Van Leeuwen v Bank of Western Australia Ltd
[2001] WADC 95
•3 MAY 2001
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: VAN LEEUWEN -v- BANK OF WESTERN AUSTRALIA LTD [2001] WADC 95
CORAM: MULLER DCJ
HEARD: 2 APRIL 2001
DELIVERED : 3 MAY 2001
FILE NO/S: CIV 2363 of 2000
BETWEEN: THEODORUS LEONARDUS VAN LEEUWEN
Defendant (Appellant)
AND
BANK OF WESTERN AUSTRALIA LTD
Plaintiff (Respondent)
Catchwords:
Appeal from decision of Registrar allowing aplication for summary judgment - Competing claims by appellant and respondent arising out of services rendered by appellant for respondent and moneys advanced by respondent to appellant - Claims arising at different times - Whether appellant justified in claiming set-off of his claim against respondent's claim - Principles governing equitable set-off
Legislation:
Nil
Result:
Appeal dismissed
Representation:
Counsel:
Defendant (Appellant) : Mr B W Duckham
Plaintiff (Respondent) : Mr G R Donaldson
Solicitors:
Defendant (Appellant) : B W Duckham & Co
Plaintiff (Respondent) : BankWest Legal
Case(s) referred to in judgment(s):
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Geraldton Building Co Pty Ltd v Christmas Island Resort Pty Ltd (1992) 11 WAR 40
Hazcor Pty Ltd v Kirwanan Pty Ltd (1996) 12 WAR 62
Webster v Lampard (1993) 177 CLR 598
Westwind Air Charter Pty Ltd v Hawker De Havilland (1990) 3 WAR 71
Case(s) also cited:
Galambos & Son v McIntyre (1975) 5 ACTR 10
W Pope & Co Pty Ltd v Edward Souery & Co Pty Ltd (1993) WAR 117
MULLER DCJ: This is an appeal by the defendant (appellant) against a decision of the Registrar made on 21 December 2000 allowing summary judgment for the plaintiff (respondent) against the defendant (appellant) in the sum of $42,597.82 together with interest from 5 August 2000. By a writ of summons issued out of this Court on 11 September 2000 the respondent claimed the sum of $40,737.61 from the defendant (appellant) being the amount outstanding in respect of a loan in the name of the defendant (appellant) and arising out of the defendant's (appellant's) alleged failure to pay moneys due as and when they became payable. In its statement of claim the respondent ("BankWest") alleged that by a written agreement made on or about 22 December 1997 between BankWest as lender and the defendant (appellant) as borrower BankWest undertook to provide a cheque account facility to the defendant (appellant) subject to specific terms and conditions. It was a term of the agreement that if the appellant (defendant) overdrew on the account without the approval of BankWest the full amount owed would be immediately due and payable. It was further alleged in the statement of claim that the defendant (appellant), without BankWest's prior approval, overdrew the account in an amount of $46,039.39. It was further alleged that on or about 28 April 1999 the parties agreed to vary the agreement in the following way: immediate repayment of the outstanding balance would be deferred provided the defendant (appellant) repaid what was owed, together with interest, in monthly instalments of $999.87, and that, if the defendant (appellant) failed to pay any instalment, the total amount outstanding would become payable on demand. The statement of claim concluded with an allegation that in breach of the agreement as varied the defendant (appellant), after making a series of payments between 28 April 1999‑1 May 2000, neglected to make any further payments and had rendered himself liable to repay the balance then outstanding together with interest thereon.
In his defence the defendant (appellant) essentially denied the plaintiff's allegations and went on to allege that BankWest gave him an assurance that a sum of money owed to him by two BankWest customers named Kenneth Hugh Mosedale and Victoria Constant Mosedale would be paid. This undertaking, the defendant (appellant) alleged, was not honoured by BankWest and led to the institution of proceedings by him against BankWest in an action numbered 973 of 2000. In his defence the defendant (appellant) sought to set off against the BankWest claim so much of his claim in action No 973 of 2000 as was necessary to satisfy the Bank's claim.
