Charan v Commonwealth Bank of Australia

Background

1. The first plaintiff, Mr Charan, and his wife the second plaintiff Mrs Charan, were the proprietors of the Holsworthy land as joint tenants.
2. Mrs Charan and Mr Prashant Charan, a son of the plaintiffs, were the proprietors of the Casula land as tenants in common.
3. Mrs Charan is an undischarged bankrupt. Her trustees are the present third defendants, Mr Pascoe and Mr Scott.
4. Mr Prashant Charan was made bankrupt. His trustee was the present second defendant, Mr Gleeson. Mr Prashant Charan has been discharged from bankruptcy.
5. At some stage after Messrs Pascoe and Scott were appointed as trustees for Mrs Charan, they applied under s 90 of the Real Property Act 1900 (NSW) to be registered as proprietor of her interest in the Holsworthy land. They became so registered.
6. Messrs Pascoe and Scott also made application under s 90 in respect of the Casula land, and in due course were registered as proprietors of Mrs Charan's interest in that land.
7. Likewise, Mr Gleeson made application under s 90 to be registered as proprietor of Mr Prashant Charan's interest in the Casula land, and in due course became so registered.
8. I interpose to note at this point that it does not appear from the evidence or the "pleadings" and particulars in the statement of claim that Mr Charan (as I shall call the first plaintiff) ever had a legal interest as a registered proprietor of an interest in the Casula land. He does plead, and he asserts in his affidavit, that the Casula land was purchased in the names of Mrs Charan and Mr Prashant Charan, using money provided by Mr Charan from various sources. Mr Charan pleads, further, that he spent further money from his own resources on the improvement of the land. He may wish to assert that, by reason of those matters, he had some equitable interest in the Casula land. However, he does not seek any relief directed to vindicating that equitable interest. Nor has he ever commenced proceedings against Mr Gleeson or against Messrs Pascoe and Scott asserting an equitable interest in the Casula land, let alone an equitable interest that would be excluded from the divisible property of the two bankrupts under s 116(2)(a) of the Bankruptcy Act 1966 (Cth).

Prior litigation

1. There have been earlier proceedings between various of the parties. In one set of proceedings, the first defendant (the Bank) as plaintiff sought judgment for possession of the Holsworthy land and the Casula land, and judgment for debt. That claim was based upon mortgages given by the respective proprietors to the Bank by virtue of which the Bank became registered as first mortgagee. It was the Bank's case that the various proprietors had made default. That case was vindicated by a judgment of this Court given on 14 February 2013. The Bank recovered judgment for possession of both parcels of land, and a judgment in debt against Mr Charan in a sum exceeding $800,000.
2. None of the defendants in those proceedings raised any defence denying the bank's entitlement to any of the relief sought.
3. Mr Charan commenced earlier proceedings in this Court, 2014/196642. The defendants were the present defendants: the Bank, Mr Gleeson and Messrs Pascoe and Scott.
4. In summary, the relief claimed was: 1. "reversion of the whole of" the Holsworthy land; 2. alternatively, if "reversion could not be granted", compensation for loss of the land quantified at $785,000; 3. compensation for loss by reason of the maintenance of a caveat over the Casula land; 4. apportionment of those various claims between the three defendants; 5. an order that the bank "indemnify the purchaser of Holsworthy property for the purchase price paid and any work carried out on the property after the purchase" in the event that "reversion" of that land were granted; 6. orders that Messrs Pascoe and Scott pay "shortfall from the mortgage debt secured over the Casula property together with all costs...".
5. There was other relief claimed, but it is not necessary to detail it.
6. The defendants to those proceedings moved for summary dismissal, alternatively for the statement of claim to be struck out. That application was heard by White J on 8 October 2014. His Honour ordered that the proceedings be dismissed, I think pursuant to r 13.4. However, he noted that the order of dismissal was: without prejudice to any right the plaintiff [Mr Charan] might have to claim an account or equitable damages against the first defendant [the Bank] in respect of the first defendant's conduct as mortgagee in possession of the [Holsworthy and Casula] properties...or in respect of its exercise of its power of sale of those properties, or in respect of a determination of the amount of the net proceeds of sale...
7. White J gave detailed reasons indicating why, in his view (with which, to the extent that it is relevant, I respectfully agree) that, apart from the reserved claim, the claims sought to be advanced were unmaintainable.
8. I should say at this point that, despite the submissions put by Mrs Charan (who, despite her bankruptcy, appeared today and spoke on behalf of herself and Mr Charan), I do regard the judgment of White J as relevant. It will become apparent why I take that view.
9. It might have been thought that, following on from his Honour's reasons and orders, the plaintiffs (or at least Mr Charan) might have commenced proceedings in respect of the reserved claims. They did not, at least in terms, do so.

