HACIDE PTY LTD v COMMONWEALTH BANK OF AUSTRALIA

Court of Appeal (NSW)|1991-06-05|Before: Samuels JA, Priestley JA, Sully J, Mrs P, Clarke JA

HACIDE PTY LTD v COMMONWEALTH BANK OF AUSTRALIA SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

SAMUELS JA, PRIESTLEY JA, CLARKE JA 4-5 June 1991, 1 August 1991

Real Property Act - Mortgagor and Mortgagee APPEAL against judgment for possession in favour of mortgagee Bank against mortgagor - land under Real Property Act - Bank's claim under registered mortgage - trial judge rejects each of mortgagor's three defences - on appeal, only ground taken that trial judge erred in fact in regard to one defence - court reviews facts - no error by trial judge.

Priestley JA Nature of dispute: its decision at first instance.

On 8 May 1986 there was registered under the Real Property Act a mortgage of land on which stands a dwelling house known as 52 Taloombi Street, Cronulla ("No 52"). The mortgagor named in the mortgage was Hacide Pty Ltd, the appellant in this appeal. The mortgagee was the Commonwealth Bank of Australia, the respondent.

In 1988, the Bank commenced proceedings in the Supreme Court seeking judgment for possession of the mortgaged land. The statement of claim subsequently filed alleged the existence of the mortgage, various of its terms, the making of advances to or at the direction of the mortgagor, those advances allegedly being secured by the mortgage, a request for payment of moneys due under the mortgage and payment of some part of the moneys allegedly owing and failure to pay the rest. The appellant's written defence was lengthy but was conveniently summarised by the trial judge, Sully J, as divisible into three parts which asserted: 1, that the Bank had been guilty of fraud in connection with the mortgage; 2, that the Bank and the appellant had never been ad idem as to the purposes of the mortgage and 3, that the mortgaged land was trust property in regard to which the mortgagor in its dealing with the property was in breach of trust to the knowledge of the Bank with the result that it was precluded from enforcing the mortgage.

The trial judge found against the appellant on each of these defences and entered judgment in favour of the Bank for possession of the mortgaged land. In its appeal, the appellant claimed the trial judge had been wrong in rejecting the second of the three defences, but conceded that it could not challenge the decisions on the first and third.

Many factual aspects of the case were explored at great length at the trial, and to follow the point raised by the appellant in the appeal an understanding of the main features of the evidence is necessary.

The person conducting the affairs of the mortgagor and other proprietary companies relevant to the proceedings was Mrs Poulos ("Mrs P"). It was common ground that she had authority to act for each of them. When she caused the mortgage and related documents in question in this case to be executed, none of the blanks in them was filled. They were simply signed and sealed in the name

of the appellant and then returned to the Bank's Caringbah Branch. At the Branch the blanks were later filled up, and the mortgage took the form in which it was registered. The aspect of the appellant's case at the trial which was raised under the second head of defence, and is now the only matter relied on in the appeal, was the assertion that the appellant at no time authorised the Bank to fill in the blanks in the way that was done.

Mrs P's case at the trial was that she forwarded the executed but otherwise incomplete forms to the Bank following a conversation with Mr Byrne, the Caringbah Branch manager, which took place towards the end of March 1985 and concerned a transaction quite separate from that in connection with which the Bank shortly afterwards (on 1 May 1985) filled in the blanks in the documents. Hacide as well as being the registered proprietor of No 52, was the registered proprietor of commercial premises at Caringbah, the certificate of title for which had, in September 1984, been deposited with the Bank to serve as security for financial accommodation to be provided by the Bank, at Hacide's request, for another company run by Mrs P, Zeus Industries Pty Ltd.

Accommodation for Zeus was still needed at the time of Mrs P's conversation with Mr Byrne at the end of March, and, by her account, she was asking that accommodation (in the form of bank cheques) should be provided. To this request, in her account, Mr Byrne said:

"°That is all right, but unfortunately... we will need security.' And I said:

"But you have already got the Hacide deed.' And he said: "Yes but we have got nothing to tie it up. If we are queried by Head Office we really don't have anything to show them.' And I said: 'All right, we'll send the documents down, and we will sign them.'"

So, according to Mrs P, she sent off the documents executed in blank following a conversation in which she had impliedly authorised the Bank to fill up the blanks so as to perfect the security the Bank already held over the Caringbah property in respect of the advance to Zeus. The amount involved in this arrangement was to be about $43,000. Mr Byrne did not remember any detail of the conversation which Mrs P said had taken place. He did say that he would not have said the things which she alleged he said. The trial judge accepted his denial, and for a number of reasons concerning Mrs P's credibility, came to the conclusion that he should not accept anything that she said unless it was corroborated. Her version of the conversation was not corroborated, and he did not accept it. The trial judge found that the probabilities strongly favoured the Bank's contention that the intended purpose of the mortgage (which in the context in which Sully J was speaking meant the forwarding of the mortgage documents executed in blank) so far as concerned both the Bank and Hacide was to give the Bank a registrable security in consideration of advances of $360,000. This conclusion thus rejected any idea that the Bank had no authority to fill in the blanks in the way it did. In the appeal, Hacide, because of the rules concerning factual findings at trial bound up with the demeanour of witnesses, took the view it could not seek to challenge the trial judge's assessment of Mrs P's credibility. For Hacide, however, it was submitted that the documentary materials in evidence were such that the trial judge should have drawn the inference that the Bank did not have authority to fill in the blanks in the mortgage documents in the way that it did and should have drawn the inference that they were sent to the Bank only for the purpose of perfecting the security required for the advance to Zeus.

URJ HACIDE PTY LTD v COMMONWEALTH BANK OF AUSTRALIA (Priestley JA) 3

What had happened to the mortgage documents executed in blank was that after the blanks were filled up by reference to No 52 and to the mortgage's being in consideration of advances and accommodation to be granted to Hacide, the Bank supposedly discounted a Bill of Exchange signed by Mrs P for Hacide, for $360,000, and disposed of the discounted proceeds at Mrs P's direction. The supposed Bill was dated 7 May 1985 and was to be honoured in 180 days. On 4 November 1985, this Bill has replaced by Hacide signing a Bill of that date, payable i.n a further 180 days. When this Bill became due on 5 May 1986, it was not met. On 8 May 1986 the mortgage was registered.

Counsel for Hacide, in developing his submission that the materials in evidence showed that the Bank had no authority to use the mortgage documents as it did took the court through some of the details of the documentation. He urged the court to bear in mind the need to keep separate the details of the transaction by which Zeus was to have accommodation for about $43,000, and that by which Hacide was to have $360,000. In some ways this was a sound. approach, but it also happens that it is impossible to understand the two transactions properly without knowing that each played its part in a connected sequence of events, in which Mrs P was the driving force, and in which her objective was to bring about a major reorganisation of the borrowings of the various companies whose affairs she was managing.

There was no one place in the evidence where the various components of this reorganisation were all described in their relation to one another. By dredging through the appeal papers however and putting together matters from the documentary and oral evidence about which there was or can be no serious dispute, the following story can be told.