Turning to the defendant (appellant's) claim against BankWest which was the subject of action No 973 of 2000 the amended statement of claim filed by the defendant (appellant) alleged that he was engaged by Kenneth Hugh Mosedale and Victoria Constant Mosedale to rationalise their business affairs and realise their assets in order to minimise the extent of their indebtedness to BankWest. The amended statement of claim went on to allege that on 23 May 1993 an officer of the bank agreed to what was referred to as the defendant's (appellant's) realisation plan designed to minimise the Mosedales' financial problems and undertook that BankWest would pay the defendant's (appellant's) fees for the work he had to do. It was further alleged that the bank advanced the defendant (appellant) the sum of $5,000 in consideration of the services he had undertaken to perform and subsequently assured him that his fees would be paid by BankWest on what was referred to as "final settlement of the realisation plan". This reassurance was allegedly repeated by officers of the bank on subsequent occasions but, notwithstanding the successful completion of the realisation plan, and the recovery by the bank of the $5,000 it had advanced to the defendant (appellant), BankWest never paid the defendant (appellant) any fees for services which the defendant (appellant) calculated at $52,500. It was this amount that forms the subject of the defendant's (appellant's) claim against BankWest in action No 973 of 2000. The defendant (appellant) says he was entitled to set‑off the amount allegedly owed to him by BankWest against the amount he owed BankWest under the written agreement made on 22 December 1997 and subsequently varied on 28 April 1999.
Evidence relied upon in support of appeal
In an affidavit sworn 7 November 2000 the defendant (appellant) set out the background to the competing claims I have just described and in pars 16‑19 asserted the following:
"16.In November 1997 Mr Robin Woods an officer of the Plaintiff who was known to me requested that I discuss my financial position with him. I explained to him that monies were due to me and I had a separate claim against the Plaintiff which is now the subject of the said proceedings 973 of 2000.
17.My original request was for $25,000.00 against the background of my claim against the Plaintiff. He agreed to make available a sum of $15,000.00 which is referred to in these proceedings. This sum was made available on the 24th December 1997 and was progressively increased against the same background with the approval of Mr Woods eventually to the sum of $45,000.00.
18.In regard to paragraph 5 of the Plaintiff's Statement of Claim in these proceedings I say that this is incorrect as the Plaintiff gave approval for the overdrawing.
19.I say therefore that the advances I received from the Plaintiff the subject of these proceedings were:
(i)firstly against the background of the claim that I intended to pursue against the Plaintiff as referred to in the proceedings 973 of 2000 and was in contemplation of all parties when the advance was made to me.
(ii)the financial predicament I was placed in November 1997 was contributed to if not directly caused by the failure of the Plaintiff to give effect to the representations made by it."
In a later affidavit filed on 2 April 2001 the defendant (appellant) alleged that it was a direct result of BankWest's failure to pay his fees fixed at $52,500 that led to his inability to satisfy the debt he owed to BankWest.
It was against this background that Mr Duckham, who appeared as counsel for the defendant (appellant), submitted that the defendant (appellant) was entitled to set‑off the money allegedly owed to him by the bank against the debt he admitted he owed to the bank. Relying on the paragraphs in the affidavit I have just referred to counsel submitted that the two claims were inextricably linked and that the bank would not have loaned money to the defendant (appellant) had it not itself owed money to him. Counsel went on to submit that the indebtedness of the bank to the defendant (appellant) was the sole reason for the loan facility being made available to the defendant (appellant) and that his inability to continue the repayments to BankWest was directly contributed to or caused by the conduct of BankWest in refusing or neglecting to pay the money it owed him. It was on this basis the submission was made that the doctrine of equitable set‑off could be invoked by the defendant (appellant).
BankWest did not respond to the allegations made by the defendant (appellant) in his affidavits. It did, however, rely on the material placed before the Registrar in support of its application for summary judgment. This material included the affidavit of one Eric Joseph Eisenmann and accompanying documents. The documents attached to that affidavit include a copy of the cheque account opened in the defendant (appellant's) name on 22 December 1997 and also revealed that a $15,000 advance was made to him on 24 December 1997. Of particular significance, however, is a letter dated 20 April 1999 from BankWest to the defendant (appellant). By this time the defendant (appellant's) overdraft facility had apparently risen to $46,039.39. Obviously discussions between the defendant (appellant) and BankWest had taken place and, as a result of those negotiations, BankWest in this letter offered to accept payment of the amount outstanding, together with interest, in monthly instalments of approximately $999.87 over a five year period. Paragraph 6 of that letter is particularly significant. This paragraph read as follows:
"6.Your alleged claim against BankWest is a separate issue and is to be pursued as you deem appropriate however (without admitting any liability whatsoever) if any settlement is reached these moneys are to be used firstly to reduce your indebtedness to BankWest."
