Commonwealth Bank of Australia v Sammut [2000] VSC 374

100. Mr Sammut said in evidence that these amounts were not in the document when he signed it. He said they were written in later. He contends that the home loan should not have been paid out. The case for the bank is that the figures and the corresponding references to the accounts had been written on the document when Mr Sammut signed it. I refer below to the fact that I find Mr Sammut to be an untruthful witness. Corcoran was an honest witness, whose evidence I accept as establishing that the handwritten references to the accounts and the corresponding figures were on the form when it was signed by Mr Sammut. Furthermore, it is consistent with the terms of Mr Sammut's letter and the application prepared by Corcoran, and with the probabilities, that those details were endorsed on the form. By signing the form with that information so endorsed Mr Sammut gave the bank a clear direction as to the disbursement of the new funding. It is probable and reasonable that the bank desired and obtained such clarity in its customer's instructions.

103. In arriving at this conclusion I have taken account of the submissions of Mr Sammut on behalf of himself and Mrs Sammut, in particular that which relied on the expression "working capital" in the letter dated 23 April 1991. Mr Sammut distinguished working capital provided by the trading bank and funding in the form of a home loan from the Savings Bank. This use of the expression, he submitted, indicated that the home loan was not part of the facility as it was finally agreed upon. He sought in this respect to find some support in the fact that when he gave evidence Morgan said nothing concerning the letter dated 23 April 1990. The greater point may be, however, that Mr Sammut refrained from asking Morgan a question on the point when he cross-examined him. In my view the reference to working capital requirements did not indicate, and could not reasonably have been considered by Mr Sammut to have indicated, that at the final point of approval the home loan was excluded from the application. That is to say, that the home loan was to be left in place and not discharged out of the bill facility. It would have been a significant change to the application, and the bank denies the contention. I reject Mr Sammut's contention. I add that in reality, in the circumstances of Mr Sammut's use of the several accounts, the distinction between working capital and a housing loan provided by different sides of the bank was artificial. The fact is that the housing loan funded drawings on the Lemburg Home Builders account. That was a commercial account of Mr Sammut. Further, by bringing that account within the overdraft limit and clearing the Caulfield Plaster account and the home loan account, Mr Sammut's obligations to the bank had been re-arranged in a manner that may be taken as being beneficial in relation to his business activities.

106. Once Mr Sammut had signed the authority Corcoran was able to implement Mr Sammut's requests. Accordingly, on 8 May the bank passed credit entries to the three accounts in accordance with Mr Sammut's instructions and drew down a bill of a face value of $205,000 for a period of 92 days. Corcoran wrote to Mr Sammut and advised of the draw down of the bill.

109. On 9 May Corcoran prepared a letter to Mr Sammut from Morris. It advised that "your housing loan has now been repaid and we congratulate you on this achievement". Mr Sammut said in evidence that he told Morris that this was a mistake, that the housing loan had not been discussed and should not have been discharged. He asked that the mistake be rectified. He claimed that Morris had said that was how we do it and nothing could be done. Morris said in his evidence that Mr Sammut did not complain about the Savings Bank being paid out. I prefer the evidence of Morris. I reject Mr Sammut's evidence. Morris also said, and this seems overwhelmingly probable, that he would have made a record of such a complaint. There is no such record.

112. On 10 May 1991 a discharge of the Savings Bank mortgage was executed. As noted earlier the discharge was registered on 27 May 1991 and that was immediately followed by registration of the CBA mortgage.

115. On 16 July 1991 Mrs Sammut lodged a caveat on the title to the property. Mr Sammut advised her to do so. He prepared and she typed the caveat, which was dated 15 July. As lodged it claimed "An equitable interest" and stated that the ground of the claim was "Pursuant to Loan Agreements". In response to a notice from the Registrar of Titles, Mrs Sammut clarified the caveat (by a letter prepared by Mr Sammut and which she typed) by stating that the interest claimed was an equitable estate in fee simple and that the ground of the claim was "An implied trust resulting from the Caveator being the beneficial and prior registered owner of the land and has transferred the said land without consideration to John Sammut, whereby the current registered proprietor holds the said land in trust for the Caveator Victoria Rebecca Sammut". The caveat was amended accordingly on 14 August 1991. I infer that pursuant to s. 89(3) of the Transfer of Land Act 1958 (Vic) the Registrar duly gave Mr Sammut, as registered proprietor, notice of the caveat. Mr Sammut did not advise the bank of the caveat until his conversation with Morris in April 1992. In the meantime the bank honoured drawings on the Lemburg Home Builders account which, to pick a date, was in debit to $88,977.24 on 15 July 1991 and increasing.

118. It is appropriate to mention that Mrs Sammut also did not inform the bank of her claim. She claims that she transferred the property to Mr Sammut in May 1990 "for the purpose of obtaining a loan from the Commonwealth Bank". She claims that in the circumstances there was an implied trust in her favour as "beneficial owner". She made these claims in a declaration which she made for stamp duty purposes on 22 May 1995 in connection with the re-transfer of the property by Mr Sammut to herself.

121. In her evidence Mrs Sammut said that she knew the title had been used to raise money to complete the house. She denied knowing that Mr Sammut had also used the title to secure business facilities. Whether or not that evidence is true I accept her evidence that she typed Mr Sammut's letters. That included the letter dated 24 February 1991 in which Mr Sammut referred to "my property" and "my secured loans". By then at least she was aware that Mr Sammut had secured the Lemburg Home Builders and Caulfield Plaster accounts on the property. She also understood that the CBA mortgage was to secure the consolidation of the accounts and the commercial bill. She said further that she knew as at 23 April 1991 that the bank agreed to provide Mr Sammut with a commercial bill facility of $205,000 and an overdraft of $10,000.

124. Mrs Sammut permitted the bank to proceed without saying anything to it concerning the use of her property as security, let alone that she objected to this happening or informing the bank that she claimed an interest in the property. The fact is that she went along with what was happening. Her explanation for not advising the bank of the caveat was that Mr Sammut had all the dealings with Morris and that she thought he would have told Morris. She added that "I thought that they do searches and they'd know anyway". I reject as false these explanations of Mrs Sammut. In the first place she knew what I find to be the case that Mr Sammut is a person who will be untruthful when it suits him and would tell the bank only what suited his purposes. It would not have been in his interest to inform the bank of Mrs Sammut's caveat and her claimed interest as that was material to the value of the bank's security. I find that Mrs Sammut, who I observed to be an alert person, was astute to these matters and that the omission to inform the bank was deliberate. I reject as an afterthought or attempted justification her expressed view as to searches and knowledge.

127. I said above that Mrs Sammut's awareness of Mr Sammut's use of the property for his business purposes was "at least" from the time of the letter dated 24 February 1991. Her evidence referred to above was given in cross-examination. But earlier when giving evidence in chief in response to questions from Mr Sammut she said that in late October 1990 she became aware that "he'd secured his working capital on the housing loan". Her awareness came from reading the bank's letter to Mr Sammut dated 1 October 1990 which advised approval of the $10,000 overdraft facility on the security of the property. The evidence of Mr and Mrs Sammut is that that made her upset and angry, that she told Mr Sammut not to take any more security on the property and that she would inform Morris he could not do this any more. Their evidence is that Mr Sammut then found cl. 4(gg) in the memorandum of common provisions and that the notice of discontinuance was prepared, typed and served on the bank. This was the means by which Mrs Sammut's requirement was met, according to Mr and Mrs Sammut. Whatever be the truth in this account I accept that Mrs Sammut was aware of the secured overdraft facility in October 1990. I reject her evidence in cross-examination to the extent to which it is to the contrary.

130. On 8 August 1991 the bank rolled over the commercial bill and charged the interest to the Lemburg Home Builders account. The bill was rolled over a further four times with an ultimate maturity date of 23 April 1992.

