Tomcsanyi v National Australia Bank Ltd

[2015] WASC 448

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   TOMCSANYI -v- NATIONAL AUSTRALIA BANK LTD [2015] WASC 448

CORAM:   ACTING MASTER GETHING

HEARD:   20 & 21 OCTOBER 2015

DELIVERED          :   30 NOVEMBER 2015

FILE NO/S:   CIV 1427 of 2014

BETWEEN:   LEWIS MICHAEL TOMCSANYI

MICHELLE ELIZABETH TOMCSANYI
Plaintiffs

AND

NATIONAL AUSTRALIA BANK LTD
Defendant

Catchwords:

Contract - Mortgage - Whether breach excused innocent party from compliance - Causation of damages - Mitigation of damages - Ejectment

Legislation:

Australian Consumer Law, s 21

Result:

Claim dismissed
Judgment awarded to defendant, including right to possession

Category:    B

Representation:

Counsel:

Plaintiffs:     In person

Defendant:     Ms E C Hensler

Solicitors:

Plaintiffs:     In person

Defendant:     Allens Linklaters

Case(s) referred to in judgment(s):

Australian Competition and Consumer Commission (ACCC) v CG Berbatis Holdings Pty Ltd [2003] HCA 18; (2003) 214 CLR 51

Australian Goldfields NL (in liq) v North Australian Diamonds NL [2009] WASCA 98

Bak v Glenleigh Homes Pty Ltd [2006] NSWCA 10

Brian Fletcher as Trustee of the Brian Fletcher Family Trust v St George Bank Ltd [No 2] [2011] WASC 277

British Westinghouse Electric Co Ltd v Underground Electric Railways Co Ltd [1912] AC 673

Chappel v Hart [1998] HCA 55; (1998) 195 CLR 232

Commercial Bank of Australia v Amadio [1983] HCA 14; (1983) 151 CLR 447

Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64

Finding v Commonwealth Bank of Australia [2001] 1 Qd R 168

Foran v Wight [1989] HCA 51; (1989) 168 CLR 385

Glew v Frank Jasper Pty Ltd [2010] WASCA 87

Golby v Commonwealth Bank of Australia (1996) 72 FCR 134

Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125

Ibrahim v The Honourable Justice Carolyn Martin [2012] WASC 338

Lambert v Lewis [1982] AC 225

Mackinlay v Derry Dew Pty Ltd [2014] WASCA 24; (2014) 46 WAR 247

Mallesons Stephen Jaques v Trenorth Ltd [1999] 1 VR 727

March v E & MH Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506

McKenzie v McKenzie [1971] P 33

McPhail v Persons Unknown [1973] Ch 447

Motium Pty Ltd v Arrow Electronics Australia Pty Ltd [2011] WASCA 65

MTI v SUL [No 2] [2010] WASCA 58

Murphy v Zamonex Pty Ltd (1993) 31 NSWLR 439

Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; (2010) 41 WAR 353

Reg Glass Pty Ltd v Rivers Locking Systems Pty Ltd [1968] HCA 64; (1968) 120 CLR 516

Robinson v Harman (1848) 1 Exch 850; (1848) 154 ER 363

Sacher Investments Pty Ltd v Forma Stereo Consultants Pty Ltd [1976] 1 NSWLR 5

Schagen v The Queen (1993) 8 WAR 410

Smart v Prisoner Review Board (WA) [2012] WASC 48

Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 83 ALJR 390

TC Industrial Plant Pty Ltd v Robert's Queensland Pty Ltd [1963] HCA 57; (1963) 180 CLR 130

TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130

The State of Western Australia v Houston [2015] WASC 174

Tobin v Dodd [2004] WASCA 288

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165

Tomcsanyi v Yuswak [2015] WASC 111

Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38; (1998) 192 CLR 603

Wentworth v Rogers (No 5) (1986) 6 NSWLR 534

Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 86 ALJR 1

ACTING MASTER GETHING: 

1. Background

1. Lewis Tomcsanyi is the registered proprietor of three lots of land near Denmark, which I will refer to as 'the Denmark Farm'.  In 2009 he borrowed around $4.4 million from the National Australia Bank Ltd (Bank) to acquire another farm and a house in Albany.  This loan was secured by mortgages over the Denmark Farm.  At some stage prior to 2011 a dispute arose between Mr and Mrs Tomcsanyi, the Bank and a lawyer who had advised Mr Tomcsanyi, Craig Sutherland.  The dispute led to Mr and Mrs Tomcsanyi commencing an action in the Supreme Court.  This action was ultimately settled at a mediation conference.  The parties recorded their settlement in a settlement deed dated 21 February 2012 (Settlement Deed).[1]

   [1] Exhibit D1.

2. A key aspect of the terms of the Settlement Deed was that Mr Tomcsanyi's liability to the Bank was to be reduced to $765,000, which was to be paid to the Bank 12 months after the date of execution of the Settlement Deed.  After the Settlement Deed was executed, automatically generated bank statements in respect of the accounts with the Bank the subject of the Settlement Deed were sent to Mr Tomcsanyi which did not reflect the reduction agreed to in the Settlement Deed.  Mr Tomcsanyi asserts that the issue by the Bank of these automatically generated bank statements constitutes a breach of the Settlement Deed.  He says that the breach caused him to incur significant damages in that it impeded his ability to refinance the Denmark Farm so as to be able to pay out the remaining amount due under the Settlement Deed.

3. The Bank asserts that the automatically generated account statements were no more than internal bank documents.  At all times, including in the present action, the Bank has remained committed to the position that the principal amount owing under the Settlement Deed is $765,000.

4. Mr Tomcsanyi did not pay the Bank the $765,000 when due under the Settlement Deed, being 21 February 2013.  The Bank asserts that, under the terms of the Settlement Deed, this meant that Mr Tomcsanyi was in default of the relevant finance facility and the mortgage over the Denmark Farm.  The Bank then proceeded to attempt to enforce the mortgage.

5. Mr and Mrs Tomcsanyi remain in possession of the Denmark Farm.

6. On 28 March 2014 Mr and Mrs Tomcsanyi commenced this action.  They seek damages in the order of $5 million for breach of the Settlement Deed by the Bank.  The Bank counterclaimed seeking payment of the money due under the Settlement Deed and possession of the Denmark Farm.

7. All parties accept and purport to abide by the terms of the Settlement Deed.

8. The trial of the action took place before me on 20 and 21 October 2015.  Mr and Mrs Tomcsanyi were not represented by a lawyer.  They were, however, very ably assisted at the trial by a 'McKenzie friend'[2], Mr Jonas Ferguson.  It is appropriate that I express my gratitude to Mr Ferguson for his assistance.  His assistance ensured that Mr and Mrs Tomcsanyi's case was put before the court in its most cogent form.  Notwithstanding Mr Ferguson's assistance, it is appropriate that I treat Mr and Mrs Tomcsanyi as litigants in person.  This means that it is appropriate that I approach the documents in which they articulate their claim (and defence to counterclaim) with some flexibility.[3]  They may require, and be given, some leniency in relation to compliance with the rules set out in the Rules of the Supreme Court 1971 (WA) (RSC).[4]  I need to be astute to ensure that, in a poorly expressed or unstructured document setting out their claim, there is no claim which, with appropriate amendment or permissible assistance from the court, could be put into proper form.[5] 

9. At the same time, I also need to ensure that any latitude given to Mr and Mrs Tomcsanyi does not deprive the Bank of its rights to procedural fairness and a fair trial.[6]

1. What issues arise for determination?

   [2] McKenzie v McKenzie [1971] P 33; Schagen v The Queen (1993) 8 WAR 410, 412 (Malcom CJ).

   [3] Wentworth v Rogers(No 5) (1986) 6 NSWLR 534, 536 ‑ 537 (Kirby P), 543 (Hope & Samuels JJA agreeing); Smart v Prisoner Review Board (WA) [2012] WASC 48 [10] (Pritchard J).

   [4] Glew v Frank Jasper Pty Ltd [2010] WASCA 87 [10] (Reasons of the Court).

   [5] Ibrahim v The Honourable Justice Carolyn Martin [2012] WASC 338 [21] (Beech J); Tobin v Dodd [2004] WASCA 288 [15] (EM Heenan J, Murray & Le Miere JJ agreeing); Wentworth (536 ‑ 537).

   [6] Glew [10]. See generally: MTI v SUL [No 2] [2010] WASCA 58 [42] ‑ [43] (Newnes JA, Pullin & Buss JJA agreeing).

1. The parties filed pleadings and written opening submissions.  From those documents, the following issues arise for determination:

   •Did the Bank breach the Settlement Deed in sending out the automatically generated account statements?[7]

   •If the Bank did breach the Settlement Deed, did the Bank act unconscionably in entering into the Settlement Deed on terms it knew at the time it could not honour?[8]

   •If the Bank did breach the Settlement Deed, did this excuse Mr Tomcsanyi from paying the remaining $765,000?[9]

   •What amount, if any, does Mr Tomcsanyi owe the Bank?[10]

   •If the Bank did breach the Settlement Deed, what losses could Mr Tomcsanyi potentially claim?[11]

   •Were any losses which Mr Tomcsanyi could claim caused by the Bank's breach?[12]

   •Did Mr Tomcsanyi mitigate any loss he has suffered?[13]

   •Is the Bank entitled to possession of the Denmark Farm?[14]

   •What final orders are appropriate?

   [7] Statement of claim [6] ‑ [12], [18] ‑ [19], [21]; reply and defence to counterclaim [6], [42] ‑ [43].

   [8] Statement of claim [16] ‑ [17].

   [9] Reply and defence to counterclaim [42] ‑ [46].

   [10] Defence and counterclaim [24(b)(iii), (v)], [42] ‑ [49]; reply and defence to counterclaim [7], [38], [40], [46], [48].

   [11] Statement of claim [13], [20] ‑ [24]; reply and defence to counterclaim [37].

   [12] Defence and counterclaim [24(a)].

   [13] Defence and counterclaim [8], [24]; reply and defence to counterclaim [5], [7] ‑ [9].

   [14] Defence and counterclaim [33], [42] ‑ [48], [53]; reply and defence to counterclaim [43.5], [47].

2. In the reply and defence to counterclaim, Mr Tomcsanyi refers to representations made in 2009 by an officer of the Bank which I understand to be part of the dispute settled in the Settlement Deed, and then make a claim for damages.[15]  Given the width of the release in cl 3 of the Settlement Deed, Mr Tomcsanyi is no longer able to pursue this claim, nor did he seek to do so in the course of the trial.

   [15] Reply and defence to counterclaim [18] ‑ [37].

3. Although both Mr and Mrs Tomcsanyi are parties to the Settlement Deed and the present action, the finance facilities in issue in the present action and the Denmark Farm are only in Mr Tomcsanyi's name.  Accordingly, for the most part, the reasons which follow need only refer to Mr Tomcsanyi.

4. Before analysing these issues, it is necessary to set out the context for the issues in dispute.

1. Context

1. The facts set out in this Part are not contested.

2. Mr Tomcsanyi has been the registered proprietor of the Denmark Farm for many years.  The Denmark Farm comprises three lots:

   (a)lots 4308 and 4309 on Deposited Plan 202976 (Certificate of Title Volume 1895 Folio 652); and

   (b)lot 4331 on Deposited Plan 202986 (Certificate of Title Volume 1789 Folio 527).

3. In 2009 Mr Tomcsanyi wanted to acquire two additional properties:

   (a)Darjeeling Farm, comprising lot 361 on Deposited Plan 224104 (Certificate of Title Volume 1733 Folio 721); and

   (b)a house in Albany at 52 Barnesby Drive, Yakamia, comprising lot 233 on Plan 13038 (Certificate of Title Volume 1550 Folio 230) (Albany House).

4. In order to acquire the Darjeeling Farm and the Albany House, Mr Tomcsanyi entered into two loans with the Bank:[16]

   (a)Market Rate Facility in the amount of $3,899,000 (MR Facility); and

   (b)Farmers Choice Farm Management Account Overdraft in the amount  of $500,000 (FM Overdraft).

   [16] Exhibit D2.

