-out application were that the counterclaim disclosed no reasonable cause of action, pursuant to O 20 r 19(1)(a) of the Rules, or alternatively that the counterclaim would prejudice, embarrass or delay the fair trial of the action, pursuant to O 20 r 19(1)(c) of the Rules.[19]
[19] Primary decision [37].
The pleadings
NAB's pleaded action is, in substance, for:
1.recovery of the balance of the debt (allegedly) due under the Gawthorne Loan Agreement, after having credited Mr and Mrs Rowe with the proceeds of sale of the Gawthorne property, after the exercise of the power of sale under the Gawthorne Mortgage;
2.recovery of the debt (allegedly) due under the Yallingup Loan Agreement; and
3.possession of the Yallingup property under the (subsisting) Yallingup Mortgage.
Mr and Mrs Rowe, by their re‑amended defence (defence), alleged, in effect, that:
1.In relation to the Gawthorne transaction:
(a)they did not execute the Gawthorne Loan Agreement;[20]
[20] Defence, par 3.2; BB 72.
(b)if the Gawthorne Loan Agreement is binding, there were 'irregularities' such as omissions of barcodes on statements for the relevant loan account (2871), as a result of which the statements do not accurately, or reliably, record transactions on the loan account;[21]
[21] Defence, par 3.6; BB 72.
(c)they did not sign the Gawthorne Mortgage, and the Gawthorne Mortgage is defeasible for fraud and should be set aside as alleged in the counterclaim;[22] and
[22] Defence, pars 9, 38.3; BB 78 - 79, 88 - 89. In the prayer for relief D, Mr and Mrs Rowe sought (amongst other things) a declaration that the Gawthorne Mortgage was at all material times void and unenforceable as against Mr and Mrs Rowe, and an order directing the Registrar of Titles to cancel the registration of them. Similar relief was sought in relation to the Gawthorne Mortgage in the prayer for relief G.
(d)they deny that NAB was entitled to sell the Gawthorne property, and do not admit that the sum of money pleaded by NAB was received from the sale of that property.[23]
[23] Defence, par 19; BB 82 - 83.
2.In relation to the Yallingup transaction:
(a)they did not execute the Yallingup Loan Agreement;[24]
(b)there are irregularities in bank statements with respect to the loan account (4042) in connection with the Yallingup Loan Agreement, as a result of which the statements do not accurately, or reliably, record transactions on the loan account;[25]
(c)the Yallingup Loan, if made, was for a purpose, including the refinance of a Commonwealth Bank of Australia (CBA) loan, and the loan did not give effect to the purpose,[26] and, further their CBA loan account bank statements also had irregularities;[27]
(d)they did not sign the Yallingup Mortgage, and the Yallingup Mortgage is defeasible for fraud and should be set aside as claimed in the counterclaim;[28]
(e)certain funds were paid into and out of the account 4042 in respect of the Yallingup Loan on 6, 8 and 12 May 2015;[29] and
(f)they deny that they have any obligation to deliver up possession of the Yallingup property.[30]
3.In relation to the whole of the statement of claim they are 'entitled to set‑off and hereby set‑off their entitlement to damages and other compensation and remedies by reason of the matters pleaded in the … counterclaim in extinction or diminution of any liability that [they have] to [NAB] pursuant to the Gawthorne Loan Agreement and/or the Yallingup Loan Agreement or otherwise'.[31]
[24] Defence, pars 6.2 - 6.3; BB 74.
[25] Defence, par 6.5; BB 75. This plea was presumably in the alternative to the plea that they did not sign the Yallingup Loan Agreement.
[26] Defence, par 6.6 - 6.7; BB 76 - 77.
[27] Defence, par 7; BB 77.
[28] Defence, pars 10, 38.3; BB 79, 88 - 89. In the prayer for relief D, Mr and Mrs Rowe sought a declaration that the Yallingup Mortgage is void and unenforceable against them, and an order directing the Registrar of Titles to cancel the registration of the mortgage.
[29] Defence, par 16; BB 81.
[30] Defence, par 34; BB 87.
[31] Defence, par 38.5; BB 89.
Other aspects of the counterclaim are considered below. At this point, it is convenient to note that Mr and Mrs Rowe pleaded further alleged irregularities in the counterclaim in relation to the Yallingup Loan account (4042).[32] The particulars, in this regard, referred to a KTEQ loan account (7532) in the period 2010 ‑ 2012. As explained by counsel, the allegations of irregularity in the KTEQ loan account, some years earlier, are said to provide an inferential basis for the conclusion that there were irregularities in the Yallingup Loan account.[33] It is unnecessary for present purposes to consider whether the particulars are reasonably capable of supporting the plea.
[32] Counterclaim, par 281; BB 182.
[33] Appeal ts 79.
As noted earlier, the counterclaim included an extensive pleading of various business and other arrangements and the provision of credit to Mr and Mrs Rowe, and their associated companies KTEQ and GTC, going back many years. The counterclaim pleaded, amongst other things:
1.The purchase of certain properties by Mr and Mrs Rowe, their mortgage to NAB, and subsequent dealings with the properties: the Calluna Way property (purchased in April 2000 and sold by Mr and Mrs Rowe in 2004), the Zamia Road property (refinanced in 2008 by Mr and Mrs Rowe with a mortgage from the CBA which later entered into possession), the Cherratta Road property (purchased in 2006 by Mr and Mrs Rowe using another lender and later refinanced by NAB), and two other properties partly owned by Mr and Mrs Rowe - the Anderson Road property and the Gap Ridge property (pars 50 - 109 and 136 - 143).[34]
[34] The pleaded events in relation to these properties concerning NAB relate to the periods (1) April 2000 to July 2004 (Calluna Way); (2) July 2004 to May 2008 (Zamia Road); (3) October 2006 to May 2013 (Cherratta Road); (4) April 2010 to June 2016 (Anderson Road), and (5) July 2011 to November 2011 (Gap Ridge property). There is no dispute that none of these properties remain owned by Mr and Mrs Rowe and any mortgages have been discharged: primary decision [23].
2.The purchase of certain properties by KTEQ: the Fairbairn property, the Unit 6 McCann Street property, the Victoria Road property and the South Trees property, and certain mortgages of the properties to NAB (pars 110 - 135).[35]
[35] The pleaded events occurred between 2011 and 2016. It appears that there was an allegation that the McCann Street property (par 120) and the Victoria Road property (par 128) were or were purportedly mortgaged to NAB. Again, it is not in dispute that none of the properties remain owned by KTEQ or GCT and that any mortgages to NAB have been discharged: primary decision [23].
3.A 2010 Master Asset Finance Agreement (MAFA), and accompanying facility, between NAB and KTEQ (pars 144 ‑ 149, 155 - 183),[36] and a 2011 MAFA between NAB and GCT (par 184).
[36] Primary decision [26].
4.Various plant and equipment loans made by NAB to either KTEQ or GCT, and certain alleged irregularities in respect of those dealings (pars 213 - 231).[37]
5.Certain details of a September 2014 overdraft facility between NAB and KTEQ (pars 232 ‑ 240).[38]
6.Certain allegations and communications about, and inquiries as to, certain internet banking facilities associated with NAB's 'money tracker' program in relation to KTEQ and GCT, and the authorisation to operate certain KTEQ and GCT accounts by a shareholder and employee of KTEQ (Ms Baruffi) (pars 47.11, 147, 241 ‑ 280).[39]
7.Various alleged 'irregularities' with respect to other loan accounts,[40] including for KTEQ, the Anderson Road property and GCT, by which it is alleged that the bank statements and other materials issued by NAB were not accurate or reliable in respect of those loan accounts (pars 281 - 287).
8.The contents of various oral and written communications with respect to the Cherratta Road property, a KTEQ account, certain Equipment Loan accounts, and GCT, in connection with alleged inconsistencies (pars 288 - 294).[41]
9.That (1) NAB had issued certain demands, in early 2016, in relation to KTEQ, 'copied to [Mr and Mrs Rowe] … as guarantors' for the repayment of certain sums, (2) that NAB's demands of 10 and 16 February 2016 stated, in effect, (amongst other things), that the payments sought were secured by mortgages over properties owned by KTEQ (Fairbairn, Unit 6 McCann Street, South Trees and Victoria Road), and secured by a mortgage over the Cherratta Road property (Cherratta Road Mortgage), and (3) that Mr and Mrs Rowe did not pay (and were not liable to pay) any of the amounts so demanded by NAB (pars 307 ‑ 310, 314 ‑ 318, 323 ‑ 324).
10.That (1) NAB also issued certain demands, in early 2016, in relation to GCT, 'copied to [Mr and Mrs Rowe] … as guarantors', and (2) that Mr and Mrs Rowe did not pay (and were not liable to pay) any of the moneys so demanded by NAB (pars 311 ‑ 313, 325 ‑ 326).
11.That (1) NAB also issued a demand, 'copied to [Mr and Mrs Rowe]', dated 19 February 2016, which stated (amongst other things) that the Cherratta Road Mortgage had been given as security, and (2) that Mr and Mrs Rowe had not made (and were not liable to make) any payments pursuant to that demand either (pars 318 ‑ 322).
