HEINRICH v COMMONWEALTH BANK OF AUSTRALIA No. SCGRG-93-1648 Judgment No. S210 [1999] SASC 210

The proceedings were commenced in September 1993 when the Commonwealth Bank issued a summons seeking possession pursuant to Part XVII of the Act, Mr Heinrich allegedly being in default under the mortgage.

Subsequently, the Commonwealth Bank abandoned its claim for possession, and in the same proceedings substituted a claim for the money said to be due on the loans. In its statement of claim, filed about two and a half years after the proceedings had commenced, namely, in February 1996, it sought repayment of $384,393.01 said to be the amount due and unpaid at that stage, together with interest calculated at a daily rate of $106.59.

By the time the trial commenced, which was some three years after the filing of the statement of claim, namely, in February 1999, the arrears said to be due had risen to $612,448.62, and the daily rate of interest accruing on that amount was said to be $162.76.

The pleadings upon the basis of which the matter went to trial, reflect no credit on either party or their advisers. The statement of claim, instead of simply asserting the loan contract and the default under it, contains assertions irrelevant to the plaintiff's claim, relating to the discharge of a prior encumbrance, namely, a mortgage by Mr Heinrich to Miss A.R. Heinrich. As will be seen, that irrelevant plea has spawned an equally irrelevant plea in the defence, creating a false issue which is a distraction to the orderly disposal of the trial. Other matters pleaded in the statement of claim, which were likewise irrelevant to its asserted entitlement to repayment of the moneys due on the loan contracts, were alleged defaults by Mr Heinrich in compliance with a notice of sale given under s132 of the Act and a notice given under s55A of the Law of Property Act 1936.

Notwithstanding the pleading of those irrelevancies, the Commonwealth Bank's statement of claim serves to make it clear that its claim is limited to repayment of the principal and interest due on the loans paid to Mr Heinrich.

In paragraph 10 of the Commonwealth Bank's statement of claim, Mr Heinrich's alleged failure to repay the loans is said to be in breach of the covenant to pay contained in the mortgage. But alternatively (in paragraph 10A) the plaintiff asserts that "If the defendant is not bound by the covenants in the mortgage, which is denied", Mr Heinrich owes the money on a simple money count, that is, as "moneys loaned and interest".

It is important to note that on the hearing of the appeal, Mr Lunn for the Commonwealth Bank eschewed any reliance at all upon the mortgage, and indicated that the plaintiff proceeded on the money count alone.

As for Mr Heinrich's defence, this suffers by reason of the fact that for most of the time since the action was commenced, he has been unrepresented.

In the form in which it stood at the time of the commencement of the trial, the defence and counterclaim ran to 100 pages. During the pre-trial hearings, attacks were mounted by the Commonwealth Bank upon the terms of the defence and counterclaim, in some instances successfully. In other instances it simply gave up, reserving its rights to pursue its claim at the time that many of the pleadings were irrelevant or vexatious. It is clear from the history of the interlocutory proceedings that if the Commonwealth Bank had not taken that course, there was a risk that the matter would never reach trial.

The defence and counterclaim is a convoluted and obtuse document. It is the product of various pre-trial applications to amend, the history of which is set out in the reasons of the learned trial judge for the rulings the subject of the appeal. No useful purpose would be served by repeating that history now. I think it better simply to address the defence and counterclaim in the terms in which it stands, and endeavour to identify from it the bases upon which the Commonwealth Bank's claim is resisted, and the nature of the counterclaims, including the factual and legal basis upon which they are advanced.

Mr Heinrich's defence and counterclaim is, in the main, drafted in an anecdotal and narrative fashion, replete with much that is irrelevant. It commences by indicating that prior to his dealings with the Commonwealth Bank, he had certain loans with the ANZ Bank, with whom, for various reasons, he fell out. Following that, he approached the Commonwealth Bank with a view to taking his banking business to them in lieu of the ANZ Bank. He dealt with Mr Saunders, the Commonwealth Bank's manager at its Kadina branch. Mr Heinrich refers in the statement of claim to a number of meetings with Mr Saunders, during the course of one of which Mr Saunders is alleged to have said, "The Commonwealth Bank will match anything that the ANZ Bank had provided to you".[1]

15 Mr Heinrich concedes that eventually an agreement was reached between him and Mr Saunders on behalf of the Commonwealth Bank for the Commonwealth Bank to take over from the ANZ Bank and to re-finance him on various terms set out in the defence.[2] Amongst the terms which he asserts is his allegation that the property to be offered by Mr Heinrich by way of security was to be a property situated at Aldgate, and furthermore, that at no time would the Commonwealth Bank seek as security the Maitland land.

