COMMONWEALTH BANK OF AUSTRALIA -v- CHENG [2017] WASC 136 (24 May 2017)

3 By the amended statement of claim filed on 8 November 2016 the plaintiff claims against the first defendants monies it claims are owing pursuant to two written loan agreements, variations to those loan agreements and mortgages claimed to have been granted pursuant to them. It also claims possession of land which it claims are security for the alleged indebtedness.

4 The first named first defendant admits loans were made but does not admit variations and denies any continuing indebtedness. She counterclaims declarations and damages, including punitive and exemplary damages.

5 The plaintiff's application is made under all four paragraphs of O 20 r 19(1). The details of the application are specified in a schedule to submissions filed with the application.

6 As Allanson J said in David Clarke Air Conditioning Pty Ltd v Quann [2016] WASC 73 [11] [15] it is necessary to consider the role of pleadings in the context of modern case management practices, including the pretrial exchange of witness statements: Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82 [8]. However it remains necessary for pleadings to define with clarity and precision the issues or questions which are in dispute between the parties to be determined by the court: Nyoni v Patterson [2012] WASCA 171 [36] [37]. Pleadings ensure a basic requirement of procedural fairness, and, to do so, must state the party's case sufficiently clearly to allow the other party a fair opportunity to meet it: Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279, 286 287; Gould v Mount Oxide Mines Ltd (in liq) [1916] HCA 81; (1916) 22 CLR 490, 517; Forrest v Australian Securities and Investments Commission [2012] HCA 39; (2012) 247 CLR 486 [26].

7 Pleadings may be struck out on the ground that they may prejudice, embarrass or delay the fair trial of the action 'because they are evasive, they conceal or obscure the real questions in controversy, they are ambiguous or not reasonably intelligible, they raise immaterial or irrelevant issues, they fail to confine the issues or state the case of the party in question with reasonable particularity, or they raise a case in terms which are simply too general': Hart Roach v Public Trustee (Unreported, WASC, Library No 980044, 11 February 1998) 8 9; DM Drainage and Constructions Pty Ltd v Karara Mining Ltd [2014] WASC 170 [34].

8 In paragraph 7 of the statement of claim the plaintiff pleads that on or about 23 April 2007 the plaintiff and the first defendants entered into the first written loan agreement. In paragraph 8 it pleads that pursuant to that loan agreement the first defendants borrowed the sum of $1,000,600 from the plaintiff, that the first named first defendant secured repayment of all monies advanced under the loan agreement by a mortgage over land and that on or about 30 April 2007 the plaintiff advanced the sum of $1,000,600 to the first defendants.

9 Paragraph 3 of the first named first defendant's defence and counterclaim is in the following terms:

The First Named First Defendant (Mary) admits signing a written Loan Agreement (referred to as a 2007 Loan Agreement) in paragraph 7 of the Statement of Claim but does not know and cannot admit the date of signing and that the First Defendants were advanced on/or about the period the 27th April, 2007 a loan sum of $1,000,600.00 on CBA Account 511031108 (herein referred to as 1108).

10 The plaintiff submits that it is unclear from the paragraph whether the advance of funds is admitted. The first named first defendant submits that the paragraph means that she does not know the date of signing of the first loan agreement.

11 In paragraphs 8(a) and 8(c) of the defence and counterclaim the first defendant admits paragraphs 8(a) and 8(c) of the statement of claim, in which the plaintiff pleads that pursuant to the loan agreement the first defendants borrowed the sum of $1,000,600 from the plaintiff and that on or about 30 April 2007 the plaintiff advanced that sum to the first defendants.

12 While the nonadmission in paragraph 3 of the defence and counterclaim is not well expressed in view of the admissions contained in paragraphs 8(a) and 8(c) I consider that the first named first defendant's position is clear. I do not propose to strike out paragraph 3 of the defence and counterclaim.

13 In paragraph 15 of the statement of claim the plaintiff pleads that on or about 28 February 2008 the plaintiff and the defendants entered into the second written loan agreement. In paragraph 18 it pleads that on or about 21 May 2010 the plaintiff and the defendants entered into a letter of variation to the second loan agreement.

14 Paragraph 18 of the first named first defendant's defence and counterclaim is in the following terms:

Mary the First Named First Defendant agrees entering into and signing a variation for the Second Loan Agreement (Second Variation) with the other named Defendants.