12.That receivers and managers sold the KTEQ properties of Victoria Road, Unit 6 McCann Street, Fairbairn and South Trees in June to December 2016 (pars 327 ‑ 330).
13.That the receivers and managers of KTEQ realised gross assets in excess of $8 million, of which they paid approximately $6 million to NAB, and that the receivers and managers of GCT realised gross assets of approximately $1.6 million, of which approximately $580,000 was paid to NAB (pars 331 ‑ 332).
[37] Primary decision [29].
[38] Primary decision [29].
[39] In oral submissions, counsel for Mr and Mrs Rowe said that it was 'implicit' in the pleading that it was being alleged that NAB was in breach of contract (presumably to KTEQ and/or GCT) for allowing Ms Baruffi to operate the accounts: appeal ts 19 ‑ 20.
[40] Ie, other than the Yallingup Loan and the Gawthorne Loan.
[41] Primary decision [33].
There were also allegations to the effect that:
1.In relation to the Cherratta Road property, Mr and Mrs Rowe's signatures on certain loan agreements and the Cherratta Road Mortgage were not theirs, and that NAB procured the registration of the Cherratta Road Mortgage by fraud within the meaning of s 68(1) of the Transfer of Land Act 1895 (WA) (TLA) (pars 78 ‑ 79, 81, 93). In prayer for relief D and G, Mr and Mrs Rowe sought a declaration that the Cherratta Road Mortgage was void and unenforceable against them and, in prayer for relief D, an order directing the Registrar of Titles to cancel the registration of the Cherratta Road Mortgage.
2.Mr and/or Mrs Rowe 'purportedly' guaranteed certain financial obligations of KTEQ and GCT, and that in certain instances their signatures were purported signatures and that their alleged signatures were falsely witnessed by an officer of NAB (pars 113, 126, 133, 144 ‑ 145, 156 - 174, 180 - 181, 184 ‑ 211).[42]
[42] Primary decision [27].
In relation to the 'purported' guaranteeing of the debts of KTEQ and/or GCT, Mr and Mrs Rowe did not plead that they had incurred any obligations as actual guarantors. Further, it was not pleaded that either the Yallingup Mortgage or the Gawthorne Mortgage secured any 'purported' liabilities of Mr and Mrs Rowe as 'purported' guarantors. Nor did Mr and Mrs Rowe plead that they paid any money to NAB pursuant to any 'purported' guarantees. Rather, their pleaded case was that certain alleged demands were made by NAB in early 2016, 'copied' to them as guarantors, and that they did not make any payments pursuant to these demands by NAB.[43] Moreover, NAB does not allege in the primary proceedings that Mr and Mrs Rowe owe any money pursuant to any guarantees given by Mr and Mrs Rowe.
[43] Counterclaim, pars 307 - 326; BB 198 - 209.
It is not alleged in the defence or counterclaim that Mr and Mrs Rowe advanced money to NAB or were otherwise creditors of NAB.
The relief sought in prayers for relief A, B, D and G were in the following terms:
A.An order for the taking of a general account of [Mr and Mrs Rowe's], KTEQ's and [GCT's] accounts with [NAB], and of the accounts between [NAB] and [Mr and Mrs Rowe] and each of them on the footing of wilful default by [NAB], alternatively on a common account basis.
B.Payment of any monies found due by [NAB] to [Mr and Mrs Rowe] … on the taking of accounts.
…
D.A declaration that the Gawthorne Mortgage, the Yallingup Mortgage and the Cherratta Road Mortgages at all materials times were void and unenforceable as against [Mr and Mrs Rowe], and an order directing the Registrar of Titles to cancel the registration of them.
…
G.Further or alternatively, a declaration that the Cherratta Road Mortgage and the Gawthorne Mortgages were at all times void and unenforceable.
Primary decision
The judge said:[44]
Counsel for the plaintiff pointed out that the claim for a general account sought an account going back to 2002. On that basis counsel submitted, and I accept, that the strike-out application did not raise a mere technical point. The claim for an account will significantly increase the scope of the plaintiff's discovery obligations and prolong the trial. If the claim to an account fails to disclose a reasonable cause of action, striking out the claim will better achieve the goal in O 1 r 4A and the objects in O 1 r 4B of the Rules of the Supreme Court 1971 (WA).
Judge's summary of principles for general account
[44] Primary decision [40].
The judge, at [113] of the primary decision, stated the principles as follows:
(1)Ordinarily an applicant for an order for an account must demonstrate two matters: (a) that the parties are in an accounting relationship; and (b) that, in performance of the accounting party's obligations, the applicant is entitled to some amount from the accounting party.
(2)Where an account is sought by a mortgagor before the mortgagee exercises its power of sale the mortgagor must make an offer to redeem.
(3)Post-discharge of a mortgage the court may still order an account. There are then two usual forms of claim: (a) where a former mortgagor seeks to recover a surplus following exercise of a power of sale; and (b) where a former mortgagor seeks to recover an overpayment.
(4)Where a former mortgagor seeks an order to account to recover a surplus on exercise of the mortgagee's power of sale the former mortgagor must plead and prove that there is a surplus.
(5)Where the claim is one of overpayment the court will not order an account if the mortgagor is able to particularise the amounts said not to have been lawfully payable. Whether there might otherwise be an account will ordinarily depend on proof that the former mortgagor is entitled to some unquantified amount. But here, arguably, there is at least one exception to the general rule expressed at par (1)(b) above. Where, by reason of fraud, a former mortgagor is unable to plead and prove that it is entitled to some amount from the mortgagee, it might be that the court will order the taking of accounts even if the exercise may prove futile.
(6)The court may order an account where the proceedings would otherwise be deficient or incompetent due to complexity. But complexity alone is insufficient. And, in any case, complexity does not warrant equitable intervention unless such an account could not otherwise possibly be taken justly and fairly.
There was an issue in the appeal as to the true effect of the finding referred to in [113(1)(b)] of the primary judgment above.[45] Mr and Mrs Rowe contend that his Honour found, in effect, that ordinarily a plaintiff seeking an account must plead that upon the taking of the account, some amount of money will be found due to that party. An alternative construction of the reasons, advanced by NAB, might be that the judge found that in the particular circumstances of this case, Mr and Mrs Rowe were required to plead that some amount would be found due to them upon the taking of an account. It appears, when the primary decision is read as a whole,[46] that his Honour concluded, in effect, that, subject to one possible exception, a party seeking an account in equity must ordinarily plead that there will be some amount found due to that party (although the precise amount may not be known) upon the completion of the taking of the account.
[45] Appeal ts 36, 40 - 41, 101 - 103.
[46] And, in particular, [56] - [73], and the last sentence of [111], of the primary decision.
The arguable exception, which the judge referred to in [113(5)] of the primary decision above, was described by the judge as the 'possible "fraud" exception'.[47] The possible exception, according to the judge, is where, after discharge of the mortgage, the former mortgagor is seeking an account but cannot plead, because of fraud by the mortgagee, that some amount will be found due to the mortgagor upon the taking of the account. In this way 'it might be that the court will order the taking of accounts even if the exercise may prove futile'.[48]
Findings on general account
[47] Primary decision [93], [117], read in the context of primary decision [82] - [102].
[48] Primary decision [113(5)].
The judge said Mr and Mrs Rowe's counterclaim for a general account was sought in three ways:[49]
1.As to the amount, if any, due in respect of the Yallingup Mortgage ‑ encompassing the amounts due under the Gawthorne Loan Agreement and the Yallingup Loan Agreement as well as any offsetting claims.
2.As to any overpayments in respect of now finalised mortgages and accounts in relation to which Mr and Mrs Rowe were mortgagors (for example, the Calluna Way, Zamia Road and Cherratta Road properties).
3.As to the dealings between NAB on the one hand, and KTEQ and GCT on the other.
[49] Primary decision [114].
As to the first of those matters, the judge found that the claim in relation to the Yallingup Mortgage did not disclose a reasonable cause of action. The judge said Mr and Mrs Rowe made no offer to redeem, and instead they deny the validity of the Yallingup Mortgage by claiming it to be defeasible for fraud.[50]
[50] Primary decision [114] - [115].
As to the second of those matters:[51]
1.The judge said Mr and Mrs Rowe did not plead that, on an account, they would be entitled to some amount from NAB. Instead they contended that without an account being taken it was impossible for Mr and Mrs Rowe to ascertain whether money was owed to them by NAB. As they had not pleaded any entitlement to some amount from NAB on the taking of accounts, the plea did not disclose an arguable cause of action, subject to a consideration of the possible fraud exception.
2.Mr and Mrs Rowe pleaded fraud in a limited way. Fraud was not pleaded for all aspects of Mr and Mrs Rowe's dealings with NAB, and allegations of irregularities in the pleading did not amount to allegations of fraud. More fundamentally, to the extent that fraud was pleaded, Mr and Mrs Rowe did not allege that any alleged fraudulent conduct was the reason why Mr and Mrs Rowe are unable to determine whether NAB owed them some amount. Accordingly the pleading was insufficient, in relation to accounts and mortgages previously discharged, to bring the case within an arguable exception to the general rule that in order to obtain an account, Mr and Mrs Rowe must plead an entitlement to some amount from NAB.
