Commonwealth Bank of Australia v Bride & Ors [2004] WASC 177

Commonwealth Bank of Australia v Bride & Ors [2004] WASC 177 - WASC 2004 case summary — Zoe

[143]

48 Another submission raised by Mr Bride in his challenge to the validity and efficacy of the appointments of Messrs Young and Anderson as receivers and managers relies on the fact that the second bill of sale in favour of ABL, namely the security of 23 March 1984, was granted within six months of the subsequent bankruptcy of the Brides and, therefore, to the extent that it gives the secured creditor a preference over other creditors, was void against the trustee in bankruptcy by virtue of s 122 of the Bankruptcy Act 1966 (especially s 122(8)(b)). Undoubtedly the position in this regard was correctly described by Parker J as his Honour reached the same conclusion based on s 31 of the Bills of Sale Act (1899) which is substantially to the same effect. The position is that such a security is void only against the trustee in bankruptcy of the debtor. There was nothing to show that the trustee in bankruptcy later appointed actually avoided this second bill of sale on the grounds that it constituted a preference. This possibility is however mentioned in a Deed of Compromise of 19 August 1986 mentioned below. Further, as Parker J observed, all issues between the then trustee in bankruptcy of the Brides and ABL were later resolved by a deed of compromise and mutual discharge. Not only is there nothing to show that the second bill of sale was avoided on the grounds that it constituted a preference to the secured creditor or otherwise, but this submission cannot possibly lead to any advantageous conclusion for the Brides. This is because the appointments of the receivers and managers made under the first bill of sale have never been challenged and are quite sufficient to authorise the actions of the receivers and managers in taking possession of all the assets which had also been charged by that security. For reasons already given the possession of the lands, including the Oat Mill land taken by the receivers and managers are authorised under the appointments of the bank made on 22 August 1984. These also authorise the receivers' dealings with the revenues of the lands which were subject to the mortgages.

[148]

53 It is unnecessary to pursue any such enquiry further because the dispute between Mr Putnin, as trustee, and the receivers and managers led to a deed of compromise between them being executed on 19 August 1986. This deed, which does not appear to have been in evidence at the trial before Parker J but which is Exhibit EJB10 to the affidavit of Mr E J Bride sworn 16 March 2003 and tendered in these proceedings was between ABL, Messrs Young and Anderson and the two trustees in bankruptcy Messrs Putnin and Campbell-Smith. Mr Bride contended that this compromise was prompted by initiatives proposed by the trustees to conduct a s 81 examination of the bank's officers and of the receivers and managers. There is no evidence to support that contention but nothing turns upon it. The deed recited that until 9 August 1984 the Brides carried on business as oat millers and stock food producers under the names and styles of, inter alia, "Oat Milling of Katanning", "Bride Foods Pty Ltd" and "Swan Stock Foods Pty Ltd" ("the Business") and, after reciting details of the secured advances by the bank, the events of default, the receivers and managers taking possession on 10 August 1984, the appointment of a trustee in bankruptcy under Pt X, the deed also recited that the trustee in bankruptcy had collected certain book debts then due and owing to the business to the total value of $43,960.43. The deed then goes on to recite that the bank and the receivers and managers disputed the entitlement of the trustee to collect those book debts and commenced proceedings in this Court (action No 2154 of 1984) seeking, among other things, orders compelling the trustee to account to the receivers and managers for the book debts and that the trustee defended that action and counterclaimed asserting that the security instruments were invalid and void against him, that the business had been carried on by the Brides in partnership and that the receivers and managers should account to the trustee for book debts for the business which they had collected.

[161]