133. In early 1992 the Sammuts tried to sell the property. Mr Sammut told Morris he was trying to sell the property on a reserve of $650,000. He raised no dispute with the bank. He did not say he was selling as a trustee or that liability under the mortgage had been discontinued. An auction was conducted on 22 February 1992 by an agent appointed in writing by Mr Sammut. The property was passed in without a bid. On 24 February 1992 Mr Sammut contacted Morris and advised the result of the auction and that the house was now for sale for $675,000. I infer, having regard to the way in which Mr Sammut was dealing with Morris and the circumstances generally, that if the property had been sold the proceeds would have been applied to pay out the bank, and that Mrs Sammut would have concurred in that course. In the course of the discussion on 24 February Morris informed Mr Sammut that the bank might move to a forced sale of the property.

136. On 10 April 1992 an officer of the bank sent Mr Sammut a letter advising that the bill was due for roll over and enclosed a new bill for signing and return by 22 April. I find that this letter was sent by oversight of the situation then existing between the bank and Mr Sammut. The bill was not rolled over and nothing turns on the sending of the letter.

139. On 13 April Mr Sammut both spoke and wrote to the bank. He wanted the loan facilities to be converted to a housing loan at the current rate of 9.25%. The loan facilities were the debit balance of the Lemburg Home Builders account which at 13 April was $135,374 and the bill facility of $205,000, a total of $340,374. The figures show the extent to which Mr Sammut's debt had increased - from an initial $110,000 in October 1990, to $215,000 in May 1991 and now to $340,374 in April 1992.

142. With his letter Mr Sammut enclosed financial information, provided a projection of his future fees, estimated the value of the house at $650,000 - $700,000 in a depressed market and a probable $900,000 in a good market and requested favourable consideration before the next bill rollover date.

145. Mr Sammut's conversation on that day was with Morris. He noted that Mr Sammut had not made payments on the Lemburg Home Builders account although he had paid interest on the bank bill. Morris asked Mr Sammut to reduce the Lemburg debt to within $127,000 but Mr Sammut said he was reluctant to do so unless Morris were to guarantee approval of the loan. When Morris said that approval would be difficult and that he could give no guarantee, Mr Sammut advised him of Mrs Sammut's caveat to establish her interest. This was the first intimation to Morris of Mrs Sammut's caveat. Morris said it was most unsatisfactory to learn about it and indicated that the bank would not be interested in refinancing the debt. Effectively Mr Sammut's advice concerning Mrs Sammut and her caveat stopped further reliance by the bank on the existing mortgage security.

148. In his evidence Mr Sammut said that he wrote the letter dated 13 April to "trap" the bank. He said that if the bank had approved the loan it would thereby have provided evidence that it had wrongfully terminated the previous home loan. He said that the bank "had deceived me already so now it was my turn to establish something against them". He thought he would have a basis for claiming the CBA had interfered in the contract with the Savings Bank. He also said that if the loan had been approved he would have considered whether to take it up. I reject this evidence as false. I find that Mr Sammut's application was genuine.

151. Following this conversation Morris ordered a search of the title. I find that the letter was a genuine application by a debtor in a desperate financial position.

154. On 16 April 1992 Morris received from Mrs Sammut the letter referred to at [5] in which she claimed to be the beneficial owner of the property and that John Sammut "holds same in trust for me". She said that she had not authorised the bank to encumber the property with the CBA mortgage and requested advice of the amount secured by 3.00 pm on the 16th in order that she might make repayment at the next bill roll over if so advised. Mrs Sammut said in evidence that this letter was prepared by Mr Sammut and she typed it. She said, correctly, that Mr Sammut would have known how much was owed to the bank. She further said, and this I reject as false, that she did not ask him as to the amount and he did not tell her. She said she had no idea although she also said she thought about $34,000 was owing. She referred in this respect to doing searches of the mortgage at the Office of Titles to ascertain the amount owing; I refer to this matter below. She said that throughout Mr Sammut never told her the amount owing to the bank and she never asked him. This evidence is quite bizarre. I reject it. It was an invention to suit their purposes.

157. On 16 April 1992 Morris spoke to Mr Sammut and wrote separately to Mr and Mrs Sammut. He also obtained a search of the title and a copy of Mrs Sammut's caveat. In his letter to Mr Sammut he advised that his debts were $205,000 on the bank bill and $137,175.48 on the overdraft, a total of $342,175.48. If that was not paid on 23 April he would recommend the bank realise on the debts. In his letter to Mrs Sammut he advised the above as the pay out figure on 23 April and requested advice as to the place for settlement. Those letters were duly received. Mrs Sammut said she thought the figure was a mistake. She did not speak to Morris and seek by her own inquiries with him to ascertain the correct amount owing. She said that she spoke to Mr Sammut and that "he just laughed at it too".

160. On 22 April 1992 Morris received from Mr Sammut a request to advise by 5.00 pm if he intended to allow him to roll over the bill. Morris prepared a letter in reply which he read to Mr Sammut over the telephone that day, and which he also posted to him. He told Mr Sammut the bill would not be rolled and that it would be returned to a Bills Matured Account. He further advised that the Lemburg overdraft had been placed "in reduction" and that no further cheques could be drawn. He requested immediate clearance.

163. Mr Sammut prepared another letter for Mrs Sammut which she typed and sent to Morris dated 21 April 1992. The letter referred to the bank's letter dated 16 April which was received on 21 April. The letter disputed the pay out figure, and stated that "Your attention is drawn to the Notice of Discontinuance served on you by John Sammut". It concluded with a threat to seek an injunction should the bank seek to sell the property.

166. This letter was the first reference in writing by either Mr or Mrs Sammut to the alleged notice of discontinuance. Corcoran sent a copy of the letter to the regional office of the bank under cover of a memorandum. The copy of this memorandum in evidence had the words "already held" written on it by an unknown person. I reject Mr Sammut's submission that these words are to be taken as referring to the notice of discontinuance as distinct from the caveat or anything else and that they support the Sammuts' evidence that they served the notice on the bank on 1 November 1990.

169. Then, somewhat hopefully, Mr Sammut attended at the bank on 23 April to roll the bill for a further 60 days. Morris refused his request.

172. On 29 May 1992 Morris sent a demand to Mr Sammut to pay the amount owing which by then was $348,794.46. In the event of failure to pay the bank would take action to recover payment. On 5 June 1992 Mr Sammut responded by a letter in which he made allegations of breach of agreement against the bank, disputed the amount claimed, and made an offer of settlement some of the terms of which involved release of the security and the provision of an unsecured loan. From this point the file was handled by the bank's solicitor who responded by a letter dated 16 June 1992.

175. On 22 June 1992 Mr Sammut wrote to the bank's solicitor and stated that pursuant to his notice of discontinuance "duly served and witnessed" the bank could not rely on the mortgage to secure loans made in April 1991. Again he threatened to apply for an injunction.

178. In a letter in reply dated 24 June the bank's solicitor requested a copy of "your so called 'Notice of discontinuance' whatever this document may in fact be".

181. In his letter in response dated 6 July 1992 Mr Sammut did not provide a copy of the notice. Rather, he suggested that "you contact the Elsternwick branch of the CBA for a copy". Mr Sammut claimed that the failure to discharge the mortgage was preventing him from refinancing the property and that the bank would be liable for all loss and damage. He requested advice of the amount owing to discharge the mortgage at the time when the notice was served.

184. The question arises as to why Mr Sammut did not provide the bank with a copy of the notice of discontinuance. Mr Sammut impressed me as a person given to cunning in his dealings with other people, quite prepared to seek and take for his benefit whatever advantage he could. In my view a reasonable person dealing with his bank which had granted him substantial financial accommodation would have responded to the request of the bank's solicitor by providing a copy of the notice of discontinuance. On his case Mr Sammut had a signed copy and there was nothing preventing him providing the solicitor with a copy. In my view the explanation is found in a true understanding of Mr Sammut's nature and character. I find that he was hoping that the branch or the solicitor might make a slip in relation to the alleged notice such as, for instance, by saying that it must have been mislaid at the branch or some other such words that would give Mr and Mrs Sammut a basis, in addition to their own evidence, for contending that the bank had in fact received the notice. Again, to use Mr Sammut's own word, he was setting a "trap" into which with a little inadvertence the bank might have fallen.