3.Accordingly the pleading failed to disclose an arguable cause of action in respect of finalised mortgages and accounts to which Mr and Mrs Rowe were mortgagors.
[51] Primary decision [114], [116] - [119].
As to the third of those matters, the judge said that there were a number of obstacles to the claim:[52]
1.Mr and Mrs Rowe did not plead that KTEQ and GCT would be entitled to some money from NAB on the taking of an account.
2.There was no plea to the effect that Mr and Mrs Rowe were unable to plead and prove that KTEQ and GCT were entitled to money from NAB as their former mortgagee, by reason of fraud.
3.Nor were any facts pleaded to show that Mr and Mrs Rowe had standing to seek an account for KTEQ and GCT. Any claim for an account by KTEQ and GCT should be brought by those parties, and the accounts sought by Mr and Mrs Rowe cannot result in any diminution of their alleged liability to NAB.
4.Insofar as Mr and Mrs Rowe contended in submissions that a general account is appropriate because they might not have borrowed funds if KTEQ had not made alleged overpayments to NAB, the submission cannot be accepted as the pleading does not aver that fact. Moreover, even if KTEQ were allegedly overcharged, it did not follow that NAB claimed more money from Mr and Mrs Rowe. Also, even if that were the case, the person with a legal entitlement to make a claim for the alleged overcharging is KTEQ, rather than Mr and Mrs Rowe.
5.Insofar it was suggested that Mr and Mrs Rowe had standing to claim a general account for KTEQ and GCT if, as guarantors, they had paid money on behalf of KTEQ and GCT to NAB, there was no plea by Mr and Mrs Rowe that as guarantors they had made payment to NAB. Nor did NAB's claim in the primary proceedings concern any claim by NAB against Mr and Mrs Rowe under any guarantee in relation to any borrowings by KTEQ and GCT.[53]
6.The pleaded facts in support of the claim for an account on behalf of KTEQ and GCT do not disclose a reasonable cause of action, and in the pleaded circumstances, NAB is not an accounting party in relation to Mr and Mrs Rowe concerning the dealings between NAB and KTEQ and GCT.
[52] Primary decision [120] - [130].
[53] The judge referred, apparently for completeness, to Commercial and General Law (SA) Pty Ltd v Permanent Custodian Ltd (No 2) [2012] SASC 216; (2012) 273 FLR 247 [56], in relation to the question of a guarantor seeking an account as to the alleged improper exercise of the mortgagee's power of sale so as to reduce liability under a guarantee: see primary decision [127].
The judge also said that Mr and Mrs Rowe's reliance on the complexity of the dealings between the parties and associated companies did not transform the deficiencies in the pleading into a reasonable cause of action. That was particularly so in relation to the account sought between NAB on the one hand, and KTEQ and GCT on the other. Any complexity in that regard raised a false issue. Mr and Mrs Rowe lacked standing to seek an account for KTEQ and GCT. The judge also said 'much of the suggested complexity is eliminated when the [counterclaim] is considered stricken of the dealings as to [NAB] and KTEQ and GCT'.[54]
[54] Primary decision [130].
The judge also said that complexity alone did not justify an order for an account.[55] The judge said in this regard:[56]
It should also be clarified that complexity alone will not justify, or arguably justify, an order for the taking of an account. The general requirements that must be met to establish an entitlement to an account continue to apply. Complexity alone is not described in the cases as providing any exception to the general requirements. Thus the applicant must also establish that it is in a relationship with the other party whereby the other party is an accounting party. Such an accounting relationship existed in all the cases on which counsel for the defendants relied.[57]
[55] Primary decision [130].
[56] Primary decision [111].
[57] See the cases referred to at [111] of the primary decision.
The judge further said that a trial judge could justly and fairly ascertain the state of the accounts as between NAB and Mr and Mrs Rowe, and that the contrary proposition was not reasonably arguable.[58] In that regard, the judge referred to the court's concurrent administration of law and equity and said:[59]
It cannot be contended that a trial before a judge would not be able to competently ascertain, with precision, what amount is due by [Mr and Mrs Rowe] to [NAB] or the other way around. Indeed given that [Mr and Mrs Rowe] denies [NAB's] pleas as to the amounts owing under the Loan Agreements, it will be necessary for the trial judge to determine what amount, if any, is due by [Mr and Mrs Rowe] to [NAB].
[58] Primary decision [131].
[59] Primary decision [129] - [131] read with [109].
The judge concluded that Mr and Mrs Rowe's pleaded claim for a general account as to the dealings between NAB and Mr and Mrs Rowe and their associated companies did not disclose a reasonable cause of action. No part of Mr and Mrs Rowe's claim for a general account survived the strike‑out application. The judge gave Mr and Mrs Rowe the opportunity to re-plead a claim for an account:[60]
1.in relation to the Yallingup Mortgage in the event that they decided to offer to redeem it; and
2.in relation to the mortgages which had been discharged some time ago, in the event that it is open to plead an allegation to the effect that NAB committed a fraud as a result of which they may have a claim for overpayment in relation to those mortgages, but are unable to ascertain the amount without an account.
[60] Primary decision [99], [102], [113(6)], [129], [135].
Mr and Mrs Rowe are not able to re‑plead their claim for an account of the dealings between NAB on the one hand and KTEQ and GCT on the other. The judge said that this might be revisited if NAB were to sue Mr and Mrs Rowe in the capacity as guarantors of the debt alleged to be owed by KTEQ and GCT to NAB.[61]
Counterclaim repeating the defence
[61] Primary decision [129], [136] - [137].
NAB sought to strike out the whole of the counterclaim, including the paragraph of the counterclaim that repeated the defence (par 40). However, NAB did not suggest in its written submissions that the defence should be struck out, and NAB accepted at the hearing that the defence must be litigated. The judge found that par 40 should remain, as should pars C, D, E and F of the prayer for relief so far as they reflect the defence made to NAB's claim under the Yallingup Mortgage.[62]
Misleading conduct and unconscionable conduct claims
[62] Primary decision [139].
Mr and Mrs Rowe pleaded a claim in relation to misleading conduct and unconscionable conduct (pars 300 - 302). The claims pleaded in relation to misleading conduct and unconscionable conduct referred to the alleged contraventions as 'by its conduct pleaded above'. The judge found that the plea was too general, and that the plea referred to parts of the counterclaim for an account that were struck out, meaning the grounding conduct for the plea fell away. The claims also referred to Mr and Mrs Rowe suffering 'loss or damage by reason of the conduct', without specifying Mr and Mrs Rowe's case on causation or the nature of the loss or damage suffered. The judge thus struck out the pleading as it related to misleading conduct and unconscionable conduct but gave Mr and Mrs Rowe liberty to re-plead the claims.[63]
Banking Code of Practice claim
[63] Primary decision [141] - [143].
Mr and Mrs Rowe pleaded (at pars 303 - 306) that the 2004 Banking Code of Practice (2004 Code) and the 2014 Banking Code of Practice (2014 Code) were either incorporated into the express terms of guarantees executed by Mr and Mrs Rowe or were incorporated by Mr and Mrs Rowe accepting an offer to be bound by one of those codes. Mr and Mrs Rowe pleaded any breach of the 2004 Code or the 2014 Code was a breach of contract by NAB. The judge found that Mr and Mrs Rowe failed to allege any breach of the 2004 Code or the 2014 Code, and that Mr and Mrs Rowe failed to plead that any breach caused loss to them. The judge found that no reasonable cause of action was disclosed by the pleading in this claim, and struck out pars 303 - 306. The judge gave Mr and Mrs Rowe liberty to re-plead the claim.[64]
Orders
[64] Primary decision [144] - [147].
The judge ordered that:
2.The following portions of the re-amended defence and counterclaim dated 12 September 2018 are struck out:
(a)paragraphs 41 to 332;
(b)paragraphs A, B, G, H and I of the prayer for relief; and
(c)as to paragraph D of the prayer for relief - the words 'the Gawthorne Mortgage' and 'and the Cherratta Road Mortgages'.
The judge also ordered, by order 3 of the orders, that Mr and Mrs Rowe were granted leave to re-plead their counterclaim and were ordered to file and serve any minute of further re-amended defence and counterclaim setting out the terms in which they seek leave to amend by 22 November 2018. The minute was to be 'in conformity with' the primary decision.
Grounds of appeal - the issues
It is unnecessary to set out in detail the grounds of appeal. Counsel for Mr and Mrs Rowe summarised the case on the appeal by reference to the following issues:
1.Does the counterclaim plead facts by which [Mr and Mrs Rowe] could establish at trial there is an accounting relationship between them and [NAB]?
2.Is it an inflexible requirement that, subject only to a limited fraud exception, [Mr and Mrs Rowe] must plead and prove at trial an entitlement to some, presently unquantified, amount in order to establish an entitlement to an order for an account to be taken?
3.Have [Mr and Mrs Rowe] pleaded in the counterclaim facts sufficient to establish an entitlement for an order for an account to be taken under the M'Intosh v Great Western Railway[65] principle?
4.Does the counterclaim otherwise plead facts sufficient to establish an arguable entitlement for an order for an account to be taken?