The present litigation

1. The present statement of claim was filed on 9 December 2014, that is to say the date after White J give judgment in respect of the earlier statement of claim.
2. The relief sought is by Mr Charan only, although for reasons that are unclear, both he and Mrs Charan are named as plaintiffs.
3. The relief claimed by Mr Charan may be summarised as follows: 1. compensation for wrongful possession and sale of the Holsworthy property and the Casula property "at current market values"; 2. compensation for "maintenance of caveat over investment property" (which, as is clear from the statement of claim and from the affidavits in support, is the Casula property) and the transfer of title of that property "with no equitable interest and loss of future earnings"; 3. compensation for "breach of statutory duties for the seizure and unlawful transfer of title" of that property; 4. compensation for conspiracy; 5. "reversion of the land".
4. Again, there are another claims for relief. It is not necessary to detail them.
5. The first of the claims that I have summarised is made against the Bank only. The second is made against Mr Gleeson only. The third is made against Messrs Pascoe and Scott only. The fourth is made against the Bank only.
6. Nothing in the pleadings suggests that the statement of claim is intended to seek vindication of the right to account which White J reserved.
7. When one goes to the pleadings, it is, to put it mildly, difficult to relate the claims to the relief claimed. And that is so regardless of the somewhat random way the statement of claim from time to time purports to do so.

The claim against Mr Gleeson

1. I propose to deal with the claims in the order, and according to the way, in which they are "pleaded". Thus, I start with the claim against Mr Gleeson.
2. That claim is made in respect of a caveat that he lodged over the Casula property. It is asserted that he was requested to remove the caveat but did not do so. It is asserted further that, after a lapsing notice had been served and had expired without any action being taken to continue the caveat, Mr Gleeson procured the transfer of Mrs Charan's interest in that property into his own name, pursuant to s 90 of the Real Property Act, by lodging the bankruptcy application to which I have referred.
3. It is asserted, without any particulars or other indication of material facts that would support it, that these actions give rise to a right for compensation. It is also asserted that Mr Gleeson is in breach of duty under s 66D of the Conveyancing Act 1919 (NSW).
4. In the submissions that were put, to the extent that I could understand them, it appears to be the plaintiffs' case that in some way, by allowing the caveat to lapse, Mr Gleeson thereby allowed his claimed equitable interest to lapse. That argument was put to White J. His Honour rejected at [33]. If I may say so with respect, I agree entirely with what his Honour there said.
5. Caveats are lodged to protect claimed equitable interests. They do not create equitable interests. Lapsing of a caveat does not of itself mean that the claimed equitable interest likewise lapses. It means that the proprietor may deal with the land free of interference from the caveator.
6. The second point, based on s 66D, appears to me to be entirely misconceived. Mr Gleeson was not a trustee for sale.
7. Another underlying theme of this aspect of the case is based on the proposition that Mrs Charan's interest in the Casula land (and, for that matter, Mr Prashant Charan's interest in that land) did not form part of their divisible property on their bankruptcies. That would appear to be based on the proposition that they held their interests on trust for Mr Charan. As I have said, Mr Charan does not in the present case seek relief directed to that end. Nor has he ever attempted in any of the proceedings to which I have referred, or in the respective bankruptcy proceedings, or in any proceedings against the various trustees, sought to assert such an interest.
8. in my view, the plaintiffs - specifically Mr Charan - demonstrate no basis whatsoever for showing that they have suffered any damages by reason of the asserted wrongful maintenance of the caveats. For that matter, they have not gone anywhere near pleading facts that could show that the caveats were in fact wrongly maintained for the period that they were.
9. That aspect of the case cannot be supported.