Property acquired by Mr and Mrs P Zeus was a commercial food equipment manufacturer and exporter. Its business had begun in about 1970 in a very small way. Mr and Mrs P were its founders. Mr P played a part on the manufacturing side of the business and Mrs P had the overall running of the business. By 1984 the business had grown and Mr and Mrs P had put together very substantial assets, held in their own names or in the names of companies. There was no question in the proceedings but that Mrs P had full authority to act on behalf of the legal owners of all the assets, which I will call the P interests. The assets consisted of commercial freehold properties, some used in connection with the business and some for rental income; the family home, (No 52); manufacturing equipment; and considerable personal property. Most, but not all, of the freehold property was subject to registered mortgages to a variety of mortgagees. No 52 was subject to a first mortgage to Finance Corporation of Australia Ltd and a second mortgage to Australia and New Zealand Banking Group Ltd the latter securing an amount in the region of $700,000. On the valuation put by Mrs P on the various properties the assets of the P interests considerably exceeded the liabilities.

Proposed re-financing by Elders. Mrs P decided to discharge all the existing mortgages and to borrow $1.5 million from one lender to be secured by various mortgages, in place of the existing ones. This would pay out the existing mortgages and leave funds available for use in the business. It seems that some sort of arrangement with Elders Finance and Investment Ltd ("Elders") was made in early 1984, which according to Mrs P should have been settled by May 1984 (AB 79, T 42). No details were given in evidence of what properties at that stage

were proposed as security for the Elders mortgage, but it seems, in light of later events, that No 52 was not going to be part of the Elders security.

Possible alternatives to Elders: business with Bank's Caringbah Branch. In about August 1984 Mrs P spoke to Mr Byrne (with whom she had had some dealings on behalf of Zeus some years before), told him of delays that were occurring in the Elders transaction and asked whether the Bank would be interested in doing a similar deal in place of Elders. At this time she had also been in touch with finance brokers to see whether any of them could arrange a loan generally of the kind that was being negotiated with Elders. In this conversation with Mr Byrne there was some mention of Zeus reopening an account with the Caringbah Branch of the Bank. This would be an overdraft account secured by lodgment of a title deed of a property owned by Hacide.

In response to Mrs P's suggestion, Mr Byrne contacted the Corporate Banking Division of the Commonwealth Banking Corporation Ltd who had two of their officers, Mr Day and Mr Geale report on the proposal. Mrs P's accountants by letter dated 13 September 1984 provided a number of tax returns to Mr Day. He completed his detailed report on 21 September 1984, recommending the proposal be refused, for reasons which in light of later events appear to have been very sound. (Amongst other things he recorded that Mrs P was extremely keen to have the loan funded in foreign currency (Swiss) to take advantage of the lower interest rates.) He was of opinion that security was inadequate. Amongst the security offered was No 52. Mr Day's recommendation was endorsed by his superior officer on 19 October 1984 and the report refusing the application (Exhibit 18) was received in the Caringbah Branch on 5 November 1984 (AB 371).

By this time Zeus had opened an account at the Caringbah Branch. The first business concerned the establishment of a documentary credit for about $11,000 connected with the import of aluminium trays from Taiwan. Then overdraft accommodation was also agreed, supported by Hacide's certificate of title to the Caringbah property. Hacide executed a document acknowledging this situation (Exhibit N). A proposal to Bank to borrow $550,000. By letter dated 30 November 1984 Morgoode Dunn Australia Ltd, mortgage brokers, saying their clients were Hacide and Mr and Mrs P, wrote to a department of the Bank seeking a loan of $550,000 by means of Fixed Rate Bills on the security of a registered first mortgage over No 52. On 4 December 1984 Mr Rogers of the Southern Division of the Bank recommended that a Bills Discount Facility of $550,000 gross be approved subject to satisfactory valuation of No 52 and legal opinion concerning the trust aspects of the matter. Mr Moran, of the department of the Bank known as NSW Branches Administration passed on to the Caringbah Branch a copy of the recommendation of 4 December 1984 and of the Morgoode Dunn application. By letter dated 6 December 1984, prepared by Mr Wilson ("Mr W"), the loans officer at the Caringbah Branch, and signed by Mr Byrne, addressed to Hacide at No 52, the essential details of the Bank's offer were set out, including the fact that the security for the loan was to be No 52. The letter ended by asking the recipient to telephone the Branch to arrange a time for aspects of the approval to be explained. A letter of the same date, conveying the same information, was written by Mr Moran to Morgoode Dunn.

Dealings with Caringbah Branch. A diary note by Mr W records that on 19 December 1984 Mrs P called and discussed with Mr Byrne and Mr W the Bill Facility recently approved by Head Office and also requested short term accommodation of $38,500. This was said by Mrs P to be for land tax due on 21

URJ HACIDE PTY LTD v COMMONWEALTH BANK OF AUSTRALIA (Priestley JA) 5

December 1984 as a result of some accountancy error. The negotiations with Elders were mentioned. Mrs P was expecting settlement on 21 December. The Caringbah property was going to be part of the Elders' security for the advance. During the interview a phone call to Elders obtained the news that settlement was near but would probably be some days later than 21 December. It was then agreed with Mrs P that the Bank would meet the land tax amount drawn on the Zeus account, would attend the Elders settlement with the Certificate of Title to the Caringbah property, and hand it over to Elders upon receipt of a cheque in satisfaction of the land tax loan. The diary note shows that this was done on the basis, inter alia, that the Bank would be advancing in excess of $500,000 by way of Bill Discount Facility on the security of No 52. That is, on that day, it was in the contemplation of both the Bank and the appellant that at the conclusion of the Elders settlement, Elders would be holding the Certificate of Title to the Caringbah property as security, and the Bank the Certificate of Title to No 52.

Following the interview, bank cheques totalling $38,500 were made available to Zeus on 19 December and were paid for by the Bank debiting its account. However, no doubt because of a lengthier postponement of the Elders settlement than anticipated, on 21 December 1984 the cheques were deposited to the credit of the same account (Exhibit 6).

A memorandum to NSW Branches Administration, Southern Division, prepared by Mr W, signed by Mr Byrne, and dated 5 March 1985, recorded that a valuation had been done of No 52 by Property Valuation Department at a figure of $520,000. It was noted that Mrs P had been told by telephone, not of the exact figure, but that a valuation insufficient to support the $550,000 facility had been obtained. The memorandum sought advice from Southern Division. Mr Byrne had a conversation with Mr Moran of that Division, following which Mrs P was advised that a reduced Bill Discount Facility of $364,000 gross ($330,000 net) had been approved. The Branch asked whether in view of the amount now involved the account would revert to Manager's control (which is what happened). The Branch also asked for the revised establishment fee and for steps to be taken because a trust was involved. (Memo, 2 April 1985 part Exhibit AF). On 9 April 1985 it is noted in Southern Division's records that the Branch phoned to say there was no trust involved, that solicitors had confirmed that a trust deed had been drawn up but never signed or stamped and the Ps had since decided not to become involved in a trust situation.