62 In the course of his submissions Mr Bride attempted to meet the point, that any rights which he or his wife may have had against ABL, Peat Marwick Mitchell, Messrs Young and Anderson or others arising from the enforcement of the bank's securities and the actions of the receivers and managers had become vested in the trustee in bankruptcy and did not revest in the Brides upon their discharge by asserting that the rights of action against those and other parties had been expressly assigned to him by Mr Putnin as trustee (and, presumably, by Mr Campbell-Smith). No evidence of any such assignment was adduced in these proceedings nor referred to by the parties in the course of their submissions. As the onus of establishing the existence of such a vital assignment must rest upon the Brides it is enough to dispose of this issue by concluding, as I do, that the Brides have simply failed to establish that any such right or rights have been re-assigned to them as asserted. In this regard, however, I consider it appropriate to notice previous findings which have been made in other proceedings dealing with assertions by Mr Bride that rights of action have been re-assigned to him and his wife by Mr Putnin as their trustee in bankruptcy. In WA G62 of 1987, an application by the Brides made in the Federal Court of Australia against ABL and Mr B G Stewart, French J decided, in a judgment of 26 July 1988, that the Brides had no standing to bring those proceedings against the bank or Mr Stewart because any such right of action had vested in their trustee in bankruptcy (Mr Putnin) as a result of their 1984 bankruptcies. Mr Bride had sought to avoid that consequence by claiming that, by a letter of 29 October 1984, Mr Putnin had indicated that as bankruptcy trustee he had no objection to the Brides commencing such an action and that, consequently, Putnin had assigned that right of action to them personally. French J decided that that letter did not constitute any such assignment and that, in any event, this could not at that stage have been done by the trustee.

[183]

77 The fact that the Brides sued as trustees, and not for their personal or beneficial interests, distinguishes this action in some respects from previous cases where they sued on their own behalf. But I consider that the distinction is not entirely conclusive to prevent the operation of the doctrine of issue estoppel. This is because, separating out issues to do with standing and other effects of the Brides' bankruptcies, decisions reached about the existence of default under the securities to ABL, the validity of the appointment of the receivers and managers, the validity of the sales of land by the mortgagee exercising its powers on default, the indefeasibility of the title taken by purchasers at the mortgagees sales and of the title obtained by subsequent transferees do not depend upon whether or not the Brides were suing in their personal capacities or as trustees. This is because the securities granted by them to the bank did not differentiate, in any material respect, between property secured which was held beneficially or held on trust. While the question of the indefeasibility of the titles to land taken by purchasers from the selling mortgagee, or by subsequent transferees depended, in some instances, on the absence of any reasonable basis to contend that the individual purchaser or transferee was implicated in an alleged fraud, and so some of these cases could, on that ground, be differentiated from others, in other instances a finding that ABL, Peat Marwick Mitchell or its partners Young and Anderson were not involved in any fraudulent conduct in relation to those sales where that had been alleged by the Brides would, in my view, give rise to an issue estoppel preventing the Brides from asserting, as against ABL, Peat Marwick Mitchell or subsequent transferees of the land sold at the mortgagees' sales, such as the Fulfords, that the bank, as mortgagee, had engaged in fraudulent conduct in relation to the enforcement of the securities or the sale of the lands. Even if the adjudication of the absence of fraud in such earlier cases dealt with allegations of fraud which, in particular details, were different from the allegations of fraud that the Brides still seek to advance that would not prevent an issue estoppel arising between the same parties or their privies because of the doctrine in Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589.

[218]

94 There is an additional practical reason which, in my view, favours this course. No judicial officer faced with the task of dealing with any application, action, other proceeding or appeal in relation to the Bride disputes could escape the difficulties of becoming familiar with the vast number of actions and the many issues involved in all the cases, applications and appeals which have been brought before the courts and determined in the past. In dealing with an application or a particular action the focus of the court is, necessarily, upon the issues raised directly by those proceedings and it would not usually be necessary for such a judicial officer to canvas or have regard to the details or outcomes of the large number of other proceedings. Unusually, in an application such as the present under the Vexatious Proceedings Restriction Act, the canvas is much wider and the court can, and should, have regard to the history of the defendants' litigation in the past and the manner in which other actions or claims have been determined by the courts when such determinations may have a bearing on whether or not current proceedings are vexatious. In this case I have received and considered a large quantity of evidence relating to other litigation in which the Brides have been involved and which, with only two exceptions, has been resolved adversely to them. The magnitude and dimension of the evidence so considered is likely, if I may say so without pretension, to provide any Judge dealing with such an application, with a better perspective than could hope to be gained when undertaking an application for leave to proceed in a single action or appeal under s 6. At least it is likely to spare the Judge faced with a s 6 application the task of undertaking a second review of such a volume of material. For that reason, therefore, I consider that I should embark on the further task of considering whether or not any order made on the present application under s 4 should be restricted or qualified in respect of either of the two appeals presently pending before the Full Court.

