Scott, John Joseph v Bagshaw, Leith Gordon

[1997] FCA 1212

FEDERAL COURT OF AUSTRALIA

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

BETWEEN:	JOHN JOSEPH SCOTT APPLICANT
AND:	LEITH GORDON BAGSHAW & ORS RESPONDENTS
JUDGE:		WHITLAM J
DATE OF ORDER:		28 OCTOBER 1997
WHERE MADE:		SYDNEY

THE COURT ORDERS THAT:

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

BETWEEN:	JOHN JOSEPH SCOTT APPLICANT
AND:	LEITH GORDON BAGSHAW & ORS RESPONDENTS

JUDGE:	WHITLAM J
DATE:	28 OCTOBER 1997
PLACE:	SYDNEY

REASONS FOR JUDGMENT

By motion, notice of which was filed on 6 December 1996, the first respondent seeks an order under O 20 r 2(1) of the Federal Court Rules dismissing this proceeding. 

The applicant commenced the proceeding on 11 October 1994.  He claims (1) a declaration that each of four specified properties is charged with payment of moneys due to him under a loan agreement and (2) orders for sale and the appointment of a receiver.  The first respondent and his wife, the second respondent, are the registered proprietors of two of the properties, which are located in New South Wales and Victoria.  The first respondent is the registered proprietor of the other two properties, which are located in South Australia.  The first respondent is a bankrupt and the trustees of his bankrupt estate have also been joined as the third respondents.  However, the applicant does not invoke the jurisdiction of the Court in bankruptcy, but invokes the jurisdiction of the Court under the cross-vesting laws of those States to exercise the equitable jurisdiction of their respective Supreme Courts.  Upon the hearing of the present motion the second respondent has not appeared and the third respondents submit to any order save as to costs. 

The pleadings are closed.  By his amended statement of claim the applicant claims an equitable charge arising out of an agreement made on or about 31 December 1985 with the first and second respondents.  The applicant provided further particulars of the alleged agreement, which was said to be “partly oral and partly in writing”.  The “oral part” was said to have been made in September, October, November and December 1985 and in January 1986 at the offices of a Mr Ken Livingstone, who was said to have been either the agent for the first and second respondents in discussions with the applicant or, alternatively, to have been the agent for the applicant in discussions with the first respondent as agent for him and his wife, the second respondent.  The statement of claim alleged that the first and second respondents agreed to borrow the sum of $375,399.21 and to charge the properties with the payment of the said sum;  that the applicant extended the agreed financial accommodation;  that the first and second respondents provided to Mr Livingstone as the applicant's agent the certificates of title to the properties;  that the applicant lodged caveats on the titles of the said properties; that the certificate of title to one of the properties in South Australia was released to the first respondent for the purpose of subdividing that property and that the substitute certificate of title was then returned to the applicant.  The pleading concluded that the first and second respondents had failed to repay the moneys and the applicant claimed to enforce the alleged equitable charge over the properties. 

The first respondent filed his defence to the amended statement of claim on 14 November 1996.  The pleading is embarrassing.  This is perhaps not surprising as the first respondent is not a lawyer and was proceeding in person.  The first respondent did not admit the matters alleged to be the subject of the agreement.  In respect of the written documents said to constitute the agreement, the first respondent denied the authority of Mr Livingstone and a solicitor to act on his behalf and also alleged forgery of his own signature.  The first respondent alleged that Mr Livingstone was his accountant and that any certificates of title were held by Mr Livingstone in safe custody on behalf of the first and second respondents.  The first respondent did not admit the provision of the financial accommodation, but alleged that all moneys owed by him to the applicant had been repaid.  In particular, he alleged that Mr Livingstone acted as agent for the applicant in lending moneys to him and in collecting the repayment of moneys from him to the applicant.  It may be observed at once that the first respondent does not deny the receipt of the loans from the applicant.