Further dealings re land tax; Elders settlement gets closer. Toward the end of March 1985, Mrs P had again been in touch with the Caringbah Branch in regard to the land tax payment. Elders were apparently saying that settlement would take place towards the beginning of April. Mrs P told Mr Byrne and Mr W that she was going overseas for ten days from 29 March to accept an award the company had won. She wanted the same arrangement made in regard to land tax as had been made in December. This time $38,000 was needed for land tax and $5,000 for stamp duty. The diary note of this meeting, (which was made on 10 April) also refers to the Bill Discount Facility, mentioned in the diary note as being of about $400,000, being required in the main to pay out the ANZ, following which the company's banking would be transferred to the Bank. The diary note recorded that to support the overdrawing of Zeus's account which would be brought about by the payment of the $43,000, the Bank held a certificate of title over the Caringbah property and stated that in all the circumstances the Bank agreed to allow overdrawing on the account to $70,000. This diary note, which was made on 10 April 1985, also recorded that Mrs Murant, accountant for Mrs P, had rung

on 9 April to say that she wished to draw the cheques for $43,000 to which there was agreement. The note recorded that Mrs Murant was not clear whether the Elders settlement would take place but she hoped Friday of that week would be the day. The note said, "If this is so and the CT we hold is required we shall attend settlement and not release the deed until our debt has been liquidated or considerably reduced" (Exhibit AF). Added to the diary note in Mr W's handwriting was the statement that the Bank also needed to know from Mrs P how much the Bank was to pay over at settlement as well as some other mechanical details.

As had happened in December, bank cheques were issued, in the amount of $41,296, debited to Zeus's account, on 9 April 1985, and deposited to the credit of that account on 19 April 1985, after the settlement with Elders had again been postponed.

It was to the occasion when she asked Mr Byrne for the land tax arrangement to be repeated on Zeus's account, that Mrs P attributed Mr Byrne's request to execute mortgage documents in respect of the Caringbah property which, she said, were to secure Zeus's indebtedness for land tax and overdraft. As I have said, Sully J rejected her account of the conversation. I note here that at the time the conversation occurred the arrangement for a Bill Discount Facility was on foot, and, as had been the case when the interview of 19 December 1984 took place the security for the facility was to be a mortgage over No 52 and the Certificate of Title to the Caringbah property was to be handed over to Elders at the settlement in return for a cheque discharging Zeus's overdraft. At the time of the conversation with Mr Byrne, just before Mrs P went overseas, it was possible that the Elders settlement might take place while she was away.

It is plain from the diary note of 10 April 1985 and the later circumstances of the settlement that if settlement did take place while Mrs P was away the Bank would want its security for the Bill Discount Facility to be complete at that time. So far as I can see, there is no record in the evidence at this point of any preparation being made by Mr Byrne or Mr W to get Hacide's signature on a Bill of Exchange. There is no sign in any record in evidence of the figure $360,000 at this stage, either. Possibly the explanation is that Mrs P did not think the Elders settlement would be ready to go before she got back from her trip, and if she was wrong in that judgment would either have postponed it for a few more days, or taken urgent measures to complete necessary documentation from abroad.

One thing about which there seems to be little doubt however is that on 29 March 1985 Mrs Wither, a secretary working for Mrs P, made photostat copies of documents she sent to the Bank that day. These photostats show a blank form of mortgage under the Real Property Act with the common seal of Hacide affixed in the appropriate place under the signature of mortgagor, signed by Mrs P and countersigned by Mr P. Two of these executed but otherwise blank forms were sent to the Bank as slight differences in the otherwise identical photostats show. With each form was an annexure A, which had no point in the case of a corporate mortgagor. Another document returned to the Bank of which a photostat was kept showing that the original had been executed by Hacide in the same way as the mortgage form, but otherwise left blank, was an "Authority to Complete and Pay" which requested the manager or any officer of the Bank to date and fill in any blanks in the mortgage and other documents so they would when completed provide a good and effective security for any advances granted or to be granted by the Bank. The final document of which a photostat was kept, likewise blank except for execution by Hacide was an "Application for Accommodation" form

URJ HACIDE PTY LTD v COMMONWEALTH BANK OF AUSTRALIA (Priestley JA) 7

addressed to the Bank asking for the grant of accommodation to the applicant by way inter alia of endorsing or discounting Bills of Exchange drawn by the applicant and setting out the terms and conditions upon which such accommodation would be granted.

Mr W was on leave from 17 March to | April, and as it seems likely that the executed but otherwise blank documents would have been received in the Caringbah Branch on 29, 30 or 31 March, they probably did not immediately come to his attention.

The next document in evidence is a diary memo of 23 April 1985 signed by Mr Byrne (Exhibit AF 20) noting that Mrs Murant telephoned on that day saying it was possible the Elders settlement could take place next Friday (which would have been 26 April) and Elders were again asking for provision of the land tax and stamp duty money. His note continued that the Bank had again agreed to allow further overdrawings of about $44,000 to cover those expenses, which would take the Zeus overdraft to about $70,000.

In fact, the settlement with Elders took place on Friday 3 May 1985.

Preparation for Elders settlement. The solicitor acting for the P interests in bringing the transaction with Elders to completion was Mr Fordyce of PA. Somerset and Co. He attended on the settlement on 3 May. In evidence he said that Mrs P had, prior to the settlement, told him that she was organising the finance that would become available from the Bank. His contact with the Caringbah Branch prior to the settlement was very scanty. The evidence is not very clear how the Caringbah Branch became aware that settlement would take place on 3 May.

Mr W gave evidence which shows that the Branch must have become aware by 1 May that settlement was finally going to take place two days later. He said that he stayed late at the Branch on | May getting the documentation ready to go into the NSW Branches Administration, Branch Securities. He completed the mortgage forms, relying on the authority that had been executed by Hacide. The description of the land to be mortgaged which he inserted in the mortgage document was of No 52. He noticed that the mortgage form gave the name of the Bank as "Commonwealth Trading Bank of Australia". The name of the Bank had been changed not long before to "Commonwealth Bank of Australia" In the two places where "Trading" appeared in the Bank's name on the mortgage Mr W, as he later told the court in his evidence in chief, struck out "Trading" and put initials next to the striking out "to make it appear as if they were the initials of the Director and Secretary of the Company" (AB 544, T 463). In his evidence he said that he did it because settlement was due on the Friday and he did not think by contacting Mrs P and having the documents properly initialled, they could be returned in time for the settlement. He saw no advantage to himself or the Bank in doing what he did or any detriment to the P interests. He also said that he regarded it as the wrong thing to have done and that it was something no Bank officer should do, no matter what the circumstances.

As well as getting the mortgage into registrable form, Mr W also filled up the "Application for Accommodation" form, which involved only inserting Hacide Pty Ltd as the name of the applicant and the date 1 May 1985, and the "Authority to Complete and Pay" in which he inserted the date, the name of Hacide Pty Ltd next to the word loan, and, in the critical sentence in the Authority, the words "52 Taloombi Street" and "$245,000" so that the sentence read "At settlement in connection with discharge of mortgage 52 Taloombi Street, South Cronulla I/we request and authorise you to pay on my/our behalf to PA. Somerset and Co or his

nominee the sum of $245,000 together with any additional moneys payable by me/us on settlement on exchange for documents to your satisfaction, which are to be held by your Bank as security." At the same time he stamped this authority with a date stamp showing it was received in the Branch on 1 May 1985. He said he placed this date stamp on the document because there should have been a date stamp on it and the date when he was dealing with it was as good as any other.