16 Apart from allegations that the Commonwealth Bank would act in accordance with its fiduciary duties towards him, the defendant asserts that the Commonwealth Bank would "always act and behave within the plaintiff's specific conduct guidelines and in general diligently abide by and act in accordance with all State and Commonwealth laws and guides which apply to the banking industry".[3]

17 In the course of his dealings with Mr Saunders, Mr Heinrich asserts that Mr Saunders sent to him what he describes as "two blank memoranda of mortgage documents" for Mr Heinrich to sign.[4] Mr Heinrich says that he signed the Memorandum of Mortgage in blank, and returned them to the Commonwealth Bank's Kadina branch.

18 In fact it is common ground that a Memorandum of Mortgage was signed with respect to the Maitland land. Mr Heinrich's pleadings as to the circumstances of this are, to say the least, confusing.[5] He seems to be admitting that he signed such a mortgage knowing it to be a mortgage on the Maitland property, but notwithstanding that fact, that he was asked to do so was in breach of a verbal understanding reached between him and Mr Saunders.

19 There are then a number of allegations in the defence and counterclaim to do with dealings with Miss A.R. Heinrich. Mr Heinrich asserts that Miss Heinrich's signature to a document in which she advised the Commonwealth Bank of the amount due to her on the mortgage to her was obtained "under false pretences and misrepresentation".[6] There follow a number of other pleadings to do with the Commonwealth Bank's dealings with Miss Heinrich.

20 As I have indicated, in the first place, the allegations concerning Miss Heinrich in the Commonwealth Bank's statement of claim were otiose, and it seems to me that the pleadings concerning the Commonwealth Bank's dealing with her, which appear in Mr Heinrich's defence, are equally irrelevant. She is not a party to the action, and the circumstances in which a discharge of the mortgage to her was obtained could not give rise to a ground of defence or counterclaim by Mr Heinrich in these proceedings.

21 At all events, Mr Heinrich, by way of some sort of peroration to the irrelevant pleadings concerning Miss Heinrich, denies breaches of any "alleged loan agreements" and denies that the plaintiff is entitled to any of the relief which it seeks in the statement of claim.[7]

22 The rest of the defence is taken up with pleadings under the heading Counterclaim.

23 The first ground under that heading,[8] asserts:

"By virtue of the matters pleaded herein, the defendant is not entitled to receive the said sum of $348,393.01 and interest calculated at the daily rate of $106.59 from the plaintiff".

24. A lengthy plea follows in which Mr Heinrich asserts that he "incorrectly paid interest to the total sum of $388,213.55" (sic) between dates in 1985 and 1992, and claims "the reimbursement of this wrongfully paid interest".[9]

Mr Heinrich then asserts that representations by Mr Saunders made in order to induce Mr Heinrich to transfer his banking business from the ANZ Bank to the Commonwealth Bank were "deceptive".

25 While it is difficult fully to understand the particularity asserted in that respect, part of it at least seems to have to do with the creation of a "bill" facility by the Commonwealth Bank.[10] There is a further plea that "the defendant acted in an unconscionable manner towards the plaintiff which resulted in the defendant causing the plaintiff further losses".[11] [The plaintiff and defendant have been transposed, presumably to indicate plaintiff and defendant by counterclaim.] Particulars of the alleged "unconscionable" conduct on the part of the Commonwealth Bank relate to the circumstances of the execution of the mortgage over the Maitland property and the suggestion, apparently made by another officer of the Commonwealth Bank, a man named Clark, to sell the Aldgate property, as well a certain ultimatums given by another of the Commonwealth Bank's officers, a Mr Hardman. Details of the settlement of the sales of both the Aldgate and another property, and another property at Hackham, are then pleaded.

26 The basis upon which Mr Heinrich proceeds to counterclaim that he suffered a number of losses by reason of the sales of the Aldgate and Hackham properties is not clearly pleaded, although a general allegation to that effect appears in Mr Heinrich's pleading.