187. After some further correspondence and the service of a notice to pay under s. 76 of the Transfer of Land Act, the bank commenced the proceeding on 19 August 1992.

190. Perusal of the court file reveals a deal of activity down to 23 November 1993 when the bank filed an affidavit of documents. Then the bank filed a short supplementary affidavit of documents on 5 June 1995. Then nothing happened until 22 November 1996 when the bank filed a one month notice of intention to proceed with the claim. Then the proceeding came to life in 1997 and from then until the trial it generated a degree of activity that was way and beyond anything that the issues in the case could ever have justified. Along the way, on 15 May 1997, Mrs Sammut was added as a defendant.

193. On 22 March 1995 Mr Sammut wrote to the bank's solicitor and advised that he had executed a transfer of the property to Mrs Sammut pursuant to her caveat dated 15 July 1991. He requested the bank make the duplicate certificate of title available at the Office of Titles to enable the transfer to be registered. On 31 March the bank's solicitor agreed to do so on receipt of $160 for costs which amount Mr Sammut paid on 4 April.

196. On 6 April the bank's solicitor required confirmation that Mrs Sammut "is aware that she is taking the transfer and hence the property subject to my client's mortgage and that my client does not recognise any claims which it is alleged that she has to the property". He requested that Mrs Sammut attend his office and sign a copy of the letter.

199. After some toing and froing in April and May, Mr and Mrs Sammut attended upon the bank's solicitor on 23 May 1995. They read and she signed an acknowledgment appended to the foot of the solicitor's letter dated 6 April. It read:

"I, Victoria Sammut confirm that I have read this letter and understand that the transfer between John Sammut and I relating to the property more particularly described in Certificate of Title Volume 3914 Folio 770 and being the property situate at 288 St Kilda Street, Brighton is subject to mortgage registered no. R359642T in which the Commonwealth Bank of Australia ("CBA") is mortgagee and that the CBA does not recognise any claims which it is alleged that I have to the property."

203. On 29 May 1995 the bank's solicitor sent Mr Sammut the transfer of the property duly endorsed with an order to register, and advised that the certificate of title had been made available at the Office of Titles. On 31 May 1995 Mrs Sammut was registered as the proprietor. The CBA mortgage was and continues to be registered upon the title. In addition to the acknowledgment which Mrs Sammut signed on 23 May 1995 the transfer to Mrs Sammut was itself expressed to be "subject to the encumbrances affecting the land". The CBA mortgage was such an encumbrance.

206. The final fact to mention is that on 28 June 1995 Mr Sammut became a bankrupt. He was discharged from bankruptcy on 26 August 1998. By a caveat dated 5 March 1998 and lodged on 12 March, Mr Sammut's trustee in bankruptcy claimed an interest in fee simple in the property pursuant to s. 121(1) of the Bankruptcy Act 1966 (Cth). This caveat remains on title. The existence of the caveat and the fact that the trustee is awaiting the result of this case before determining what course to take in relation to it means that Mr and Mrs Sammut have an interest to establish before me their contention that at all material times Mr Sammut held the property as trustee for Mrs Sammut. The trustee is not a party to this litigation and I do not consider the correctness of his claimed interest.

210. At [7-9] I outlined the claims of the bank. I now refer to the pleadings of Mr and Mrs Sammut and those of the bank in response.

213. In their defences neither defendant admitted that the CBA was an incorporated entity. The plaintiff established incorporation by production of a certificate under the Corporations Law.

(a) at all times when he was the registered proprietor of the land he held the land in trust for Mrs Sammut;

(b) the mortgage was invalid as the plaintiff knew of the trust but did not obtain Mrs Sammut's consent to the mortgage;

(c) the plaintiff's security for any loans made to him "ceased" on 1 November 1990 pursuant to the Notice of discontinuance;

(d) he was not liable to pay the plaintiff the amounts demanded by it or any amount at all;

(e) the plaintiff consented to his transfer of the land to Mrs Sammut on the condition only that she pay the lodgment fee at the Office of Titles and that the transfer was not subject to any mortgage;

(f) he was not obliged to deliver up possession of the property;

(g) the plaintiff's action was not maintainable by reason of s. 153(1) of the Bankruptcy Act and "at Law".

These are the points which the defence made in a specific or positive sense. Apart from them most of the statement of claim was denied or not admitted.

223. A couple of these defences, which were disputed by the plaintiff in a reply, can be disposed of now without further reference to the pleadings.

226. The ground of defence in (e) was abandoned in the course of the trial. In any event the point had no substance. The amount of $160 was the amount properly charged for production of the title. Further, the transfer itself was expressly subject to prior encumbrances and the mortgage was such an encumbrance. Hence Mrs Sammut took the transfer on the basis that her interest was subject to the bank's mortgage. Moreover, by the acknowledgment which she signed on 23 May 1995 Mrs Sammut conceded that this was the fact. If Mrs Sammut had not signed the acknowledgment the bank would not, I find, have taken the course it did in making the title available.

229. The ground of defence in (g) can also be disposed of at this point. Mr Sammut relied solely on s. 153(1) to establish the defence. No other provision "at Law" was relied upon to establish the defence. Section 153(1) provides that, subject to the section, where a bankrupt is discharged from bankruptcy, the discharge operates to release him from all debts (including secured debts) provable in the bankruptcy, whether or not, in the case of a secured debt, the secured creditor has surrendered his security for the benefit of creditors generally. If the only relevant facts were those of the bankruptcy and the provisions of s. 153(1) the defence might be supposed to have had substance. But, as often happens, there were further facts. At a further hearing on 8 September, which I convened for the purpose of gaining elucidation of this point, the parties provided an agreed statement of facts, namely, that the plaintiff did not prove in the bankruptcy for any part of the debt it alleges is secured by the registered CBA mortgage. In that circumstance, and on the premise that the debt or part thereof was secured by the mortgage, s. 153(3) has the following operation: the discharge of Mr. Sammut from bankruptcy does not affect the right of the plaintiff as a secured creditor to realise or otherwise deal with the mortgage for the purpose of obtaining payment of the secured debt, and for that purpose, but not otherwise, the secured debt is deemed not to have been released by Mr Sammut's discharge. Hence, if the premise is correct, the bank is not prevented by s. 153(1) of the Bankruptcy Act from making its claim for possession. For this reason the defence in (g) fails.

232. I turn now to the bank's reply to Mr Sammut's defence. Apart from a general joinder of issue, the reply:

(a) denied that Mr Sammut held the land in trust or that the bank knew of such trust and alleged further that, in any event -

(i) the title of the bank as registered mortgagee was indefeasible;

(ii) the trust was unenforceable by reason of s. 53 of the Property Law Act 1958 (Vic);

(b) denied that, if the notice of discontinuance was given, the mortgage "ceased" on 1 November 1990;

(c) alleged that, even if the notice of discontinuance were given -

(i) Mr Sammut by his conduct and representations in dealing with the bank after 9 November 1990 withdrew and/or waived the Notice by reason of which the mortgage was reactivated; alternatively

(ii) Mr Sammut on 23 April 1991 provided the mortgage as security for the bill discount facility of $205,000 and the overdraft facility of $10,000,

by reason whereof the mortgage was at all material times a good and effective security;

(d) alleged that even if Mr Sammut held the land on trust for Mrs Sammut he had been guilty of laches, acquiescence and delay.

