Scott, John Joseph v Bagshaw, Leith Gordon

[1998] FCA 1164

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 684 of 1994

BETWEEN:

JOHN JOSEPH SCOTT
FIRST APPLICANT

AND:

LEITH GORDON BAGSHAW
FIRST RESPONDENT

JUDITH HAMPTON BAGSHAW
SECOND RESPONDENT

PHILLIP GREGORY JEFFERSON
and JAY ARSCOTT STEVENSON
as Trustees of the Bankrupt Estate
of Leith Gordon Bagshaw
THIRD RESPONDENTS

JUDGE:

WHITLAM J

DATE OF ORDER:

21 SEPTEMBER 1998

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1. The proceeding is dismissed.

1. The applicant pay the respondents’ costs.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 684 of 1994

BETWEEN:

JOHN JOSEPH SCOTT
APPLICANT

AND:

LEITH GORDON BAGSHAW
FIRST RESPONDENT

JUDITH HAMPTON BAGSHAW
SECOND RESPONDENT

PHILLIP GREGORY JEFFERSON
and JAY ARSCOTT STEVENSON
as Trustees of the Bankrupt Estate
of Leith Gordon Bagshaw
THIRD RESPONDENTS

JUDGE:	WHITLAM J
DATE:	21 SEPTEMBER 1998
PLACE:	SYDNEY

REASONS FOR JUDGMENT

The first and second respondents, Mr and Mrs Bagshaw, are the registered proprietors of land located at Terrigal in New South Wales and at Mildura in Victoria.  Mr Bagshaw was also formerly the registered proprietor of land at Para Wirra in South Australia.  Mr Bagshaw is a bankrupt and his land in South Australia has been sold.  The proceeds of the sale are presently held in trust by the solicitors acting for the trustees of Mr Bagshaw’s bankrupt estate.  Those trustees are the third respondents.

In this proceeding the applicant, Mr Scott, seeks a declaration that the Terrigal and Mildura land is charged in his favour with payment of moneys due under a loan agreement, an order for the sale of that land, and a declaration that the sale proceeds of the Para Wirra land held by the trustees are similarly charged in his favour.  The amended statement of claim alleges (inter alia) that Mr and Mrs Bagshaw agreed in 1985 to charge the lands mentioned with payment of moneys borrowed from Mr Scott and that pursuant to the agreement Mr Scott lent moneys, which have not been repaid.  By an amendment to his defence Mr Bagshaw denies, in effect, that Mr Scott ever lent him any moneys.  Mrs Bagshaw’s defence does not admit the alleged agreement or loans.  Nor, unsurprisingly, does that of the trustees.

This is a truly bizarre case.  The two principal witnesses in the applicant’s case, Mr Scott himself and one Ken Livingstone, contradict each other on the fundamental issue as to whether Mr Scott lent any moneys at all to Mr and Mrs Bagshaw.  Mr Scott said he did not.  Mr Livingstone said he did.  Mr and Mrs Bagshaw have not given evidence.  There is no doubt that moneys were advanced to the Bagshaws from an account operated by Mr Scott.

Mr Scott is an accountant who, many years before the events in question, used to employ Mr Livingstone.  A company called Ophix Finance Corporation Pty Ltd, which was owned and controlled by him and a Mr John Slattery, ran a deposit-taking and money-lending business.  Ophix operated a bank account for this purpose with the Commonwealth Bank at North Sydney styled the J Scott and J Slattery Clearing Account, of which the applicant and Mr Slattery were the signatories.  Ophix maintained a separate ledger account for each client.  At the time of the advances to the Bagshaws, Mr Livingstone was a client.  He deposited funds with Ophix.  In order to withdraw moneys from the account, Mr Livingstone was supplied with blank cheques signed by Mr Scott, who did not know the intended payee or the amount of any cheque.  Amounts paid were debited to Mr Livingstone’s ledger account.

Mr Scott said that he was aware Mr Livingstone was depositing other people’s money in the Clearing Account, but he never knew whether, as between Mr Livingstone and those persons, deposits were loans to Mr Livingstone or repayments to Mr Livingstone.  He was adamant that he did not know the sources from which the deposits were made.  So far as debits in Mr Livingstone’s ledger account were concerned, such entries merely reduced the amount of money owing by Ophix to Mr Livingstone.  Mr Scott said that he knew no details of payments made to or on behalf of the Bagshaws until Mr Livingstone produced to him a schedule of such payments for the purposes of this litigation.  So far as he was concerned, such transactions represented a withdrawal of funds standing to Mr Livingstone’s credit in the Clearing Account.  Mr Scott said that at no time did he expect a mortgage or any other security to be given to him in respect of such withdrawals.  Mr Scott confirmed that he had never lent moneys to the Bagshaws or a company called Devebo Pty Ltd at Mr Bagshaw’s request.  He did not know that Mr Livingstone or anyone else had requested security documents from Mr Bagshaw.  Mr Scott was guarded about agreeing to a bald proposition that he had no knowledge of any transaction being conducted by Mr Livingstone.  He said he had no specific knowledge, he knew no details, and he certainly had not given any authority to Mr Livingstone to enter into transactions on his behalf.

Mr Scott first saw copies of the documents relied on in his case, including Exhibit 10, after this proceeding was commenced.  It did not concern him that the name of the Scott Family Trust was used in documents, notwithstanding that it was no longer in existence.  He knew that he was named as the applicant in this proceeding, but regarded himself as a nominee or agent for Mr Livingstone.  Mr Scott agreed that he had also lodged a proof of debt in Mr Bagshaw’s bankruptcy with the trustees, although he explained that he had told them he was not, in fact, a creditor.  Mr Scott said that he was maintaining this proceeding on behalf of Mr Livingstone.  Most importantly, Mr Scott completely resiled from the statements in an earlier affidavit which suggested that moneys were advanced by him to the Bagshaws.  He explained that he had been confused.  Mr Scott was at pains to convey his role in this litigation as that of a mere nominee for Mr Livingstone and said that he expected to account to Mr Livingstone for moneys recovered.