5. The MR Facility and the FM Overdraft were secured, among other ways, by first registered mortgages (Mortgages) over the Denmark Farm.[17]  The Mortgages each incorporated a Memorandum of Common Provisions (Common Provisions), being Western Australia No K391377.[18]

   [17] Exhibits D3 and D4.

   [18] Exhibit D5.

6. At the same time, Mr Tomcsanyi entered into a series of mortgages with the Bank to acquire certain farm equipment (Equipment).

7. As I have already noted, at some stage prior to 2011 a dispute arose between Mr and Mrs Tomcsanyi, the Bank and Mr Sutherland.  The dispute led to Supreme Court litigation being commenced in 2011 by Mr and Mrs Tomcsanyi against the Bank and Mr Sutherland.

8. On 9 August 2011, and again on 9 September 2011, the Bank served notices of default on Mr Tomcsanyi in relation to the FM Overdraft and the MR Facility.  By the time of the September notice of default the amount owed to the Bank was in the order of $5.3 million.  Mr Tomcsanyi did not pay the amount demanded in these notices of default.

9. Employees of the Bank, Mr and Mrs Tomcsanyi and Mr Sutherland participated in a mediation before a Supreme Court Registrar.  The parties settled their dispute and recorded their settlement, being the Settlement Deed.[19]  The key terms of the Settlement Deed were as follows:

   [19] Exhibit D1.

   (a)Mr and Mrs Tomcsanyi were to deliver up the Equipment to the Bank within seven days of the date of the Settlement Deed;

   (b)the Bank would sell the Equipment and retain the full net proceeds of sale;

   (c)Mr and Mrs Tomcsanyi were to deliver up the Darjeeling Farm to the Bank within two months of the date of the Settlement Deed;

   (d)the Bank would sell the Darjeeling Farm and retain the full net proceeds of sale;

   (e)Mr and Mrs Tomcsanyi were to deliver up the Albany House to the Bank within four months of the date of the Settlement Deed;

   (f)the Bank would sell the Albany House and retain the full net proceeds of sale;

   (g)the account limit on the MR Facility and its current balance would be reduced to $765,000, and would not be further reduced as a consequence of the sale of the Equipment, the Darjeeling Farm and the Albany House;

   (h)the FM Overdraft would be closed;

   (i)interest would not accrue on the reduced MR Facility until the day 12 months after the date of the Settlement Deed;

   (j)the MR Facility was to be repaid in full on or before 12 months of the date of the Settlement Deed;

   (k)in the event that the MR Facility was repaid, the Bank would discharge the Denmark Mortgage and release Mr and Mrs Tomcsanyi from all claims under the facilities as varied by the terms of the Settlement Deed;

   (l)in the event that the varied MR Facility was not paid in full as set out in (j), then, from the day 12 months after the date of the Settlement Deed, there would be a default under the MR Facility and the Denmark Mortgage;

   (m)subject to the terms of the Settlement Deed, the total amount owing by Mr and Mrs Tomcsanyi to the Bank would be limited to $765,000; and

   (n)each party would bear their own costs arising out of the negotiation, preparation and execution of the Settlement Deed.

10. Shortly after the execution of the Settlement Deed the issues relating to the automatically generated bank statements arose.  I will return to this issue in in pt 4 of these reasons.

11. Mr and Mrs Tomcsanyi delivered up possession of the Equipment, the Darjeeling Farm and the Albany House to the Bank in accordance with the requirements of the Settlement Deed.

12. Pursuant to the terms of the Settlement Deed, the varied MR Facility was due to be repaid on or before 21 February 2013 in the amount of $765,000.  This did not occur.

13. On 22 February 2013 Mr and Mrs Tomcsanyi submitted a dispute to the Financial Ombudsman Service (FOS).[20]  In the field headed 'Summary of Dispute' the Tomcsanyis stated the following:

    [20] Exhibit P6.

    Summary of Dispute:

    Breachs [sic] to our settlement deed by the NAB Bank

    1.  keeping accounts open that should be shut

    2.  not capping our debt to $765.000

    3.  the charging of interest

    4.  charging their legal costs to our account

    because of these breachs [sic] our last 12 month finacials [sic] don't reflect what they should what was a modest profit and a aproximate [sic] plus 70% equity is now a massive half million dollar loss and a aproximate [sic] negative 150% equity.

    Outcome Sought:

    We believe the NAB should correct its mistakes so our finacials [sic] can reflect what they should, and they should carry our loan for another 12 months because the action by the NAB has impacted our ability directly for any alternate arrangement regarding our settlement of this matter.

14. At some stage towards the end of June 2013, Mr Tomcsanyi received a copy of an email from the Bank to FOS in relation to his complaint.  The substance of that email is in the following terms:[21]

    We have previously provide [sic] your office with copies of correspondence our representative has sent to the disputants representatives in respect to the Deed.

    We dispute the claim that NAB have breached the Deed.

    In brief, the debt was limited to $765,000 as agreed therefore we were not in a position to implement the remaining outstanding items of the Deed.  This would take effect once the disputants delivered possession of the Equipment (as defined in the Deed) to the Bank.

    We again request your office to review the Deed and the disputants' claim as a matter of priority and determine whether there has been any breach by the Bank.

    [21] Exhibit P7.

15. The third paragraph appears to contain an error as it is common ground that Mr and Mrs Tomcsanyi  surrendered the Equipment to the Bank shortly after the Settlement Deed was executed in 2012.  Nothing turns on this error.

16. Mr Tomcsanyi also received a copy of a letter dated 29 October 2013 from the Bank to FOS.[22]  The author was Greg Daniel, a senior employee with the Bank responsible for the accounts in issue.  The relevant portion of this letter is as follows:

    Nab agrees that the settlement Deed dated 21 February 2012 provided, among other things, the existing facilities of Mr and Mrs Tomcsanyi were varied such that:

    •the account limit and current balance of the Varied Market Rate Facility were reduced to $765,000; and

    •the Farmers Choice Farm Management Account Overdraft could be closed.

    The variation took effect from 21 February 2012, and was not conditional on other terms of the deed as your letter points out.  This was simply the effect of the deed once executed and exchanged on 21 February 2012.

    It is the case that the system generated statements for the Varied Market Rate Facility and the Farmers Choice Farm Management Account Overdraft did not reflect this reduction in limit and reduced balance owing under the facilities. This was because of internal system issues in 'writing off' the significant debts of Mr and Mrs Tomcsanyi which is required to be written off (an amount in excess of $2.0m) under the settlement terms in the settlement deed.  This write off needs to be finalised once the final $765,000 is repaid - which Mr and Mrs Tomcsanyi were required to do by 21 February 2013 under the settlement deed, but has not yet occurred.

    [22] Exhibit P8.

17. The FOS dispute was closed on or around 24 December 2013.

18. On or about 13 January 2014 the Bank served a notice of default on Mr Tomcsanyi dated 13 January 2014 in relation to the varied MR Facility (2014 Notice of Default).[23]  The amount then asserted by the Bank to be due was $878,564.69 (plus accrued interest, fees, costs and expenses).

    [23] Exhibit D7.

19. Mr Tomcsanyi did not comply with the 2014 Notice of Default.

20. By letter dated 5 March 2014, Mr and Mrs Tomcsanyi reiterated their complaints to the Bank, again seeking compliance with the terms of the Settlement Deed reducing the account balances.[24]  The substance of this letter is as follows:

    As you are aware we have complained for two years that NAB Limited has failed to honour its obligations under the Deed of Settlement dated 21 February 2012 between LM & ME Tomcsanyi and NAB Limited.

    In your letter to the office of the Financial Ombudsman dated 29 October 2013, you admit that the system generated statements for both facilities do not reflect the agreed reduction in limit and reduced balances owing.  You imply that the NAB has failed to honour its legal obligation because a condition subsequent has not been met by us.

    You must understand that the bank's failure to honour its obligations under the Deed of Settlement amount not only to a breach of contract but also potentially, contempt of court.

    Any reasonable person would understand that the Deed of Settlement is made meaningless if the NAB fails to honour the commitment to reduce the balance owing to $765,000.00.  Furthermore, the NAB's failure has resulted in serious and sustained losses in our financial statements for the years 2012‑2014.

    After repeated attempts to have this serious problem rectified over the last 18 months, with absolutely no adequate response from the NAB, the time has come for us to take action.

    To restore us to the position we should have been in at the end of February 2012 we require payment of the difference between the current balance for the Varied Market Rate Facility and the agreed sum of $765,000.00; and, the difference between the current balance of the Farm Management Account Overdraft Facility and the agreed balance of $0.00.

    [24] Exhibit D9.

1. Mr Daniel responded by letter dated 13 March 2014, which Mr Tomcsanyi received.[25]  Mr Daniel reiterated the Bank's position that Mr Tomcsanyi was in breach of the Settlement Deed by not paying the $765,000 due by 21 February 2013:

   Nab denies that it breached the Deed of Settlement dated 21 February 2012 (Settlement Deed).  At all relevant times, nab has simply required (and still requires) payment of the final amount (initially $765,000 by 21 February 2013) agreed to in resolution of your previous court proceedings.  You have not paid this amount in whole or part.  As at 13 March 2014, the amount owing is $899,109.80, comprising $765,000 plus interest accrued since 21 February 2013 when payment was due under the Settlement Deed.  Default interest will continue to accrue, together with enforcement costs and charges, until the balance is paid in full.

   [25] Exhibit D10.

2. By deed dated 11 March 2014, the Bank appointed three principals of Korda Mentha as receivers over the Demark Farm (Receivers).[26]  The receivers sought to take possession of the Denmark Farm on 12 March 2014.  Mr Tomcsanyi refused to let them do so in circumstances which led to criminal charges being laid against him.[27]

   [26] Exhibit D16.

   [27] The circumstances of this incident are set out in Tomcsanyi v Yuswak [2015] WASC 111 (Hall J).

3. By letter dated 17 March 2014 to the Bank's lawyers, Mr and Mrs Tomcsanyi set out their understanding of the effect of cl 2 of the Settlement Deed:[28]

   [28] Exhibit D11.

   The plain meaning of these provisions is that the amount owed to the NAB Limited would be reduced to $765,000 from the settlement date, which would be interest free for 12 months, during which time we would either refinance that amount, or sell the property.

   The actual situation is:

   (i)The current balance under the Varied Market Rate Facility has never been reduced to $765,000;

   (ii)The Varied Market Rate Facility has continued to accrue interest;

   (iii)The account balance as at 23 July 2013 was $3,167,794.30;

   (iv)The Farmers Choice Farm Management Account Overdraft has not been closed;

   (v)The overdraft account balance continues to accrue interest at the rate of 14.37% and the balance as at 31 May 2013 was $1,353,899.68.

   As a result of the Bank failing to honour the plain intent of the Deed of Settlement we have been unable to comply with our obligations under the Deed which could never be honoured if the Bank failed to satisfy these conditions precedent.

   It appears that the Bank has completely ignored its legal obligations in the belief that the elapse of time would force us into non‑compliance with the Deed, thereby allowing the Bank to proceed as if there had never been a Deed of Settlement.

   Please note that in the circumstances we are not prepared to surrender possession of the secured property without the Bank having first obtained an order from the Court.

4. On 28 March 2014, Mr and Mrs Tomcsanyi commenced these proceedings.

5. In response, to Mr Tomcsanyi's letter of 17 March 2014, Philip Blaxill, a principal with the Bank's lawyers, wrote to Mr Tomcsanyi (being a letter dated 15 April 2014) highlighting what he saw as a misunderstanding as to the amounts owing under the Settlement Deed, stating:[29]

   It appears to us that there may be some misunderstanding as to the amounts owing under the Deed of Settlement dated 21 February 2012.

   By way of clarification, the Bank seeks payment of the Varied Market Rate Facility only, as provided for in clause 2.1(b)(i) of the Deed of Settlement.  The Bank does not seek payment of the total amounts that, prior to the Deed of Settlement, were owing under the Market Rate Facility and the Farmers Choice Farm Management Account Overdraft.  The amount owing by you under the Varied Market Rate Facility is limited (in accordance with clause 2(b)(viii) of the Deed of Settlement) to $765,000 plus interest, fees, costs and expenses accruing since 22 February 2013.