27 He further asserts that the Commonwealth Bank "exercised duress" upon him "in an unconscionable manner in an attempt to destroy him financially and seize his asserts".[12] That allegation is followed by a number of particulars relating to the management of the various accounts of Mr Heinrich by the Commonwealth Bank.

28 After pleading certain breaches alleged of Commonwealth legislation relating to the business of banking, and also provisions of the Commonwealth Constitution, Mr Heinrich pleads that:[13]

"... he and his family were deprived of their property and rents by the actions of the Bank in breach of the said Common Law, Constitution and derivative statutes."

29. He asserts further that the Commonwealth Bank "having had the requisite powers and duties conferred upon it by Parliament, failed in its duty to ensure that its policies were directed to the greatest advantage of the plaintiff and the stability and balanced development of the Australian economy".[14]

30 At that stage of the pleading, Mr Heinrich then asserts a number of alleged breaches of duty on the part of the Commonwealth Bank by reference to its conduct in relation to what is described as a "Bills Discount Facility".[15] Various "bills" are alleged to be "defective and illegal" by reason of the alleged failure to comply with no less than seven statutory provisions, including s51(xii) of the Commonwealth Constitution. Lengthy pleadings then follow detailing much the same complaints with respect to the Commonwealth Bank's dealings with a number of specified bills.

31 At the end of those lengthy allegations, namely, in para 270.1 of the defence and counterclaim, Mr Heinrich "... denies that the defendant is entitled to the relief sought in paragraph 12 of the defendant's more explicit statement of claim or any relief at all".

32 Finally, Mr Heinrich advances a plea at the conclusion of the defence and counterclaim under the heading Summary.

33 In the summary, which takes the form of an extended prayer for relief, Mr Heinrich asserts that various representations made by Mr Saunders in 1985 were "false" and "deceptive" in various respects; and that whilst "misled and deceived" by Mr Saunders' representations, Mr Heinrich changed from ANZ Bank to the Commonwealth Bank.[16] Importantly, in para 319, Mr Heinrich pleads, "The plaintiff hereby rescinds the said loan accommodation and any other loan agreement with the defendant", the basis of the rescission being the alleged misrepresentations.[17]

34 He further claims[18] various declarations that by reason of infringement of various State and statutory provisions "the said accommodation and memoranda of mortgage are void"[19] and have been rescinded[20] as a result of which he seeks a refund of an amount in excess of $388,000, said to be the amount of interest paid "in consequence of the defendant's misrepresentation and misleading statements", and certain other losses said to have arisen by reason of the sale of the Hackham and Aldgate properties. Further declarations are sought to much the same effect on various alternative bases, including "fraudulent misrepresentation".[21]

35 Para 322.6 asserts that the claim to relief by way of a declaration that the Commonwealth Bank has engaged in "misleading and deceptive conduct by not bringing accrued interest income to account for the purposes" of various provisions in the Income Tax Assessment Act 1936, and by reason of the alleged irregularities against that Act and the Corporations Act 1989. That plea includes an assertion that the Commonwealth Bank misrepresented and deceived "322.6.2 the taxpayers of Australia into believing that the Defendant was a trustworthy corporate citizen who took its income tax obligations seriously enough to be granted a prudential audit status while in fact it defrauded the Commonwealth through not properly preparing its assessable income and claiming against its declared items of assessment income, deductions to which it was not entitled to make ...." (sic) and other allegations in a similar vein.

In written reasons for the ruling which is the subject of the present appeal, the learned trial judge refers to the basis upon which she allowed the matter to proceed to trial, having regard to certain orders which she made and understandings which she noted at a directions hearing which took place on 4 February 1999 when Mr Fitzgibbon of counsel appeared for Mr Heinrich. As to that occasion, she said:

"There was still considerable confusion arising out of the purported amendments to the pleadings. It appeared that yet another version of the proposed amended pleadings had been produced. Some of the issues arising out of the second action had been included in the present action by way of amendment but, in addition, other aspects of the present action had also been amended, and the manner of amendment was confusing. Mr Lunn articulated the difficulty that the Bank had in pleading to the pleadings in the form presented. He again raised his anxiety to maintain the scheduled trial date. Eventually, in an endeavour to resolve the matter, and in order to give Mr Heinrich a chance to put everything before the court, Mr Lunn indicated that the Bank would agree to the proposed amendments on the basis that Mr Fitzgibbon confirmed that the pleadings, as now amended, represented the case which Mr Heinrich would pursue at trial. He also asked that the pleadings be certified by Mr Fitzgibbon pursuant to SCR 46.04(1)(g) and that Mr Fitzgibbon further certify that the case for Mr Heinrich would be ready to proceed on the appointed date if the Bank delivered its answer to the pleadings by Monday 8 February 1999 as ordered. On that basis, the trial could commence and the Bank would pursue its case on the basis that it would: 1. Open and tender documents already admitted or admissible under Statute. 2. Call witnesses in its own case and make them available for cross-examination until the stage at which the issue of Mr Heinrich's pleadings became important. At that time, the Bank would seek a ruling on all disputed pleading aspects under SCR 75.02(c). Mr Lunn mentioned that the first witness for the Bank would be Mr Saunders, the bank manager of Heinrich's bank from 1985 to 1987, whose evidence, with one possible qualification, appeared to be unexceptional. At some point, however, and before he was released, the pleadings matters could be resolved. 3. Mr Lunn would not proceed to the next witness unless it was clear that there was no need to recall the last witness as a result of any disputed matter of pleading. 4. The Bank, on that basis, would conduct its case strictly on the pleaded issues."

The trial commenced on 11 February 1999. Following the opening by Mr Lunn for the Commonwealth Bank, there was an adjournment for reasons unrelated to these proceedings until 22 February 1999, when the trial resumed.

On that date, Mr Lunn called the first witness for the Commonwealth Bank, Mr Saunders, who deposed to his dealings with Mr Heinrich, more particularly the circumstances in which the mortgage came to be executed. It appears that Mr Heinrich does not deny signing the Memorandum of Mortgage, but denies signing it in Mr Saunders' presence. Mr Saunders' evidence was to the effect that he thought the mortgage was executed at the Kadina branch of the Commonwealth Bank, rather than at Mr Heinrich's farm property at Maitland.

That aspect of the matter became the subject of vigorous cross-examination by Mr Fitzgibbon, who produced an affidavit sworn by Mr Saunders at an earlier stage of the proceedings in 1994, when Mr Saunders deposed to the fact that the mortgage had been executed at Mr Heinrich's property.

Eventually, the trial was adjourned until Wednesday 24 February 1999 when Mr Saunders' cross-examination was resumed but not completed. As Mr Saunders was not able to resume his evidence until 26 February 1999, the learned trial judge then commenced hearing the Commonwealth Bank's application to strike out portions of the defence and counterclaim. The arguments on those topics was interrupted by Mr Lunn calling an interstate witness, a Mr Clark.

When Mr Fitzgibbon commenced making responding submissions, he produced a document which included further proposed amendments.

At all events, before the completion of the arguments advanced by counsel on the pleading issues, Mr Fitzgibbon resumed cross-examination of Mr Saunders on 26 February 1999. Before completing his cross-examination, Mr Fitzgibbon then made an application in the absence of Mr Saunders submitting to the learned trial judge that she should deliver the transcript of the evidence of Mr Saunders and various documents with which Mr Saunders had been associated to the Attorney-General, on the basis that the Attorney might then be given the opportunity to consider whether Mr Saunders had been guilty of perjury.

At the same time, Mr Fitzgibbon applied to amend the pleading in order "to re-plead all of the pleadings in terms of fraudulent conduct".

The learned trial judge refused the application to refer the matter to the Attorney-General on the basis that any such application was both inappropriate and premature, given that Mr Saunders had not yet completed giving his evidence and had denied various allegations which had been put to him. Any conflict on the evidence given by him had not been resolved by any findings.

Mr Fitzgibbon then pursued his application to amend the pleadings. His application was stood over until the precise amendments were formulated by him.

When Her Honour eventually received detail of the proposed amendments and had heard further argument from counsel, she proceeded to strike out various paragraphs of the defence, and refused the application to amend, or at least most of the proposed amendments.