The claim against Messrs Pascoe and Scott

1. The same general propositions or arguments appear to underlie the pleading of the third claim, which relates to the caveat lodged by Messrs Pascoe and Scott over both properties. For the reasons I have given, that claim must fail in respect of the Casula land. And in respect of the Holsworthy land, there is simply no basis for saying that Messrs Pascoe and Scott could not have had any equitable interest in that land capable of supporting a caveat. That is because this was the residence of Mr and Mrs Charan, owned by them as joint tenants. They have not suggested that Mrs Charan had anything other than a beneficial interest in that property. That beneficial interest would have vested in Messrs Pascoe and Scott.
2. I should note that in among the various allegations, and also repeated in the evidence and submissions, were claims that the bankruptcy proceedings against Mrs Charan were in some way defective. Further, as it appears, Mrs Charan had sought orders for removal of the caveats lodged by Messrs Pascoe and Scott. In circumstances where those claims were determined, adversely to Mrs Charan, by a court of competent jurisdiction, there would in any event be issue estoppels, if not estoppels per rem judicatam, arising out of those decisions.
3. There are said to be claims against Messrs Pascoe and Scott relating to their want of due diligence and "rental seizure". The pleadings of those claims are not related to any of the specified claims for relief. In any event, those claims are simply unsustainable. To the extent that they relate to the Casula land, they were unsustainable for the reasons I have indicated. To the extent that they relate to the Holsworthy land, in circumstances where, as I have said, it has not been suggested that Mrs Charan did not have a beneficial interest in that property, they are likewise unsustainable.
4. Further, to the extent that this aspect of the claims appears to relate to the duties imposed on trustees by s 19 (1)(j), (k) of the Bankruptcy Act, there are two further defects. The first is that the pleading entirely misunderstands the nature of those particular duties. The second is that the pleading discloses no breach of those duties properly construed, let alone any loss flowing from the actions that, it appears, are said to be in breach.
5. Finally, to the extent that the duty of care is said to be one to all creditors and to the estate, neither of the plaintiffs has any interest sufficient to support it.

Further claims against Mr Gleeson and Messrs Pascoe and Scott; claim against the Bank

1. There is a confused section of the pleadings dealing with the circumstances in which the trustees became registered and the Bank exercised its power of sale. It appears to be suggested that in some way the trustees caused or permitted the Bank so to act, or that the trustees could not have become registered as proprietors without discharging the mortgagors' indebtedness to the Bank. That is simply not correct. The Bank as chargee of the land was obliged to produce the certificates of title to permit the trustees be become registered pursuant to s 90 of the Real Property Act. The trustee were entitled to become registered under that section. Their entitlement arose from the fact that the legal estate of the bankrupts (Mrs Charan and Mr Prashant Charan) vested in them respectively. The vesting of those legal interests in them could not affect the Bank's registered rights as first mortgagee, because the trustees had no better claim than the bankrupts did, and held subject to the mortgage rights of the Bank.
2. I should add that this section of the pleadings makes scandalous, irrelevant and utterly unfounded allegations against the Registrar General and people who appear to be employees in the Registrar General's office. Those allegations should never have been made.
3. There is also a confused section of the pleadings relating to the Bank's alleged failure to surrender its security. Of course, it was not obliged to do so. It was entitled, should it wish, to enforce its security and to recoup the amount owing from the proceeds of enforcement. That is what the Bank did. It is only to the extent that those proceeds exceed the amount owed that any question arises of accounting to the trustees for the interest of the bankrupt parties.