   The Bank denies any breach of the terms of the Deed of Settlement and simply seeks to enforce the Deed of Settlement, as previously agreed.

   [29] Exhibit D12.

6. Mr Tomcsanyi received this letter.

7. Mr and Mrs Tomcsanyi are still in possession of the Denmark Farm.

1. Did the Bank breach the Settlement Deed in sending out the automatically generated statements?

Issues

1. The case of Mr and Mrs Tomcsanyi is that, notwithstanding the terms of the Settlement Deed:[30]

   (a)the balance of the MR Facility was not reduced to $765,000;

   (b)the FM Overdraft was not closed;

   (c)interest continued to accrue on both accounts; and

   (d)fees of $47,040.89 for Allens Arthur Robinson were debited.

   [30] Statement of claim [6].

2. Their expectation was that pursuant to the Deed of Settlement, their accounts would show an amount owing of $765,000 with no interest to accrue for 12 months.[31]

   [31] Statement of claim [12].

3. The relevant portion of the Settlement Deed is cl 2.1(b)(i) to (iii):[32]

   (b)The Facilities are from the Settlement Date varied such that:

   (i)the account limit and the current balance under the Varied Market Rate Facility will be $765,000, and will not be reduced as a consequence of the sale of the Darjeeling Farm, the Albany House and the Equipment under clauses 2.2, 2.3 and 2.4;

   (ii)the Farmers Choice Farm Management Account Overdraft will be closed;

   (iii)The First Plaintiff is not entitled to make any draw down under the Varied Facilities;

   [32] Exhibit D1.

4. The most cogent way in which to express Mr and Mrs Tomcsanyi's claim is that:

   (a)the Bank did not reduce the account limit and the current balance of the MR Facility to $765,000 as required by Settlement Deed cl 2.1(b)(i);

   (b)the Bank did not close the FM Overdraft as required by Settlement Deed cl 2.1(b)(ii); and

   (c)the automatically generated statements received by Mr Tomcsanyi were evidence of these breaches.

5. The analysis of this issue is divided into four parts:

   •The evidence of Mr Tomcsanyi.

   •The evidence of Mr Daniel.

   •Factual findings.

   •Determination of the issue.

   Mrs Tomcsanyi did not give evidence.

The evidence of Mr Tomcsanyi

1. Mr Tomcsanyi had filed a signed witness statement in accordance with the case management directions made by the court.  However, after discussing the matter with Mr Ferguson and counsel for the Bank at the commencement of his evidence, I formed the view that it would be more appropriate that he give his evidence at trial orally, which he did.

2. As I have noted, the Settlement Deed was executed on 21 February 2012.  Mr Tomcsanyi's concerns about whether the Bank would comply with the Settlement Deed emerged within a week or so of its execution.[33]  The first catalyst appears to have been a letter dated 23 February 2012 to Mr Tomcsanyi from the Bank (Mr Daniel).[34]  In the letter, the Bank advised that in managing Mr Tomcsanyi's files it had incurred legal fees in relation to services provided from 18 November 2011 to 7 December 2011.  The letter noted that under its security documentation the Bank was entitled to pass those costs on to Mr Tomcsanyi.  The Bank advised that it would be debiting his account with an amount of $16,290.89 in the next few days.

   [33] ts 12.

   [34] Exhibit P1.

3. Mr Tomcsanyi also received a second letter of the same date in similar terms from the Bank (Mr Daniel), this time referring to the period from 18 November 2011 to 25 January 2012, noting that the amount of the costs was $30,750.[35]

   [35] Exhibit P1.

4. At around the same time, Mr Tomcsanyi received an Account Balance Summary in relation to the FM Overdraft for the period from 2 December 2011 to 29 February 2012.[36]  It stated that the balance as at 29 February 2012 was $1,114,218.89 in debit, and recorded the amount of the two sets of legal fees described in the preceding two paragraphs being debited against the account.

   [36] Exhibit P1, ts 18.

5. Mr Tomcsanyi's expectation was the after the Settlement Deed, the balance in the accounts would be reduced to $765,000.[37]

   [37] ts 25.

6. In response to this information, Mr Tomcsanyi spoke to his lawyer, Paul Sheiner of Roe Legal Services.  In evidence before me is an email from Mr Sheiner to Farrah Valibhoy, a senior associate at the Bank's lawyers, sent on 11 April 2012.  Mr Sheiner attaches a copy of the letters dated 23 February 2012 from the Bank to Mr Tomcsanyi.  He then states:

   I have advised my client to ignore the letter as it is inconsistent with the settlement deed.  Please let me know if your client contends to the contrary.

7. Mr Tomcsanyi's evidence is that he was provided with advice in these terms by Mr Sheiner at around this time.[38]

   [38] ts 14, 53.

8. Ms Valibhoy's email response to Mr Sheiner of 12 April 2012 stated that the amount of any legal expenses added to the accounts did not affect the amount of $765,000 to be paid by Mr Tomcsanyi:[39]

   Thank you for your email attaching a letter from our client to Mr Tomcsanyi dated 23 February 2012.

   Our client is entitled to pass on the costs it has incurred in connection with exercising, enforcing or preserving rights, powers or remedies (or considering or attempting to do so) in connection with any transaction document, facility or any transactions under or in relation to them.  Our client was therefore entitled to debit Mr Tomcsanyi's account with the legal costs incurred by it in relation to this matter up to the date of mediation.

   Subject to your client complying with the terms of the Settlement Deed, the debited amount of legal costs will not affect the amount ($765,000) to be paid by your client under the Varied Market Rate Facility.

   [39] Exhibit D8.

9. Mr Tomcsanyi saw this email in or about April 2012.[40]

   [40] ts 53.

10. Around this time Mr Sheiner and Mr Tomcsanyi parted company as Mr Tomcsanyi felt that Mr Sheiner was not acting in his best interests.[41]

    [41] ts 17.

11. In cross‑examination, Mr Tomcsanyi accepted that in April 2012 he visited the Albany branch of the Bank and asked the bank teller for new bank statements showing the correct amount.  The bank teller told him to speak to Mr Daniel.[42]

    [42] ts 45 (also ts 42).

12. In early June 2012, before he vacated the Albany House, Mr Tomcsanyi received another Account Balance Summary in relation to the FM Overdraft.[43]  This was for the period 2 March 2012 to 31 May 2012.  The account balance as at 31 May 2012 was $1,169,071.97 debit.

    [43] Exhibit P2, ts 15 ‑ 16, 18.

13. Mr Tomcsanyi testified that around the end of June 2012 he and his wife vacated the Albany house.  They were going to be two days late in vacating the house due to inclement weather.  He rang the Bank, told the person he spoke to of the circumstances, and was told this would be all right.[44]  In cross‑examination, it was put to Mr Tomcsanyi that the person he spoke to was Mr Daniel, which he conceded it might have been.[45]

    [44] ts 12.

    [45] ts 41.

14. At some stage before Christmas 2012, Mr Tomcsanyi received another Account Balance Summary for the FM Overdraft, which he appears to have collected from the Bank (it is addressed to the Albany House which Mr and Mrs Tomcsanyi had vacated by then).[46]  This was for the period 2 June 2012 to 31 August 2012 and showed a closing account balance of $1,214,040,74 debit.[47]  At the same time, he also received a copy of an Account Balance Summary for the MR Facility.[48]  This was for the period 16 February 2012 to 25 July 2012, and showed a closing account balance of $4,725,191.48 debit.

    [46] ts 25.

    [47] Exhibit P4.

    [48] Exhibit D6; ts 51.

15. In the middle of December 2012 Mr and Mrs Tomcsanyi went to the Bank of Queensland branch in Albany, and spoke to a stand‑in manager there by the name of Tracy.  Mr Tomcsanyi explained to Tracy that he was interested in a bridging loan to buy a station and perhaps to borrow some extra money to 'spruce up' the Denmark Farm.  He advised Tracy that they had been in dispute with the Bank but they had a Settlement Deed.  He enquired of Tracy what information the Bank of Queensland would require in order to consider a loan application.  He was told that he needed to provide two or three years' worth of financial accounts demonstrating the ability to provide adequate security and serviceability.[49]  In cross‑examination, Mr Tomcsanyi confirmed that the purpose of 'sprucing up' the Denmark Farm was to sell it.[50]  He also stated that he did not provide Tracy with a copy of the Settlement Deed, but he did explain it to her.[51]

    [49] ts 21 ‑ 22.

    [50] ts 46.

    [51] ts 66.

16. The Bank of Queensland was the only financier Mr Tomcsanyi saw at this time, that is, prior to the due date for the payment of the $765,000 being 21 February 2013.[52]

    [52] ts 32.

17. As to what occurred after the visit to the Bank of Queensland, this is best expressed in Mr Tomcsanyi's own words:[53]

    It came into Christmas.  Christmas walked on us, and it just seemed to be a bad time.  The accountants seemed to go on holiday.  Everyone is on holiday.  You - it's just about an impossible task to achieve anything in that period.  And we realised that things weren't going to happen the way we intended.  We weren't going to be able to achieve what we - what we were wanting to do.  And I will take you back before that.  We vacated the house in June, and winter struck us, and I had to do a bit of work on the Denmark farm, so - to generate an income from that.  We sought of just stuck to ourselves.  We had been two - two, three years already arguing or two years arguing with a bank.  We were just happy to have a chill-out period where we didn't really chase anything we didn't have to.  We just stayed to ourselves, chilled out and when we were ready to readdress it we found this.  Couldn't - sort of went to a place we weren't sure what to do, you might say.

    What did you do in the end after this Christmas period was over  The payment that was due under the settlement deed by you was coming - falling due.  What action did you take---Well, in the end we - the action we took, because the date came up, we put a complaint in with the Financial Ombudsman.

    [53] ts 25 ‑ 26.

18. Mr Tomcsanyi had not done his financials for some time and thus had to bring them up to date.[54]  In around the end of 2012 Mr Tomcsanyi spoke to his accountant and asked him if he could prepare accounts showing the position as set out in the Settlement Deed.  His accountant told him that he did not want to prepare the accounts.  His accountant also told him that he refused to prepare the accounts on the basis of the Settlement Deed.[55] In cross‑examination Mr Tomcsanyi clarified that the accountant did not want to prepare the accounts for two reasons.  The first was that Mr Tomcsanyi was not able to pay him immediately and the accountant did not want to carry the debt.  The second was that the accountant did not want to get involved in preparing accounts that may be used in litigation.  Mr Tomcsanyi described this reason as the 'main thing'.[56]

    [54] ts 21 ‑ 22.

    [55] ts 32 ‑ 33.

    [56] ts 46.

19. As at the end of 2012 and beginning of 2013 Mr Tomcsanyi believed that he was not in a position to make an application for finance because he could not get his accounts up to date.[57]

    [57] ts 33.

20. Mr Tomcsanyi also gave evidence that he took advice from two lawyers (whom he named) to the effect that he should commence action in the terms which he did.

21. It emerged in cross‑examination that Mr Tomcsanyi:

    (a)was represented by lawyers at the mediation, who had some input into the drafting of the Settlement Deed;[58]

    (b)regarded the Settlement Deed as reflecting the settlement that was agreed at the mediation;[59]

    (c)regarded the Settlement Deed as giving him '97%' of what he had asked for in the statement of claim in the initial Supreme Court action;[60]

    (d)had asked Mr Daniel for copies of the bank statements in 2014, but did not on that occasion ask him to correct the bank statements; and[61]

    (e)never asked Mr Daniel for bank statements to be prepared reflecting the terms of the Settlement Deed.[62]

The evidence of Greg Daniel

[58] ts 66 ‑ 67.

[59] ts 67, also ts 69.

[60] ts 40.

[61] ts 66.

[62] ts 66.

1. Mr Daniel's evidence‑in‑chief was given by the tender of his witness statement.[63]  I granted leave for him to be asked a number of additional questions.

   [63] Exhibit D13.