5.Because s 16(1)(d)(i) of the Supreme Court Act 1935 confers power and authority on this Court to execute the equitable jurisdiction of the Lord Chancellor of England as at 18 June 1861, is it appropriate for the equitable jurisdiction to order an account to be taken and appropriate inquiries and other ancillary orders in aid of common law rights to be confined and limited in the manner done in the decision under appeal?
6.If the answer to issue 5 is 'yes', was it appropriate to do so on the striking out application before the Court which was made on a limited basis?
7.If the answer to issue 6 is 'yes':
7.1were [Mr and Mrs Rowe] denied procedural fairness by not being afforded an adequate opportunity to make submissions on the matters decided before the decision was made?
7.2if the answer to issue 7.1 is 'yes', did the denial of procedural fairness deprive [Mr and Mrs Rowe] of the possibility of a successful outcome?
[65] M'Intosh v Great Western Railway Company [1850] 2 Mac & G 74; (1850) 42 ER 29.
Most of the arguments in the appeal were directed to a consideration of the general principles for an account in equity, including in the context of the mortgagor/mortgagee relationship, and the case law.
Accounting - general principles
General principles
The authorities referred to by the judge, and the parties in their written and oral submissions, were extensive. Debate focused on (1) the general principles relevant to when an account would be decreed in equity, and (2) the principles of particular application to the mortgagor/mortgagee relationship. The following discussion seeks to address the general principles and main authorities canvassed in the appeal as to the former question. The particular principles and authorities relevant to mortgages are discussed in the next section of these reasons. It is to be recalled that the observations are made with respect to the issues raised in the appeal in the context of the judge's reasons dealing with NAB's strike‑out application.[66]
[66] The principles of which are referred to in General Steel Industries Inc v Commissioner for Railways (New South Wales) (1964) 112 CLR 125.
Before a party can be ordered to account, liability to account must be established: Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd.[67]
[67] Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd [2000] HCA 25; (2000) 202 CLR 588 [56].
An account is one of the oldest common law actions, instances of which appeared as early as 800 years ago. The account was issued as a praecipe writ, in the form of an order from the king that the defendant 'does account'. It involved two stages: (1) a decision that the defendant was liable to account (quod computet), which, if it entailed issues of fact, was decided by a jury, and (2) a taking of the account (by court‑appointed auditors - with no power to order discovery), drawing with it liability and enforcement (quod recuperet).[68] The subject matter was not confined to money but included goods and other property, reflecting its origins at a time when goods and services were primary forms of payment.[69]
[68] See, eg, Anonymous (1388/89) 12 Rich II (Jenk 66); 145 ER 47.
[69] Watson JA, The Duty to Account: Development and Principles (2016) 1 [2], 14 [28], 38 [95], 62 [169], 64 [173].
The defendant could be required to account generally[70] or in respect of specific dealings.[71]
[70] For example, Mellish v Royal African Co and Richard Edlin [1679] 2 Chan Cas 11; (1679) 22 ER 822: an order that an agent account generally in relation to the agent's dealings on behalf of the principal.
[71] For example, Turner v Wright [1862] 2 NSW SCR Eq 9: an account ordered of the number of cattle on a station purchased by the plaintiff where the purchase price was to reflect the number of cattle at the time of purchase and a muster had not been done as required under the contract.
Accounting parties at law included receivers (actual and constructive), partners, joint tenants and tenants in common, executors, employees, bailees, factors, and agents.[72]
[72] Watson, The Duty to Account, 82 [225] - 98 [281].
By at least the 1700s, in part due to the rise of the common law action for (in effect) money had and received, and the perceived difficulties of an account at law, the common law action for an account, was falling, or had largely fallen, into desuetude. Chancery in the 1700s was effecting bills for accounts at law in its concurrent equitable jurisdiction. In his Commentaries in 1760, Blackstone observed that the common law action for account was very seldom used and that:[73]
It is found by experience that the most ready and effectual way to settle these matters of account is by bill in a court of equity, where a discovery may be had on the defendant's oath, without relying merely on the evidence which the plaintiff may be able to produce.
[73] Watson, The Duty to Account, 125 [380] - [381] citing Blackstone, Commentaries, vol III, ch 9, 163. See also Wilkins v Wilkins (1689) 1 Show KB 71, where Holt CJ said 'the inconvenience is, the giving of a long rambling account in evidence to the jury'.
The categories of relationships or circumstances in which equity would decree an account in support of a legal right are not closed. In London, Chatham and Dover Railway Company v South Eastern Railway Company,[74] a case on which Mr and Mrs Rowe placed particular reliance, Lindley LJ said:
Before the Judicature Acts a suit for an account could be maintained in equity in the following cases: - (1.) Where the plaintiff had a legal right to have money payable to him ascertained and paid, but which right, owing to defective legal machinery, he could not practically enforce at law. Suits for an account between principal and agent, and between partners, are familiar instances of this class of case. (2.) Where the plaintiff would have had a legal right to have money ascertained and paid to him by the defendant, if the defendant had not wrongfully prevented such right from accruing to the plaintiff. In such a case a Court of law could only give unliquidated damages for the defendant's wrongful act; and there was often no machinery for satisfactorily ascertaining what would have been due and payable if the defendant had acted properly. In such a case, however, a Court of Equity decreed an account, ascertained what would have been payable if the defendant had acted as he ought to have done and ordered him to pay the amount: M'Intosh v Great Western Railway Company… is the leading authority in this class of case. (3.) Where the plaintiff had no legal but only equitable rights against the defendant, and where an account was necessary to give effect to those equitable rights. Ordinary suits by cestuis que trust against their trustees and suits for equitable waste fell within this class. (4.) Combination of the above cases.
[74] London, Chatham and Dover Railway Company v South Eastern Railway Company [1892] 1 Ch 120, 140.
The case of M'Intosh, referred to by Lindley LJ in the second category, and on which Mr and Mrs Rowe also placed significant reliance, was a case in which, in broad terms, the plaintiff entered into a building contract with the defendant for the execution of the building works. Payment to the plaintiff depended upon certifications being made by the defendant's principal engineer. The plaintiff claimed that he had carried out the works contracted for, but the defendant's engineer had failed to issue the proper certificates upon which the plaintiff's remuneration depended. Lord Cottenham treated the matter as a case of equitable fraud and said:[75]
It will probably be extremely difficult for a Court of Equity to do justice to the Plaintiff, according to the case made by the bill; but there does not appear to be any possibility of a Court of law doing so. What might be the effect of such a state of things if this impossibility had arisen from the act or conduct of the Plaintiff, it is not necessary to consider, because it is, I think, sufficiently stated and shewn that it not only exists in this case, but that it has arisen from the conduct of the Defendants, not adopted probably from any fraudulent intention or scheme, but now made the instrument of fraud if it should prevail to prevent the Plaintiff from recovering payment of what is justly due to him.
…
It is true that the specification and contract constitute a relationship between the Plaintiff and the Defendants, which, if correctly acted upon, would have given to the Plaintiff a legal right, and a legal right … only, to the benefits he claimed by this bill; but if the facts stated in the bill are such as, if true, deprive the Plaintiff of the means of enforcing such legal right, such facts having arisen from the conduct of the Defendants, or of their agent so recognised by the specification and contract, and now used for the fraudulent purpose of defeating the Plaintiff's claim altogether, the Defendants cannot resist the Plaintiff's claim in equity upon the ground that his remedy is only at law; nor is it any answer to shew that, if the Plaintiff cannot get at law what he contracted for, he may obtain compensation in damages. It is no answer to a bill for specific performance, that the Plaintiff may bring an action for damage for a breach of the contract, or in a proper case of a bill for discovery of specific chattels, that damages may be recovered in trover: the language of pleading is not that the Plaintiff has no remedy, but no adequate remedy save in a Court of Equity. It is therefore no answer, in the present case, for the Defendants to urge that if they, or their agent, have been neglectful of what they undertook to do, by which the Plaintiff has suffered, they may be liable in damages to the Plaintiff. He contracted for a specific thing, and is not bound to take that or something in lieu of it, if such other thing be not what this Court considers as a fair equivalent. I do not therefore consider that any answer is given to the Plaintiff's right to file a bill in this Court, by shewing that the ground upon which he seeks his right so to do, namely, the being barred of his legal remedy by the conduct of the Defendants, may subject them to damages at law. (emphasis added)
[75] M'Intosh v Great Western Railway Company [1850] 2 Mac & G 74; (1850) 42 ER 29, 37.
Another example of the second category is Harrington v Churchward.[76] In that case the plaintiff was engaged by the defendants to carry post by sea. It was agreed that he would receive a share of the profits (in addition to a salary) and it was agreed in that regard that the defendants would keep proper accounts, made up annually, and provide them to the plaintiff which, once verified by statutory declaration, would be binding and conclusive with respect to such matters. The plaintiff sued for an account when he did not receive any profit share. Wood VC said:[77]
Now, if there had been a declaration made year after year, as provided by the contract, as to the profits and earnings of the business, the case might have been different, but from the mode in which the parties have dealt it is plain to me that this gentleman has a right to come to this Court for an account of the profits, not in the shape of discovery, but under the clause contained in the agreement, providing that proper accounts should be made at annually, which has never been done. That never having been done, the plaintiff has a right … to have that account taken which the parties have not chosen to take for themselves, and that alone would be enough to bring him into this court. (emphasis added)
[76] Harrington v Churchward 1860] 29 LJ Ch 521.