The letter concluded with a request that, if acceptable to the defendant (appellant), he sign a duplicate copy of the letter and return it to BankWest.
Instead of signing the duplicate copy and returning it to the bank the defendant (appellant) replied by letter dated 28 April 1999. In this letter he expressly accepted the bank's offer and acknowledged that if he were successful in his claim for $52,750 against BankWest the moneys he received were to be used to reduce his indebtedness to the bank. His acceptance of BankWest's offer concluded with the following remarks:
"In accordance with the above and the requirements as per your letter of the 20th instant I have therefore now complied with all requirements as stipulated therein and assume from the text of your letter that the $1,000 monthly reductions of overdraft payments are to be made into the overdraft account."
As I have already said the defendant (appellant) then began making monthly payments to BankWest until 1 May 2000 when the payments stopped.
While counsel for the defendant (appellant) sought to minimise the significance of what was referred to as the variation in the agreement between the parties as reflected by the BankWest letter dated 20 April 1999 and the defendant's (appellant's) reply dated 28 April 1999, the material I have referred to leaves little room for doubt that what had begun as a fluctuating overdraft had been converted into a capital sum to be repaid in monthly instalments of approximately $1,000 over a period of five years. This variation in the nature of the agreement, and the date upon which the variation came into existence, are of significance for reasons which I will explain later.
The law
The nature of an equitable set‑off is explained by Meagher, Gummow and Lehane in Equity Doctrines and Remedies (3 ed) 1992) p 815. The authors' categorisation of the "fourth kind" is said to be of the kind which equity recognised wherever "the parties seeking the benefit of it can show some equitable ground for being protected against his adversary's demand." This kind of set‑off, the authors say, is the true equitable set‑off. In contrasting set‑off with common law set‑off the authors say at p 818‑819:
"One ingredient was necessary in equity but not required at law, that is, that the set‑off actually go to the root of, be essentially bound up with, 'impeach', the title of the plaintiff. No such requirement existed at law, but in equity it was indispensable. It was not sufficient that there be countervailing claims, nor that those claims were mutual, nor even that they arose out of the same transaction. The defendant, in order to make out an equitable set‑off, had to establish that he possessed some equitable right to be protected from the plaintiff's claim. There are many cases where equitable set‑offs have been disallowed because this element was wanting."
It is incumbent upon the defendant (appellant) to show that his claim against BankWest is "essentially bound up with" the title of the bank or, to put it another way, that the claim which he pleads as a set‑off to BankWest's claim has been "brought about by" the conduct of BankWest itself. In deciding whether this nexus between the two claims has been established I believe it is useful to examine what was said and decided in Westwind Air Charter Pty Ltd v Hawker De Havilland (1990) 3 WAR 71 by the Full Court. In that case Westwind brought an action against Hawker for breach of an agreement under which Hawker had agreed to maintain, repair and do other work upon aircraft operated by Westwind. It was also claimed in the alternative that Hawker had been negligent in doing this work and, as a consequence of such negligence, Westwind's aircraft were grounded for longer periods than was reasonably necessary. Hawker counterclaimed for debts allegedly owed by Westwind for maintenance and repair work done by Hawker on aircraft operated by Westwind and claimed summary judgment for the amounts it claimed was owed to it. Westwind sought to set‑off the amount said to be owing to Hawker against their own unliquidated claim for damages. In dealing with this issue Murray J said (at p 85):
"In my view, the point in this case is to be decided in the same way and upon the same process of reasoning. Subject to the unresolved question of the effect of the decision in Fryer's case, Olney J cited with approval as to the availability of equitable set‑off, a passage in 1 C F Spry Equitable Remedies (2nd ed, 1980), pp 170‑171, as in his view correctly stating the law revealed by the authorities:
'…if an otherwise sufficient equity can be found, it does not matter whether or not the material claim of the defendant is for an unliquidated amount, nor whether or not the opposing claims might properly be described as "mutual". But a defendant can establish an equity only by bringing forward a claim which impeaches that of the plaintiff. For this purpose it is not sufficient merely to prove a countervailing claim; nor, indeed, is it necessarily sufficient to prove a countervailing claim arising out of the same contract as that upon which the plaintiff is bringing suit. What generally must be established is such a relationship between the respective claims of the parties that the claim of the defendant has been brought about by, or has been contributed to by, or is otherwise so bound up with the rights which are relied upon by the plaintiff that it would be unconscionable that he should proceed without allowing a set‑off."