At the same time and for the same reason he put a similar date stamp on another document signed by Mrs P for Hacide addressed to the Manager of the Caringbah Branch authorising and directing the Bank to pay the proceeds of the Bill Discount Facility advance by crediting an amount sufficient to clear Zeus's overdraft and paying any remaining approval proceeds to PA. Somerset and Co upon receipt of the discharges of the two registered mortgages over No 52 and the certificate of title for No 52. This document also authorised the Bank to release the certificate of title to the Caringbah land to PA. Somerset and Co.

Just when this last document came into existence is not shown by the evidence.

Mrs P said that she signed it on 19 December 1984. There was nothing to corroborate this statement and it is presumably part of the evidence not accepted by the trial judge. At 19 December 1984 Mrs P should have known that the Bank had approved a Bill Discount Facility of $550,000, subject to the matters stated in Mr Byrne's letter to Hacide of 6 December 1984. If, as seems likely, the document, which was prepared by the Bank, came into existence at some later date, she would have known that the Bank was only prepared to approve a Bill Discount Facility of $364,000 or $360,000. On either state of knowledge, the amount to be supplied by the Bank was not of itself enough to pay out the mortgages over No 52. It would seem therefore that the document whenever prepared and signed was brought into existence in the belief that the proceeds of the facility would be used in connection with a transaction or set of transactions, happening simultaneously, in the course of which Zeus's overdraft account with the Bank would be cleared, the certificate of title lodged as security in respect of that overdraft would be released to Mrs P's solicitor, the mortgages over No 52 would be discharged, and the released certificate of title to No 52 then handed to the Bank.

All these things happened at the settlement with Elders on 3 May 1985. Also, at the settlement on 3 May 1985, a representative of the Bank attended and handed three cheques to Mr Fordyce totalling $245,000.

Other documents completed by Mr W on | May 1985 in preparation for settlement on the following Friday were a memo of deeds forwarded for release on the Bank's form S24, and a settlement instructions sheet on the Bank's form S70, (both being parts of Exhibit AJ). Various matters in the evidence make it in the highest degree unlikely that these documents were not prepared at or about the time that Mr W said they were. The deed forwarded with the memo of deeds document was the certificate of title for the Caringbah property. In a paragraph requiring the person filling in the form, where settlement was to be effected at a point other than the initiating Branch, to give details of the debtor's written instructions regarding disposal of the documents, Mr W wrote that the CT was "to be released without consideration provided simultaneous settlement (relative to our S70 dated 1 May 1985 in the name of Hacide Pty Ltd) is effected". The date, time and place of settlement were given as Friday, 3 May, at 3 at the Law Society. The settlement instructions showed customer's name as Hacide Pty Ltd, the type of advance as a Bill Discount Facility, the subject property as No 52, the loan approved as $330,000 net, and that on settlement the Bank was to pay

URJ HACIDE PTY LTD v COMMONWEALTH BANK OF AUSTRALIA (Priestley JA) 9

$245,000 to PA. Somerset and Co. There was also a note on this document asking that the Caringbah Branch be telephoned on the day of settlement so that the Bill Discount Facility might be funded.

The documentation prepared by Mr W on | May 1985, whatever else may be said about the propriety of the preparation of some of it, shows that someone had communicated to Caringbah Branch the details of the finance needed from the Bank to enable the settlement to go through with Elders on 3 May. The details that were communicated were all those that were necessary for the Bank's side of the documentation and provision of funds to be got ready for the settlement. This is shown by the fact that the settlement was effected on 3 May on the exact basis, so far as the Bank was concerned, as that on which Mr W made his preparations on 1 May.

Evidence about the mechanics of preparing for the settlement, in particular who spoke or wrote to whom fixing the quite numerous payout figures that would be needed, and how the provision of the cheques was organised, is, with the exception of the evidence about what was done by Mr W, almost entirely lacking. Inferences about what must have happened can be drawn however from documentary evidence of what happened at the settlement.

The settlement - 3 May 1985. From letters written by Mr Fordyce on 3 and 6 May 1985 and from Bank documents including the settlement instructions S70 form prepared by Mr W and used (and added to) at the settlement, the following details appear. The $245,000 from the Bank was used in three cheques: one in favour of Finance Corporation of Australia Ltd for $84,027.13; this must have been towards the discharge of that company's first mortgage over No 52: one in favour of Custom Credit Holdings Ltd, mortgagee of another property, for $42,651.70 and one in favour of the Ps for $118,321.17. Cheques to be provided by Elders included one for $731,756.91 in favour of the Ps, one for $270,000 in favour of Westpac, one for $176,744.29 in favour of Zeus and one for $17,245.71 in favour of the P's.

Further aspects of the settlement appear in Mr Fordyce's letter dated 6 May, (which was written to Mrs P). He confirmed that the advance from Elders was duly completed on Friday 3 May and that shortly before 5 pm on that day bank cheques totalling $135,545.38 had been deposited to "your" account. (This appears to be the sum of the cheque from the Bank for $118,321.17 and that from Elders for $17,245.71, subject to a $20 adjustment unexplained in the evidence.) The letter then detailed how the "moneys available on settlement were dealt with". He did this by separately stating what had happened in regard to each of ten properties, which did not include No 52. In regard to six of the properties existing mortgages were discharged. In regard to two others, it was noted that the certificates of title had been held by Laurence and Laurence, the solicitors for Elders. Whether these certificates of title were being held as security does not appear. The certificate of title of a ninth property had been unencumbered. The tenth was the Caringbah property, the certificate of title for which had, as he reported, been held by the Commonwealth Bank.

Mr Fordyce's letter then noted that on settlement all of the ten certificates of title were delivered to Laurence and Laurence. It is clear that this happened as part of the arrangement by which Elders advanced money to the P interests, to be secured by mortgages of the properties. Mr Fordyce also noted that Land Tax as assessed up to and including the 1985 land tax years was paid about | pm on 3 May.

The letter further noted that at settlement, the certificate of title for No 52 was delivered to the Commonwealth Bank "in respect of its security". In this connection he added that although the Commonwealth Bank attended the settlement he did not believe that Laurence and Laurence were aware of the mortgage advance the Bank was making to assist the transaction.