[77] Harrington (525)
The learned authors of Meagher, Gummow & Lehane's Equity: Doctrines and Remedies have suggested that there are around 10 categories of case in which equity may decree an account in support of a legal right:[78] (1) mutual accounts, (2) fiduciary or quasi fiduciary relationship, (3) dissolution of partnership, (4) waste, (5) trespass, (6) intellectual property infringement, (7) protection of non‑accrued contractual rights,[79] (8) royalty agreements, (9) accounts otherwise too complicated to settle at common law, and (10) treasonable activities.
[78] Heydon JD, Leeming MJ and Turner, P G, Meagher Gummow & Lehane Equity: Doctrines and Remedies (5th ed, 2015) [26‑030] ‑ [26‑075].
[79] This is the second category referred to by Lindley LJ in London.
Mr and Mrs Rowe also rely in particular on the ninth category of case referred to in Meagher, Gummow & Lehane above. Mr and Mrs Rowe refer to the decision of Brereton J in Southern Equity Pty Ltd v Timevale Pty Ltd[80] and Australian Securities and Investments Commission v GDK Financial Solutions Pty Ltd.[81]
[80] Southern Equity Pty Ltd v Timevale Pty Ltd [2012] NSWSC 15.
[81] Australian Securities and Investments Commission v GDK Financial Solutions Pty Ltd [2006] FCA 1415; (2006) 236 ALR 699.
Southern Equity was a royalty case. Mr Maynard and his company owned certain intellectual property rights in relation to a cartoon of a fictitious Australian pub. The defendant, Timevale, was granted a licence to use the intellectual property in connection with its tourist facility known as 'Aussie World', in consideration for the payment of a royalty. The royalty was based on certain revenues derived (including from food and drink etc) from the operation of the tourist facility. The intellectual property rights were assigned to the plaintiff, Southern Equity. Southern Equity brought proceedings against Timevale alleging an underpayment of royalties. An account of the royalties payable was ordered. In a passage referred to by Mr and Mrs Rowe,[82] Brereton J said, evidently with respect to Timevale as a debtor (royalty payer) and Southern Equity as a creditor (royalty payee):[83]
[Southern Equity's claim] is a claim for debt ‑ for moneys due and owing by Timevale under the Agreement. That relationship of debtor and creditor satisfies the prerequisites to ordering an account that the plaintiff be entitled to moneys from the defendant, and that the defendant be an 'accounting party' [Doss v Doss (1843) 18 ER 464 at 472; Re Sharpe (Drummond J, Unreported, Federal Court of Australia, 11 December 1992), [5]]. Any account would be ordered for the purpose of calculating the amount of the debt, rather [than] assessing damages.
[82] Appeal ts 25.
[83] Southern Equity [112].
Doss v Doss,[84] referred to by Brereton J in Southern Equity in the above passage, is discussed in [74] ‑ [75] below. In Re Sharpe[85] (also referred to by Brereton J), Drummond J said:
The taking of an account is only appropriate once it has been established that the parties involved are in an accounting relationship with each other, that is, only once it has been established that one party is liable to pay to the other anything that is found, on the taking of the account, to be due to that other: Rapid Metal Developments (Australia) Pty Ltd v Rosato (1971) Qd R 82 at 88-90; Rockhampton Permanent Building Society v Petersen (1986) 1 Qd R 128 at 130 and Lang v Simon (1952) 53 SR (NSW) 508 at 514. Rules such as Order 39, rules 1 and 3 of the Federal Court Rules do not create a new cause of action or a new equity, nor do they confer a general right to an account in substitution for the trial of issues; these rules do not authorise the sending of the whole case to the Registrar, they only authorise the directing of such accounts as are subsidiary to determining the rights of the parties, thus emphasising that the main issue in suit cannot be disposed of by ordering the taking of an account: Rapid Metal Developments (Australia) Pty Ltd v Rosato at pages 88 and 89. (emphasis added)
[84] Doss v Doss [1843] 3 Moo Ind App 175; (1843) 18 ER 464.
[85] Re Sharpe [1992] FCA 616 [5].
Brereton J, in Southern Equity, also said at [110] that relevant factors which would incline a court to order an account include (1) that it would otherwise be difficult for the plaintiff to establish the true state of affairs, as the defendant is in possession and control of the relevant information and documents, and (2) that the accounts are too complex to be clearly resolved in a common law trial, that is to be left to a jury. For the first proposition, Brereton J cited Mackenzie v Johnston,[86] Beaumont v Boultbee[87] and Padwick v Stanley.[88] In relation to the second proposition, Brereton J referred to O'Connor v Spaight;[89] Frietas v Dos Santos;[90] Taff Vale Railway Co v Nixon[91] and Lang v Simon.[92]They are also relied on by Mr and Mrs Rowe. Those authorities, together with Doss, are referred to next.
[86] Mackenzie v Johnston [1819] 4 Madd 373; (1819) 56 ER 742.
[87] Beaumont v Boultbee [1802] 7 Ves 599; (1802) 32 ER 241.
[88] Padwick v Stanley [1852] 9 Hare 627; (1852) 68 ER 664.
[89] O'Connor v Spaight [1804] 1 Sch & Lef 305.
[90] Frietas v Dos Santos [1827] 1 Y & J 574; (1827) 148 ER 800, 801.
[91] Taff Vale Railway Co v Nixon [1847] 1 HLC 111; (1847) 9 ER 695, 701.
[92] Lang v Simon [1953] 53 SR (NSW) 508.
In O'Connor, the landlord brought an action at law for ejectment for non‑payment of rent. The tenant obtained an injunction restraining the action at law pending the taking of an account as to the rent due. The circumstances were that (1) the rent was payable per acre but the number of acres demised had not been ascertained, (2) there were no formal payments, or receipts, of rent, and (3) for 16 years the tenant had been accepting the landlord's bills, paying money on his order, and selling him goods on credit and supplying him and his family with money, for which he alleged that if credit were given, then a balance would appear due to him (the tenant). Lord Redesdale, in granting the injunction and ordering an account, said:[93]
The account has become so complicated that a Court of Law would be incompetent to examine it upon a trial at Nisi Prius, with all necessary accuracy, and it could appear only from the result of the account that the rent was not due. This is a principle on which Courts of Equity constantly act by taking cognisance of matters, which, though cognizable at Law are yet so involved with a complex account that it cannot properly be taken at Law, and until result of the account, the justice of the case cannot appear.
[93] O'Connor (309).
O'Connor is referred to in the English edition of Story's Commentaries on Equity Jurisprudence[94] on the topic of equity's jurisdiction to order an account with respect to rents and profits:
Between landlord and tenant accounts often extend over a number of years, where there are any special terms or stipulations in the lease, requiring expenditures on one side and allowances on the other. In such cases, where there are any controverted claims, a resort to courts of equity is often necessary to a due adjustment of the respective rights of each party.
[94] Grigsby W E, Story's Commentaries on Equity Jurisprudence (1st English ed, 1884) 333.
O'Connor is also an example of an equitable set‑off, where the true amount of rent owing was incapable of being ascertained without the taking of an account in respect of the moneys paid and services provided by the defendant over the years.[95]
[95] See Meagher, Gummow & Lehane [39‑055] and [69] above.
In Frietas, the plaintiff was the defendant merchant's agent in London. The merchant remitted certain foreign money to the agent for conversion into English money and brought an action at law to recover the money from his agent. The agent sought an injunction to restrain the action on the basis that there were, historically, mutual dealings between the merchant and the agent, and sought an account of the mutual dealings. The agent's action for an account was dismissed, on the basis that any defence to the merchant's action could be dealt with at law and that, in substance, the agent's allegations of mutual dealings were 'thrown in' merely to give 'colour' to the suit.[96]
[96] Frietas (801).
In Taff Vale, the railway company engaged Nixon, a contractor, to carry out railway works. A contract was entered into in which a certain amount was agreed to be paid for the works, subject, in effect, to variations at specified prices. Works were undertaken by Nixon on that basis. Subsequently, Nixon required additional funding for the work and obtained a loan from another contractor, Storm. It was agreed between Storm and Nixon that Storm would provide certain funding and carry out the works on behalf of Nixon and recover the amounts payable to Nixon by the railway company. The railway company was given notice of the arrangement and was sent a letter requesting that amounts due to Nixon be paid to Storm. Works were then carried out on that basis. After that, a second contract was entered into between the railway company and Nixon and Storm jointly, in substitution for the first contract with Nixon. Works were subsequently executed on the basis of that contract. Later, Storm went into bankruptcy and Nixon, in effect, completed the works himself. The railway company made payments without distinguishing between the first and second contractors and without reference to the particular works in respect of which the payments were made. An account was ordered in respect of the various dealings on the various contractual arrangements between the parties. The Lord Chancellor said:[97]
Then, not only is the account of this complicated nature between Nixon and the company, but as between the three there is the duty of ascertaining to what contract and to what works the payments made are to be referred; a question of account utterly impossible to be investigated at Nisi Prius, not only from the complicated nature of the original account of receipts and payments, but from … the mode in which … the company [itself], have dealt with the several contracts, not keeping distinct those payments in which Nixon was interested, but making them as payments on account generally, some of which might be referred to one account and some to another, but which they have not distinguished.