In that sense the question is, as it is put, whether the countervailing claim has the effect of impeaching the claim against which the set‑off is contended for."
And at a later stage (pp 85‑86):
"Here, what is said for the plaintiffs raising the question of set‑off in answer to the defendant's counterclaims, is not that the nature of their claims by writ was such as to deny Hawker relief upon its counterclaims. Indeed, as we have seen, there are admissions upon the affidavits that at least to some extent the claims may be made out, in the sense that they are claims for Hawker to be paid for maintenance work performed, but for which it has not been remunerated. All that is said for the plaintiffs is that their claims relate to the same contractual relationship in respect of the maintenance of aircraft, as those of the defendant. That is all that can be said, I think, and it is clearly insufficient, leading me to conclude that a set‑off is unavailable and causing me to confirm my view that I would order judgment to be entered for Hawker against Westwind to the extent that I have mentioned above."
See also Geraldton Building Co Pty Ltd v Christmas Island Resort Pty Ltd (1992) 11 WAR 40 at 52‑53; Hazcor Pty Ltd v Kirwanan Pty Ltd (1996) 12 WAR 62 at 67‑68.
Conclusions
The central issue I have to decide is whether the relationship between the respective claims of the parties meets the test set out in Westwind Air v Hawker De Haviland (supra) as to give rise to a set‑off. In considering that central question I must also take into account that in an application for summary judgment the Court must be completely satisfied on the material before it that there is no question to be tried between the parties. Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99. Given that BankWest has not chosen to file an affidavit contesting the material contained in the defendant (appellant's) affidavits I am required to decide the issue on the basis that the defendant's allegations will ultimately be accepted on the trial of the action. Webster v Lampard (1993) 177 CLR 598 at 608.
I should say at the outset I do not agree with Mr Duckham's submission that the material before the Court points irresistibly towards the conclusion that the only reason for the loan by BankWest was the existence of the alleged pre‑existing debt by BankWest to the defendant (appellant). The affidavit of the defendant (appellant) does not go as far as that. The most that can be said is that the initial advance of $15,000 and the subsequent advances eventually totalling $42,597.82 were made by BankWest to the defendant (appellant) "against the background" of the defendant's (appellant's) claim against BankWest. While I must accept that the defendant's (appellant's) failure to pay the money he owed BankWest was due to his non‑recovery of the money allegedly owed to him by BankWest I am not satisfied on the material before the Court that the two claims were so inextricably linked to one another that the only reason BankWest loaned money to the defendant (appellant) was because the bank knew it owed money to him. An examination of the relationship between the respective claims demonstrates that a substantial gulf exists between them. In the first place it cannot even be said the defendant's (appellant's) claim related to the same contractual relationship as the unpaid loans made by BankWest to the defendant (appellant). The competing claims arose out of two quite distinct contracts. In the second place there is a substantial period of time between the two claims. The defendant's (appellant's) claim arose from an agreement reached with BankWest on 23 May 1993 culminating in an alleged debt owed by BankWest to the defendant (appellant) of $52,500 by 6 December 1993. This alleged debt arose some four years before the loan made by BankWest on 22 December 1997 and six years before the variation of the agreement between the parties on or about 28 April 1999. What can be said with some certainty is that the competing claims are not contemporaneous, one pre‑dating the other by a considerable period; they do not arise out of the same contract; and, while the alleged debt by the bank to the defendant (appellant) may have provided the background to the subsequent loan made by BankWest, there is certainly no material before the Court to suggest that BankWest only advanced the money to the defendant (appellant) because of the bank's own indebtedness to him. Apart from the fact that the same parties are involved in both competing claims there are no other characteristics that point to the type of relationship necessary to give rise to a claim for set‑off.
For these reasons I believe the decision of the Registrar should be confirmed and the appeal dismissed.
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