The amendments pursuant to which Mr Fitzgibbon, on behalf of Mr Heinrich, wished to raise fresh allegations of fraud were described by the learned trial judge in these terms:

In a matter in which a party seeks to allege such serious matters as fraud and criminal conduct, it is essential that the specific conduct relied on be clearly identified so that the other party knows precisely the case it has to meet. That becomes of even greater importance in a case such as this, where the allegation is sought to be made at such a late stage of the proceedings. The consequence of this amendment would be to require the Bank to meet a case which, for all intents and purposes, is completely different from that which has been on foot for nearly six years. The execution of the mortgage is fundamental to the Bank's proceedings against Heinrich. The dispute as to the manner in which the mortgage was executed is of long-standing. The mortgage document is one of the many documents which has been the subject of extensive pre-trial discovery and therefore available for inspection by Heinrich. The attestation clause on that document states that it was executed in Saunders' presence at Kadina as opposed to the statement by Saunders in his affidavit that it occurred at Maitland. Heinrich presumably read that document at least five years ago and should therefore have been aware well prior to trial of that conflict. The majority of the proposed amendments seek to raise allegations of misrepresentation and/or fraud against Saunders, at a time when Saunders has completed his evidence. Several of the matters now sought to be included were not even put to Saunders in the course of his cross-examination. For example, the proposed amendments to paras 272 to 275, inclusive, of the counterclaim see to introduce the concept that Saunders had 'constructive knowledge that the plaintiff may have left school at a young age due to a learning difficulty'. It asserts negligent conduct by Saunders in failing to act in a proper and professional manner, failure to disclose to Heinrich the possible financial consequences of incurring further debt, failing to explain details of loan accounts and banking facilities. It also alleges a failure to make any proper enquiries of Heinrich concerning his ability to read and understand written documents, and Heinrich's failure to make any proper enquiries as to Heinrich's level of education, understanding of written and oral language or his reasons for leaving school at such a relatively young age. None of these matters has previously been raised in the pleadings. Saunders was not asked any questions about his 'constructive knowledge' of Heinrich's limited understanding of these matters. The proposed amendment purports to introduce a new cause of action of negligent conduct arising out of the actions of a witness whose evidence has been completed on facts well known to the defence prior to the commencement of the trial. To permit such an amendment at this stage of the proceedings would be, in my view, grossly unfair."

I have not so far referred to the detail of the allegations of fraud which are central to the amendments which Mr Heinrich proposed and which were disallowed by the learned trial judge. In essence, the proposed amendments convey the plea that Mr Saunders was guilty of fraudulent conduct in obtaining Mr Heinrich's signature on blank forms of mortgage; in completing details which effectively meant that one at least of the mortgages attached to the Maitland property, contrary to assurances which had been given to Mr Heinrich that the Maitland property would not be involved; and in altering various internal records of the Commonwealth Bank to do with the transaction.

As a particular of the fraud, it is also asserted that Mr Saunders falsely swore that Mr Heinrich was present at Kadina when he executed the mortgage, whereas in fact Mr Heinrich says that he was never at Kadina on that date.[22]

But of course, any subsequent false testimony by Mr Saunders, while it may be indicative of an attempt to conceal a fraud, could not itself be indicative of fraud tainting the transaction at the time it was entered into.

50 Be that as it may, the proposed amendments included the assertion[23] that the creation of the Maitland mortgage was "fraudulent" and the mortgage "is a sham" by reason of the Commonwealth Bank's fraud, misleading and deceptive conduct, unconscionable conduct, negligence and fraudulent misrepresentations. The proposed pleading further asserts that the Commonwealth Bank is "estopped" in equity "from enforcing any loan contracts" because the (Maitland) "mortgage is void ab initio by reason of fraud".

51 Further extended particulars of the alleged fraud are set out in proposed para 276.2, but they centre, as do the other allegations, on the circumstances in which it is alleged that the Maitland mortgage was executed, and the alleged alteration of internal records of the Commonwealth Bank. However, I note that the allegations are extended at one stage[24] to encompass the Commonwealth Bank's dealings with Miss Heinrich.

52 In my opinion, the proposed amendments alleging fraud on the part of the Commonwealth Bank pleaded matters which were untenable, and for that reason could not properly be allowed, for reasons more fundamental than those identified by the learned trial judge in her reasons for her ruling.

53 Insofar as the learned trial judge founded her disallowance of the proposed amendments upon her view that to permit such amendments at that stage of the proceedings would be "grossly unfair", that was a view which was perfectly understandable and justifiable, given the history of the matter and the difficulties experienced by her in achieving any degree of clarity at all in Mr Heinrich's pleadings during the course of the lengthy pre-trial hearings conducted by her, and also having regard to the various assurances given to her by Mr Fitzgibbon before the matter was finally listed for trial.