PARTICULARS

[a] The variation being only to substitute security 2/111 Shakespeare Avenue, Yokine that was subject to a sale contract for 167 Lockhart Street, Como (the second property);

[b] At all material times Mary the First Named First Defendant agreed to substitute the security on the understanding that the Plaintiff would apply the net proceeds of the sale of 2/111 Shakespeare Avenue in discharge and payment of the second loan Agreement;

[c] Unit 1/111 Shakespeare was sold the 15th September, 2009 and the net proceeds of $713,980.98 were applied into the loan account (1904) which reduced the principal from $749,855.49 to $35,874.97;

[d] At all material times Mary did not authorize the Plaintiff to reinstate the original amount of $749,853.49 and or Frank and Andrea redraw from that account by way of redraw or otherwise.

15 In that paragraph the material facts pleaded in paragraph 18 of the statement of claim appear to be admitted and then particulars of the admission are provided. There are three distinct faults with this pleading. First, the particulars are not particulars of the admission of the variation of the second loan agreement, but are new allegations. The pleading of material facts as particulars is confusing: RoganGardiner v Woolworths Ltd [2005] WASC 194 [4] (Master Sanderson).

16 Secondly the basis of the subjective 'understanding' particularised in paragraph 18(b) is not specified. Nor is it pleaded whether or not this subjective understanding was known by the plaintiff and, if so, how it was known.

17 Thirdly it is not possible to understand why the first named first defendant's allegation made in particular 18(b) and the allegation made in particular 18(d) that she did not authorize the plaintiff to reinstate the original amount are relevant to the pleading of the admission of the variation.

18 The pleading may prejudice or delay the fair trial of the action. It should be struck out.

19 In paragraph 19 of the statement of claim the plaintiff pleads that pursuant to the variation to the second loan agreement:

(a) the defendant agreed to repay the amount lent under the second loan agreement and the variation to it (I understand that by that plea the plaintiff is pleading that the defendants so agreed);

(b) the first defendants agreed to secure repayment of those monies by providing the plaintiff with a mortgage on a property; and

(c) the plaintiff agreed to release a property, described as the Yokine Property, from its security.

20 The reference to the Yokine Property needs to be clarified - there are three Yokine Properties referred to in the statement of claim.

21 Paragraph 19 of the first named first defendant's defence and counterclaim is in the following terms:

[a] Mary the First Named First Defendant admits paragraph 19(a) as at all material times it was her belief that the Plaintiff was applying the net proceeds of sale of the security properties in reduction of the loan (1904) and in accordance with the terms and conditions of the said loan.

[b] Mary admits paragraph 19[b].

[c] Mary denies paragraph 19[c]. Mary only agreed to release 2/111 Shakespeare Avenue, Yokine being the last remaining subdivided property that comprised the 'third Yokine property'.

22 The basis of the subjective 'belief' pleaded in paragraph 19(a) is not specified. It is not pleaded whether or not this subjective belief was known by the plaintiff and, if so, how it was known. The relevance of this belief is also unclear.

23 The relevance of the pleading in paragraph 19(c) that the first named first defendant only agreed to release one property on Shakespeare Avenue to her denial of the plaintiff's pleading that it agreed to release the Yokine Property from its security is unclear.

24 The pleading may prejudice or delay the fair trial of the action and should be struck out.

Paragraph 30(d) of the defence and counterclaim

25 In paragraph 30 of the first named first defendant's defence and counterclaim the first named first defendant pleads that the 'material particulars of the second 2008 Loan Agreement entered into between the Plaintiff and Mary the First and Second Defendants were'. That plea is followed by particulars of the amount of the loan, the period of the loan, the number and amount of the repayments and the total of the repayments. Those four matters are identified by the letters (a), (b), (c) and (d). Following those particulars there are paragraphs 30[a] to 30[e] which provide details of five securities. As the pleading is set out in this way it is not clear whether paragraphs 30[a] to 30[e] are pleaded as material facts or as particulars, but they appear to be particulars.

The fourth security being:-

(i) 172a McDonald Street, Joondanna being Certificate of Title Volume 2625 Folio 50;

(ii) The Registered Proprietor was the Third Named First Defendant (Andrea);

(iii) The Plaintiff Registered a Mortgage number H769041 over the said property and several months thereafter discharged the same on the 16th May, 2008 releasing the said title to Andrea without notice to the First Named First Defendant (Mary) in breach of the terms of the Second Loan Agreement and/or the mortgage documents;

(iv) On or about the 26th March, 2008 Andrea sold the Joondanna property for $850,000.00 and at settlement received the net sum of $833,488.58.

27 The breaches particularised in paragraph 30[d](iii) are not identified. Further the allegation of a breach is not a particular of the loan agreement but a new allegation. The first named first defendant submits that the plaintiff's criticism of this paragraph is misplaced and out of context and says that the pleading is expanded upon in paragraphs 31 and 33 of the defence and counterclaim. I have therefore considered whether the pleading is made clear in those paragraphs. For reasons that follow those paragraphs are defective. They do not clarify the pleading in this paragraph. Paragraph 30[d] of the defence and counterclaim may prejudice or delay the fair trial of the action and should be struck out.