2. In relation to the automatically generated statements, Mr Daniel's evidence is that at the time the Bank was not able to show the amount owing on the MR Facility as being $765,000 nor to close the FM Overdraft.[64]

   [64] Exhibit D13 [34] ‑ [39], [44] ‑ [45].

   34.On NAB's internal system at the time, it was not possible to show the amount owing on the Market Rate Facility as $765,000.  The debts owing by Mr Tomcsanyi were marked on NAB's internal system as 'bad and doubtful debts' as they were in default.  Once a debt has been marked 'bad and doubtful' on NAB's internal system the amount could not be reduced on the internal system to show the debt as $765,000 until the debt is written off in full.  The only way the internal system could show a debt of $765,000 would have been to write off the whole amount owing and create a new facility for $765,000.  This would have required further documentation to be signed by the Tomcsanyis.  I did not believe this was a realistic option.

   35.Given the constraints of NAB's internal system, I formed the view that the best option was to wait until the $765,000 had been paid by Mr Tomcsanyi, or the Mortgages were discharged and then write off the balance.  If Mr Tomcsanyi had paid the $765,000 on or before 21 February 2013 (as required by the Settlement Deed), I would have then written off the balance of the debt.  If NAB receives the amount owed by Mr Tomcsanyi under the Settlement Deed (that is, $765,000 plus interest, costs and expenses) in the future, the balance of the debt will then be written off.

   36.Even though NAB's internal system showed a much larger amount owing on the Facilities, I had caused NAB to provision for the ultimate write down of the Facilities to zero once the $765,000 (plus any interest, costs and expenses after 21 February 2013) had been paid.  This was on the basis that NAB had agreed under the Settlement Deed that only $765,000 would be owing (if paid before 21 February 2013) and interest would not accrue on the Market Rate Facility before 21 February 2013.

   37.Similarly to the Market Rate Facility, it was not possible to close the Overdraft on the system until Mr Tomcsanyi met the conditions of the Settlement Deed, being paying out the $765,000.  So until then, the Overdraft would continue to accrue interest on a gross debt position and was marked as a bad and doubtful debt.  The effect of this is that once the $765,000 plus any interest, costs and expenses have been paid, the Overdraft will be written off and closed.  As with the Market Rate Facility, there is provision in NAB's bookwork for the ultimate writing off of the Overdraft.

   38.As far as I am aware, Mr and Mrs Tomcsanyi have never been required to pay any more than what was required under the Settlement Deed and no communication has been made with them to any other effect.

   39.I am not aware that anyone at NAB has communicated to Mr and Mrs Tomcsanyi that they consider the Settlement Deed was void.

   …

   44.After the date of the Settlement Deed, bank statements for the Facilities should not have been provided to Mr Tomcsanyi.  NAB's usual practice, in these circumstances, is that the relationship banker should have amended the address on the account details so that any further bank statements would be sent to the branch rather than the customer's address.

   45.The address associated with the Facilities was changed to the Albany branch on or around 4 December 2012.

3. In oral evidence and re‑examination, Mr Daniel stated that:

   (a)he formed the view in [35] of his statement after settlement;[65]

   (b)in forming the view in [35], it did not occur to him that it was in breach of the meaning or intent of the Settlement Deed;[66]

   (c)at the time he agreed to the Settlement Deed he was not aware that the Bank's internal systems would not permit the kind of adjustments that were specified in the Deed;[67]

   (d)there was a change in the Bank's internal systems such that by the time that settlement was due under the Settlement Deed entries could have been passed to reduce the account balances down to those in the Settlement Deed;[68]

   (e)at and after the time of entry into the Settlement Deed, if requested, Mr Daniel would have provided a certificate of amounts owing which would have reflected terms of the Settlement Deed;[69]

   (f)at and after the time of entry into the Settlement Deed, if requested, the Bank could have produced a manually generated statement of account reflecting the terms of the Settlement Deed;[70] and

   (g)the reason why the accounts have not now been adjusted is that the Bank was proceeding to trial 'so the accounts have been left as they are'.[71]

   [65] ts 104.

   [66] ts 105.

   [67] ts 107.

   [68] ts 92, 106.

   [69] ts 108, 120.

   [70] ts 120 ‑ 121.

   [71] ts 115.

1. Mr Daniel's evidence was that he did mark the FM Overdraft 'stopped to customer debit operations'.  This meant that Mr and Mrs Tomcsanyi could deposit money into the account, but could not make a withdrawal.[72]

   [72] ts 119.

2. Mr Daniel also gave evidence to the effect that he had limited communications with Mr and Mrs Tomcsanyi in the 12 months following the execution of the Settlement Deed.  His evidence is to the same effect as that of Mr Tomcsanyi about the communications with Mr Sheiner in April 2012, adding that it was he who gave instructions to Ms Valibhoy to respond in the terms in which she did.[73]

   43.After the Settlement Deed was signed, Mr and Mrs Tomcsanyi did not contact me regarding the amount owing under the Settlement Deed.

   …

   48.Other than the email from Paul Sheiner dated 11 April 2012 (referred to above), I received no complaint or other communication from Mr and Mrs Tomcsanyi or their solicitor about the amounts showing on the bank statements until receiving the details of the FOS Dispute on around 22 February 2013.

   49.I spoke with Mr and Mrs Tomcsanyi by telephone on a few occasions in 2012 after the Settlement Deed was executed.  Those phone calls were the only contact I have had with Mr and Mrs Tomcsanyi following the execution of the Settlement Deed aside from the written correspondence annexed to this witness statement.  During none of those conversations did Mr or Mrs Tomcsanyi raise the account balances of the Facilities or any matters relating to bank statements.

   [73] Exhibit D8.

3. Elaborating on [49], Mr Daniel gave oral evidence that he had a telephone conversation with Mr Tomcsanyi on 20 June 2012 in which Mr Tomcsanyi asked for some extra time to vacate the Albany Property due to inclement weather and the fact that the roof was leaking.  Mr Daniel sought advice from someone else within the Bank, and then telephoned back and spoke to Mrs Tomcsanyi letting her know that they could have a short extension.[74]  I am satisfied that this is the conversation referred to by Mr Tomcsanyi in his evidence.[75]

   [74] ts 92 ‑ 93.

   [75] Above [58].

4. In cross‑examination, Mr Daniel was asked whether the FM Overdraft had been closed and the MR Facility had been reduced.  Given the significance of this evidence, it is appropriate that I quote from the transcript:[76]

   THE WITNESS:  Yes.  You asked whether the overdraft account is still open.

   FERGUSON, MR:  Yes---It is on our system.

   It is still open on your system---That's correct.

   And is it also true to say that the market rate facility shows a balance other than 765,000 plus interest?---That is correct.

Factual findings

[76] ts 96.

1. Both Mr Tomcsanyi and Mr Daniel gave evidence in a credible and forthright manner.  With three caveats, I have no hesitation in accepting their evidence, and finding as proven on balance of probabilities the facts set out at [47] ‑ [73].

2. The first caveat is that there is only one point at which there is a measure of inconsistency between the evidence of Mr Tomcsanyi and that of Mr Daniel.  This is on the issue of who Mr Tomcsanyi spoke to at the Bank in June 2012 about obtaining an extension of the time to vacate the Albany House.  The substance of the conversation is the same.[77]  Mr Tomcsanyi conceded it might have been Mr Daniel.  Mr Daniel refreshed his memory of the conversation from his diary notes.[78]  I find that his recollection is more reliable than that of Mr Tomcsanyi and therefore find that the conversation was with Mr Daniel.[79]

   [77] Above [58], [72].

   [78] ts 93.

   [79] Above [72].

3. The second caveat is that I only accept Mr Tomcsanyi's evidence of what his accountant told him as being evidence of the fact that the accountant made these statements (which is relevant to what Mr Tomcsanyi believed to be the position), as distinct from the truth of the statements.[80]  In particular, I do not find from the evidence before me that it was not possible for Mr Tomcsanyi's accountant to prepare financial statements based on the position in the Settlement Deed, as opposed to the position set out in the automatically generated account statements.

   [80] Above [63]. See generally: The State of Western Australia v Houston [2015] WASC 174 [22] (Hall J).

4. The third caveat is like the second.  I only accept Mr Tomcsanyi's evidence of his conversation with the employee of the Bank of Queensland in December 2012 as being evidence of the fact the employee made these statements, which is relevant to what Mr Tomcsanyi believed to be the position.[81]

Determination of the issue

[81] Above [60].

1. The meaning of the terms of a contract is to be determined by what a reasonable person would have understood them to mean, which in turn is to be determined by the language in which the parties express their agreement.[82]  If there is ambiguity in the language, then, and only then, the court may have regard to the surrounding circumstances known to the parties and the purpose and object of the transaction.[83]

   [82] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40] (Judgment of the Court); Mackinlay v Derry Dew Pty Ltd [2014] WASCA 24; (2014) 46 WAR 247 [53] (Pullin JA, Buss & Newnes JJA agreeing on this point).

   [83] Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 86 ALJR 1 [3] (Judgment of the Court); Mackinlay [54].

2. In closing submissions counsel for the Bank stated that the Bank had to keep an account of its expenditure in relation to the two facilities until it was paid.  It took steps to close the accounts by placing the 'stopped to customer debit operations' notation on the account.  Counsel referred to the Macquarie Dictionary definition of 'close' which relevantly includes:  'to refuse or deny access to, or to bring to an end'.[84]  However, a fuller Macquarie Dictionary definition of 'close' does not allow for such a restrictive meaning:[85]

   1. to stop or obstruct (a gap, entrance, aperture, etc).  2. to stop or obstruct the entrances, apertures, or gaps in.  3. to shut in or surround on all sides; enclose; cover in.  4. to refuse access to or passage across:  lifesavers closed the beach because of heavy seas.  5. to bring together the parts of; join; unite:  to close the ranks of troops.  6. to bring to an end; to shut down, either temporarily or permanently:  to close a debate; to close a shop.  7. to bring (a sale) to a successful completion.  8. SE Asian English Colloquial to turn off (a light or an electrical appliance).  -verb (i) 9. to become closed; shut.  10. to come together; unite.  11. to come close.  12. To come to an end; terminate:  *the meeting closed with the recitation of the Angelus, when the bell of the church opposite rang out. - JOHN MURRAY 1960.

   [84] Defendant's submissions [19].

   [85] Macquarie Dictionary (5th ed, 2009, Macquarie Dictionary Publishers Pty Ltd) 326.

3. Clause 2.1(b)(ii) of the Settlement Deed provided that:  'the Farmers Choice Farm Management Account Overdraft will be closed'.  I am of the view that a reasonable person would have understood this clause to mean that any outstanding balance in the FM Overdraft would be written off so that the account balance would be reduced to zero and the account would be 'closed' in the sense of being brought to an end.

4. Mr Daniel's evidence was that this did not occur.[86]  Indeed, the Bank has been quite transparent in its correspondence that this did not occur, perhaps most clearly in its letter dated 29 October 2013 to FOS.[87]

   [86] Above [73].

   [87] Above [29].

5. Clause 2.1(b)(i) relevantly provides that 'the account limit and the current balance under the Varied Market Rate Facility will be $765,000'.  I am of the view that a reasonable person would understand this term to mean exactly what it says:  the account balance under the MR Facility would be reduced to $765,000.  To the extent that the balance was in excess of $765,000 it would be written off.

6. Again, Mr Daniel's evidence is that this did not occur,[88] a position also stated in the Bank's letter of 29 October 2013 to FOS.[89]

   [88] Above [73].

   [89] Above [29].

7. There appears to have been internal systems issues preventing the FM Overdraft from being 'closed' and the balance of the MR Facility being reduced.[90]  However, these internal systems issues did not excuse the Bank from complying with the obligations it agreed to cl 2.1(b)(i) and (ii) of the Settlement Deed.

   [90] Above [68].