Another claim against the Bank

1. The next section of the pleadings asserts breaches of duty under ss 180, 181 and 182 and 420A of the Corporations Act 2001 (Cth). That appears to be asserted against officers of the Bank. It is utterly misconceived. The properties in question were not properties of a corporation. Undoubtedly, the bank officers owed duties to their employer, the Bank. Undoubtedly, the Bank is a corporation. However, even if the bank officers had acted in breach of duty to their employer (and there is nothing pleaded to suggest that they did), any claim for that breach of duty must rest with the Bank. It could not be a claim in which either of the plaintiffs have any interest.
2. To the extent that the claim under s 420A is made against the Bank direct, it cannot succeed. Section 420A relates to the duty of care of "a controller". That expression is defined, in relation to property of a corporation, to mean a receiver or manager of that property or anyone else who is in possession or control of that property for the purpose of enforcing some charge.
3. There is not any "property of a corporation" in respect of which it could be said that anyone was a controller for the purposes of that definition.
4. This aspect of the pleading appears to relate to the first, fourth, fifth and sixth claims (which are the first third and fifth of the claims that I have identified, together with a claim for interest.
5. This section of the pleadings is heavily confused because it asserts that the Bank's lawyers, the firm known as Gadens, were receivers and hence "controllers". There is no pleading of any material fact that could demonstrate that Gadens were receivers. There is no pleading of material facts that could show that they were controllers. There is no pleading of material facts that could show that they did anything other than act as lawyers on the Bank's enforcement of its rights.

Conspiracy claim against the Bank

1. The final section of the pleading is the conspiracy case, which is the fourth of the claims that I have summarised. It is the only pleaded claim that comes within hailing distance of the reserved claim for an account.
2. The pleading of the conspiracy claim asserts that the conspiracy was initiated by Gadens, who, it is asserted "did not want to lose their commission on the sale of the two properties". That is a nonsense. Gadens as lawyers had no entitlement to commission. They had an entitlement to fees. They would be paid fees for whatever work they did. This aspect of the pleading appears to be premised on the assumption that Gadens were not in fact lawyers, but were receivers and hence controllers.
3. This aspect of the pleading also asserts that an officer of the Registrar General's Department may have been involved. There is absolutely no basis whatsoever for that scandalous assertion. And this is made clear from the so called pleading, which says among other things: The truth of conspiracy can only be extracted at full hearing during cross-examination of persons involved...
4. There are numerous reasons why this aspect of the claim is not maintainable. The first is that it simply does not plead any material facts capable of showing an actionable conspiracy. The second is that it appears to be based on the erroneous notion that the lawyers were in fact receivers. A third reason is that it appears to assert also that in some way breach of duty under the sections of the Corporations Act to which I have referred may be a basis of the claim.

Conclusion: each claim is unsustainable

1. It follows, in my view, that each and every one of the claims pleaded is utterly unsustainable. That applies also to the claims for "reversion" of the Holsworthy and Casula land, which I have not expressly dealt with. No facts are pleaded that could show fraud, let alone fraud in which the purchasers from the Bank conceivably might have been involved.

Other problems

1. I should add that because Mr and Mrs Charan are self-represented, I have taken the course of dealing in some detail with each of their pleaded claims. However, in my view, it is equally correct to say, as put for the Bank, that: 1. to the extent that the claims for relief made by Mr Charan (and I repeat that only he made any claims for relief) related to the Casula land, he has not sought any relief directed to vindicating his claimed equitable interest in that land; and 2. by reason of decisions in the earlier proceedings to which I have referred, including proceedings in the Federal Magistrates Court, the possession proceedings in this Court and the earlier proceedings dismissed by White J, the plaintiffs are estopped from asserting all the claims, except perhaps the conspiracy case, which are now alleged in the statement of claim.
2. As to the second point: it might have been simpler to go through the reasons of White J and show, in greater detail than I have done by reference to the caveat claim, why effectively his Honour either decided the very issue that the parties now seek to reargue or decided issues that could and should have been raised in conjunction with those which the plaintiffs now seek to argue (or reargue). But it seemed to me, as I have said, to be more appropriate, taking into account the self-represented status of the plaintiffs, to deal with the merits (to the extent that there are any) of the claims that they plead.

Orders

1. I make the following orders: 1. Order that the statement of claim be dismissed pursuant to UCPR r 13.4 against each of the defendants. 1. Order the plaintiffs to pay the defendants' costs.

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