54 However, where, as was the case here, for most of the time when the pleadings were prepared and filed by Mr Heinrich, he was unrepresented, and there were obvious difficulties confronting Mr Fitzgibbon when he was briefed to represent Mr Heinrich, late in the day, the Court must be astute to ensure that, even although the pleadings, including here the proposed pleadings, appear riddled with irrelevancy and vexatious allegations, there is not buried within them some matter which deserves to be ventilated at the trial and adjudicated upon. Even if allegations come very late in the day, as in this case when they are made for the first time during the course of the trial, every effort should be made to ensure that genuinely justiciable issues are addressed.

55 In that connection, I refer to the decision of Kirby J in Attorney-General for the Commonwealth of Australia and Anor ex parte Skyring.[25] That case concerned Mr Skyring, who had been declared a vexatious litigant by order of the High Court. The question arose whether certain proceedings which he wished to issue raised matters already dealt with in earlier proceedings. In the course of his judgment, Kirby J observed:

"I approach the application by Mr Skyring for leave to proceed on the three proceedings .... with the following considerations in mind: First, it is always important for every Judge to keep an open mind in case a person who has been rejected by courts in the past may have, hidden amongst the verbiage of his or her arguments, a point which has not been previously seen and which may have merit. Vigilance, and not impatience, are specially required where that person is not legally represented; .....Mr Skyring appears before me today unrepresented. If he had commenced proceedings by an irregular process which had any separate or different merit from the matters which have already been determined by the Court, I would endeavour to assist him to get such proceedings into proper form or require him to commence again in proper form. I would not dispose of his application upon such a formal basis;"

Here, although Mr Fitzgibbon has represented Mr Heinrich at certain times, in the main, he has been unrepresented. In any event, I think it important to try to determine from the pleadings which have been struck out whether they raise matters which, in fairness to the defendant, should be allowed to go to trial.

However, it seems to me on a close perusal of the amendments which were struck out that they do not raise any factual matters which could possibly give rise to a finding of fraud of a kind which could either extinguish the Commonwealth Bank's entitlement to repayment of the loan, with interest, or give rise to a separate cause of action which could support an award of damages in favour of Mr Heinrich.

In an endeavour to ensure that I had not overlooked anything in the course of perusing the proposed amendments, and in case there were matters which Mr Heinrich wished to raise which might not clearly appear from the proposed amendments, during the course of the presentation of Mr Fitzgibbon's argument on the appeal I invited him to indicate whether or not the allegations of fraud went beyond factual allegations associated with the circumstances in which the mortgage over the Maitland property was executed. He indicated clearly that there were no relevant factual allegations which extended beyond that, although, as will have been seen, the proposed amended pleadings embodied the suggestion that in some way the Commonwealth Bank is estopped from enforcing its entitlement to repayment of the loan by reason of any such fraud, if established.

There are a number of answers to the points taken by Mr Heinrich which are fatal to the proposed amendments.

In the first place, even if the circumstances of the execution of the mortgage were affected in some way by fraudulent conduct on the part of Mr Saunders, this could not possibly impinge upon the Commonwealth Bank's entitlement to repayment of the loan and interest. The Commonwealth Bank now eschews reliance upon the mortgage, and it no longer seeks possession of the mortgaged property from Mr Heinrich. Even if Mr Heinrich was to be successful in obtaining rescission of the mortgage, this could only be granted on condition that he brought into account in the process of effecting restitutio in integrum, what was due on the mortgage: see Langman v Handover,[26]

Maguire and Anor v Makaronis and Anor,[27] Mayfair Trading Co Pty Ltd v Dreyer and Ors,[28] and Bank SA v Ferguson.[29]

61 In the latter case, the High Court held, reversing the decision of the Full Court of this Court, that fraud said to attach to the circumstances in which a mortgage was granted by one of its customers to the Bank of South Australia Ltd was not such as possibly to justify the conclusion that the mortgage was liable to be set aside by reason of the fraud.