Inferences from facts to 6 May 1985. The inferences from the materials, including Mr Fordyce's letter, bearing upon the settlement of the Elders' transaction are that the requirement of Elders as mortgagee concerning Land Tax was met, that the Commonwealth Bank released the certificate of title to the Caringbah property, that the certificate of title to No 52 was handed to Mr Fordyce by the then mortgagee upon receipt of moneys to discharge that mortgage and then handed by Mr Fordyce to the Commonwealth Bank in exchange for bank cheques from that Bank handed over on the security of the certificate of title. The inference is also available that Mr Fordyce had no instructions to make known to Laurence and Laurence that Elders were not obtaining security over all of the properties owned by the P interests. Mr Fordyce's observation that he did not think Laurence and Laurence were aware that the Bank was making a mortgage advance is no doubt connected with the fact that the cheque for $731,756.91 made payable by Elders to the Ps must have been used to discharge the second mortgage over No 52 to the Australia and New Zealand Banking Group Ltd, which as at 12 March 1985 had been claiming the amount secured by (inter alia) that mortgage was $714,266.91 (AB970). As the Bank came away from the settlement with the Certificate of Title to No 52, both the first and second mortgagees must have been paid out at the settlement. Discharges.of the mortgages were registered on 23 May 1985 (Exhibit A, AB640).

More directly relevant to the issues litigated at the trial and in the appeal, is the inference already mentioned, that Mr W on | May was somehow in possession of all the details necessary for preparation of the steps to be taken by the Bank at the settlement on 3 May. This settlement was of fundamental importance for the P interests. It would effect the refinancing that Mrs P had been wanting, in one form or another, for a year. One element of it was to be the deposit to the account of her husband and herself of a substantial sum, as it turned out, $135,545. In the way the settlement was done, the provision by the Bank of the moneys pursuant to the Bill Discount Facility was an essential factor. Without it, the settlement could not have taken place. When the Certificate of Title for No 52 was delivered to the Bank "in respect of its security", that can only have been done by Mr Fordyce on behalf of the P interests.

In the appeal, the appellant's submissions were directed at the evidence and documents said to be directly relevant to the issue of the authority of the Bank to fill in the blanks in the mortgage documents in the way that was done. I found it difficult to understand that evidence however without looking at the whole body of material in which it was embedded. Having done that it also seems to me to be necessary, in understanding the effect of the trial judge's findings relevant to the appeal issue, to see what issues he had to deal with at the trial. These had a very different appearance from what was argued on the appeal.

For instance, in light of the trial judge's findings based on credibility, which the appellant's counsel (rightly I think) felt he could not challenge, and the indisputable fact that the Bank made $360,000 available at Mrs P's directions, on the security, as her solicitor wrote to her on 6 May 1985, of No 52, appellant's

URJ HACIDE PTY LTD v COMMONWEALTH BANK OF AUSTRALIA (Priestley JA) 11

counsel was constrained to agree that the Bank was entitled to possession of the Certificate of Title to No 52 at least as security for an equitable mortgage over the land for the amount advanced. Thus the argument on appeal came to the narrow question whether the Bank, although entitled to a mortgage of the land in equity, was not entitled to remain the registered mortgagee of it, because the registered document had not been filled in by the authority of the mortgagor. A full drawing out of the implications of the appellant's recognition of the position in equity would I think reveal great difficulties in the appellant's presenting any intelligible version of the facts in the appeal.

However, I will not pursue that last line of thought; I have mentioned the position the appellant was constrained to take only to make the point of the contrast between the issues at the trial and in this court. At the trial Mrs P maintained and elaborated on what she had said in an affidavit she swore on 1 June 1988 (Ex 11). She denied (i) that Morgoode Dunn Australia Ltd had been authorised to seek a loan of $550,000; (ii) that the appellant had ever applied for any bill discount facility from the Bank or for any other type of loan; (iii) that No 52 had ever been offered as security for any loan; (iv) that she was aware of any bill discount facility claimed by the Bank to be on foot until after she received a written demand from the Bank dated 2 February 1987 (AB 181-2, T 142-3 and passim).

Mrs P maintained these denials during very lengthy cross examination and in face of very considerable documentary material showing that it was impossible for them all to be correct. The trial judge described her as "immovable" on these matters. This immovability completely negated any possibility of the court relying on what she said about any disputed fact dependent on her evidence alone. It also bore upon one positive assertion she made, that she signed the Bill dated 7 May 1985 on 4 November 1985 at the same time as signing the Bill admittedly of that date.

The demonstration at the trial that Mrs P's account of affairs could not by any possibility be right, and that the P interests had beyond doubt had the benefit of the advance by the Bank on 3 May 1985 of $360,000 in accordance with Mrs P's directions, on the security of No 52, may have been responsible for the evidence concerning the way in which Mr W received the information he had on 1 May, about settlement, and how and when the first bill of exchange was signed by Mrs P, being left somewhat obscure. That more communication took place between Mr W, Mr Fordyce and Mrs P in the run up to the settlement on 3 May than found its way into evidence seems to me to be quite certain.

Even on the evidence available to this point however, the probabilities of what happened are very strong. It is unlikely that the Bank would have furnished the funds it did on 3 May without having its documentation, including the Bill of Exchange, in order. It is always possible of course that there may have been an oversight about getting the Bill of Exchange signed. It is also unlikely that Mrs P was not aware of the provision by the Bank of funds for the settlement and that part of the mechanism by which she was paying for that provision was by way of the Bill of Exchange. This way of doing things involved a not insignificant payment in advance to the Bank. Although it is possible that the full detail of the way the settlkement was accomplished was not in Mrs P's mind, it is hard to imagine that she was not interested in and aware of the net sums of money which the settlement made available, and of how they were arrived at. The likelihood of both the Bank failing to get the Bill of Exchange signed at the right time, and

Mrs P not noticing that the P interests were being charged by the Bank on the footing that a Bill of Exchange had been signed, seems to me to be small.

This view of the matter is confirmed by what happened after 6 May 1985 - a date chosen because that was the day Mr Fordyce reported to Mrs P what had

The day after Mr Fordyce's letter of 6 May to Mrs P, the settlement documents which had been left with Branch Securities on 3 May 1985 arrived at the

Caringbah Branch. If Branch Securities had rung through on the afternoon of the 10 settlement as requested, the information was not acted on till the documents

reached the Branch. Zeus's account at the branch was then, on 7 May, credited with $86789.78, the Bill of Exchange was dated, (according to Mr W) and the following letter written: "The Secretary 15 Hacide Pty Ltd 7 May 1985 52 Taloombi Street SOUTH CRONULLA NSW 2230 20 Dear Mrs Poulos BILL DISCOUNT FACILITY: HACIDE PTY LIMITED

Settlement relative to the above has been effected and the above facility has been funded.

Face value of the Bill was $360,000 and details of disbursement are provided

25 below: Face Value $360,000.00 Less: Discount (rate of 15.10%) $ 25,078.72 Usage fee (1.25%) 2,231.00 30 | Facility Fee (0.50%) 900.00 Amount paid over at settlement $245,000.00 $273,210.22 $ 86,789.78

All calculations shown above have been based on the term of the Bill, 181 35 days. The Bill will mature on 4th November 1985 and we suggest that separate provision be made for 'rollover' costs of say, $25,000 upon maturity. As agreed, the facility should be cleared in full within 3 years. We will contact you approximately one month prior to maturity to discuss rollover arrangements. In the meantime, should you have any further queries regarding the approval, please 40 do not hesitate to contact me. Yours sincerely JLW LOANS OFFICER" This letter was amongst the documents produced by the appellant on discovery. It is entirely consistent with the Bank's case, and inconsistent with that 45 of the appellant. When Mrs P was shown the document in cross examination, she said she did not recall having received it, but had found it, after litigation with the Bank began, attached to Zeus's bank statements. She did not believe it had been mailed to No 52 but thought it would have been picked up by the lady that collected the bank statements from the Bank. It is difficult to think Mr W could 50 have sent it if the Bank did not at the time of writing have in its possession the Bill the letter referred to.