Finally, Mr Scott confirmed that the Bagshaws were never shown as debtors in Ophix’s records.  Indeed, Mr Livingstone was always in credit in the Clearing Account and the balance owing to him was shown as a liability in Ophix’s books.  Ophix paid interest to Mr Livingstone on his credit balance.

Mr Livingstone had a different story.  He said that Mr Scott, not he, made the loans, and that he was merely Mr Scott’s agent.  There are a great many difficulties with this version.  The paper trail, such as it is, has his fingerprints all over it in a way that arouses suspicion that he was a principal and not merely an agent.  Documents were created by him.  The non-existent lender, the Scott Family Trust, was shown at his address, not Mr Scott’s.  Mr Livingstone used to be Mr Bagshaw’s accountant.  He was ideally placed to give the impression of acting for both parties.  Clive Austin is a solicitor who was intermittently retained to act on the purchase of the lands in question and on the somewhat desultory attempts to lodge caveats on behalf of the Scott Family Trust.  It is quite plain from Mr Austin’s oral testimony and from an examination of his relevant files that overwhelmingly his instructions came from Mr Livingstone.  Many of the documents in this case resemble pakapu tickets.  In particular, a photocopy of a mortgage dated 31 December 1985 that Mr Livingstone said Mr Bagshaw signed is extremely suspicious.  No explanation was provided as to the whereabouts of the original.  In the absence of such evidence, no weight may be attached to it.  In the witness box Mr Livingstone maintained his mantra that he was a mere agent for Mr Scott.  I am bound to say, however, that I found him a most unimpressive witness.  He was most likely a middle man of some sort in some of these advances, but I am satisfied that the hapless Mr Scott has been offered up as a principal simply because he was the signatory on the Clearing Account. 

Counsel for the applicant opened that it was not disputed that ultimately some of the funds advanced were those of Mr Livingstone or his clients.  But he submitted Mr Scott was entitled to recover those advances and enforce the remedies of an equitable chargee.  In his closing address counsel, faced with the unequivocal evidence of his client, described Mr Scott as the nominated lender and mortgagee and contended that his case may be conducted as a claim by Mr Scott for debt.  I find this an astonishing argument.  It suggests that, if, for example, X lends Y the sum of $1,000 by handing Y a bank cheque for that amount, the bank manager who signed the cheque may claim for the moneys lent.  In the end (and counsel was in a difficult position) the contradiction in the evidence of these two key witnesses was said to represent no more than a difference in what they “believed” to be the case.

Ultimately, however, counsel was driven to submit that Mr Livingstone was, in fact, acting as agent for Mr Scott.  The applicant bears the onus of establishing that fact.  He has not succeeded.  Particularly having regard to his own denial, I find that Mr Scott did not lend any moneys to the Bagshaws. 

In a reply filed by leave on the first day of the hearing, Mr Scott pleads that the respondents are estopped from denying that the Bagshaws borrowed moneys from him.  His counsel relies on Commonwealth v Verwayen (1990) 170 CLR 384. In that case the Commonwealth had originally admitted liability before amending its defence to plead a statute of limitations. The first step required for the conclusion that the Commonwealth was estopped from disputing its liability to the plaintiff was a finding that it would be acting unconscionably if it later disputed liability: per Deane J at 446. The present case is very different. There has never been a similar admission by the respondents. The fact that Mr Scott was not the lender only became apparent when his solicitors served his affidavit sworn on 9 April 1997. The respondents never made any representation that in the future they would conduct their cases without regard to evidence given by Mr Scott. In my opinion, there is no possible scope in the present case for any application of the doctrine of estoppel.

If no debt is owing to Mr Scott, he can have no charge to realize.  No authority was cited for the proposition that Mr Scott may sue as a nominated chargee.  There is no evidence to suggest that Mr Scott is the assignee of any debts owing by the Bagshaws.  Whoever the lenders to Mr and Mrs Bagshaw are, whether Mr Livingstone, one of his clients or anyone else, no piece of evidence indicates they have divested themselves of any of their rights and vested them in Mr Scott.  Counsel referred to Troncone v Aliperti (1994) 6 BPR 97455 as an example of the kind of limited equitable interest that might support a caveat. In the present case, however, Mr Scott plainly has no equity whatsoever to enforce. His role in instituting this proceeding smacks of overt maintenance. If any lenders have rights against the Bagshaws, Mr Scott would have no interest in any suit they might bring. The position of parties such as tutors and next friends is entirely exceptional. In any event, counsel for Mr Scott does not submit that his client is bringing this suit on behalf of anyone else.

The respondents have raised many other points in defence of Mr Scott’s claims.  However, in my view, this very odd case may be disposed of on this one critical point.  The proceeding is dismissed with costs.

I certify that this and the preceding four (4) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Whitlam

Associate:

Dated:             21 September 1998

Counsel for the applicant:	C J Birch
Solicitors for the applicant:	Church & Grace
Counsel for the first respondent:	G A Stevens
Counsel for the second respondent:	E A Cohen
Counsel for the third respondents:	J Oakley
Solicitors for the third respondents:	Camatta Lempens
Dates of hearing:	16-20 February 1998
Date of judgment:	21 September 1998