Under these circumstances Nixon files his bill, and asks for an account to be taken of what is due from this company in respect of the contract in which he was originally interested; and also for an account to be taken as between himself and the other party who had become interested in the account as security for the money advanced.
Looking at the rule laid down by Lord Redesdale,[98] and looking at the facts of this case as they are developed in these papers, it appears to me clear that if ever there was a case which was quite unfit for a trial at law, and which necessarily became the subject of investigation in a court of equity, the facts of this case come within that rule; and that is the point for our consideration here. (emphasis added)
[97] Taff Vale (700).
[98] O'Connor (309) at [69] above.
In Doss,[99] Dr Lushington, speaking for the Privy Council said:
We cannot make a Decree, ordering them to account, without first determining that they are liable to pay if anything be found due.
A Decree for an account is not, as appears to have been assumed, a mere direction to inquire and report. It proceeds, and must always proceed, upon the assumption that the party calling for it is entitled to the sum found due. It is a Decree affirming his rights, only leaving it to be inquired into, how much is due to him from the party accounting. (emphasis added)
[99] Doss (472).
The case of Doss concerned a dispute over a family banking business. Relevantly, there were two brothers in the business - Muttychund and Ramchund. Ramchund had managed the bank at Nagpore until his death. Muttychund (and later his sons, after his death) sought an account, as plaintiff, from Ramchund's sons, of all Ramchund's dealings with the bank, and sought to make them liable for any amount found to be due on the taking of the account. The account was sought against Ramchund's sons on the basis that the sons were his heirs and representatives, and, accordingly, liable for his acts and debts. Ramchund's sons defended the suit on the basis that they 'became separate' from Ramchund in 1823, and that Ramchund had bequeathed his estate by will to his grandchild, Hurry Doss. It was evident that there were contested issues of fact as to whether a separation had occurred, and whether the will was valid. Dr Lushington noted that, in the course of the proceedings, Ramchund's sons had asked for a trial of the validity of the will and the deeds in relation to the separation. The validity of the will could not, however, be tried as Hurry Doss was out of the jurisdiction and not a party to the proceedings. In that context, Dr Lushington made the observations referred to in [74] above. In other words, absent a trial of the underlying facts in properly constituted proceedings, the plaintiff had not established that Ramchund's sons were his heirs and representatives and, accordingly, the plaintiff had not established that the sons were an accounting party with any liability to the plaintiff.
It may also be noted here that in a somewhat similar vein, in Milltec Australia Pty Ltd v Burnes,[100] Handley JA (Hodgson JA & Campbell AJA agreeing) observed:
A plaintiff is not entitled to an inquiry to discover whether or not he has a cause of action. The rights of the parties must be determined at the trial and any accounts or inquiries which are then ordered 'follow merely consequentially': McGrory v Alderdale Estate Co Ltd [1918] AC 503 at 511 and generally Spencer Bower Turner & Handley 'Res Judicata' 1996 pp 76‑8.
[100] Milltec Australia Pty Ltd v Burnes [2006] NSWCA 13 [13].
In Lang, the defendant engaged the plaintiff to manage a pig farm. The plaintiff managed it for seven years. The agreement was that the plaintiff, as manager, would receive 50% of the profits in addition to a wage. The plaintiff gave certain financial information to the defendant's accountant. The plaintiff also asked the defendant to provide balance sheets for the pig farm but the defendant refused. Ultimately nothing was paid to the plaintiff by way of profit share. The plaintiff alleged that there were profits and the defendant alleged that there were no profits but a loss. McLelland J ordered an account. His Honour held that a jury would not be competent to examine the accounts:[101]
It is of course, necessary to envisage the probable course of proceedings in a court of law at nisi prius; the form in which the evidence would be presented to the jury; the manner in which the questions in dispute would be put before the jury; the probabilities of the jury and the jury room being in a position, after having determined all relevant facts and figures, to make out with all necessary accuracy the account for each year of operation … Having envisaged the course of proceedings … I have come to the conclusion that a jury would not be competent to examine the accounts in this case with all necessary accuracy, or, indeed, justly and fairly.
[101] Lang (512 ‑ 513).
In making the order for an account, McLelland J rejected a submission by the defendant, based on Dr Lushington's observations in Doss (referred to in [74] above), to the effect that the court would not decree a general account. McLelland J said in that regard:[102]
In the present case it is admitted on the pleadings that the defendant is liable to pay 50 per cent of profits if any profits are found to have been made. I do not think, therefore, that the principle mentioned by Dr Lushington would prevent the plaintiff from obtaining an account.
[102] Lang (514).
Mr and Mrs Rowe also place reliance on Southampton. In that case the Southampton Harbour and Pier Board (Board) sued the Southampton Dock Company (Dock Company) at law for £5,000 representing back charges for which the Board said the Dock Company was liable for the period between 1847 and 1858. The statutory arrangement governing the relationship between the parties was that the Board could recover from the Dock Company the amount by which the Board's receipts from rates and duties etc fell below £1,000 in each year. The Board, after not levying anything against the Dock Company until 1870, sought to recover the £5,000 as one lump sum. It was held that as the Board could only recover from the Dock Company to the extent to which its annual income for rates and duties etc fell below £1,000, the Board stood in relation to the Dock Company in a position not dissimilar to a fiduciary.[103] Sir James Bacon VC said:[104]
To the extent of this sum, which is in dispute between the parties, the [Board], who were the persons to manage the fund coming into their hands, were surely bound in all good husbandry and fairness to receive all that they could be entitled to receive. That seems to me to raise a case, if not strictly a trusteeship, yet so nearly approaching to it that the [Dock Company] in this suit have a right to hold the [Board] to the strict exercise of [the Board's] powers and their duties, and to the observance of perfectly good faith between them; because, if it were not so, it would be in the power of [the Board], for any reasons, good or bad, to forbear from receiving that which they might have received, or which, perhaps, they could not receive without difficulty, and have recourse to the [Dock Company] to make up the deficiency of the £1,000 … That proposition seems at once to shew that it is encumbent upon [the Board] to shew actually what they have received, and entitled [the Dock Company] … to insist upon what they might, but for their wilful default, have received. That is not an account which could be conveniently taken in a Court of Law. (emphasis added)
[103] Southampton (260).
[104] Southampton (260 - 261).
The decision in O'Connor was referred to by Finkelstein J in GDK[105] in support of the proposition that accounts can be ordered when the transactions between the parties are too complex to be resolved in legal demands. Finkelstein J also referred to the case of North‑Eastern, upon which Mr and Mrs Rowe placed much reliance.
[105] GDK [50].
In North‑Eastern, a firm of surveyors and engineers sued a railway company for fees and expenses incurred in the course of work done for the railway company between 1845 and 1847. They had rendered a bill consisting of 160 items against which credit was given for various amounts which had, from time to time, been paid by the railway company on account and leaving a balance for which the action was brought. The railway company sought to restrain the action at law on the basis that it was entitled to an account in equity of the dealings between the firm and the railway company. Lord Cottenham dismissed the railway company's suit for an injunction and for an account. Lord Cottenham said:[106]
I am of the opinion that this is not a proper case for an injunction. It is applied for upon the ground that, under the circumstances disclosed in the pleadings, justice cannot be done, or not so effectually done, by a trial of the action as by an account taken before the Master. That may be; but it does not of necessity follow that the trial of the action ought to be restrained. The observations … in … the Taff Vale [case] have been referred to as expressing opinions that accounts ought to be decreed in all cases in which references would be pressed at nisi prius; I apprehend that those observations were not intended to intimate any such rule or opinion, but were intended only to exemplify the great difficulty in dealing with such cases at law. But, be that as it may, I cannot accept any such ground or measure for exercising the equitable jurisdiction of this Court in matters of account. It has rules and principles of its own, although the practical difficulty experienced in proceeding at law does form an important consideration in the exercise of the discretion of this Court.
The jurisdiction in matters of account is not exercised, as it is in many other cases, to prevent injustice which would arise from the exercise of a purely legal right, or to enforce justice in cases in which Courts of law cannot afford it; but the jurisdiction is concurrent with that of the Courts of law, and is adopted because, in certain cases, it has better means of ascertaining the rights of parties. It is, therefore, impossible with precision to lay down rules or establish definitions as to the cases in which it may be proper for this Court to exercise this jurisdiction. … It is, therefore, necessary for this Court to reserve to itself a large discretion, in the exercise of which due regard must be had, not only to the nature of the case, but to the conduct of the parties. In the present case, both concur in satisfying me that the trial of the action at law ought not to be stayed; it is not a case of mutual accounts … The only matter in contest, therefore, is the amount of the claim of the surveyors for services rendered to the … company: they cannot recover for anything they do not prove to have been done under proper authority, or for more than they can prove such service to be fairly worth. (italicised emphasis added, original emphasis underlined)
[106] North‑Eastern (1138).