URJ HACIDE PTY LTD v COMMONWEALTH BANK OF AUSTRALIA (Priestley JA) 13

By letter headed "Mortgage securing Bills Discount Facility of $360,000", dated 4 July 1985, the Bank advised Hacide of a recent change of policy of the Commissioner of Stamp Duties relating to payment of loan security duty on mortgages or other securities securing the usual form of Bills Discount Facility. This change meant the payment of increased duty. The Bank said it had no alternative but to pay the increased duty on Hacide's behalf "in order that the Bank can obtain a fully effective and registerable (sic) security position. The cost of this duty as claimed by the Commissioner is for your account".

This letter was addressed to 52 Taloombi Street, South Cronulla. Mrs P claimed she never got it. She said the letter box at No 52 was never, ever, cleared by her or any member of her family. In her cross examination about this unbelievable claim, it became clear that the only possible reason for making it was to try to distance herself from knowledge of various documents inconsistent with her version of events.

Also produced on discovery by the appellant was a letter from the Bank, dated 4 October 1985 to Zeus, headed "Bill Discount Facility - Hacide Pty Ltd". The letter asked Mrs P to have an authority which was addressed to the Bank, authorising the Bank to debit all charges relative to Hacide's Bill Discount Facility to Zeus's account, executed for Zeus and returned to the Bank. The letter also reminded her "that the Bill facility is due for rollover" on 4 November 1985. She did not answer this letter, but in cross examination said although she had seen it she did not understand what it was all about. This was because she knew Hacide had no Bill facility with the Bank, nor did Zeus, and she knew that no Bill had ever been signed. This led to the cross examiner asking her about the $86,000 credited to Zeus on 7 May 1985:

"Q. Where do you say that came from? A. I beg your pardon?

Q. Where do you say that came from? A. I don't know, the bank put that in.

Q. Just as a gift or what? A. I don't know, I don't know because today --

Q. We are talking about $86,000, aren't we? A. Yes, we are, Mr Murr.

Q. We are not talking about $10 error? A. No we are not.

Q. As far as you are aware there was no explanation at all why $86,000 should have been deposited into the Zeus Industries account? A. Not to my knowledge.

Q. Have you ever thought of giving it back? A. Had the bank asked Zeus Industries for that amount of money they would have received it, instead of going on with this charade about Hacide owing them money.

Q. Have you ever thought of giving it back? A. I haven't." I have set out this exchange to give some flavour of the lack of reality which pervaded a great deal of Mrs P's evidence.

A diary note (part Ex AF) by an officer of the Caringbah Branch, Mr Churchward, records that on 1 November 1985 he spoke to Mrs P by phone; that she said she had not received the letter of 4 October, and in any case did not want the fees debited to Zeus. The diary note, which was dated as made on 5 November 1985 does not directly refer to the Bank's obtaining of a further Bill signed for Hacide but speaks, in its latter part, on the footing that one was in the Bank's possession. The note also earlier recorded that after Mrs P said she did not want the fees debited to Zeus, the writer spoke to Mr W and it was decided to open an account in the name of Hacide to which the about to become due Bill would be debited on maturity and proceeds of a new Bill credited.

Mrs P denied speaking to Mr Churchward by phone on | November, but said she believed he spoke to an employee in relation to Bills to be signed on 4 November. A telephone record book kept in Mrs P's office noted that Mr "Churchwood" of the Commonwealth Bank Caringbah had rung for the employee. In the "comment" column was written "Close 5.00 Bill sign and return by Monday". The carbon of a message slip to Mrs P was also tendered, dated 1 November, naming Mr Churchwood of the Bank at Caringbah, and saying "Pick up Bill to sign and return by Monday". Across this was written "PICK UP MONDAY".

A Bill dated 4 November 1985 for $360,000 due 5 May 1986 was in evidence, signed by Mrs Poulos for Hacide. Also in evidence was a card dated as signed by Mrs P on the same day with a specimen signature for an account for Hacide opened on that day. The first page of the Statement of Account for this account, (tendered by the appellant) showed a credit of $327,963.63 on 4 November 1985 and a debit of $360,000 on the same day. On 19 December a cheque for $3,000 drawn on the Zeus account, signed by Mrs P, dated 7 November was deposited to the credit of the Hacide account along with $4,500 in notes.

Mrs P's account of what happened on 4 November 1985 is one of the cruxes of her case. She said Mr W called at her office, got her to sign two Bills in blank and that those were the same Bills that the Bank tendered in evidence dated 7 May 1985 and 4 November 1985. Mr W denied this. The appellant's contemporary documents suggest that one Bill was to be picked up from the Bank and returned to it, signed, by Monday 4 November. Documentary evidence shows Mrs P preparing to use the new Hacide account in the first week it was opened. Contemporary documents tendered by the Bank either demonstrate or strongly support the view that the Bill of 7 May was in the Bank's possession on that date.

What Mrs P said happened on 4 November 1985 was not believed by the judge.

Once that story was not believed, the only possible explanation of the events of the day was that Mrs P signed one Bill for Hacide, and caused it to be returned to the Bank. Once that position is reached, the probabilities are very high that that Bill was used as a source of funds for the discharge of the earlier Bill, that is, that the Bill of 7 May was in the Bank's possession, as it said it was, and had been since 7 May 1985.

The probability of all this is again shown by a letter from the Bank to Hacide dated 5 November 1985. This said the Bank had "today rolled over your Bill of $360,000"- It provided the details of various costs, including the discount fee of $28,892.53 and also the crediting to Hacide's account of $327,963.63. This letter also was produced on discovery by the appellant. Mrs P said she imagined it would have been received on or about 5 November. She nevertheless still maintained that Hacide had no Bill facility and that she knew of no bank account such as that mentioned in the letter. Her attempts to explain how this could be so in face of all the material to the contrary with which she was confronted were incoherent and virtually unintelligible. The judge did not believe her explanations. On the materials before him I do not see how he could have.

The hopelessness of the appellant's position by the time this stage of the case was reached is shown by Mrs P's answers to questions concerning the next item of evidence. This was a letter dated 17 January 1986 from the Bank to Hacide. It referred to Hacide's overdrawn account at the Caringbah Branch, requested

URJ HACIDE PTY LTD v COMMONWEALTH BANK OF AUSTRALIA (Priestley JA) 15

clearance of the amount owing (which represented the balance of the discount fee for the November rollover) and noted that interest was accruing on the amount owing at 21.75%.

When asked whether she recalled receiving the letter Mrs P at first said she did, then qualified that to recalling a letter in relation to interest rate which she thought was excessive and then said that she did not recall seeing the letter. She then again asserted that at the date of the letter she was unaware of any account opened in the name of Hacide.