8. A number of account balance summaries received prior to 21 February 2013 are in evidence before me.[91]  Counsel for the Bank made it very clear that these statements tendered as exhibits were not tendered as evidence of the truth of their contents.  That is, the statements were not tendered as evidence that the stated balances were the amount due and payable at law by Mr Tomcsanyi to the Bank.  Rather, they were tendered as evidence of a communication from the Bank to Mr Tomcsanyi.  They are, however, statements of the account balances as recorded in the internal systems of the Bank.  The account balance summaries are further evidence of the fact that the balance of the MR Facility was not reduced to $765,000 and the FM Overdraft was not closed.

   [91] Exhibits P1, P2, P4, D6.

9. For these reasons, Mr Tomcsanyi has established on the balance of probabilities that the Bank breached:

   (a)cl 2.1(b)(i) of the Settlement Deed in not reducing the account limit and current balance of the MR Facility to $765,000; and

   (b)cl 2.1(b)(ii) of the Settlement Deed in not closing the FM Overdraft.

10. I will refer to these two breaches as the 'Account Breaches'.

1. If the Bank did breach the Settlement Deed, did the Bank act unconscionably in entering into the Settlement Deed on terms it knew at the time it could not honour?

1. As an alternative claim, Mr Tomcsanyi asserts a right to relief on the basis of unconscionable conduct by the Bank.  This claim is pleaded in the following way:[92]

   16.If the Defendant knew when it offered the Deed of Settlement that it would be unable because of internal systems issues to honour its obligations then it has acted unconscionably with in the meaning of s. 4 of the Competition and Consumer Act 2010 (Cwth).

   17.If the Defendant did not know of its inability to honour its commitments then it ought to have known before entering a Deed on which it knew others would rely.

   Particulars of Knowledge

   The Defendant's knowledge of the matters pleaded in paragraphs 16.and 17. is derived from the letter dated 29 October 2013 from Mr Greg Daniels, Manager, to Mr Zrobek from FOS.

   [92] Statement of claim [16] ‑ [17].

2. There are unconscionable conduct provisions in both the Australian Consumer Law (ACL)[93] and the Australian Securities and Investments Commission Act 2001 (WA) (ASICA).[94]  In its submissions, the Bank suggested that the appropriate regime was that in the ASICA.[95]  However, the present claim does not relate to a 'financial service' as defined in the ASICA s 12BAB and is thus not excluded from the operation of the ACL.[96]  Rather, it is the ACL which covers the provision of banking services.[97]

   [93] Competition and Consumer Act 2010 (Cth) (CCA), sch 2, s 20 and s 21.

   [94] ASICA s 12CA and s 12CB.

   [95] Defendant's submissions [23].

   [96] CCA s 131A.

   [97] Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; (2010) 41 WAR 353 [363] (Murphy J),

3. ACL s 20(1) provides that a 'person must not, in trade or commerce, engage in conduct that is unconscionable, within the meaning of the unwritten law from time to time'. The reference in ACL s 20(1) to unconscionable conduct in the unwritten law is a reference to conduct that is within the equitable doctrine of unconscionable conduct.[98]  The court may set aside a contract pursuant to the equitable doctrine of unconscionable conduct 'whenever one party by reason of some condition [or] circumstance is placed at a special disadvantage vis-a-vis another and unfair or unconscientious advantage is then taken of the opportunity thereby created'.[99]

   [98] Australian Competition and Consumer Commission (ACCC) v CG Berbatis Holdings Pty Ltd [2003] HCA 18; (2003) 214 CLR 51 [7] (Gleeson J), [38] (Gummow & Hayne JJ), [156] ‑ [160] (Callinan J).

   [99] Commercial Bank of Australia v Amadio [1983] HCA 14; (1983) 151 CLR 447, 462 (Mason J).

4. There is then a more general prohibition on unconscionable conduct in ACL s 21(1). That subsection relevantly provides that a person must not, in trade or commerce, in connection with the supply of services to a person 'engage in conduct that is, in all the circumstances, unconscionable'. The 'services' to which ACL s 21 applies includes contracts between a bank and its customer.[100] ACL s 21(2) sets out a number of factors that the court may have regard to for the purposes of s 21(1).

   [100] ACL s 2.

5. In my view, the claim for relief on the basis of unconscionable conduct fails for four reasons.  The first reason is that the factual basis asserted was not established in the evidence.  Mr Daniel's evidence is that he did not become aware of the difficulties in the Bank's internal systems until after the Bank had entered into the Settlement Deed.[101]  In any event, had he been requested, Mr Daniel could have provided Mr Tomcsanyi with a manually generated account statement to reflect the terms of the Settlement deed or a certificate to similar effect.[102]

   [101] Above [69].

   [102] Above [69].

6. The second reason is that for the purposes of ACL s 20(1), there is no evidence of the 'special disadvantage' required to invoke the equitable doctrine of unconscionable conduct, nor that the Bank took unconscientious advantage of any such special disadvantage. The requirements for when equity will set aside a transaction as being unconscionable are discussed by Murphy J in Permanent Mortgages Pty Ltd v Vandenbergh, whose comments I respectfully adopt:[103]

   [103] Permanent Mortgages [219] ‑ [233].

   Equity's jurisdiction to set aside a transaction for unconscionable dealing is invoked where one party to the transaction is under a special disadvantage or disability in dealing with the other party, and that special disadvantage or disability was sufficiently evident to the other party to make it prima facie unfair or unconscionable for that other party to accept or retain the benefit of the transaction:  Commercial Bank of Australia v Amadio; Louth v Diprose (1992) 175 CLR 621, 637.

   The underlying equitable principle may be invoked 'whenever one party by reason of some condition or circumstance' is placed at a special disadvantage of which unfair and unconscientious advantage is taken by the other party:  Commercial Bank of Australia v Amadio (462).

   The special disadvantage will be sufficiently evident to the other party if the other party knows facts which would raise the possibility of the special disadvantage in the mind of a reasonable person:  Commercial Bank of Australia v Amadio (467 - 468, 479).

   Where such circumstances are shown to exist, the onus is on the other party to establish that the transaction was fair, just and reasonable:  Commercial Bank of Australia v Amadio (474).

   The special disadvantage need not have been created by the party taking the benefit of the transaction:  Louth v Diprose (629).

   The special disadvantage alleged must be one 'which seriously affects the ability of the innocent party to make a judgment as to his own best interests'; mere difference in bargaining power is insufficient:  Commercial Bank of Australia v Amadio (462).  The 'essence of such weakness is that the party is unable to judge for himself':  Blomley v Ryan (1956) 99 CLR 362, 392; or 'to conserve his own interests': Blomley v Ryan (415); ACCC v C G Berbatis Holdings [12], [46], [55].

   In this regard care must be taken not to 'eviscerate unconscionability of its meaning':  NZI Capital Corporation v Fulton [1998] FCA 667 Black CJ & Lehane J, quoting Mason CJ in Stern v McArthur [1988] HCA 51; (1988) 165 CLR 489, 503.

   In ACCC v C G Berbatis Holdings, Gleeson CJ [14] said:

   'Unconscientious exploitation of another's inability, or diminished ability, to conserve his or her own interests is not to be confused with taking advantage of a superior bargaining position.  There may be cases where both elements are involved, but, in such cases, it is the first, not the second, element that is of legal consequence ...'

   In ACCC v C G Berbatis Holdings, Gummow & Hayne JJ [56] also said that even a person in a 'greatly inferior bargaining position' may nevertheless not lack capacity to make a judgment about that person's own best interests.

   In all cases, the court's equitable jurisdiction is to be exercised according to recognised principles, and the courts are not armed with a general power to set aside transactions which in the eyes of the judges appear unfair, harsh or unconscionable:  Louth v Diprose (654) (Toohey J, although in dissent in the result).  See also the observations of Sir Anthony Mason in 'The Impact of Equitable Doctrine on the Law of Contract', (1998) 27 Anglo-American Law Review 1, 12 cited by Debelle & Wicks JJ in Micarone v Perpetual Trustees Australia Ltd [1999] SASC 265; (1999) 75 SASR 1 [648]:

   'There is a strong objection to simply equating the concept to what is unreasonable and unfair.  The object of the doctrine is not to protect people from the consequences of their own mistakes.  Because our contract law, unlike that of the United States, does not impose a general obligation of good faith and fair dealing, it is preferable to think of unconscionable conduct in terms of that which shocks the conscience, something which is harsh or oppressive in that it involves taking advantage of another's special disability or disadvantage.  So understood, the concept is not one which is open-ended, to be applied according to the subjective whim of the Judge, though like other standards, such as that of "the reasonable person", borderline applications will require an element of value judgment.'

   In Bridgewater v Leahy [76], Gaudron, Gummow & Kirby JJ referred with approval to the Privy Council's observations in Hart v O'Connor [1985] AC 1000, in which unconscionable conduct was described as:

   '[V]ictimisation, which can consist either of the active extortion of a benefit or the passive acceptance of a benefit in unconscionable circumstances.'

   In The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008) 225 FLR 1 [4924], Owen J said that it is not enough for there to be unequal bargaining power - the conduct of the stronger party has to be exploitative or oppressive.

   Whilst the categories of disability are not closed, the requisite special disadvantage often involves poverty, need, sickness, age, infirmity of body or mind, sex, drunkenness, illiteracy, lack of education and lack of assistance or explanation when assistance or explanation is necessary:  Blomley v Ryan (405, 415); lack of or limited comprehension of the English language:  Commercial Bank of Australia v Amadio; impaired intelligence:  Wilton v Farnworth (1948) 76 CLR 646; or infatuation with or emotional dependence upon another person: Louth v Diprose.

   Absence of independent legal advice may in a given case be a circumstance of factual importance in determining whether a special disability exists:  Bridgewater v Leahy [41].

   Physical frailty and enfeeblement, with diminished knowledge by the party in question of that party's property and affairs generally, are not necessary elements of a special disadvantage:  Bridgewater v Leahy [116].

7. In the present case, there is no evidence that Mr Tomcsanyi falls within one of the existing categories of special disadvantage.  For example, there is no evidence to the effect that he is illiterate or had a limited comprehension of the English language (in fact, his letters of 5 and 17 March 2014 to the Bank strongly suggest the contrary).  The settlement agreement was reached in the supervised environment of a Supreme Court mediation at which Mr Tomcsanyi was represented by lawyers, who had some input into the drafting of the Settlement Deed.[104]  He regarded the Settlement Deed as reflecting the settlement that was agreed at the mediation, which in turn provided him with '97%' of what he claimed in the statement of claim in the first Supreme Court action.[105]  This is strongly suggestive of an absence of a special disadvantage.  Nor did Mr Tomcsanyi lead any evidence to the effect that he otherwise lacked the ability to make decisions in his own best interests.  Further, there is no evidence to the effect that the Bank knew that Mr Tomcsanyi was labouring under any special disadvantage.  Nor is there any evidence to this effect in relation to Mrs Tomcsanyi.

   [104] Above [66].

   [105] Above [66].

1. Mr Ferguson submitted that the Bank was in a fiduciary relationship with Mr Tomcsanyi.  As there was no allegation to this effect pleaded, it is not open to me to consider it.  In any event, the 'law does not recognise the relationship of banker and customer as one of the accepted categories of fiduciary relationship'.[106]  The relationship between a banker and customer may be fiduciary in some circumstances.[107]  To the extent that there are facts which would be relevant to this analysis, I have dealt with them in the context of considering whether Mr Tomcsanyi was under a 'special disadvantage' in his relationship with the Bank; those facts fall well short of establishing a fiduciary relationship in the context of this case.

   [106] Finding v Commonwealth Bank of Australia [2001] 1 Qd R 168 [9] (Reasons of the Court); Golby v Commonwealth Bank of Australia (1996) 72 FCR 134, 136 (Hill J); Brian Fletcher as Trustee of the Brian Fletcher Family Trust v St George Bank Ltd [No 2] [2011] WASC 277 [116] (Allanson J).

   [107] Fletcher [117]; Finding [9].

2. The third reason is that there is no evidence which suggests to me that the Settlement Deed was anything but a fair, just and reasonable bargain.  As I have already noted, Mr Tomcsanyi's evidence is that the Settlement Deed provided him with '97%' of what he claimed in the statement of claim in the first Supreme Court action.[108]

   [108] Above [66].