Again, with respect, that passage is consistent with the principles referred to earlier. Neither C2C Developments nor Riva, nor Tsatsoulis, is authority for the proposition that in all cases (subject only to the 'fraud exception' referred to by the judge), a mortgagor seeking an account from a mortgagee must plead that there will be an amount found to be owing to the mortgagor upon the taking of the account. Those cases confirm, however (consistently with the observations referred to in [87] ‑ [89] above), that a plaintiff must plead and establish the facts upon which an account in equity may be ordered. They do not support a more general proposition to the effect that a party seeking an account in equity must ordinarily plead that upon the taking of an account, some amount of money will be found due to it. Thus, for example, it may be noted, but it is unnecessary to decide for present purposes, that there might be a real question as to whether a mortgagor who pleaded a mortgagee sale to itself or to its trustee, and sought an account on a wilful default basis without pleading affirmatively that an amount would be found due to it upon the taking of the account, would have its action struck out as disclosing no reasonable cause of action. A possible alternative argument might be that the pleading could stand, but the plaintiff might fail to obtain an order for an account at trial (or possibly, have the suit dismissed on a defendant's summary judgment application) if the state of the evidence was that the sale had, in any event, been effected at a substantial overvalue.[236]
[236] See, eg, Robertson v Norris (1858) 1 Giff 421; (1858) 65 ER 983 where, it seems, the plaintiff did not plead that an amount would be due to it on the taking of an account where the mortgagee had sold to itself, but an account was ordered.
The judge also placed reliance on Noble Earth.[237] That case concerned a claim by the plaintiffs for an account to be taken of profits in respect of sales made by the plaintiffs' (alleged) joint venture partner, in breach of fiduciary duty. Robb J found that no relevant sales were proved by the plaintiffs at trial that gave the plaintiffs an unquantified entitlement to be paid moneys, and that accordingly there was no basis for ordering an account.[238] The case did not concern a pleadings application, and it is not authority for the proposition referred to in [101.1] above.
[237] Previously referred to in [149] above.
[238] Noble Earth [209] - [210].
Disposition
Issue 1
Issue 1 should be answered in the negative. The counterclaim did not plead material facts by which Mr and Mrs Rowe could establish that NAB was in an 'accounting relationship' with them. That is because:
1.In relation to the only subsisting mortgage pleaded, namely the Yallingup Mortgage, there was no express or implicit offer to redeem the mortgage, the counterclaim was plainly not advanced in the context of a redemption of the mortgage, and there is no merit in other arguments advanced in support of their contention that the counterclaim pleaded an arguable basis for an account in respect of the Yallingup Mortgage.
2.In relation to the (alleged) Yallingup and Gawthorne Loans, NAB will bear the burden of proving the amounts claimed. The usual pre‑trial procedures will be available to Mr and Mrs Rowe in any contest as to the amounts advanced, and as to any amounts paid (or not paid) at their direction. In any event, there was no plea that Mr and Mrs Rowe did not receive bank statements in relation to the two home Loans; further, the particularised transactions on the Yallingup Loan account (4042) were very few and lacked any complexity,[239] and there was no plea of any transactions (let alone any transactions of any complexity) on the Gawthorne Loan account (2871).[240]
[239] See [10.2(e)] above.
[240] Although Mr and Mrs Rowe particularised what they referred to as 'irregularities' in the 'barcode'. See [162.1(b)] above.
3.In relation to the discharged Gawthorne Mortgage, following the exercise of the power of sale:
(a)A redemption of the mortgage, involving the taking of accounts for that purpose, is no longer available, and Mr and Mrs Rowe's pleading did not suggest otherwise.
(b)There was no plea to the effect that NAB had improperly exercised the power of sale, leading to a sale at an undervalue or as a result of which there was some other basis upon which an account in equity might be ordered.
(c)There was no allegation that the sale led to a surplus in respect of which an account might be ordered.
(d)The plea that the registration of the Gawthorne Mortgage was procured by fraud could not arguably give Mr and Mrs Rowe a right to a general account as alleged (either alone or in combination with the other matters pleaded). Whether or not, if the Gawthorne Mortgage were shown at trial to be defeasible for fraud, an account might be ordered of any moneys received by NAB as a result of exercising purported rights under the alleged mortgage (including under the purported power of sale) is not a matter calling for present determination. The prayer for relief did not include a claim for the taking of an account in that event. Also, if the Gawthorne Mortgage were set aside, Mr and Mrs Rowe would prima facie remain liable for the whole of the Gawthorne Loan (if proved by NAB) rather than just the balance due after (on this hypothesis) the purported exercise of the power of sale.
4.The pleas concerning discharged mortgages in respect of all the other properties previously owned by Mr and Mrs Rowe and sold by NAB, where no fraud is alleged in relation to those mortgages, also suffer from the same defects as those identified in 3(a) ‑ (c) above. Also, insofar as it was alleged that certain mortgaged properties were discharged following refinancing by CBA (Zamia Road) or, following a sale directly by Mr and Mrs Rowe (Calluna Way), those facts did not disclose an arguable claim for an account.
5.In relation to the Cherratta Road Mortgage which (in addition to the Gawthorne Mortgage) was allegedly defeasible for fraud, the observations referred to in 3(a) ‑ (d) above apply equally.
6.The pleas in respect of the properties previously mortgaged by KTEQ (Fairbairn, Unit 6 McCann Street, South Trees and Victoria Road) also suffer from similar defects, as well as the additional defect that Mr and Mrs Rowe were not, in any event, the (former) mortgagors, and any claim to an account as former mortgagor would inhere in KTEQ, and not Mr and Mrs Rowe.
7.The pleas concerning the purported guarantees did not arguably give Mr and Mrs Rowe a right to a general account as alleged. Also, there was no plea that any money was paid by them pursuant to any purported guarantees. Had such a plea been made, they would have also needed to plead the material facts which would arguably give rise to an equitable set‑off against one or more of NAB's claims (and, if so, identifying which) insofar as par 38.5 sought to rely on an equitable set‑off as a defence.[241] Moreover, their pleaded case was that they had not made any payments to NAB pursuant to NAB's demands which had been 'copied to' them as guarantors.
8.Mr and Mrs Rowe's contention that they had pleaded an arguable entitlement to a general account because they 'may have been entitled to money and had no reason to borrow moneys claimed by [NAB] in the [a]ction'[242] cannot be accepted for four reasons. First, such a case was not pleaded. Secondly, if they did not borrow the money under the (alleged) Gawthorne and Yallingup Loans, that is a complete answer to NAB's claim in debt. If it is established that they did borrow the money, the fact that they may have had 'no reason to borrow' it provides no arguable defence. Thirdly, the argument assumes that they were entitled to a general account on the pleaded facts, and that such an account, once taken, may produce a credit balance in their favour. It does not disclose any arguable basis upon which the court might decree a general account in the first place. Fourthly, the argument assumes that any credit balance on a general accounting would then be brought to account for the purpose of the taking of an account with respect to the Yallingup Mortgage. But, as indicated in point 1 above, any account in respect of the Yallingup Mortgage debt could only effectively occur (in the absence of any other arguable basis for an account) in the context of a claim for the redemption of the Yallingup Mortgage.
9.The counterclaim did not disclose an arguable case for an account in equity based on the principles (1) that an account may be ordered where the plaintiff would have had a legal right to have money ascertained and paid, and that the defendant wrongfully prevented such a right accruing to the plaintiff, and/or (2) that prior to the Judicature Act, an account might be decreed in equity where the taking of an account at law was too complicated.
10.As to the first of the principles in point 9 above, the counterclaim did not identify (1) the legal rights which Mr and Mrs Rowe had, the enforcement of which NAB wrongfully prevented, and (2) the wrongful conduct by NAB which prevented the enforcement of those legal rights.
11.As to the second of the principles in point 9 above, there is now no accounting at law in the sense understood in the pre‑Judicature Act system. Equitable intervention which rests entirely on the procedural difficulties associated with an accounting at law is of historical significance only. Whilst the principle remains live in the context of an accounting relationship, where actions for debt or money had and received (or perhaps for the vindication of other legal rights) are inadequate,[243] the plaintiff must still establish the existence of the underlying accounting relationship. The facts pleaded in the counterclaim did not arguably disclose such a relationship. Nor did the loans and securities pleaded reflect a case involving any more complexity than cases typically dealt with by this court. Moreover, Mr and Mrs Rowe's reliance on cases such as Southern Equity is misplaced. In those cases, the party seeking an account was a creditor by virtue of the underlying legal relationship, and the creditor's legal entitlement could only adequately be ascertained by the taking of an account in equity, where the defendant had the knowledge and information relevant to the quantification of the plaintiff's claim.
12.Nor does the generalised plea of set‑off in par 38.5 of the defence assist Mr and Mrs Rowe. In all cases of claimed set‑off, whether at law or in equity, no claim will be recognised unless, if it stood alone, it would constitute its own actionable right.[244] Mr and Mrs Rowe's pleading was not directed to an arguable actionable right giving rise to a claimed set‑off. In substance, their claim for a general account was, in the language of Dr Lushington in Doss, for 'a mere direction to inquire and report'.