She was then shown a letter from Zeus to the Bank which she had signed, dated 17 February 1986 in which she apologised for not having replied to the letter of 17 January and said the Bank would be advised as soon as possible how the balance of $25,362 would be cleared. In a series of confused answers to questions concerning the state of her knowledge of the Hacide account as at the date of this letter she at first said that in February 1986 she would have been aware there was an account with the Bank in the name of Hacide and shortly afterwards that she did not know until some time after a statement was issued after March 1986 that there in fact had been an account opened. The long passage of evidence from which I have excerpted these answers is explicable only on the basis that Mrs P was committed to maintaining the unmaintainable no matter what material to the contrary of her assertions was put before her.

During April 1986 the Bank wrote two letters to Hacide referring to the falling due of the Bill on 5 May 1986 and asking what arrangements were proposed in regard to the moneys that would then be outstanding. These letters were not answered. However, Mrs P was not inactive at this time. She had been in touch with the National Australia Bank Miranda with a view to having that Bank pay out all of Hacide's debts upon the security of No 52. Mr Crawshaw from the Miranda Branch of that Bank gave evidence that he first dealt with Mrs P in October 1985 in connection with a loan to her personally and then in January 1986 in connection with a loan to be secured by No 52. His bank took a second mortgage over No 52. He said that Mrs P had told him in the course of the arrangements for this loan that the Commonwealth Bank had the first mortgage.

By letter dated 5 May 1986 the Bank wrote to Hacide noting the maturity on that day of the Bill for $360,000 and saying that because of the pending involvement of the National Australia Bank it had not been rolled over but its face value debited to Hacide's account. The letter ended by asking when the Bank could expect the National Australia Bank to take over the debt. By letter dated 14 May 1986 the Bank wrote again to Hacide saying the National Australia Bank had advised that settlement of Hacide's accounts might take place in the near future and enclosing a form of authority to be signed by two directors of Hacide in connection with the proposed settlement. This later letter was answered by letter dated 20 May 1986 on Zeus letterhead, signed on behalf of Hacide by an employee. This letter enclosed the authority to release security documents, as requested.

In the first half of September Mr Elyard, now the manager of the Caringbah Branch, called on Mrs P at her office and discussed the amounts owing by the P interests. The outcome of the discussion was a proposal by Mr Elyard to the Bank's New South Wales Branches Administration, Southern Division for a further bill discount facility. There is no evidence of any claim made by Mrs P at this meeting either that the Bank was not entitled to be the registered mortgagee of No 52 or that no bill discount facility had been granted to Hacide.

Mr Elyard's proposal to Branches Administration was refused and he accordingly wrote to Hacide by letter dated 23 September 1986. The letter said that Hacide's application for finance had been referred to Head Office who had declined the application because of lack of financial information and Hacide's inability to meet "rollover costs on the Bills Discount Facility in November 1985 and May 1986...". The letter continued that the Bank was now seeking full clearance of its debt or organisation of a satisfactory repayment programme, in the absence of which "the Bank will have no option but to consider action under its securities". There was no response to this letter so far as the evidence shows, but an undated letter from Zeus to the Caringbah branch refers to a letter from the Bank of 26 November 1986 and says, inter alia,

"We have already advised the Bank that we intended to re-finance our Loan, and copy of an approval letter is enclosed herewith. We are unsure at this stage, the date of settlement, but will advise you. We would appreciate you NOT contacting the lender at this time..."

By notice dated 2 February 1987 the Bank demanded payment from Hacide of $433,152,21 which was the amount to which the overdraft in Hacide's account had then grown. This notice stated the security held for the debt was a registered mortgage over No 52. On 20 February 1987 Mrs P caused $10,000 to be credited to Hacide's account. A further notice of demand dated 11 March 1987 was served on Hacide for payment of an amount then said to be owing of $431,989.89. This notice was given under s57(2)(b) of the Real Property Act and stated that non payment would lead to exercise of power of sale in respect of No 52. A solicitor for Hacide then wrote to the Bank by letter dated 6 April 1987. After referring to the s57(2)(b) notice the letter then said:

"We would advise that we are arranging finance from an alternate source to discharge the mortgage to the Bank. We have received a letter of approval for the necessary finance...

In the meantime we would be pleased if you would arrange to prepare your discharge and supply us with the precise payout figure..."

This letter was followed by one dated 7 April 1987 from Hacide to the manager of the Caringbah branch repeating that alternative finance was available and concluding:

"In view of the above, we would assume that you will extend the time permitted to us under your demand, to enable settlement of this matter..."

On 10 April 1987 Mrs P wrote to the manager of the Caringbah branch, heading her letter "52 Taloombi Street, South Cronulla". The letter asserted that the Bank was stalling (by not supplying information necessary to calculate payout figures) so that time under the notice under the Real Property Act would run out and the Bank could exercise its power as mortgagee. The letter then continued:

"As we are both aware, your demand gives us one (1) month from the 11th March, 1987, the time allowed for settlement will have passed, and in normal circumstances, the Bank would be in a position to take possession. We confirm you have been contacted by Mr Peter Taylor, who has given you a copy of an approval for funds from Howard Finance, and that this approval is in the names of John and Patricia cP]. It is[with this lo]n that we intended to repay any commitment that Hacide Pty Ltd, Zeus Industries or J and P [P] may have with your Bank. However, as it appears the Bank's intention is only to go into possession, we feel we must now advise the following:

URJ HACIDE PTY LTD v COMMONWEALTH BANK OF AUSTRALIA (Priestley JA) 17

At the time of borrowing funds from the Bank, and indeed Elders Finance, we were advised by Laurence and Laurence, Solicitors, who were acting for both Elders and ourselves, that the Trust Deed, which we believed to have been lodged and to which 'The [P] Family Trust' related was never lodged.

Consequently, mortgage documents were drawn up in the name of Hacide Pty Ltd. Some time later, we discussed this matter with our Accountants, who confirmed our belief that the Trust Deed had been lodged and that the properties were owned by The [P] Family Trust and not by Hacide Pty Ltd which is reflected in the Balance Sheets of Hacide Pty Ltd. Hacide has no assets, it is merely a Trust Company for the [P] Family Trust. We then realized that the mortgages could be deemed to be invalid. However, we did not notify the Bank or Elders, as it has never been our intention not to honour any of our obligations. This is evidenced by the payment of $10,000.00 into the Hacide Bank account after the receipt of the Bank's letter to us of 2nd February, 1987.

We advise we will be happy to discuss this matter further with you at a convenient time.

Please note that we intend to pay you out in full but any attempt by you to enforce the mortgage in a manner which is not lawfully open to you will be resisted."

This letter marks the first occasion in the evidence when Hacide or Mrs P suggested mortgages might be invalid. The suggestion was not based on non existence of a Bill Discount Facility, the non giving of No 52 as security to the Bank or anything of that kind. In fact the letter acknowledged that mortgage documents were drawn up in the name of Hacide as well as the existence of the Hacide account with the Bank in overdraft by reason of being debited with the amount due on the second Bill when it matured in May 1986. The position suggested as a possibility by the writer of the letter was not that the indebtedness had not been incurred nor the security or the Bills given but that, those things all having happened, the mortgage might be invalid because given by Hacide in breach of trust.