238. I did not understand counsel for the bank to rely on (d) in his closing address. I will not consider it further.

241. To this pleading of the bank Mr Sammut produced a further pleading he called a reply to the plaintiff's reply. It constituted a rejoinder and notwithstanding the error in description and that it might not have been necessary I allowed the document to be filed. The "rejoinder" made the following points:

(a) the defence concerning the land being held in trust relied on s. 42(2) of the Transfer of Land Act, and the trust, being presumed or implied, resulted in the land reverting to the person who originally owned it;

(b) on receiving the Notice of discontinuance the bank had the option to discontinue providing accommodation to Mr Sammut or, if further accommodation was provided, to require new security;

(c) in making any further loans, including the bill facility of $205,000, the bank did not require or obtain a new mortgage and, hence, any further loans were unsecured;

(d) the plaintiff was at all material times made aware of a trust and its position arose due to the negligence of its employees.

247. The findings which I have already made to an extent dispose of Mr Sammut's points of defence. I deal below with the issue whether Mr and Mrs Sammut did serve the notice of discontinuance. Assuming for the moment that they did the fact is, as I have found it to be, and which finding I repeat, the granting of the bill facility and the overdraft as part of the consolidation of the accounts in April 1991 was on the agreed basis that the accommodation be secured by the existing CBA mortgage. In my view Mr Sammut's evidence to the contrary was an invention made up in an attempt to escape liability.

250. I now refer to Mrs Sammut's defence. It alleges that:

(a) her transfer of the land to Mr Sammut in May 1990 was made for no consideration and on the basis that he hold the land in trust for her and, further, was made at the oral request of Morris for the Savings Bank to Mr Sammut between February and May 1990;

(b) at all material times the bank knew that Mr Sammut held the land on trust for her;

(c) she conducted a search of the CBA mortgage at the Office of Titles which revealed that the mortgage was for $34,000;

(d) at all material times she was not aware that Mr Sammut had entered into the CBA mortgage;

(e) the loans made to Mr Sammut without her consent were made negligently by the plaintiff and therefore were unsecured;

(f) any loan that was secured against the property ceased to be so secured on the service of the notice of discontinuance;

(g) in relation to the bank's concurrence in the re-transfer of the land to her in 1995:

(i) the agreed consideration was $160 which was paid to the bank's solicitor;

(ii) further, the bank fraudulently induced her to pay the $160 "as it had no intention of transferring the land to [her], as agreed upon";

(h) she signed the acknowledgment on 23 May 1995 under duress;

(i) alternatively, she signed the acknowledgment believing the mortgage was for $34,000;

(j) she denied being obliged to deliver up possession of the property;

(k) she denied the partition claim and alleged further that she had had no dealings with the bank and that any liability she had to the Savings Bank was discharged when the plaintiff (the CBA) interfered with the contractual relationship she had with the Savings Bank;

(l) the plaintiff's claim was barred by the Limitation of Actions Act 1958 (Vic).

256. The defence then pleaded a counter-claim. There were two parts to this. The first part was based on the tort of an intentional interference in the performance of a contract. The contract for this purpose was the agreement whereby the Savings Bank provided the home loan in September 1990. It is alleged that Mrs Sammut entered into that contract. On the face of it the contract was made by Mr Sammut. It is alleged in the counterclaim that the plaintiff knew at all material times that the home loan contract had been entered into by the defendant "as aforesaid", apparently meaning that the plaintiff knew that Mr Sammut entered into the contract as trustee for Mrs Sammut, and that the relationship thus brought about was one in which Mrs Sammut was a party to the contract and entitled to sue upon it. It is alleged that the plaintiff on or about 8 May 1991 wrongfully and with intent to injure Mrs Sammut procured and induced the Savings Bank to break the contract and refuse to perform it. By particulars Mrs Sammut identified the act of interference she relied upon as the payment of monies by the CBA to the Savings Bank on 8 May 1991 to discharge the home loan. As a result, it is alleged, Mrs Sammut was greatly injured, put to considerable trouble, inconvenience and expense and had thereby suffered loss and damage. No particulars were provided of the loss and damage. The second part of the counterclaim is an allegation that Mrs Sammut suffered loss and damage as a result of the bank's breach of an agreement made in or about February/March 1995. This must be a reference to the arrangement under which the bank made the title available to the Office of Titles to permit registration of the transfer to Mrs Sammut.

259. The prayer for relief to the counterclaim claimed: exemplary damages; damages; interest; a declaration that Mr Sammut held the property in trust for her between 7 May 1990 and 31 May 1995; alternatively, if she had dealings with the bank, a declaration that the liability thereunder was limited to $35,000; a declaration the plaintiff was negligent in not obtaining her consent to mortgage the land; a declaration that the mortgage was invalid; costs; an order directing the plaintiff to provide a discharge of mortgage upon payment to the plaintiff of the amount, determined by the Court, secured by the mortgage; and a declaration as to the amount secured by the mortgage.

262. Some of the issues of fact thus raised have been touched on or dealt with already. All I detail at the moment are the defences in (g) and (h). The allegation in (g)(i) was abandoned in the course of the trial. The allegation in (g)(ii) was either abandoned or not pressed, but, if I am wrong in that, I record my finding that it was entirely without substance. There was not a scintilla of a basis on which Mrs Sammut could have alleged fraud. I accept the evidence of the solicitor Garry William Moffatt as to the transaction and find that in responding to Mr Sammut's request to produce the title the bank's solicitor acted reasonably and honestly in stating the bank's position and in accordance with the arrangement made with Mr and Mrs Sammut.

265. The allegation in (h) that Mrs Sammut signed the acknowledgment under duress fails at the threshold. I reject the allegation as totally unsupported by facts. There was no duress, whether actual, attempted or accidental or in any form whatsoever. The bank's position or requirements had been made clear over a period of time. Mrs Sammut acted entirely of her own free will in signing the acknowledgment. She was free to refuse to do so. She was also at liberty to seek any information concerning the mortgage and the amount secured from the bank's solicitor. She chose to make no inquiry. Of course she could have ascertained the amount owing from Mr Sammut. No pressure was placed upon her by the bank and the bank had no cause to suspect any circumstance of duress or lack of understanding that induced her to sign the acknowledgment, or which might in any way have affected her in doing so. In fact, I find, she was under no duress at all and she signed the acknowledgment willingly and freely knowing and understanding its terms.

268. The final part of the counterclaim is the allegation that the bank broke an agreement made in February/March 1995. As noted above this must refer to the arrangement under which the bank was to produce the title to the Office of Titles. It would seem that the breach must be constituted by the matters referred to in (g) and perhaps (h) above in the defence. As I have rejected these allegations that part of the counterclaim must fail.

271. I now turn to the bank's reply to Mrs Sammut's defence and counterclaim. Passing over matters upon which I have just ruled, the reply makes the same allegations as were made against Mrs Sammut. The reply does not in terms seem to plead to the counterclaim but the counterclaim was clearly opposed on grounds that were investigated and argued during the trial. In the same way as Mr Sammut, Mrs Sammut filed a "reply" to the bank's reply. Save for the omission of a few matters it made the same allegations that were made by Mr Sammut. For these reasons it is not necessary to set out the allegations in the further pleadings of the bank and Mrs Sammut.