3. The fourth reason is that there is no evidence of any conduct by the Bank which could be said to be contrary to the norms of conscientious behaviour or which would offend against basic notions of good conscience and fair play so as to establish unconscionable conduct for the purposes of ACL s 21. ACL s 21 is in identical terms to the former Trade Practices Act 1974 (Cth) s 51AC, the law in relation to which is also conveniently summarised in the judgment of Murphy JA in Permanent Mortgages Pty Ltd v Vandenbergh, which I again respectfully adopt:[109]

   In s 51AC of the Trade Practices Act, the word 'unconscionable' is not limited to unconscionable behaviour under the general law or s 51AA of the Trade Practices Act:  Australian Competition & Consumer Commission v 4WD Systems Pty Ltd[2003] FCA 850; (2003) 200 ALR 491 [183] - [185].

   Like s 12CC of the Australian Securities & Investments Commission Act 2001 (Cth), it is intended to build upon, and not be constrained by, the general law:  Australian Securities & Investments Commission v National Exchange Pty Ltd (2005) 56 ACSR 131 [30].

   The word 'unconscionable' should be given its natural and ordinary meaning, ie 'doing what should not be done in good conscience':  ASIC v National Exchange [33], [39].

   It is necessary to show more than unreasonableness, unfairness or simply misleading or deceptive conduct:  ACCC v 4WD Systems [185].  The term imports a perjorative moral judgment or moral obloquy:  Hurley v McDonald's Australia Pty Ltd [1999] FCA 1728; [2000] ATPR 41-741, 40,585; ASIC v National Exchange [43].

   It requires a consideration of whether the conduct is 'contrary to the norm of conscientious behaviour' or 'offends against basic notions of good conscience and fair play':  ASIC v National Exchange [44].

   Section 51AC(3) provides that the 12 factors referred to therein are factors to which the court may have regard 'without in any way limiting' the matters to which the court may have regard for the purpose of determining whether a contravention of s 51AC has occurred: Australian Competition & Consumer Commission v Oceana Commercial Pty Ltd [2004] FCAFC 174; [181]. Further, in considering the potential application of s 51AC, it is not permissible to 'search through the twelve criteria set out … find one that seems to fit the case in hand, and then move to a conclusion of unconscionable conduct': ACCC v Oceana [181].  All of the circumstances must be considered

   [109] Permanent Mortgages [356] ‑ [361].

4. A breach of contract, without more, is not sufficient to give rise to unconscionable conduct.  In the present case, at no stage has the Bank sought to renege on the position in the Settlement Deed that the principal amount owing under the Settlement Deed was $765,000.  It could have provided Mr Tomcsanyi with amended account statements, or a certificate as to the amount owing, had it been requested to do so.  The unfortunate aspect of this case is that it appears to me that the first time that Mr Tomcsanyi found out that the Bank could have provided amended account statements was half way through a Supreme Court trial.  Had amended statements been provided, perhaps as part of the FOS process, it may well have been that the litigation could have been avoided.

5. Mr Tomcsanyi in his written submissions also referred to negligent misstatement and equitable fraud.[110]  However, as these causes of action are not pleaded, I do not address them.

   [110] Plaintiff's submissions [60].

6. In summary, Mr Tomcsanyi has not established on the balance of probabilities that the Bank engaged in unconscionable conduct in breach of ACL s 20 or s 21.

1. If the Bank did breach the Settlement Deed, did this excuse Mr Tomcsanyi from paying the remaining $765,000?

1. Having found that the Account Breaches occurred, the next issue is whether this entitled Mr Tomcsanyi to defer compliance with cl 2.1(b)(v) of the Settlement Deed which required him to pay the reduced balance of the MR Facility of $765,000 by 21 February 2013.

2. Mr Tomcsanyi's case is that he and his wife complied with the terms of the Settlement Deed 'until it became clear that the Defendant had not complied' and that had 'the Defendant complied with the settlement deed the Plaintiffs would have paid $765,000.00'.[111]

   [111] Reply and defence to counterclaim [43.1], [43.3].

3. The Bank's position is that, even if there was a breach of the Settlement Deed, the breach did not relieve Mr Tomcsanyi of the obligation to pay the $765,000 due on 21 February 2013.

4. The relevant principles are conveniently summarised in the judgment of Giles J in Murphy v Zamonex Pty Ltd.[112]  In that case, Giles J considered a borrower was not entitled to cease payment of interest to a lender who had breached the terms of the loan agreement by declining to make further advances as agreed under the loan agreement, in circumstances where the borrower had not terminated the loan agreement.  His Honour stated the principles in the following terms:[113]

   [U]nless the contract so provided ... it does not seem to me that a lender's failure to make further advances would without more mean that the borrower did not have to pay the interest accruing on existing advances.  Neither breach nor repudiation by one contracting party of itself terminates the contract, and it is necessary that the other party elect to treat it as discharged:  Heyman v Darwins Ltd [1942] AC 356; Australian Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435; Carr v J A Berriman Pty Ltd (1953) 89 CLR 327; White & Carter (Councils) Ltd v McGregor [1962] AC 413. The conduct of one party may in some circumstances absolve the other party from the consequences which would otherwise attach to non‑performance on its part (for example, Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235), but generally one contracting party remains bound to perform its obligations notwithstanding breach by the other party unless it is entitled to, and does, terminate the contract for that other party's breach or repudiation: the contract remains alive for the benefit of both parties: Frost v Knight (1872) LR 7 Ex 111; Bowes v Chaleyer (1923) 32 CLR 159. [The borrower] did not purport to terminate the contract of loan, and until the amendment to its defence and cross claim at the commencement of the hearing claimed specific performance thereof. Payment of interest on the advances in fact made was not conditioned upon the making of further advances, and there is no reason in principle why [the borrower] should not have remained obliged to pay that interest even though it had a claim for damages for breach of contract.

   [112] Murphy v Zamonex Pty Ltd (1993) 31 NSWLR 439, 454 (Giles J).

   [113] Murphy (454).  See also:  Foran v Wight [1989] HCA 51; (1989) 168 CLR 385, 395 ‑ 396 (Mason CJ), 416 ‑ 417 (Brennan J), 441 ‑ 442 (Dawson J).

5. A contract may expressly provide for obligations to be conditional or interdependent.[114]  The Settlement Deed did not do so; it did not expressly provide that Mr Tomcsanyi's obligation to pay the $765,000 due on 21 February 2013 was conditional upon the Bank complying with cl 2.1(b)(i) and (ii).

   [114] Murphy (454).

6. Further, Mr Tomcsanyi did not purport to terminate the Settlement Deed.  Rather, in his correspondence with the Bank, he sought to require the Bank to honour its legal obligations under the Settlement Deed.[115]

   [115] Above [33], [36].

7. In my view, Mr Tomcsanyi remained bound by the Settlement Deed notwithstanding the Account Breaches.  Specifically, he remained bound to pay the $765,000 due on 21 February 2013.  His failure to do so constituted an event of default, triggering the responses that the parties to the Settlement Deed had agreed to in cl 2.1(b)(vii) and cl 2.1(c).

1. What amount, if any, does Mr Tomcsanyi owe the Bank?

1. The Bank claims that Mr Tomcsanyi owes it the principal sum of $765,000, together with interest and costs.[116]  It only seeks a monetary judgment against Mr Tomcsanyi, and not Mrs Tomcsanyi (who was not a party to the relevant loan agreement).  Mr Tomcsanyi disputes this claim.[117]

   [116] Defence and counterclaim [48] ‑ [49].

   [117] Reply and defence to counterclaim [7], [38], [40], [46], [48].

2. As I have set out above:

   (a)the Settlement Deed provided that the account limit on the MR Facility would be reduced to $765,000;

   (b)the Settlement Deed also provided that the MR Facility was to be repaid in full on or before 12 months of the date of the Settlement Deed, that is, by 21 February 2013; and

   (c)the Account Breaches did not excuse Mr Tomcsanyi from paying the $765,000 due on 21 February 2013.

3. It is also common ground that Mr Tomcsanyi did not pay the amount of $765,000 by 21 February 2013, and has not done so since.

4. Clause 2.1(b)(vii) of the Settlement Deed deals with the situation in which Mr Tomcsanyi fails to repay the varied MR Facility:

   (vii)in the event that the Plaintiff fails to repay the Varied Market Rate Facility in accordance with clause 2.1(b)(v), then, from the date 12 months after the date of this Settlement Deed there will be a default under the Varied Market Rate Facility.

5. The Settlement Deed also provided for interest to begin to run in cl 2.1(b)(iv):

   (iv)subject to clause 2.1(c)(ii), interest will not accrue on the Varied Market Rate Facility until the day 12 months after the date of this Settlement Deed.

6. It further provided for what was to occur in the event of a default in cl 2.1(c):

   (c)The First Plaintiff:

   (i)will comply with the terms of the Varied Market Rate Facility and the Denmark Mortgage; and

   (ii)acknowledges and agrees that in the event there is any default under the Varied Market Rate Facility (including a default arising a consequence of clause 2.1(b)(vii)) or the Denmark Mortgage;

   (A)the First Defendant is entitled to take any action, steps or proceedings, and make any charges, under the Varied Market Rate Facility and the Denmark Mortgage it determines at its absolute discretion; and

   (B)he will not oppose, defend or hinder any steps, action or proceeding taken by the First Defendant in respect of any such default.

7. It is common ground that on or about 13 January 2014 the Bank served the 2014 Notice of Default on Mr Tomcsanyi and that it was not complied with.[118]  This non‑compliance entitles the Bank to treat the amount owing as immediately due and payable and sue for the amount owing.[119]  Pursuant to the Common Provisions, the amount owing includes all amounts advanced or paid by the Bank to or on behalf of Mr Tomcsanyi of which the Bank is entitled to claim or recover from Mr Tomcsanyi, including interest and legal costs.[120]  The Bank is entitled to charge Mr Tomcsanyi for its enforcement costs and expenses.[121]

   [118] Above [31] ‑ [32].

   [119] Exhibit D5, Common Provisions cl 16.1.

   [120] Exhibit D5, Common Provisions cl 2.1, cl 14.1, cl 14.3 and cl 14.4.

   [121] Exhibit D5, Common Provisions cl 13.2, cl 13.4, cl 13.7.

8. I am satisfied that Mr Tomcsanyi owes the bank the sum of $765,000, together with accrued interest, costs and expenses.

9. The Bank asserts that, as at 20 October 2015, the amount owing is $1,271,094.57, comprising:[122]

   (a)the principal under the varied MR Facility of $765,000;

   (b)costs charged to the MR Facility of $171,752.28; and

   (c)interest accrued on the MR Facility in the amount of $334,342.29, continuing to accrue at the rate of 16.12% per annum.

   [122] Exhibit D15.

10. Mr Tomcsanyi did not lead any evidence challenging the correctness of these amounts.  I am satisfied that these amounts are owing.  The Bank is entitled to judgment against Mr Tomcsanyi in this amount, adjusted to the date of judgment, together with ongoing interest under the Mortgages.[123]

    [123] Exhibit D5, Common Provisions cl 14.4 contains a non‑merger clause.

11. The issue then becomes whether Mr Tomcsanyi has a claim for damages which he can set off against this amount.

1. If the Bank did breach the Settlement Deed, what losses could Mr Tomcsanyi potentially claim?

1. The general principle governing the measure of damages is that the innocent party suing for breach of contract is to be placed in the same position, so far as money can do it, as if the contract had been performed.[124]  The corollary of this is that an innocent party is not entitled, by the award of damages upon breach, to be placed in a superior position to that which it would have been in had the contract been performed.[125]  The compensation is to represent 'fair and adequate compensation for the loss suffered by reason of the breach of contract'.[126]  The measure of damages is to be objectively determined.[127]  The assessment of these damages will ordinarily involve 'a comparison between the position in which the innocent party would have been if the breach of contract had not occurred and what, relevantly, represents the position in which the innocent party is in after the occurrence of the breach'.[128]

   [124] Robinson v Harman (1848) 1 Exch 850, 855; (1848) 154 ER 363, 365 (Parke B); Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 83 ALJR 390 [13] (French CJ, Gummow, Heydon, Crennan & Kiefel JJ); Motium Pty Ltd v Arrow Electronics Australia Pty Ltd [2011] WASCA 65 [69] (Newnes JA), [115] (Murphy JA); Australian Goldfields NL (in liq) v North Australian Diamonds NL [2009] WASCA 98 [276] (Buss JA).