A good deal of evidence has been received on the hearing of the present motion.  However, in the end, counsel for the first respondent places her client's case on one discrete aspect of the evidence of the applicant.  Two affidavits by the applicant were read on the motion and he was cross-examined.  In his second affidavit the applicant resiled from much of what he said in his first affidavit.  Yet that first affidavit was said by his solicitors in a letter dated 3 March 1997 to the first respondent's counsel to supply the facts and circumstances from which Mr Livingstone's agency for the applicant was to be implied.

The evidence of the applicant may be summarized as follows:  He is an accountant who used to employ Mr Livingstone.  Since about 1978 a company called Ophix Finance Corporation Pty Ltd, which is owned and controlled by him and a Mr John Slattery, has operated a deposit-taking and money-lending business.  Ophix operates 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 are the signatories.  Ophix maintains a separate ledger account for each client, and Mr Livingstone has been a client since 1978.  In order to withdraw funds from the account, Mr Livingstone was supplied with blank cheques signed by the applicant.  The applicant did not know the intended payee of the cheques and the amounts paid were debited to Mr Livingstone's ledger account.  Cheques totalling $371,000 that the applicant had previously sworn represented loans by him to the first respondent were apparently debited to Mr Livingstone's ledger account in Ophix's books.  In cross-examination, the applicant agreed that any moneys lent to the first respondent came from Mr Livingstone, and not from him.  He also agreed that at the relevant times, that is, the end of 1985 and 1986, he had no dealings with the first respondent's solicitor and knew nothing about any requirements for caveats or mortgages.  The applicant did know, he says, that the moneys were being advanced in his name. 

Counsel for the first respondent submits, on the basis of these admissions by the applicant, that the proceeding is plainly an abuse of process since the applicant is not a creditor of the first respondent.  Unless the applicant lent the moneys to the first respondent, there will be no debt owing to him and it is difficult to see what is the equity he may enforce against the first and second respondents. 

Without descending to detailed analysis, counsel for the applicant draws attention to many documents (of which for present purposes it may be accepted the first respondent was well aware) from which an inference is available that the first respondent received advances from the applicant.  In particular, he instances a mortgage apparently signed by the first respondent and dated 31 December 1985.  He submits that the first respondent may be estopped from denying the receipt of the loans.  Counsel also submits that, in any event, it is open to the applicant, as principal, to ratify the acts of Mr Livingstone even if he acted without any authority at all in purporting to contract on his behalf so that he becomes fully entitled under any contract.  Such a ratification operates retrospectively: Davison v Vickery’s Motors Ltd
(In Liquidation) (1925) 37 CLR 1 per Isaacs J at 13-23.

Great caution is to be exercised in invoking the Court's summary jurisdiction effectively to terminate an action: Dey v Victorian Railway Commissioners (1949) 78 CLR 62 at 91-92 and General Steel Industries Inc v Commissioner for Railways (NSW) 112 CLR 125 at 128-130. The first respondent rests his case for summary dismissal effectively on the broad hint that the suit has been brought by the wrong plaintiff and that Mr Livingstone is his creditor. His counsel does not, of course, say that in terms. However, I think that, if that is what the first respondent wants to say, then he must be more forthcoming in his pleading and boldly enter a plea of nunquam indebitatus.  The mere non-admission in his defence is simply not good enough for present purposes, especially when the first respondent has not testified at all about the advances apparently made to him in the name of the applicant.  If the first respondent does seek leave to amend his defence, it would then be open to the applicant to raise matters, such as any estoppel, in reply. 

The motion will be refused.  Each party’s costs of the motion will be that party’s costs in the cause.

I certify that this and the preceding three (3) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Whitlam

Associate:

Dated:            28 October 1997

C J Birch of counsel, instructed by Church & Grace, appeared for the applicant.

J V Coombs of counsel appeared for the first respondent.

Dates of hearing:	27-28 October 1997
Date of judgment:	28 October 1997