275. Six witnesses gave evidence on behalf of the bank and Mr and Mrs Sammut gave evidence on their own behalf.

278. Before discussing those witnesses I refer to the further hearing on 8 September at which the bank and the Sammuts put in further evidence. The bank tendered the agreed statement of facts relating to Mr Sammut's bankruptcy and the s. 153(1) point, and Mr Sammut called an accountant employed in the same firm as Mr Sammut's trustee in bankruptcy and who had been involved in aspects of the file. Mr Sammut's questions were concerned with the trustee's caveat and any action the trustee might take to uphold the interest it claimed. These matters did not arise in the proceeding before me. As I have already said, the correctness of the interest claimed in the caveat by the trustee is not an issue that arises in this proceeding and I will not consider it. Finally, on 8 September, Mr Sammut made an application on behalf of Mrs Sammut to amend her counter-claim to seek an injunction restraining the bank from disposing of any surplus of the funds derived from the proceeds of sale of the property after allowing for the amounts owed to the bank, and he sought an injunction accordingly. I refused both applications, that is to amend and to grant an injunction. Each application was premature. It was appropriate to defer any such application until it was ascertained by judgment whether the bank was entitled to possession and, even then, until there had been a sale and a surplus was ascertained. Another difficulty was that the amended pleading raised matters between Mrs Sammut and the trustee in bankruptcy, and not between Mrs Sammut and the bank. In other words, the amendments would have introduced issues that were irrelevant to the litigation between the bank and Mr and Mrs Sammut. For these further reasons the applications could not be permitted.

284. For the bank evidence was given by the manager Morris, the assistant loans officer Corcoran, Morgan (referred to at [29]) who between 1990 and 28 June 1993 was employed as the accountant at the Elsternwick branch, Gaylard (referred to at [26]) who was employed at the branch as a loans officer, John Patrick Doherty who was a manager in the Credit Management area of the bank, and the solicitor Moffatt. The first four witnesses gave evidence as to the transactions with Mr Sammut and on other issues such as whether the bank received the notice of discontinuance.

287. Doherty gave evidence to establish the amount owing to the bank by Mr Sammut. Relying upon a prima facie evidence provision in cl. 4(s) in the memorandum of common provisions he produced a statement of the amount owing by Mr Sammut on the Lemburg Home Builders account and the bills matured account. At 18 July 2000 the respective amounts were $449,017.16 with daily interest of $173.56, and $658,046.37 with daily interest of $254.33.

290. Moffatt's evidence concerned matters that arose in the course of his involvement as a solicitor. They concerned the events leading up to and including Mrs Sammut signing the acknowledgment of the bank's position on 23 May 1995, matters such as any advice of his to Mrs Sammut, and other matters including the notice of discontinuance and an earlier alleged letter of Mr Sammut dated 12 February 1990 to which I refer below.

293. These references to the evidence are indicative only, and not exhaustive, of the matters dealt with in the course of the evidence of the witnesses. I take account of all of the evidence, including that of Mr and Mrs Sammut, in arriving at my conclusions.

296. Mr and Mrs Sammut conducted their case in the following way. Both sat at the bar table. I gave each every opportunity to say what they respectively might wish to say, or ask any question they might wish to ask, and to call such evidence and otherwise address such submissions as they might desire. Throughout the trial Mr Sammut took the lead role. He gave an opening and closing address and cross-examined. He called Mrs Sammut as a witness and then gave evidence himself. He called no other witness save for the witness referred to earlier whom he called on 8 September. Mrs Sammut chose not to add to what Mr Sammut said or to call any witness.

299. I had a good opportunity to observe the witnesses when they gave their evidence. It was an appreciable advantage. The trial went for seven days. That was a long time considering the issues involved. It would have been much shorter if witness statements had been used. The fact that they were not used afforded me a time that was longer than otherwise would have been the case in which to observe the witnesses. Further, the length of some of the cross-examination increased my opportunity to observe and form a view of the witnesses.

302. I formed the view, having regard to my impressions of all the witnesses, the documents and the probabilities, that the witnesses called by the bank were honest and reliable who sought at all times to give evidence of the facts from their best present recollection. That was not easy when the relevant events had occurred years previously. I formed a contrary view of Mr and Mrs Sammut. I found them to be unreliable witnesses who were prepared to and who did give deliberately false evidence in order to advance their position. I referred earlier to the fact that deliberately and for the purpose of avoiding stamp duty they stated what they said was a false consideration on the transfer of the property from Mrs Sammut to Mr Sammut dated 7 May 1990. In the course of their evidence on that matter, which was an altogether shabby performance, there seemed even to be an attempt to establish that an employee at the Comptroller's office had knowingly suggested the false statement of consideration. I reject that attempt. As to whether the initial or the amended statement of consideration was in fact the truth I am unable to conclude, such is the untruthfulness and unreliability of Mr and Mrs Sammut as witnesses. At one stage counsel for the bank submitted that the amended statement of consideration represented the truth. That is not established on the evidence. What is clearly established is that on their own account Mr and Mrs Sammut deliberately and knowingly adopted a form of words with the intention of avoiding the imposition of stamp duty on the instrument of transfer. They frankly stated that it was false. Of course it was in their interest to do so because, as I have already pointed out and as should by now be apparent, it is both an important part of their case against the bank and it is in their interest in respect of the caveat of the trustee in bankruptcy that the transfer was made by Mrs Sammut merely to facilitate Mr Sammut obtaining financial accommodation from the bank and in circumstances in which he took the transfer, expressly between themselves or by implication, on trust for her. The consideration stated in the transfer as to a breakdown in their relationship is inconsistent with the position they take in the present litigation. Thus, their interest in the present litigation is to deny the correctness of that stated consideration. This may explain the up-front way in which they said in evidence that it was false. Whether or not it was false, it revealed a disposition toward dishonesty, which I found reflected in other aspects of their case. I reject the evidence of Mr and Mrs Sammut where it conflicts with that given by the evidence of a witness or witnesses for the bank.

306. I now turn to the resolution of the remaining issues. I point out at first several themes or points that were important to the Sammuts' cases. They were: that Mr Sammut held the property on trust for Mrs Sammut; that the bank knew of the trust; that the notice of discontinuance was served on 1 November 1990; that subsequent to the service of that notice the bank should have obtained new security if it wished to have security to cover further accommodation; and that as it did not obtain new security the subsequent accommodation was unsecured. The result was submitted to be that the CBA mortgage secured only the debit balances of the Lemburg Home Builders account of $12,636.12 and the Caulfield Plaster account of $21,882.98 at the close of balance on 1 November 1990, a total of $34,519.10. Thus may be understood the references to $34,000 and $35,000 in Mrs Sammut's defence and the prayer for relief in her counter-claim.

309. In dealing with the issue of the bank's knowledge of Mrs Sammut's interest in the property attention must be directed to events in early 1990.

312. In his evidence Morris said that he had lunch with Mr Sammut, who he described as a valued client of the bank, on 8 February 1990. He said they discussed general business. He said there may have been talk about loans but there was no discussion of a loan that was required or would be sought by Mr or Mrs Sammut. However in his diary for the following day he made a brief entry concerning two previous accounts of Mrs Sammut. He could not recollect precisely why he made the entry and he had no recollection of an interview on that day but, he said, I think in reconstruction, he wrote it in readiness for what potentially would have been an interview on that day. That was the only reason he would have entered such information, but he had no recollection of an interview that day and he had no paperwork pertaining to an application. He had not met Mrs Sammut before then, and he did not meet her on the 9th or, as his other evidence disclosed, subsequently; this is common ground with Mrs Sammut. He described the procedure that follows the making for an application for a loan. No application was received from Mr or Mrs Sammut until the application by Mr Sammut made by his letter dated 18 September 1990. I referred to this letter earlier (see at [13]). Morris further said that the application procedure would not be replaced by a verbal approval. An application had to be formalised. Morris was shown a letter from Mr Sammut to himself dated 12 February 1990, in which Mr Sammut referred to a meeting on 9 February 1990 and confirmed that the bank would provide finance to Mrs Sammut for the construction of a residence on the property and in respect of which the bank would have the security of a first mortgage over it. Morris said that he had no recollection of any understanding or agreement as reflected in the letter. Morris said he never received the letter and that it was not on the bank file. He said the letter was "most unusual" in that the client was telling the bank how the loan would be done. That is the reverse of the norm. In the usual course it is the bank which provides the client with a letter which states that a facility is approved and sets out the terms and conditions upon which the facility is offered. Morris further said, and I accept it as correct, that if this letter had been received he would have contacted Mr Sammut and told him he seemed to be setting out a loan approval that he (Morris) had not put together. Further, the application would then have had to be processed in the course of which the usual paper work would have been prepared. That never happened until the September 1990 application was received and processed. He further said that in February 1990 he did not know that Mrs Sammut was the registered proprietor of the land and that he never suggested Mr Sammut have the property transferred to himself. He had no knowledge of the dealing between Mr and Mrs Sammut in May 1990 when she transferred the property to Mr Sammut.