   [125] Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64, 82 (Mason CJ & Dawson J).

   [126] Australian Goldfields [276].

   [127] Amann Aviation (80) (Mason CJ & Dawson J).

   [128] Australian Goldfields [276]; Amann Aviation (116) (Deane J).

2. The onus of proving damages lies on Mr Tomcsanyi as the innocent party.[129]  He must prove that the damages were caused by the breach (see pt 9 below).  The Bank can then assert that he failed to mitigate any loss which he may have suffered (see pt 10 below).

   [129] Amann Aviation (80) (Mason CJ & Dawson J), (99) (Brennan J), (118) (Deane J), (137 ‑ 138) (Toohey J); Motium [91] (Newnes JA).

3. The first issue is whether Mr Tomcsanyi has suffered any loss which he could potentially assert was caused by the Account Breaches.  There is no evidence that Mrs Tomcsanyi suffered any loss as she was not a party to the FM Overdraft or the MR Facility, nor the Mortgage.

4. Mr and Mrs Tomcsanyi claim that:

   (a)bank statements 'showing more than $5,839,420.37 of debt accruing unpaid interest have put [them] in an invidious position';[130]

   (b)had the bank statements issued by the Bank reflected the terms of the Settlement Deed, 'they would have been able to trade normally';[131] and

   (c)their financial position is 'determined inter alia by the position disclosed in their bank statements', which have not revealed their true position since the date of settlement.[132]

   [130] Statement of claim [10].

   [131] Statement of claim [13].

   [132] Statement of claim [20] ‑ [21].

5. In the statement of claim the prayer for relief is:  'Liquidated Damages for the sum of $5,058,000'.  As I understand Mr Tomcsanyi's case, the payment of this amount of money by the Bank into the MR Facility and the FM Overdraft will reduce the debit balances set out in the automatically generated bank statements to zero in the case of the FM Overdraft and $765,000 in the case of the MR Facility.

6. It is not in dispute that the effect of the Settlement Deed was that the principal amount owing by Mr Tomcsanyi to the Bank was $765,000, payable on or before 21 February 2013.  There is ample evidence before the court that the Bank has only ever sought to claim this amount,[133] evidence that Mr Tomcsanyi knew that this was the Bank's position,[134] and no evidence that the Bank has ever sought to claim a greater amount.

   [133] Above [29], [34], [38].

   [134] Above [29], [34], [39].

7. Had the Settlement Deed been performed by Mr Tomcsanyi on the basis of a refinancing secured by mortgage over the Denmark Farm, then he would have gone from owing the Bank $765,000 secured by mortgage over the Denmark Farm to owing another financial institution $765,000 secured by mortgage over the Denmark Farm.  In cross‑examination, Mr Tomcsanyi accepted that this was the case.[135]  On this basis, Mr Tomcsanyi has not established any basis for an award of damages in the amount claimed.

   [135] ts 68.

8. As to whether he is entitled to damages in any lesser amount, the position that Mr Tomcsanyi was in as a result of the Account Breaches was that the balance in the MR Facility was not reduced to $765,000 and the FM Overdraft was not closed.  As I have noted, Mr Tomcsanyi's case is that he and his wife complied with the terms of the Settlement Deed 'until it became clear that the Defendant had not complied' and that had 'the Defendant complied with the settlement deed the Plaintiffs would have paid $765,000.00'.[136]  Mr Tomcsanyi thus asserts that the position he would have been in had the MR Facility been reduced and the FM Overdraft closed in performance of the Settlement Deed, was that he would have paid the amount of $765,000 due on 21 February 2013.  Had he done so, he would have avoided the following losses as at 20 October 2015 (which I will refer to as the 'Interest and Expense Losses'):[137]

   (a)costs charged to the MR Facility of $171,752.28; and

   (b)interest accrued on the MR Facility in the amount of $334,342.29, continuing to accrue at the rate of 16.12% per annum.

   [136] Reply and defence to counterclaim [43.1], [43.3].

   [137] Above [116].

9. The Interest and Expense Losses could potentially be the subject of a claim for damages.  Payment of this sum would place Mr Tomcsanyi in the position he would have been in had he paid the $765,000 due on 21 February 2013, for example, by refinancing the mortgage over the Denmark Farm.

10. The issue then becomes one of causation.

1. Were any losses which Mr Tomcsanyi could claim caused by the Bank's breach?

1. In order to discharge the onus upon him to prove a claim for damages for the Interest and Expense Losses, Mr Tomcsanyi has to prove, on the balance of probabilities, that the Interest and Expense Losses were caused by the Account Breaches.[138]  It would be sufficient if the Account Breaches materially caused or contributed to the loss.[139]  It is not necessary for the Account Breaches to be the sole or dominant cause of the loss.[140]  Whether one event caused or resulted from another is to be resolved as a matter of common sense and experience, and not by application of a philosophical or scientific formula.[141]  A 'sufficient causal connection will, generally speaking, be established if it appears that the plaintiff would not have suffered the damage complained of but for the defendant's breach'.[142]  However, this test is not comprehensive or definitive.[143]

   [138] Reg Glass Pty Ltd v Rivers Locking Systems Pty Ltd [1968] HCA 64; (1968) 120 CLR 516, 523 (Barwick CJ, McTiernan & Menzies JJ); Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38; (1998) 192 CLR 603 [22], [27] (McHugh J); Mackinlay [80] (Pullin JA), [157] ‑ [168] (Buss JA, Newnes JA agreeing on this point); Motium [84] (Newnes JA), [128] (Murphy JA); Australian Goldfields [282] (Buss JA).

   [139] Mackinlay [159]; Australian Goldfields [282].

   [140] Mackinlay [159]; Australian Goldfields [282].

   [141] Unity Insurance [22] (McHugh J); March v E & MH Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506, 515 ‑ 517 (Mason CJ, Toohey J agreeing generally & Gaudron J agreeing), 522 ‑ 523 (Deane J); Mackinlay [160]; Australian Goldfields [282].

   [142] Chappel v Hart [1998] HCA 55; (1998) 195 CLR 232, 269 (Kirby J), (282) (Hayne J); March (522 ‑ 523).

   [143] March (515 ‑ 517, 522 ‑ 523, 524); Mackinlay [160]; Australian Goldfields [282].

1. The chain of causation may be broken by an intervening act.[144]  The intervening act may be the act of the plaintiff.[145]

   [144] Lambert v Lewis [1982] AC 225, 277 (Lord Diplock, Lords Elwyn‑Jones, Fraser of Tullybetton, Scarman & Bridge of Harwich agreeing); Mallesons Stephen Jaques v Trenorth Ltd [1999] 1 VR 727, 736 ‑ 737 (Kenny JA, Callaway & Buchanan JJA agreeing).

   [145] Mackinlay [159]; Lambert (277).

2. The Bank asserts that any loss which Mr Tomcsanyi may have suffered was caused by his own conduct.[146]

   [146] Defence and counterclaim [24(a)].

3. In the present case, as set out in pt 7, the cause of the Interest and Expense Losses was the failure by Mr Tomcsanyi to pay the $765,000 due on 21 February 2013.  This in turn was caused by the fact that he had not obtained an alternate source of finance for the $765,000, so as to be in a position to pay the amount when due.  This in turn was caused by the fact that he did not make any application for finance.  At its most cogent, Mr Tomcsanyi's case is that he did not make an application for finance because:

   (a)his inquiries with the Bank of Queensland revealed that, to do so, he would have to provide current and historical financial statements;

   (b)his accountant refused to prepare his accounts on the basis of the Settlement Deed;

   (c)the Bank, in breach of the Settlement Deed, had not reduced the balance of the MR Facility to $765,000 and closed the FM Overdraft, and then provided statements evidencing this compliance;

   (d)had these revised statements been provided, he could have prepared his accounts; and

   (e)he was not in a position to make an application for finance because he could not get his accounts up to date.

4. There are a number of other facts going to causation.

5. Mr Tomcsanyi knew that, following execution of the Settlement Deed, he had 12 months during which time he had to either refinance the amount of $765,000 or sell the Denmark Farm.  This is most evident in his letter to the Bank of 17 March 2014.[147]

   [147] Above [36].

6. The only evidence led by Mr Tomcsanyi of an attempt to secure an alternate source of finance was his conversation with an employee of the Bank of Queensland.  Even then, he only had what I describe as an informal conversation with this employee.  Moreover, this conversation did not occur until December 2012.[148]  Mr Tomcsanyi gave evidence of the difficulties of getting things done over the Christmas period.[149]  He did not lead any evidence to the effect that he had made any application for finance which had been declined on the basis of uncertainty as to the liability owed to the Bank.  Nor did he give any evidence that he ever made an application for finance.  This and the fact that his one conversation with a financier was some or so eight weeks prior to the 21 February 2013 due date (with Christmas intervening) are attributable to decisions made by Mr Tomcsanyi, and not the Account Breaches.

   [148] Above [60] ‑ [61].

   [149] Above [62].

7. Mr Tomcsanyi did seek to call David Rees, a farm consultant, to give evidence on his prospects of obtaining a loan.  For the reasons which are set out in detail in the transcript, I declined to allow Mr Tomcsanyi to lead this evidence.[150]  In any event, Mr Rees' evidence would not have assisted Mr Tomcsanyi.  From the pre‑trial disclosure given, Mr Rees' evidence would have been to the effect that if Mr Tomcsanyi's liabilities to the Bank were based on the amounts set out in the automatically generated statements of account (in essence a liability in the order of $5.9 million), he would not have been able to have demonstrate a viable farming operation so as to have been able to have obtained finance.  This is not a relevant scenario.  As I have noted, the Bank's position has consistently been that the principal amount required to complete the settlement recorded in the Settlement Deed was $765,000.  A relevant scenario would have been whether Mr Tomcsanyi had a prospect of obtaining a loan of $765,000 secured over the Denmark Farm, based on his liability to the Bank being limited to $765,000.

   [150] ts 81 ‑ 84.

8. Further, the reasons Mr Tomcsanyi gave for not taking any steps to secure an alternate source of financing for the $765,000 earlier in 2012 are also not attributable to the Account Breaches.  Rather, it was a decision to 'chill out' for a period.[151]

   [151] Above [62].

9. To the extent that Mr Tomcsanyi did not take any action in 2012 to secure an alternate source of funding due to receipt of the automatically generated account statements, this also was a decision made by him.  The Bank's position has consistently been that the amount which Mr Tomcsanyi was required to pay pursuant to the Settlement Deed was $765,000 due by 21 February 2013.  This position was confirmed to Mr Tomcsanyi in April 2012 in the email from Ms Valibhoy to Mr Sheiner of 12 April 2012, which he saw at the time.[152]  Mr Tomcsanyi has never been required to pay more than was required under the Settlement Deed, and no communication has been made with him by the Bank to that effect.[153]  Moreover, Mr Tomcsanyi received advice from Mr Sheiner in April 2012 that the letters dated 23 February 2012 from the Bank could be ignored.[154]  It is evident that he decided to ignore this legal advice.

   [152] Above [53] ‑ [54].

   [153] Above [68].

   [154] Above [51] ‑ [52].

10. Even if Mr Tomcsanyi had concerns about the Bank's position, he did not raise his concerns with Mr Daniel prior to the due date for payment.[155]  This is despite being told to do so by a teller of the Bank in April 2012.[156]  Significantly Mr Tomcsanyi did not raise his concerns about the automatically generated statements in his conversation with Mr Daniel on 20 June 2012, which took place around the same time as he received automatically generated account statements on both accounts.[157]  He never asked Mr Daniel for bank statements to be prepared reflecting the terms of the Settlement Deed.[158]  These omissions are attributable to Mr Tomcsanyi, and not to the Account Breaches.