The position with which the judge had to deal at the trial is again shown starkly by a letter dated 6 October 1987 signed by Mrs P for Hacide, to the Bank, and the cross examination upon it. The letter was headed "Without Prejudice", but was admitted in evidence, a decision of the judge not questioned in the appeal. The letter began by referring to Mrs P's letter of 10 April 1987 and repeated the idea that Hacide did not own No 52, because it was owned by the P Family Trust. The closing paragraph of the letter said: "We re-iterate, Hacide Pty Ltd does not own the abovementioned property and therefore has no power to give this property as security and therefore no right to borrow against the property. Notwithstanding this, it does recognise the credit facility given to it by the bank and will, together with reasonable interest, repay the bank as soon as practicably possible. We hope to put a proposition to the Bank shortly in an effort to resolve the situation."

Part of the cross examination on the letter went as follows:

"Q. Mrs P, what credit facility did you on behalf of Hacide recognise in that letter? A. I didn't. That letter was not drafted by me.

Q. What credit facility did you on behalf of Hacide recognise in that letter? A. None. Hacide did not have a credit facility.

Q. What was it, precisely, that you undertook to repay together with reasonable interest to the Bank in that letter? A. I don't know, Mr Murr.

Q. Did you read it before you signed it? A. No I didn't.

HIS HONOUR: Q. Do you know who drafted it? A. I believe counsel drafted it, your Honour."

Cross examination about the letter went on for a number of pages, but to the extent that Mrs P's answers conveyed any meaning, it did not make matters any better from her point of view than the excerpt I have set out.

The Bank filed its summons seeking judgment for possession on 25 March 1988. The first document filed by Hacide was filed on 2 June 1988 under the title "Cross Claim". This document sought a declaration that Hacide held No 52 as trustee for certain beneficiaries free of the Bank's mortgage, a declaration that the Bank was not authorised to complete and cause to be registered the mortgage, an order that the Bank execute a discharge of the mortgage and in the alternative to the preceding, a declaration of the amount required to be paid by Hacide to obtain a discharge, together with consequential orders. It may be that the second declaration sought was merely a corollary to the first, or it may be that it involved the assertion which was later pursued at the trial and has been further pursued in this appeal to the effect that Hacide had never authorised or intended to authorise the Bank to take No 52 as security for advances. If the explanation for the claiming of the second declaration is the latter of the two I have mentioned then it is the first indication I have been able to find in any of the materials available to this court of the stance taken up by Mrs P later in the proceedings and at the trial.

The appellant's primary submission in the appeal was summarised in its outline of submissions as being that "the documents [that is, those executed in blank] were executed and delivered to the Bank in connection with overdraft accommodation granted to Zeus... on or about 29 March 1985 and that the Bank's authority to complete the documents was limited... to that transaction and... to the property to be security for that transaction... [the] Caringbah [property]".

In support of the submission the court was asked to look at the documents relating to the transactions by which Zeus's account was debited with amounts made available by the Bank for land tax and stamp duty in isolation from the transaction by which $360,000 was dealt with at Hacide's direction on 3 May 1985. An effort was also made to suggest that the dating of the Bill of Exchange at 7 May 1985 and the notifying letter of that date from the Bank to Hacide showed that in some way what took place on 7 May was separate from what had taken place at the settlement on 3 May.

When the documents concerning the Zeus overdraft were looked at in complete isolation from those concerning Hacide's $360,000 they were difficult to understand. Some of the difficulties lent some transitory plausibility to the appellant's contentions. So too did the sparseness of the evidence concerning the signing of the Bill of 7 May 1985. However, when the sequence of events was looked at in order of occurrence and the relationship of the various transactions considered, any possibility of accepting the appellant's contention disappeared. I have earlier given my reasons for thinking that at the interview of 19 December 1984 between Mr Byrne, Mr W and Mrs P both the Bank and Mrs P were contemplating that at the conclusion of the Elders settlement, Elders would be holding the Certificate of Title to the Caringbah property as security, and the Bank the Certificate of Title to No 52. I have also indicated my reasons for thinking that this position remained the same when Mrs P spoke to Mr Byrne towards the end of March 1985, just before going overseas. That is, at the time the documents executed in blank were delivered to the Bank, the mortgage the

URJ HACIDE PTY LTD v COMMONWEALTH BANK OF AUSTRALIA (Clarke JA) 19

Bank was going to need in order to take part in the Elders settlement was a mortgage of No 52, not the Caringbah property. This in itself is enough to defeat the point sought to be made for the appellant in the appeal.

Further, however, the things done by the Bank leading up to the Elders settlement were not only consistent with this view of what the Bank was to do in connection with Mrs P's arrangements, but inconsistent with the point now put forward on her behalf which is itself inconsistent with what was actually done at the settlement.

Although, as I have earlier remarked, the absence of evidence concerning the way in which Mr W obtained his knowledge of what was to happen at the settlement on 3 May 1985 is a little strange, as is the similar dearth of evidence concerning the actual circumstances of the signing of the Bill dated 7 May 1985, nevertheless, Mr W did get accurate instructions from somewhere and they can only have originated with either Mr Fordyce acting for the P interests, or Mrs P. The settlement as organised by Mr Fordyce could not have gone forward without the Bank doing what it did. All the Bank's documentation surrounding the settlement of 3 May 1985 is consistent with the Bank having in its possession a Bill signed for Hacide and inconsistent with its not having possession of such a Bill.

When the course of events following the Elders settlement is scrutinised, it likewise is only consistent with the Bank's having a Bill at the time of the settlement and having dealt with the $360,000 on the strength of the Bill and of getting the Certificate of Title to No 52. Mrs P did not contest that the Bank had the necessary blank forms for completing a mortgage in registrable form of No 52; once her contention that those forms were only to be used in regard to the Caringbah property is rejected, the only plausible use for them that remains is for bringing into existence a registrable mortgage of No 52.

On the evidence, the actions of the P interests from the time of the Elders settlement at least until the filing of the cross claim in 1988 are consistent with what the Bank has asserted is the correct position and inconsistent with Mrs P's very late raising of the contentions that Hacide never had a Bill Discount Facility and had never obtained any advance from the Bank on the security of No 52.

One argument advanced for the appellant was that the onus lay on the Bank of showing that it had authority to fill in the mortgage documents in the way that it did. In my opinion, the evidence overwhelmingly shows that the Bank did have that authority. It also seems to me, although it does not matter in this case, that the onus lay not on the Bank but on the appellant of impeaching the validity of the registered mortgage. Once registered, the mortgage could only be displaced by the party impeaching it showing some reason why, as between that party and the registered mortgagee, a mortgage valid on the face of it and duly registered under the Real Property Act should be treated as invalid: Frazer v Walker [1967] 1 AC 569 at 584-5.

In my opinion the appeal should be dismissed with costs.

Appeal dismissed with costs. Counsel for the Appellant: R Hulme QC / J. Van Aalst Counsel for the Respondent: DH. Muir

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