315. On the other hand Mr Sammut, who said he was an accountant, a finance broker and who had conducted a plastering and a building enterprise, and who further said he built computers, had a different account. He said that he made an appointment to see Morris on 8 February but that was cancelled by Morris and re-fixed for the 9th. He never had lunch with Morris. At the meeting on 9 February he made a normal home loan application for Mrs Sammut. He went through the details and Morris said he saw no difficulty as the security was substantial. Morris told him the terms and he subsequently wrote confirming what he had been told. Morris required that the Caulfield Plaster account be transferred to the CBA and that was later done.

318. Mr Sammut said that some time later Morris inquired whether the loan was still proceeding. He said it was, although there was no immediate need for the funds. Morris said there was one difficulty which was that Mrs Sammut had insufficient income to service the loan. Morris suggested that Mr Sammut be the borrower as he could service the loan. Morris said that on a home loan the bank could not lend to one person and take a mortgage from another, that a home loan had to be made to the owner of the property. According to Mr Sammut he passed this information on to Mrs Sammut who agreed to transfer the land to him so that the home loan could be obtained. Mr Sammut said that he so advised Morris. Ultimately, when the need for additional funding approached, he went back to Morris with the application by the letter dated 18 September 1990.

321. This is sufficient to indicate, but without overlooking other evidence, the rival positions of Morris and Mr Sammut on this matter of the early meeting and the letter dated 12 February 1990.

324. I accept the evidence of Morris as indicating the course of events. I reject Mr Sammut's account as untruthful and improbable. I do take account of the fact that Morris could not accurately recall what was said in his discussion with Mr Sammut. And, although I prefer Morris' evidence, I do not consider it a significant point against either man whether the day on which they met was on 8 or 9 February or whether they did or did not have lunch. The fact is that they did speak. From that point I find that any talk about loans was more of a general nature and not specific in terms of an actual applicant and an actual loan and the conditions thereof. It is not inconsistent with such a discussion that in the course of their meeting Mrs Sammut was mentioned in such a way that led to Morris making the entry in his diary. The critical question is whether the conversation included a discussion of an actual application by Mrs Sammut and the actual terms and conditions thereof which Mr Sammut took up on her behalf in his subsequent letter. Certainly Mrs Sammut herself had no communication with the bank. The question is whether Mr Sammut did as he claimed. I find that he did not. In arriving at this conclusion I have taken account of the following matters and, I add, my general rejection of Mr Sammut's evidence where it is in conflict with the evidence of Morris and the other bank witnesses.

327. In the first place, Morris was an experienced, intelligent and alert bank manager to whom the application would have been an attractive proposition and one appropriate for the bank to seriously consider and probably take up. Yet there is nothing on the bank file. Morris made no memorandum and wrote no letter to Mr or Mrs Sammut concerning the matter. He took no action at all to follow up the matter. Secondly, the bank took none of the usual steps which are undertaken when a customer makes a loan application. There is just nothing on the file. For instance, neither Morris nor any loans officer at the branch sought title particulars or had the title searched. Nor did Mr or Mrs Sammut attend upon the bank and provide necessary particulars to enable an application to be prepared. Thirdly, I do not accept that in circumstances in which Morris had not received a loan application, and had no up to date material on file concerning Mrs Sammut's financial position and had not spoken to her, that he told Mr Sammut that she had insufficient income to service the loan, and said what Mr Sammut claimed as to him being the borrower. I note that among the things that Mr Sammut did not put to Morris in cross-examination was Mr Sammut's account of this conversation as to Mrs Sammut not being the borrower and as to who could or should be the borrower. Fourthly, I do not accept the proposition that Mrs Sammut could not have been asked to provide a third party mortgage to support a loan to Mr Sammut. I do not understand the evidence to contradict that as an option that would have been available in the circumstances. It follows that it was not necessary for Morris to require that the title be transferred to Mr Sammut. Further, Mr Sammut could have been a guarantor to a loan to Mrs Sammut. Fifthly, the Sammuts did not need a loan in February 1990. A loan was not required until September. For this reason the likelihood is that any discussion in February was of a general nature only. Sixthly, I accept Morris' evidence that it is most unusual for a customer to advise the terms and conditions of a loan to the bank. The total absence of a letter from the bank offering a facility and setting out the terms and conditions upon which it is offered, and even of a letter acknowledging Mr Sammut's alleged letter, is most singular. Seventhly, Mr Sammut's letter was not on the bank's file. Let us dwell on the matter of this letter a little more fully.

330. Mr Sammut took much time in cross-examination in asking questions about the internal procedures at the branch for handling correspondence. He sought to establish that the letter, and the notice of discontinuance, each of which the bank denied receiving, could have been received but gone astray or even been ignored. It is a remarkable thing that it was these two documents which had not made their way to Morris or to the other employees who gave evidence or to the bank's file. It is unnecessary to labour this judgment with the evidence on the matter of the internal procedures. The bank witnesses impressed as honest and diligent people who would have been attentive to their tasks. Having considered all the evidence and the submissions of Mr Sammut, I am satisfied on the balance of probabilities that the letter dated 12 February 1990 was not received by the bank on or about the date it bears or at all. I find that if it had been received it would have come to the attention of Morris or at least one of the other members of the staff at the branch and then been dealt with, and it would also have found its way to the bank file.

333. The evidence of Mr and Mrs Sammut as to the sending of the letter was most unsatisfactory and I reject it. I accept that it was typed by Mrs Sammut. At first she said she posted it, then when she noted a reference to a telefax number on the letter she said it was faxed and then she said that she had no recollection. Mr and Mrs Sammut had no note which recorded the sending, by whatever means, of the letter. In the course of Mrs Sammut's evidence, Mr Sammut stated that if it had been faxed it would have been posted as well. Later, in his cross-examination, Mr Sammut said it was faxed and not posted.

336. Then, the bank never acknowledged receipt of the letter. I find, for reasons already mentioned, that the bank would have pursued the application, if it had been received. Further, the letter requested the bank acknowledge receipt of the enclosed certificates. I find that in the usual course if the letter had been received the bank would have provided that acknowledgment. No such acknowledgment was produced by Mr Sammut and no copy of one is on the bank file.

339. I accept the evidence of Morris that the detail of the terms and conditions stated in the letter were readily ascertainable by Mr Sammut without making a formal application for a particular loan.

342. The next point is that Mr Sammut did not disclose the letter in his affidavit of documents sworn on 1 July 1993. The first reference to the letter was in a letter from Mr Sammut to the bank's solicitor dated 27 January 1997 in which he gave notice of an amendment to his defence and counter-claim to allege that Mrs Sammut was and still is the beneficial owner and registered proprietor of the land. It was to be alleged that "[T]his fact was conveyed to Michael Morris . . . by letter dated 12 February 1990". In proposed particulars it was stated that the letter was in the possession of the defendant and could be inspected. I accept the evidence of Moffatt that the first time he saw the letter was when he received an affidavit which Mr Sammut swore on 26 February 1997. The letter was an exhibit to the affidavit. This was the first time the bank had received the letter.

345. I find that the letter was not prepared and sent by Mr or Mrs Sammut on or about the date it bears. I find that Mr Sammut prepared it, and that Mrs Sammut typed it, well after the occurrence of the events with which this litigation is concerned. I find that they brought it into existence to seek to advantage their point as to Morris having an awareness that Mrs Sammut owned the property, that the property was transferred to Mr Sammut merely to facilitate the obtaining of the loan for construction purposes, and the contention that the bank knew that Mr Sammut held the property on trust for Mrs Sammut.