62 In the course of their joint judgments, Brennan CJ, Gaudron, McHugh, Gummow and Kirby JJ observed:[30]

"Further, even if a case for rescission had been made out, there appears from the facts to have been no reason to deny the application of the requirement of restitutio in integrum. It is scarcely to be supposed that the land might be relieved of the burden imposed by the registered security and the creditor be left not only unsecured but with an irrecoverable loan."[31] (emphasis added)

63. In this case, whatever may be the position with respect to the mortgage, Mr Heinrich must bring the moneys owed on the loans to him into account. This is so, whether he seeks rescission of the mortgage or rescission of the loan contract itself.

64. In any event, there is no point in entertaining an action for rescission of a mortgage when the bank no longer relies upon the mortgage.

65. The same position applies insofar as other proposed amendments attempt to set up a case for rescission based upon "unconscionability". Unconscionability of the kind proposed to be asserted might justify an order in equity preventing a bank from enforcing a security, as was the case, for example, in Commercial Bank of Australia Ltd v Amadio and Anor.[32]

But it could never operate in circumstances such as those which exist in this case to relieve Mr Heinrich from the obligation to repay the loan and interest upon it, given that he has had the use of the moneys. In that connection, it is important to note that there is no suggestion in the proposed amended pleadings that the interest rate was such as might justify a finding that the bargain was of the nature of a "catching bargain" in the sense in which that expression has been used in equity.[33]

66 I would dismiss the appeal insofar as Mr Heinrich challenges the learned trial judge's ruling disallowing the proposed amendments to the defence and counterclaim.

Parts of the existing Defence and Counterclaim struck out by the Trial Judge

67. As I have explained, a number of paragraphs of the defence and counterclaim in the form in which it was expressed at the commencement of the trial, were struck out on the application of the Commonwealth Bank. These were allegations which, in part, suggested that the Commonwealth Bank had in some way understated its income and over-stated its assets in its internal accounting, which was said to "erode the public confidence in the presented profit and loss statements, balance sheets, share price and its honesty in trading",[34]

and was in breach of various provisions of Commonwealth legislation to do with the control of banking and income tax. There are other allegations which amounted to an assertion that the Commonwealth Bank had failed to apply proper accounting and other principles in writing off bad debts and is said to have been in breach of the Corporations Law 1989, more particularly in the manner in which it prepared its profit and loss statements and balance sheets.[35]

68 Quite apart from any other considerations, Mr Heinrich clearly lacks standing to bring those allegations, which had nothing to do in particular with the transaction between him and the Commonwealth Bank. Even if he had standing, the allegations were irrelevant to any defence which he might properly mount to the Commonwealth Bank's claim against him, or as identifying any possible cause of action which could be pursued by way of counterclaim against the Commonwealth Bank.

69 The paragraphs in question were properly struck out by the learned trial judge.

71. MULLIGHAN J. I agree that the appeal should be dismissed for the reasons given by Perry J.

25. Butterworths Unreported Judgments, 26 February 1996, BC9600608.

26. [1929] HCA 42; (1929) 43 CLR 334.

27. [1997] HCA 23; (1996) 188 CLR 449.

28. [1958] HCA 55; (1958) 101 CLR 428.

32. [1983] HCA 14; (1983) 151 CLR 447.

33. The equity which was recognised in Amadio's case has its origins in the willingness of courts of equity to relieve against "catching bargains". See, for example, the observations of Lord Hardwicke in Earl of Chesterfield v Janssen [1750] EngR 119; (1751) 2 Ves Sen 125 at 155[1750] EngR 25; , 28 ER 82 at 100. See also Earl of Aylesford v Morris (1873) LR 8 Ch App 484 per Lord Selborne at 489.

[25] Butterworths Unreported Judgments, 26 February 1996, BC9600608.

[26] [1929] HCA 42; (1929) 43 CLR 334.

[27] [1997] HCA 23; (1996) 188 CLR 449.

[28] [1958] HCA 55; (1958) 101 CLR 428.

[31] Citing Maguire v Makaronis (supra).

[32] [1983] HCA 14; (1983) 151 CLR 447.

[33] The equity which was recognised in Amadio's case has its origins in the willingness of courts of equity to relieve against "catching bargains". See, for example, the observations of Lord Hardwicke in Earl of Chesterfield v Janssen [1750] EngR 119; (1751) 2 Ves Sen 125 at 155[1750] EngR 25; , 28 ER 82 at 100. See also Earl of Aylesford v Morris (1873) LR 8 Ch App 484 per Lord Selborne at 489.