    [155] Above [71].

    [156] Above [56], [66].

    [157] Above [58], [72], [75].

    [158] Above [66].

11. To the extent that it was important for Mr Tomcsanyi to have prepared accounts in order to support an application for finance, he made no attempt to do so until the end of 2012.  Even then, the unwillingness of his accountant to prepare his accounts was not due to the Account Breaches (or more specifically, the existence of the automatically generated account statements in inconsistent terms with the Settlement Deed), but the fact that Mr Tomcsanyi was not able to pay him at that time, and in any event the accountant did not want to prepare accounts which may be used in litigation.[159]

    [159] Above [63].

12. For these reasons, in my view, Mr Tomcsanyi has not established on the balance of probabilities that the Account Breaches materially caused or contributed to the Interest and Expense Losses.  Rather, as a matter of common sense and experience, the cause of the Interest and Expense Losses is properly to be seen as the failure by Mr Tomcsanyi to have obtained an alternate source of finance for the $765,000 in time to meet the due date of 21 February 2013.[160]  This in turn was caused by the decisions and omissions of Mr Tomcsanyi which I have identified in the preceding paragraphs.  Even on the 'but for' test, I am not satisfied; there is simply no evidence before me that would enable me to conclude that but for the Account Breaches, Mr Tomcsanyi would have been able to have obtained an alternate source of finance for the $765,000 in time to meet the due date of 21 February 2013.  Put slightly differently, even if there was a chain of causation between the Account Breaches and the Interest and Expense Losses, it was broken by the intervening decisions and omissions of Mr Tomcsanyi.

    [160] Mackinlay [168].

1. Did Mr Tomcsanyi mitigate any loss he suffered?

1. The Bank's case is that even if Mr Tomcsanyi is otherwise entitled to any damages, he failed to mitigate any loss he may have suffered.[161]

   [161] Defence and counterclaim [8], [24]; reply and defence to counterclaim [5], [7] ‑ [9].

2. The general principle that the innocent party suing for breach of contract is to be placed in the same position as if the contract had been performed is subject to the innocent party's duty to mitigate its loss.[162]  The principle was stated by Viscount Haldane in British Westinghouse Electric & Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd in the following terms:[163]

   The fundamental basis is thus compensation for pecuniary loss naturally flowing from the breach; but this first principle is qualified by a second, which imposes on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect to take such steps ... this second principle does not impose on the plaintiff an obligation to take any steps which a reasonable and prudent man would not ordinarily take in the course of his business.

   [162] Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125, 143 (Mason CJ & Wilson J).

   [163] British Westinghouse Electric Co Ltd v Underground Electric Railways Co Ltd [1912] AC 673, 689 (Viscount Haldane). This passage was endorsed in Bak v Glenleigh Homes Pty Ltd [2006] NSWCA 10 [4] (Handley JA). See also: Sacher Investments Pty Ltd v Forma Stereo Consultants Pty Ltd [1976] 1 NSWLR 5, 9 (Yeldham J).

3. The party in breach has the onus of establishing that the innocent party failed to mitigate his loss.[164]

   [164] TC Industrial Plant Pty Ltd v Robert's Queensland Pty Ltd [1963] HCA 57; (1963) 180 CLR 130, 138 (Kitto, Windeyer & and Owen JJ); TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130, 158 (Hope JA, Meagher JA agreeing).

4. The innocent party must either know of the facts giving rise to the breach, or ought acting reasonably to have been aware of the breach.  As Handley JA observed in Bak v Glenleigh Homes Pty Ltd:  'If the innocent party is not aware of the facts giving rise to the breach he cannot, by doing nothing, be said to act unreasonably'.[165]  At least by April 2012 Mr Tomcsanyi knew about the facts giving rise to the breach.  This is evident from the email correspondence between Ms Valibhoy and Mr Sheiner, which he was aware of.[166]

   [165] Bak v Glenleigh Homes Pty Ltd [5].

   [166] Above [51] ‑ [54].

5. As I have noted in the context of causation, Mr Tomcsanyi knew that, following execution of the Settlement Deed, he had 12 months during which time he had to either refinance the amount of $765,000 or sell the Denmark Farm.  In my view, a reasonable and prudent man in the ordinary course of a farming business like that of Mr Tomcsanyi would have taken steps to either sell the Denmark Farm or secure an alternate source of finance.  The reasonable and prudent man would have commenced these processes soon after the Settlement Deed was executed, certainly no later than the beginning of July 2012 once he had delivered up possession of the Equipment, the Darjeeling Farm and the Albany House to the Bank in compliance with the other terms of the Settlement Deed.  The reasonable and prudent man would have commenced preparation of his financial statements at the same time, July 2012.  He would have instructed his accountant to prepare the financial statements on the basis that his liability to the Bank had been reduced to $765,000.  The reasonable and prudent man would have accepted the legal advice received on this point (being the advice received by Mr Tomcsanyi from Mr Sheiner to this effect, and the confirmation from the Bank's lawyers, in April 2012).[167]  If there was any residual doubt on this issue, the reasonable and prudent man would have sought some formal clarification from the Bank, which, on Mr Daniel's evidence, would have been provided, at least in the form of a certificate as to the amounts owing.[168]

   [167] Above [51] ‑ [54].

   [168] Above [69].

6. Further, the reasonable and prudent man would have submitted an application for finance well before the end of 2012.  If he needed assistance in preparing the application or in identifying a finance provider likely to view his application favourably, the reasonable and prudent man would have sought professional assistance, for example, from a mortgage broker.  I also note that there was an exception to the confidentiality clause in the Settlement Deed, permitting Mr Tomcsanyi to disclose 'the existence or terms of [the Settlement Deed] … to a bank or other financial institution for the purpose of obtaining finance or making a loan application'.[169]

   [169] Exhibit D1, cl 8.2(d).

7. Mr Tomcsanyi did not take the steps which a reasonable and prudent man would have taken, set out in the preceding two paragraphs.  In particular:

   (a)he did not accept the advice of Mr Sheiner, confirmed by the Bank, that the letters dated 23 February 2012 from the Bank could be ignored, and the amount required to be paid was $765,000;[170]

   (b)even if he had concerns about the Bank's position, he did not raise his concerns with Mr Daniel prior to the due date for payment, despite being told to do so by a teller of the Bank in April 2012, including in his conversation with Mr Daniel on 20 June 2012 which took place around the same time as he received automatically generated account statements on both accounts;[171]

   (c)he did not take any steps towards preparing his accounts until around the end of 2012;[172]

   (d)the only steps he took to attempt to secure funding was an informal conversation with the Bank of Queensland, which did not occur until December 2012;[173] and

   (e)there is no evidence that he ever submitted any application for finance, either prior to 21 February 2013 or at all.

   [170] Above [51] ‑ [54], [66], [71].

   [171] Above [58], [71] ‑ [72], [75].

   [172] Above [63].

   [173] Above [60] ‑ [61].

8. After the due date for payment, the Bank made it clear to Mr Tomcsanyi in its letters of 29 October 2013 (to FOS, which he received), 13 March 2014 and 15 April 2014 that his principal liability to the Bank under the Settlement Deed was limited to $765,000 (I say principal liability, as there is now a liability for interest and costs consequent on the failure to pay the $765,000 due on 21 February 2013).[174]  His complaint to FOS was closed.  Even if there were some initial doubts, a reasonable and prudent man would have taken the steps set out above ([146] ‑ [147]) to attempt to secure an alternate source of funding in response to this correspondence.  There is no evidence that Mr Tomcsanyi did so.

   [174] Above [29], [34], [38].

9. For these reasons, I am of the view that even if the Account Breaches had caused Mr Tomcsanyi to suffer the Interest and Expense Losses, he could not claim this loss as the Bank has discharged the onus on it to establish that Mr Tomcsanyi failed to mitigate any loss he may have suffered.

1. Is the Bank entitled to possession of the Denmark Farm?

1. The Bank submits that one consequence of Mr Tomcsanyi's failure to comply with the 2014 Notice of Default is that the Bank is entitled to take possession of the mortgaged land, being the Denmark Farm, and sell it.

2. The Common Provisions do not provide the Bank with a power to take possession and sell.  Rather, they are drafted in such a way as to complement the relevant powers in the Transfer of Land Act 1983 (WA) (TLA).  TLA s 106 provides for the mortgagor to serve on the mortgagee a notice in writing to pay the amount owing on the mortgage.  I am satisfied that the 2014 Notice of Default complies with this requirement.

3. TLA s 108 confers on a mortgagor a power to sell the mortgaged property in the case of a continuing default.  TLA s 111 confers a right on the mortgagor to obtain possession of the mortgaged property by bringing an action of ejectment.  I am satisfied that the Bank is entitled to possession of the Denmark Farm pursuant to the action of ejectment and to then sell this property.  Further, on an action for ejectment, the plaintiff is entitled to immediate possession (though usually 28 days is provided so that there can be an orderly handover).  There is no discretion within the cause of action for the court to suspend the order for possession.[175]

   [175] McPhail v Persons Unknown [1973] Ch 447, 457, 460 (Lord Denning MR, Orr LJ agreeing), 460, 462 (Lawton LJ).

4. Another consequence of Mr Tomcsanyi's failure to comply with the 2014 Notice of Default is that the Bank is entitled to appoint a receiver over the Denmark Farm.[176]  The Bank has appointed the Receivers.[177]

   [176] Exhibit D5, Common Provisions cl 16.1(e), cl 17.

   [177] Above [35].

5. It is common ground that Mr Tomcsanyi has not let the Receivers take possession of the Denmark Farm.[178]

   [178] Above [35], [40].

6. I am satisfied that the Bank is entitled to take possession of the Denmark Farm and sell it, and to do so using the Receivers.

1. What final orders are appropriate?

1. I have not heard submissions on behalf of Mr Tomcsanyi and from counsel for the Bank on the form of any final orders it might be open for the court to make.  Accordingly, the views set out below on the orders which appropriately give effect to the findings which I have made are preliminary views.

2. For the reasons set out above, Mr Tomcsanyi has established on the balance of probabilities that the Bank breached the Settlement Deed, being the Account Breaches.  He is entitled to a declaration to this effect.  He is also entitled to an order for specific performance of cl 2.1(b)(i) and (ii) of the Settlement Deed, and to be provided with statements of account reflecting specific performance.  Mr Daniel's evidence is that the Bank's internal management systems now allow this to occur.[179]

   [179] Above [69].

3. Mr Tomcsanyi has not established on the balance of probabilities that the Account Breaches caused him to suffer any loss for which he is entitled to an award of damages, in particular the Interest and Expense Losses.  Even if he had, the Bank has discharged the onus on it to establish that Mr Tomcsanyi failed to mitigate any loss he may have suffered.  Accordingly, the balance of the claim should be dismissed.

4. Again for the reasons set out above, I am of the view that the Account Breaches by the Bank did not entitle Mr Tomcsanyi to defer compliance with cl 2.1(b)(v) of the Settlement Deed to pay the reduced balance of the MR Facility of $765,000 by 21 February 2013.  Accordingly, his failure to do so was a breach of the Settlement Deed, and, as agreed in cl 2.1(b)(vii), it was an event of default under the MR Facility and the Mortgages.  The Bank is entitled to ongoing interest and to recoup its expenses.  It is entitled to judgment in the counterclaim against Mr Tomcsanyi for the amounts owing under the MR Facility, which as at 20 October 2015 was $1,271,094.57, together with ongoing interest at the rate of 16.12% per annum.  The Bank is also entitled to an order for possession of the Denmark Farm.  As I have noted, there is no general power to extend this time for possession to occur.  I will thus set the time for repossession to occur at the minimum time Mr Tomcsanyi requires for the orderly removal of his possessions from the Denmark Farm.

5. I will hear from Mr Tomcsanyi and counsel for the Bank as to costs.

6. I propose to publish these reasons and then list a hearing a few days later at which to settle the terms of the final orders.  I direct that the Bank's lawyers file and serve a minute of proposed orders setting out the orders which the Bank proposes to move for in light of the preliminary views set out above.

with the definition of 'services' now being in ACL s 2.