348. In addition to finding that the letter is a fiction, I accept Morris' evidence that in February 1990 he did not know that Mrs Sammut was the registered proprietor of the property and that he did not advise Mr Sammut as to the property being transferred to himself. I also accept his evidence that he had no knowledge of the dealing between Mr and Mrs Sammut in May 1990 when she transferred the property to him.

351. I should add that I reject Mr Sammut's claim that Morris required that the Caulfield Plaster account be transferred to the Elsternwick branch as a condition of the loan approval. In seeking to support this contention Mr Sammut produced a statement of the account issued by the CBA on which Mrs Sammut had written "Transferred from Westpac on condition home loan approved". This was a self serving attempt to bolster the case, consistently with the fictional letter. It was part of the fiction. Certainly the account was transferred to the CBA but I reject the claim that the transfer was a condition of the approval of the alleged loan.

354. What, then, of the allegation that Mr Sammut held the property in trust for Mrs Sammut and that the bank knew of the trust? It is not necessary to decide whether in fact Mr Sammut received the transfer of the property, and thereafter held it, as trustee for Mrs Sammut. For reasons already given I regard Mr Sammut's submission (in which Mrs Sammut concurred) to this effect with suspicion. But for present purposes I am prepared to assume in their favour that Mr Sammut did hold the property on trust for Mrs Sammut. On that basis the question is whether the bank knew of the trust. In my view the Sammuts have failed to make out this part of their case. I can briefly state my reasons for that conclusion.

357. In the first place, neither Mr nor Mrs Sammut told Morris or any other officer of the bank in the course of the transactions in 1990 and 1991 of the existence of the trust and that Mrs Sammut held the entire beneficial interest in the property. The first intimation of Mrs Sammut having or claiming an interest was in the conversation between Morris and Mr Sammut in April 1992.

360. When Mr Sammut sought finance in September 1990 and in February 1991, and in the course of those applications being processed by the bank, he never said that he did not hold the full interest of the legal owner in the land. He knew that since May 1990 he was the registered proprietor. He also knew, I find, that a search of the title would not disclose a reference to any trust. It is pertinent to record that the evidence of Mr and Mrs Sammut disclosed that they, or at least Mr Sammut, understood the matter of searching titles. Further, even if the bank had searched the actual transfer to Mr Sammut there was no reference to a trust in that document. Of course, in connection with both the September 1990 and the 1991 applications, the bank did search the title. Those searches showed that Mr Sammut was the registered proprietor and disclosed nothing that could have suggested that his legal interest as owner of the fee simple estate was in any way subject to a trust. This was consistent with the fact that in dealing with the bank Mr Sammut represented himself as the proprietor of the land.

363. In his evidence Mr Sammut prevaricated (not for the only time) as to whether he had told Morris, or "the bank", that he held the land on trust for Mrs Sammut. The explanation, which I find to be the fact, is that he did not do so. I find that his omission in that regard was deliberate until the conversation in April 1992 when it suited him to do so. In the answers he gave Mr Sammut referred back to and relied upon his alleged conversation with Morris in which there was a suggestion as to Mr Sammut being the registered proprietor and to an assertion that Morris "knew" that Mrs Sammut was the registered proprietor and that he "knew" he was making a loan to her. Therein may be seen the importance of the letter dated 12 February 1990 and the associated evidence of Mr Sammut, but I have rejected his evidence on these matters. I reject Mr Sammut's evidence that the trust was the bank's "idea" and that "they knew". I find that they did not know and at all times from September 1990 until the conversation in April 1992 the bank dealt with Mr Sammut on the understanding that his ownership of the property was subject only to its security interest as mortgagee.

366. Then, of course, there is the statement of consideration in the transfer of land dated 7 May 1990. If the bank had seen this transfer the statement of consideration in it would not have indicated that Mr Sammut's ownership was subject to a trust.

369. A further point which seemed to be overlooked by Mr Sammut, is that a trustee can deal with the trust property, including by way of a mortgage and that a mortgagee dealing with the trustee is not required to obtain the consent of the beneficial owner for the mortgage to be enforceable against the trust property. Notwithstanding, in view of the way the case was argued, I have considered it appropriate to deal with the matter on the facts.

372. The next broad issue concerns the notice of discontinuance. I find, having regard to all the evidence, that this document was not prepared or served on the bank on 1 November 1990. I find that this document too is a fiction that was brought into existence at a later time for the perceived purposes of Mr and Mrs Sammut in avoiding or minimising liability to the bank.

375. I have made clear my view as to the lack of reliability of Mr and Mrs Sammut. Apart from that consideration, the probabilities favour the conclusion that the notice was not served as they contend. Let us recapitulate briefly. Mr Sammut's account (supported by Mrs Sammut) is that he gave to a person at a counter of the branch a sealed envelope addressed to Morris and he asked that it be given to Morris.

378. I find it probable that in such circumstances the envelope and the enclosed notice would have been given to Morris or, if the envelope was first opened by another officer at the branch such as Morgan, the notice would then have been brought to his attention. I refer to my previous findings concerning the diligence and competence of Morris and the bank witnesses who gave evidence. They impressed me as alert and responsible employees.

381. A relevant factor is that to all of those witnesses, and I do not doubt to any other employee at the branch at the time, the notice was an unusual document. I find that on reading it, indeed even on a mere perusal, it would have alerted them to the fact that the document required responsible and immediate consideration to ensure it was satisfactory from the bank's point of view. Morris, for instance, said that he would have contacted the legal department to find out the implications, and in the meantime he would have suspended the financial accommodation. Corcoran said he had never seen such a document and if the notice had come to his attention he would have taken it to the manager. He thought it would be sent to the legal department for advice and most likely all facilities would have been placed in reduction so that no further cheques would be paid. He also said that he would have been made aware of the notice because it referred to him. He further said that if the notice had come in it would have been given to Morris and it was likely he (Corcoran) would have become aware of it. He, like Morris and the other witnesses, never saw it. Morgan said that the notice never came to his attention. He had heard of but never seen such a document. If it had come to him he would have taken it straight to the manager of the branch and discussed it with him. He considered it extremely unlikely that the member of staff who received the envelope from Mr Sammut had mislaid it. Gaylard said that she had never seen such a document. It was not a bank form or normal procedure and it would have stood out. She would have taken it straight to Morris. It would not be ignored. The document was so unusual she would not have forgotten it. I accept the evidence of these witnesses. In my view the reactions that they expressed were reasonable and to be expected. Nothing was ever done by any of them in relation to the notice of discontinuance because, as I find, it never came to them.

384. A factor which supports that conclusion is that not only did the bank never say anything that acknowledged receipt of the notice but the bank permitted the temporary excess on the Caulfield Plaster account to be utilised and also permitted continuing drawings on the Lemburg Home Builders account which not only put it in excess of the $10,000 limit but moved the account into ever increasing debit subsequent to 1 November 1990. It is against all probability that the bank would have permitted such drawings if the notice of discontinuance had been served.

387. Another factor which relates to the probabilities is that Mr Sammut never said anything to the bank concerning the notice. In his evidence he expressed the attitude that the bank could look after itself and it was not for him to follow up the receipt or consequence of the notice. Yet it must have seemed an extraordinary windfall that the bank, which had required a mortgage to cover a $10,000 overdraft, in the face of the notice would permit drawings for increasingly greater sums on an unsecured basis without any reference to him.

390. In my view Mr Sammut would have been aware of the consequences of serving a notice of discontinuance. They are consequences of the kind described by the bank witnesses. The freezing of his accounts would have brought his show to its knees and required that he refinance or re-establish his security with the bank. This is elementary, and is a significant factor in indicating that the notice was never given.