[222]

"In this case, on this application, in 1570 the plaintiff now seeks to plead in paragraph 24.6 that notices of appointment by the first defendant of receivers and managers pursuant to the two mortgages on 9 August 1984 were false, fraudulent and defective. Particulars are proposed to that allegation. At 24.6 it presently alleges that these notices were invalid when given as the appointments themselves were not until 22 August 1984. Subsequent paragraphs of the statement of claim link paragraph 24.6 to the relief claimed which relevantly is a declaration that the appointments of the receivers and managers were invalid, that the business is held on constructive trust for the plaintiffs, and seeking a transfer of the land to the plaintiffs in damages.

Hence, what the amendment seeks to do is to add primarily fraud with respect to the original notices of appointment. What are described as the particulars of this proposed allegation of fraud are not extensive in their reach. Leaving aside matters of the form of the pleading and the particulars they raise that the receivers and managers were aware of the falsity of the notices of appointment and fraudulently pretended them to be lawful and effective and that the appointments could not have become lawful and effective until the deeds of their appointment were executed. While these particulars are directed to conduct of the receivers and managers, the proposed pleading is itself directed to invalidity of the appointment of the receivers and managers ...

The submissions of Mr Bride indicate that much more is intended than is presently raised by the proposed form of the amendment. It seems to me that only after a process of redrafting, which from the history of pleading in these two actions can be expected to be prolonged and difficult, could the full extent of the intended scope be appreciated.

From the submissions of Mr Bride it appears that at least it is intended by the pleading to allege that the first defendant was a party to the fraud of the receivers and managers or is, on some basis yet to be identified, liable to the plaintiffs for the fraud of the receivers and managers. Further, the motive or reason for the fraud is not yet hinted at in the pleading, but the submissions of Mr Bride suggest that at least it is intended to raise that the purpose was to enable the receivers and managers to gain entry to the pieces of land which were subject to the mortgages and thereby to the business and its assets which were conducted from and located on some, at least, of those pieces of land."

[236]

105 The grounds of appeal which the Brides seek to advance in their appeal from the decisions of Parker J are extensive and discursive. Their minute of proposed reamended notice of appeal in appeal No FUL 104 of 2000 is Exhibit JCV2 to the affidavit of Mr Vaughan sworn 2 January 2003. It runs to over 11 pages of closely typed grounds. I am acutely conscious of the fact that I have no power or jurisdiction to enter upon any determination of those grounds of appeal, and that nothing in the Vexatious Proceedings Restriction Act empowers me to undertake any summary or preliminary determination of that appeal. The appellate jurisdiction of this Court is vested exclusively in the Full Court by s 58 of the Supreme Court Act (1935) and, sitting as a single Judge at first instance on an independent application under the Vexatious Proceedings Restriction Act, I have no power whatever to determine any of the issues raised by the notices of appeal which have been lodged by Mr and Mrs Bride in relation to the decisions of Parker J and Chapman AM. Rather, I am restricted to considering whether or not those appeal proceedings are an abuse of the process of the Full Court or are instituted or pursued without reasonable ground under s 3 and s 4 of that Act. I appreciate that proceedings by appeal may also be vexatious if they were instituted in order to, or are conducted in a manner so as to, harass or annoy, cause delay or detriment, or for any other wrongful purpose. In this respect, however, it is my conclusion that whatever may be their other shortcomings or defects, the two appeals which the Brides have instituted have been brought in a conscientious belief by Mr and Mrs Bride, that they have suffered legal wrongs and that they may, by their appeals, obtain remedies to which they believe they are entitled at law. That, in many respects this belief may be baseless and wrong-headed and that many of the steps which they have taken in the proceedings may be maladroit, does not diminish Mr Bride's belief in his entitlement to ultimate legal relief. In my view, and with respect, Mr and Mrs Bride are seriously mistaken in the views and conclusions which they have formed about the legal significance of what has occurred in the past but I am unable to conclude that their actions in instituting these appeals were prompted by an intention to harass or annoy, to cause delay or detriment or for any other wrongful purpose. That they have been pursued in a sincere belief by the Brides that they have an entitlement to relief at law may be a very serious and grave mistake, but I do not regard it as amounting to intentional bad faith which, in my opinion, is one of the criteria of "vexatious proceedings" in s 3 of the Act.

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Commonwealth Bank of Australia v Bride & Ors [2004] WASC 177 (17 August 2004)

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