28 The first named first defendant submits that paragraph 31 of her defence and counterclaim and the particulars of the paragraph need to be considered as a whole due to their complexity to enable the plaintiff to be informed of the case it has to meet.

29 Paragraph 31[a] begins with a reference to the terms of various documents: 'the terms of the first and second Loan Agreements (Contracts) the terms of the Memorandum of Provisions, the terms of the authority to complete and pay Consumer Loan Authority (borrowers) discharge/refinance authority, Consumer Mortgage lending products'. What those terms are is not specified. The paragraph refers to 'other relevant Guidelines' which, again, are not specified. The paragraph then refers to implied terms which are also not specified. It then pleads that pursuant to the express terms of the documents, the relevant guidelines and the implied terms that the plaintiff would exercise reasonable care and skill in carrying out and/or conducting the loan accounts of the first defendants.

30 It is not possible to understand the pleading. It appears to be a plea that the plaintiff had a contractual obligation to exercise reasonable care and skill. However the vagueness of the pleading means that the basis of that allegation cannot be ascertained.

31 The vagueness is not remedied by the particulars which follow paragraph 31[c]. Those particulars are pleaded as being particulars of 'breach and/or negligence'. They do not provide any particulars from which the plaintiffs can identify the basis of the first named first defendant's case as to the existence of the pleaded contractual duty of care.

32 Paragraphs 31[b] and 31[c] are in the following terms:

[b] In respect to the operating the said loan accounts and securities provided the Plaintiff acted negligently and/or in breach of the express and/or implied terms.

[c] Further on the sale of any security property it was a term of the Discharge Authority provided to the Plaintiff that all funds received by the Plaintiff would be applied first by way of Discharge and/or partial discharge of the loans.

33 Those paragraphs are followed by eight particulars of 'breach and/or negligence'. They do not serve the function of providing particulars of the pleading at all, but are a mixture of broad allegations without the basis of those allegations being specified. They are so lacking in precision and particularity that they do not provide any detail of the case that the plaintiff has to meet.

34 The particulars refer to further and better particulars dated 14 March 2016 however those particulars do not identify the case that the plaintiff has to meet.

35 Paragraph 31 is so vague and lacking in meaning that it may prejudice or delay the fair trial of the action and should be struck out.

36 In paragraph 33 of her defence and counterclaim the first named first defendant pleads that the plaintiff released a security, 'recklessly and/or negligently and without authority and/or notice to the First Named First Defendant (Mary) and further and in the alternative assisted and/or aided the Second and Third Named First Defendants (Francis and Andrea) to benefit'. That plea is followed by a repetition of the particulars of paragraph 31 to which are added other particulars.

37 The security that was said to be released is pleaded as being 'the following named security from the said loans', however the security is not named.

38 As I have said the particulars of paragraph 31 are not proper particulars of that paragraph. They are also not proper particulars of this paragraph. The additional particulars of paragraph 33 are also defective. They do not identify the case that the plaintiff has to meet.

39 Paragraph 33 is so vague and lacking in meaning that it may prejudice or delay the fair trial of the action and should be struck out.

40 In paragraph 35[a] of her defence and counterclaim the first named first defendant pleads that the plaintiff 'deliberately forwent' full repayment of its loaned sum by releasing the securities it held pursuant to the 2007 and 2008 loan agreements 'recklessly and/or negligently'. The next sentence of the paragraph is:

In the alternative the Plaintiff and Frank and Andrea knew or ought to have known that the actions by them in the operating the First and Second Loan Agreements as they did would unjustifiably enrich Frank and Andrea and be detrimental to Mary.

41 The pleading is followed by particulars which do not clarify the pleading. They have the same defect as the particulars of paragraphs 31 and 33. They make allegations which do not clarify if the pleading in the second sentence is a pleading of unjust enrichment and do not enable the plaintiff to know the case that it has to meet.

42 Paragraph 35[b] contains a pleading of 'a special relationship' between the plaintiff, through employees, and the second named first defendant which 'circumvented and/or overrided the normal standards of client and customer relationship of banking customer relations' so that the second named first defendant dealt with employees of the plaintiff informally followed by a plea that the outcome of these arrangements were detrimental to the first named first defendant and in breach of fiduciary duty owed to her 'by the Plaintiff or the Contracts'. This pleading is followed by particulars which are inadequate and do nothing to remedy the faults that are patent in the pleading.

43 The nature or relevance of the 'special relationship' is not specified. How the informality of dealings caused a detriment to the first named first defendant is also not specified. Further, the pleading of a breach of fiduciary duty is inadequate because the facts that gave rise to that duty and how it was breached is not pleaded.