393. I mentioned at [53] that the first reference by Mr or Mrs Sammut to the notice of discontinuance was in Mrs Sammut's letter dated 16 April 1992. By that time the Lemburg Home Builders account had been placed in reduction and the Sammuts were commencing to establish their position.

396. In the result I find that the notice of discontinuance was not served.

399. The proposition that Mr Sammut has put is that the CBA mortgage is security only for the amount owing on the cheque accounts at the end of 1 November 1990. That was $34,519.10; see [94]. His submission was that after the service of the notice the bank had to obtain new security if it wished to have security for further drawings on the accounts, and that its failure to obtain (or even request) such security is attributable to negligence on its part. Hence the very substantial further drawings were unsecured. I cannot accept that the bank would knowingly have proceeded on an unsecured basis. Nor do I accept that its employees were negligent. The case I accept is that the notice of discontinuance was never served.

402. I also accept, as I have already found, that in granting the temporary excess in October 1990 and in granting the new facility in April/May 1991 the bank acted on the basis, both represented and agreed to by Mr Sammut, that the existing CBA mortgage be security for the facility. These facts militate against the likelihood of service of the notice of discontinuance. They would also ground an estoppel against Mr Sammut relying on the notice of discontinuance.

405. In the end it is seen that the position is that the plaintiff is and at all material times has been the holder of a first registered mortgage over the property and that Mrs Sammut received and holds her interest as registered proprietor of the fee simple estate subject to that mortgage. The plaintiff's primary claim is for possession pursuant to the mortgage. As the registered mortgagee the plaintiff is entitled to the protection afforded by registration under the Transfer of Land Act; see s. 42(1). It has not been suggested by Mr or Mrs Sammut that the plaintiff's priority acquired by registration was affected by any relevant fraud. All that was argued was that it knew of the alleged trust in favour of Mrs Sammut. I have rejected that contention. I find that the bank had no such knowledge. In case it was held that the bank had had notice of the alleged trust, the bank relied upon s. 43 of the Transfer of Land Act. That does not arise in view of my findings. The bank is in the position that it searched the register and dealt for value with the registered proprietor and holds a first registered mortgage and is entitled to exercise its rights as mortgagee in respect of the property. Further, the present registered proprietor expressly took her interest subject to the bank's mortgage.

408. It remains to deal with some matters raised by Mrs Sammut. First is the matter of searches of the mortgage which revealed that the amount secured was $34,000 and her alleged belief that that was the amount secured when she signed the acknowledgment in May 1995. Insofar as this belief was derived from Mr Sammut's contention that at the time of service of the notice of discontinuance the secured debt was approximately $34,000 and that following service the bank had no security, the belief cannot stand as it is falsely based.

411. In her evidence Mrs Sammut described a second basis for the belief. It will be recalled that her evidence was that she never asked Mr Sammut, and that he never told her, what amount was owed to the bank. I reject that evidence. I think it is probable that she did ask and that he told her. But, however that may be, that was her evidence, and she said that at Mr Sammut's suggestion she obtained a copy of the CBA mortgage from the Office of Titles on 15 July 1991 and 29 April 1992 to ascertain the amount owed under it. She said that each copy showed that the mortgage had been stamped to secure advances to $34,000. I record that the endorsements made by the Comptroller of Stamps show that the mortgage was stamped to secure advances of $10,000 on 10 October 1990, that it was up-stamped to $34,000 on 14 November 1990 and further up-stamped to $138,000 on 28 April 1992. Corcoran gave evidence as to the stamping requirements, including for this purpose the relationship between the mortgages of the Savings Bank and the CBA. I accept his evidence.

414. The appropriate way for Mrs Sammut to have ascertained the amount owed and secured by the mortgage was to ask the bank. The method she chose was unusual if not bizarre. It avoided asking the creditor direct. There is something about that manner of acting that fits in with other aspects of the conduct of the Sammuts exposed in this case. The way in which she went about it could not have informed her of the amount that was owing unless by some chance the debt and the amount to which the instrument had been stamped coincided. But the search would not have disclosed that. It could only have informed her of the amount of the stamping on the mortgage. This might not be accurate as a period of time was allowed for up stamping. Also, the need to up-stamp may have been overlooked. On her account Mrs Sammut had no independent knowledge of how the system of stamping worked. It was merely that Mr Sammut pointed her in that direction as a means of ascertaining what the mortgage covered. In my view the evidence was disingenuous. I accept of course that copies of the mortgage were obtained from the Office of Titles. But, beyond that, I do not accept that they were ascertained by Mrs Sammut for the purpose of ascertaining the amount owing. In the first instance that amount was readily ascertainable from Mr Sammut and the bank. Further, by its letter dated 16 April 1992 the bank told Mrs Sammut the amount that was owing in response to her request the previous day. In her letter in reply dated 21 April 1992 Mrs Sammut disputed the amount but never sought clarification of the calculation. The Sammuts, who could appreciate they were in difficulty, then proceeded as they considered best. That included obtaining another copy of the mortgage. In all these circumstances Mrs Sammut had no reasonable basis for a belief that the amount owing was in the order of $34,000.

417. Another point raised by Mrs Sammut was a lack of awareness that Mr Sammut had granted the CBA mortgage and that the loans were made without her consent. I have dealt with these matters already. I find that she was so aware.

420. Then there is the claim on her behalf founded on the tort of an intentional interference with contractual relations. There is no substance in this claim. Not only was Mrs Sammut not a party to the home loan agreement with the Savings Bank but the alleged act of interference of paying out the mortgage was authorised by Mr Sammut who was the party to the agreement. It follows that the claim fails.

423. There remains one point in Mrs Sammut's defence and that is the allegation that the plaintiff's claim is barred by the Limitation of Actions Act. Mr Sammut explained that for this purpose reliance was placed on s. 5(7) which provides that action shall not be brought to recover arrears of interest in respect of any sum of money payable in respect of a mortgage after the expiration of six years after they became due. The present was not such an action. It was an action for possession under a mortgage and for other relief not of a kind mentioned in s. 5(7). But, apart from that, Mr Sammut's argument is misconceived. The bank has not sued for a sum of money which became due for payment six years before the writ was filed. The writ was filed in October 1992 when the balance of the accounts was $149,428.93 (Lemburg Home Builders) and $219,478.43 (bills matured account), a total of $368,907.36. Since then interest has accrued on the account balances. It is Mr Sammut's submission that the bank has not sued for any interest whether arisen prior or subsequent to the filing of the writ and that if it were now to do so it would be barred by s. 5(7). Hence, Mr Sammut submitted, the bank can only now enforce its security to the extent of principal which he said was $115,353.48 and $205,000 for the above accounts, a total of $320,353.48. This approach is misconceived in my view.

426. The mortgage stands as security for the debt. If the bank obtains an order for possession and realises on the property it does so to the extent of the secured debt. It contends that the debt is a certain amount with interest accruing daily. No part of that debt was barred by s. 5(7) when the writ was filed. Accordingly s. 5(7) is not applicable and cannot operate in this proceeding to bar the claim of the bank to any extent.

429. In my view the bank is entitled to an order for possession of the property. In view of the vexation raised by Mr and Mrs Sammut I will grant the declaration that the transfer of the land by Mr Sammut to Mrs Sammut was subject to the bank's mortgage. It is not necessary to grant the other relief sought by the bank.

432. The counterclaim of Mrs Sammut fails and will be dismissed.

435. The counterclaim sought a declaration as to the amounts secured by the mortgage. Having considered the evidence and all that was submitted by Mr Sammut, I am satisfied on the balance of probabilities that the amount owing and secured by the mortgage was correctly stated by Doherty. I considered him to be a reliable witness who gave evidence in a reasonable manner. I accept his evidence including the written statement of the amounts owing. Having found the fact it is unnecessary to grant a declaration as to the amount.

438. I will hear the parties on costs and any other matter that may be appropriate.