Cannon v Statewide Secured Investments Pty Ltd

Factual background 2 In 2000, funds were advanced by Statewide to the appellants (and others) for the purpose of a building project. In 2002 Statewide called up the loan, and in February 2003 commenced proceedings in the Supreme Court of Victoria seeking judgment in the amount of $2,049,710.20 and an order for the possession of a property which secured the loan. In March 2004, judgment was entered against the appellants for the sum of $2,315,947.50 and an order for possession of the property was made ("the Supreme Court judgment"). However, within days of the judgment being entered, the parties entered into a deed which enabled the development project to proceed with further financing by Statewide. From 2006, Statewide refused to make further advances or payments. In 2011, Statewide served notices on the appellants seeking payment of the outstanding amount of the loan advances, which included the monies, and in 2012 commenced proceedings against the appellants in the County Court for recovery of the outstanding loan amount. 3 The plaintiffs to the proceeding were Statewide and Permanent. The reason for this was that in 2009, Statewide became part of the Banksia Group and in 2013 it transferred the mortgage to Permanent and assigned all of its rights, title and interest in a guarantee of the loan which the second appellant had given to Statewide. The further amended statement of claim pleaded the fact of the transfer of mortgage and the assignment of the guarantee. 4 The issues in dispute in the proceeding included: (a) whether the Supreme Court judgment was conclusive of the amount owing under the mortgage up to the date of the Supreme Court judgment; and (b) whether judgment should be entered in favour of Statewide or Permanent if successful. 5 Judgment was delivered in March 2016: Statewide Secured Investments Pty Ltd v Cipcon Pty Ltd [2016] VCC 18 (Judge Anderson). Judge Anderson held that the Supreme Court judgment was conclusive of amounts owing pursuant to the mortgage up to the date of judgment. His Honour also found for the plaintiffs in respect of the further amounts advanced after the date of the Supreme Court judgment. 6 At [129]-[130] His Honour stated: Permanent should recover judgment: Mr Scott SC [for Statewide and Permanent] submitted that the judgment should be entered in favour of Permanent and not Statewide, as Permanent was the transferee or assignee of Statewide's rights under the Mortgage and the guarantee. In final submissions, no argument was addressed to the contrary by Ms Kirton QC [for the appellants]. Accordingly, the following orders would seem appropriate: 1. The claim by the first plaintiff is dismissed. 2. Judgment for the second plaintiff against each of the second and third defendants for [a sum to be calculated by the parties in accordance with these reasons for judgment, or as ordered by the Court after hearing further submissions from the parties]. 3. … 7 At [131] His Honour stated that no orders would be made until the parties had the opportunity to study the reasons and, if necessary, to make further submissions. 8 There was a further hearing on the form of orders. In written submissions filed on behalf of the appellants (as defendants), the appellants contended that judgment should not be entered in favour of Permanent for the reason that it was not pleaded that Permanent took an assignment of Statewide's rights in the Supreme Court judgment. By the time of the further hearing, Statewide and Permanent were similarly of that view. The transcript of the further hearing records that the parties were all in heated agreement that the order should be made in favour of Statewide, and not Permanent, with respect to the amount which was the subject of the Supreme Court judgment together with statutory interest. An order to that effect was made and judgment was entered against the appellants in favour of Statewide in the amount of $5,342,205.39. Judgment was also entered against the appellants in favour of Permanent in respect of the further advances quantified in the amount of $2,254,293.87.

The FCC decision 9 The primary judge decided not to go behind the County Court judgment on the basis that: (a) whilst the primary judge expressed the view that there was "some attractiveness" to the argument that the Supreme Court judgment debt from Statewide to Permanent was covered by the deed of assignment, it did not appear that notice of the assignment of the Supreme Court judgment debt was given as required by s 134 of the Property Law Act 1958 (Vic) and thus it was not effective as an assignment at law; (b) as both Statewide and Permanent appeared to have acted on the basis that the deed of assignment did not apply to the Supreme Court judgment debt, it would "subvert the mutual intention of the parties" to construe the deed otherwise than in accordance with their joint understanding; (c) it would not be appropriate to permit the appellants to argue that the judgment should be in favour of Permanent, given that before the County Court their case proceeded upon the basis that the judgment should be in favour of Statewide.