13.Whilst the categories of accounting relationship are not closed, the facts pleaded in the counterclaim sustained no arguable basis for equitable intervention by way of the decree of a general account. Mr and Mrs Rowe's arguments that their, and their corporate entities', dealings with NAB were 'complex' does not itself arguably sustain a right to a general account in equity. No error is disclosed in the judge's reasoning referred to in [43] ‑ [47] above. Also, there was no plea to the effect that NAB was in a fiduciary or trustee relationship with Mr and Mrs Rowe, or that they had some other recognised claim against NAB in equity's exclusive jurisdiction for an account.[245] Nor was the pleaded relationship akin to a fiduciary relationship in which an account might be ordered in equity's auxiliary jurisdiction.[246]
Issue 2
[241] As to which, see generally Meagher, Gummow & Lehane [39‑060(f)], [39‑060(g)]. See also Derham R, Derham on the Law of Setoff (4th ed, 2010) [4.125] - [4.148] for a general discussion on equitable set‑off in the context of mortgages.
[242] Appellants' written submissions, par 12.6; WB 11.
[243] See [74] above.
[244] Meagher, Gummow & Lehane [39‑100].
[245] cf the third category referred to by Lindley LJ in London (140).
[246] cf Southampton Dock.
The second issue, as expressed, is whether there is an 'inflexible requirement' that subject only to the limited fraud exception referred to by his Honour, in any claim for an account, Mr and Mrs Rowe must plead (and prove at trial) an entitlement to some, presently unquantified, amount. The answer to that is no, for the reasons given in [87] ‑ [89], [150] ‑ [151] above. Insofar as the judge held otherwise, his Honour, with respect, was in error. Accordingly, express error has been established in accordance with House v The King.[247]
[247] House v The King [1936] HCA 40; (1936) 55 CLR 499, 504 ‑ 505.
However, for the reasons given under issue 1 above, his Honour was correct in his conclusion that the counterclaim did not disclose an arguable claim for a general account in equity.
Issue 3
The answer to issue 3 is no. The pleaded facts provided no arguable basis for a claim for an account based on the principles in M'Intosh, for the reasons in [152.10] above.
Issue 4
The answer to issue 4 is no, for the reasons given under issue 1.
Issue 5
Issue 5 is appropriately answered by observing that (1) the judge was correct in the conclusion that the claim to a general account was not arguable on the pleading, (2) the reasons for this are set out under issue 1 above, and (3) once it was established that the counterclaim did not arguably plead a cause of action for a general account, it was appropriate to strike out the pleading. A consideration of the documents referred to in the pleading (including the 'money tracker' documents) on which counsel for Mr and Mrs Rowe placed considerable reliance,[248] does not lead to a contrary conclusion. If, whilst assuming that all the pleaded facts were established at trial, the pleading discloses no reasonably arguable cause of action or basis for the relief sought, the application of ordinary case management principles and the due administration of justice require it to be struck out. The question of leave to replead is considered further below.
Issues 6 and 7
[248] Eg, appeal ts 49 - 56.
Issues 6 and 7 raise an issue of procedural fairness. In substance, Mr and Mrs Rowe contend that the judge went beyond the matters raised by NAB in its application to strike out, and that they were denied procedural fairness.[249] In oral submissions,[250] counsel for Mr and Mrs Rowe referred in this regard to NAB's chamber summons filed 21 September 2018 and its attached schedule,[251] NAB's written submissions filed 1 October 2018 and 15 October 2018, Mr and Mrs Rowe's written submissions of 5 October 2018, and excerpts from the transcript of the hearing before the judge.
[249] Appeal grounds 2.1, 2.2.
[250] Appeal ts 83 - 90.
[251] BB 213 - 218.
NAB's chamber summons by its terms, and in its attached schedule, alleged that Mr and Mrs Rowe's pleading did not disclose a reasonable defence or counterclaim. Insofar as Mr and Mrs Rowe contended in this appeal, that NAB's complaint was somehow on a more limited basis,[252] the contention proceeds on a misconstruction of the chamber summons and the schedule.[253] Also, Mr and Mrs Rowe's written and oral submissions raised many of the arguments and cases referred to by the judge in the primary decision, both in relation to the relationship between mortgagor and mortgagee, and, more generally, in relation to the bases upon which equity may decree an account in aid of the enforcement of a legal right.[254] Mr and Mrs Rowe have not established any denial of procedural fairness.
[252] Appeal ts 85.
[253] Mr and Mrs Rowe appear to have considered, erroneously, that the items in the schedule were confined to a complaint to the effect that the properties and accounts referred to in the counterclaim 'were not the subject of' the proceedings: appeal ts 81.
[254] See appellants' written submissions, pars 5 - 10, 17 - 18 in the primary matter; see also ts 17 - 35.
Even if that conclusion were wrong, the point raised by Mr and Mrs Rowe goes nowhere. Mr and Mrs Rowe's essential complaint is that they were denied the opportunity to make submissions to the judge about the equitable principle referred to in M'Intosh. As that matter (which is purely a legal argument) has been explored in detail in this appeal, and as it has been found that Mr and Mrs Rowe's submissions in that regard have no merit, Mr and Mrs Rowe are unable to show that any lost opportunity to make submissions to the judge on that point deprived them of the possibility of a successful outcome.[255]
[255] Stead v State Government Insurance Commission [1986] HCA 54; (1986) 161 CLR 141, 145 ‑ 146; Nobarani v Mariconte [2018] HCA 36; (2018) 359 ALR 31 [38]; see also appeal ts 89 ‑ 90.
Conclusion
There has been an error, on the discrete point referred to under issue 2. The error affects order 3 of the judge's orders in which his Honour ordered that any repleading was to be 'in conformity with' the primary decision. Also, the matters raised in the appeal were not without their complexity. It is appropriate, in all the circumstances, to grant leave to appeal.
This court is in as good a position as the judge to consider the matter afresh, and no point would be served by a remitter.
For the reasons given above, the counterclaim disclosed no reasonable basis upon which to claim a general account. The pleas with respect to the Gawthorne Mortgage and the Cherratta Road Mortgage being defeasible for fraud, were tied up in the overall pleading associated with, and were an adjunct to, the claim for a general account.[256] It was, and is, appropriate to order a strike out in accordance with order 2 of the judge's orders.
[256] Primary decision [17].
In relation to repleading:
1.There should be no leave to replead in relation to a general account on the basis of the dealings between NAB on the one hand, and KTEQ and GCT on the other, or on the basis of the alleged purported guarantees, or on the basis of the alleged fraudulently procured registration of the Gawthorne Mortgage or the Cherratta Road Mortgage.
2.Mr and Mrs Rowe may replead seeking an account in respect of the Yallingup Mortgage if they offer to redeem it.
3.Given that their pleaded case was that they did not make any payments to NAB in respect of NAB's demands in connection with alleged guarantees, there should be no automatic leave to replead on the basis that they did make such payments. However, if NAB were to sue Mr and Mrs Rowe in relation to any guarantees of the debts of KTEQ and/or GCT, or if new facts emerged which indicated that Mr and Mrs Rowe had paid moneys to NAB pursuant to obligations which purported to be, but which were not in truth, guaranteed obligations, those matters could be revisited. Whether any such claims might potentially raise an arguable set‑off against any of NAB's claims and if so which, and whether any such claims by Mr and Mrs Rowe would arguably meet the criteria for equitable set‑off, for the purposes of the plea in par 38.5 of the defence, would need to be considered if and when such claims were made.
4.Mr and Mrs Rowe should not be shut out of any arguable claims (independent of a claim for a general account) to set aside the Gawthorne Mortgage or the Cherratta Road Mortgage on the grounds of alleged fraud, and for any reasonably arguable consequential relief. Whether any such claims might arguably give rise to an equitable set‑off (as contemplated in par 38.5 of the defence) is a matter which could be considered if and when such proposed pleadings were advanced.
5.Claims of the kind referred to in points 3 and 4 above might also entail their own case‑management considerations for resolution by the judge if they were made.
6.There is no challenge to the judge's finding,[257] which may be accepted for present purposes, that in relation to discharged mortgages, it would be open to Mr and Mrs Rowe to plead (if the facts supported it) an allegation to the effect that NAB committed a fraud as a result of which they may have a claim for overpayment in relation to those mortgages, but are unable to ascertain the amount without an account.
7.The judge's references to repleading in relation to the counterclaim repeating the defence, the misleading conduct and the unconscionable conduct claims, and the Banking Code of Practice claim, referred to in [48] ‑ [50] above, were not challenged and may be accepted.
[257] See [28.2] above.
It should be added that much of the counterclaim pleaded evidence. Any repleading should be confined to the material facts relevant to establish any reasonably arguable causes of action sought to be relied on by Mr and Mrs Rowe. The judge's observations with respect to pleadings generally at [1] - [7] of the primary decision are to be endorsed.[258]
[258] See also, Mio Art Pty Ltd v Macequest Pty Ltd [2013] QSC 211; (2013) 95 ACSR 583 [58] ‑ [72].
The result is that the paragraphs of Mr and Mrs Rowe's re‑amended defence and counterclaim struck out by the primary judge should remain struck out. Orders 1 and 2 of the judge's orders made on 1 November 2018 should remain. Order 3 of the judge's orders should be amended to refer to repleading in accordance with this court's reasons and to an extension of the date for repleading. The parties should be heard on final orders and costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CL
Associate to the Honourable Justice Murphy10 SEPTEMBER 2019
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