44 The reference to a fiduciary duty being owed by 'the Contracts' is unintelligible.

45 In paragraph 35[c] the first named first defendant pleads that a summary judgment was obtained against the other defendants and that the plaintiff did not mitigate its loss. The plaintiff has obtained default judgment but, in any event, the relevance of a pleading of failure to mitigate loss in defence to a claim for a debt is not specified.

46 Paragraph 35 is not a proper pleading. It lacks clarity and may prejudice, embarrass or delay the fair trial of the action because it is not reasonably intelligible and appears to raise irrelevant issues. The paragraph should be struck out.

47 In paragraph 37 of her defence and counterclaim the first named first defendant pleads that the plaintiff received all moneys due pursuant to the second loan agreements 'however in breach of the term thereof allowed Frank and Andrea to make redraws (individually) without authorization to do so and in any event exceeding the redraw sums or accumulated special repayment amounts'. Particulars to this pleading refer to the particulars of 14 March 2016. However the pleading and the particulars do not identify the term that has been breached and the relevance of the reference to the redraw sums and accumulated special repayment amounts is not specified.

48 The paragraph may prejudice or delay the fair trial of the action and should be struck out.

49 In paragraph 39 of her defence and counterclaim the first named first defendant makes complaint about the plaintiff's release of a property in Joondanna as a security for indebtedness. This, it is pleaded in paragraph 39[c], was 'in breach of the security arrangements in 39[b]' and, in paragraph 39[d], it is pleaded that in doing so the plaintiff knew that the third named third defendant 'would receive a benefit of an unencumbered title being the Joondanna property and did so in breach of the Second Loan Agreement and of their duty to Mary as her Bankers'. However the terms that are said to have been breached are not specified, nor is the duty as bankers that is said to have been breached. The pleading is so vague that it may prejudice or delay the fair trial of the action and should be struck out.

50 In paragraph 40[a] of her defence and counterclaim the first named first defendant pleads that in October 2009 she and the second defendant sold a property in Spencer Avenue, Yokine for $845,000. In paragraph 40[b] she pleads that the plaintiff had a mortgage over that property.

51 In paragraph 40[c] the first named first defendant pleads that the plaintiff was negligent in dealing with the proceeds of sale of the property. However there is no pleading of the duty of care. The allegation of breach ends with the pleading in paragraph 40[c][v] that the plaintiff failed to carry out instructions on the disbursal and payment of proceeds of sale without pleading what those instructions were or how they were breached.

52 Paragraph 40[d] is a confusing mixture of a pleading of the plaintiff breaching the terms of the second loan agreement and enriching the second and third named first defendants without specifying the terms that were breached or any basis for the plaintiff being liable for a claim that the second and third named first defendants were unjustly enriched.

53 Paragraph 40 is so vague that it may prejudice or delay the fair trial of the action and should be struck out.

54 Paragraph 41 of the first named first defendant's defence and counterclaim deals with the sale of a property in Darch Street Yokine. In paragraph 41[d] the first named first defendant pleads that the plaintiff received the net proceeds of sale and 'failed to apply those moneys in reduction of the said loans by way of partial discharge in breach of the terms of the First and Second Loan Agreements. In doing so the CBA the Plaintiff acted negligently'. Particulars are then provided.

55 The mixing of a claim of breach of contract, in which the terms of the contract said to be breached are not specified, with the claim in negligence without the basis of the duty of care results in a confusing, defective pleading. The defects in the pleading are not remedied by the particulars. If anything the position is made worse by the addition of an allegation of 'identity fraud' by the second named first defendant in particular (iv) which appears to suggest that there is another cause of action relied upon.

56 The paragraph may prejudice or delay the fair trial of the action and should be struck out.

57 In the prayer for relief the first named first defendant seeks declarations and damages including punitive and exemplary damages. The defects in the first named first defendant's pleading mean that there is no proper basis for the claims. Even without the defects in the pleading the prayer for relief would be defective as it does not identify the basis for the claim for punitive or exemplary damages. The prayer for relief should be struck out.

58 I have concluded that paragraphs 18, 19, 30(d), 31, 33, 35, 37, 39, 40 and 41 and the prayer for relief of the first named first defendant's defence and counterclaim should be struck out.

59 The many defects in the first named first defendant's defence and counterclaim mean that it is in the interests of justice to extend the time allowed to the plaintiff to bring the application to strike out the first named first defendant's pleading because if the pleading were allowed to stand the time of the parties preparing for trial and the time of the parties and the court at trial would not be spent efficiently by reason of the lack of clarity of the issues raised by the first named first defendant. I will hear from the parties as to the orders that should be made having regard to these reasons.