Grounds of Appeal 10 The grounds of appeal are that the primary judge erred: (a) in refusing to go behind the judgment of the County Court in circumstances where the order made by the County Court was inconsistent with his findings of fact and inconsistent with the plaintiffs' pleadings; and (b) in holding that the efficacy of the assignment was to be determined by the intention of the parties rather than the terms of the assignment.

Decision 11 Dealing with the first ground, the relevant findings of fact by the County Court were said to be as follows: (a) Reasons at [9]: that on 15 March 2013, Permanent "took a transfer of Statewide's rights under the mortgage and the guarantee"; and (b) Reasons at [129]: "Permanent should recover judgment: Mr Scott SC submitted that the judgment should be entered in favour of Permanent and not Statewide, as Permanent was the transferee or assignee of Statewide's rights under the Mortgage and the guarantee. In final submissions, no argument was addressed to the contrary by Ms Kirton QC". 12 This ground was not advanced below and strictly speaking there can be no error in the primary judge refusing to go behind the judgment of the County Court for a reason not advanced below. The ground has no merit in any event, as neither paragraph relied on contains findings of fact. A finding of fact is a fact found by the Court to be established by the evidence. Paragraph [9] of the reasons did no more set out the evidence before the Court. Moreover, the "fact" did not refer to the Supreme Court judgment debt. Paragraph [129] simply recorded the submission that had been put to the Court. The reasons for judgment do not contain any consideration of whether there had been an assignment of the Supreme Court judgment debt to Permanent, let alone any finding made, nor, for that matter, had it been pleaded that the judgment debt was assigned. Nor did it become necessary for the County Court to consider and make a finding on whether the Supreme Court judgment debt had been assigned because of the common position taken by all the parties following the trial that judgment should be entered in favour of Statewide with respect to the amount which was the subject of the Supreme Court judgment. 13 In support of the second ground, it was argued that even though notice was not given, the assignment still took effect in equity and Statewide and Permanent could not, by agreement, nullify the assignment or ignore the transfer of those rights to the detriment of the appellants. There are two reasons why this ground must also fail. 14 The first reason is that the ground is premised upon the proposition that there was an assignment of the judgment debt. For the reasons given in respect of ground 1, I have rejected the contention that the County Court found as a fact that Statewide did assign the Supreme Court judgment to Permanent and it has not otherwise been substantiated that there was an assignment. 15 Secondly, even if it was established that there was an equitable assignment, Statewide, as the assignor, still had a debt claim in law against the appellants. Permanent, as the assignee, could sue the appellants on the assigned debt but it was a cause of action in equity. As Statewide and Permanent were made both made plaintiffs to the proceeding suing on the debt, Statewide was entitled to have judgment entered in its favour if Permanent chose not to enforce its claim and it was the common position of Statewide and Permanent that judgment should be entered in favour of Statewide, not Permanent: Three Rivers District Council v Bank of England [1996] QB 292 at 303. Accordingly, the argument that there was an equitable assignment does not advance the appellant's claim that the primary judge erred in refusing to go behind the judgment of the County Court. 16 No error in the primary judge's conclusion or reasoning for declining to go behind the judgment has been shown and it has not been established that there were substantial reasons for questioning whether behind the judgment there was in "truth and reality" a debt owing by the appellants to Statewide. To the contrary, as the primary judge stated at [35] it was the position of the appellants at trial that the judgment should be in favour of Statewide for the judgment debt to the extent that it related to the earlier Supreme Court judgment. The appellants not only did not put to Judge Anderson in the County Court that such a course was contrary to his Honour's earlier reasons, the appellants expressly argued that judgment should be in favour of Statewide because there had been no assignment of the Supreme Court judgment debt. Whilst the appellants now take a different view, nothing has been presented to suggest that the debt is not truly owed by the appellants to Statewide: cf. Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28. In the circumstances, the appellants have not demonstrated that the primary judge's exercise of discretion miscarried. 17 Accordingly, the appeal must be dismissed. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Davies.