Jaeger v Bendigo and Adelaide Bank Ltd

The proceedings at first instance

1. Bendigo and Adelaide Bank sued as the lender on the first, third, fourth, fifth, sixth and seventh loans. It had not lent any money to Mr Jaeger itself; it sued as the successor to the original lenders' assignee, Adelaide Bank. It pleaded its entitlement to sue thus: "Subsequent to the date of the Loan Deeds, the First Plaintiff acquired all of GSF or ABLN's right, title and interest in the: (a) First Loan Deed, Third Loan Deed, Fourth Loan Deed, Sixth Loan Deed and Seventh Loan Deed and by letter dated 30 April 2009, notice was given from the First Plaintiff to the Defendant at xxx Bondi NSW 2026; and (b) Fifth Loan Deed and by letter dated 3 June 2009, notice was given from the First Plaintiff to the Defendant at xxx Bondi NSW 2026."
2. Thus six alleged assignments to Adelaide Bank, and the vesting thereafter of those choses in action to Bendigo and Adelaide Bank, were rolled up in a single allegation, which also addressed notice to Mr Jaeger.
3. If particulars were sought and provided of that allegation, they were not in evidence.
4. Mr Jaeger's defence made no challenge to the efficacy of any of the assignments. Indeed, it admitted it. The amended defence on the basis of which the trial commenced merely pleaded in response to that allegation: "The defendant admits that he received correspondence on that date from the first plaintiff, but denies that it referred to any deed".
5. When it was pointed out during the opening at the trial that the failure to traverse part of the allegation amounted to an admission pursuant to UCPR r 14.26, senior counsel (who appeared both at first instance and in this Court on behalf of Mr Jaeger) applied to amend. In due course an amendment was permitted adding that the defendant "does not know and cannot admit the assignment of any loan".
6. During the Bank's opening, the primary judge was taken to the transactional documents pursuant to which the loans were purportedly assigned by Great Southern Finance and ABL Nominees to Adelaide Bank. The principal document relied upon was a "Second Deed of Amendment" which made a series of amendments to a "Loan Sale and Servicing Deed" between Great Southern Finance, ABL Nominees, Adelaide Bank and Great Southern Managers Australia Ltd, and which, in its amended form, was a schedule to the deed. It will not be necessary to summarise the other transactional documents.
7. Clause 2 of the Loan Sale and Servicing Deed (as amended) was headed "Assignment and origination of loan rights". Clause 2.1(a) authorised the delivery of a "Sale Notice" to Adelaide Bank, which was, relevantly, to be in the form of Schedule 3 and to satisfy various other requirements stated in cl 2.2. Clause 2.4 provided that the delivery of a Sale Notice constituted an offer by the Seller to assign to that Purchaser with effect from the Cut-Off Date and subject to the terms of the deed the Seller's entire right, title and interest in each Loan identified in an accompanying Settlement Report and all rights in respect of or connection with each Loan.
8. Clause 2.5 provided that acceptance of the offer in a Sale Notice was by payment on the Closing Date of the Purchase Price, and cl 2.5(b) provided that the offer could be accepted by no other means.
9. Clause 2.6 was as follows: "Acceptance by a Purchaser, in accordance with this Deed, of the offer contained in a Sale Notice delivered to that Purchaser (which Sale Notice has not been revoked in accordance with clause 2.1(f)) constitutes an immediate assignment with effect from the Cut-Off Date specified in that Sale Notice of the Seller's entire right, title and interest in the Loan Rights specified in that Sale Notice to that Purchaser free from all Encumbrances, Adverse Claims and other third party rights and interests whatsoever, whereupon the relevant Loans shall constituted Purchased Loans."
10. Plainly enough, the acceptance of a Sale Notice by Adelaide Bank could not of itself effect a legal assignment of a borrower's chose in action against a lender. There can be no legal assignment of a chose in action constituted by a loan without notice to the debtor. This was made clear by cl 2.7, which was as follows: "Sale in equity only (a) (Assignment in equity): An assignment of Loan Rights in accordance with this Deed takes effect initially in equity only unless and until the Purchasers perfect legal title to those Loan Rights in accordance with clause 12. (b) (Purchasers must not communicate, disclose or perfect title): The Purchasers must not: (i) take any steps to perfect their title to any Purchased Loans or the corresponding Loan Rights; (ii) give any notice to, or communicate in any other way with, a Debtor; or (iii) disseminate or disclose any information in respect of the assignment of the Purchased Loans or the corresponding Loan Rights, except in accordance with the terms of this deed."
11. Clause 12 made provision for a series of "Title Perfection Events". Thus the effect of the Loan Sale and Servicing Deed, as amended, was to provide a mechanism whereby Adelaide Bank could become the equitable assignee of loans made by Great Southern Finance and ABL Nominees, with the companies retaining legal ownership until there was a "Title Perfection Event".
12. It is far from clear that the limited operation of cl 2.6 was appreciated. The primary judge was not taken to cl 2.7, and the submissions from both sides, as well as her Honour's reasons, conflated the transactional documents (which on no view effected an assignment of any loan) with the assignments which Mr Jaeger was claiming had not been shown to be legally effective.
13. The Second Deed of Amendment was governed by the laws of the Australian Capital Territory (this was the choice of law clause which led to the grounds of appeal in this Court being based on s 205 of the Civil Law (Property) Act 2006 (ACT)). The document was purportedly executed as a deed on behalf of Great Southern Finance and ABL Nominees by two persons. Mr Colin Webeck was described as Great Southern Finance's "attorney under a power of attorney dated 31/5/06". Mr Alistair Richard Gregory, solicitor, was described as the "Delegate" of ABL Nominees "under a power of attorney dated 31 March 2005 and a deed of delegation dated 24 May 2006". The execution clause for each signatory also stated that they declared that they had not received any notice of the revocation of the power of attorney or deed of delegation. Neither of the powers of attorney was in evidence, nor was the deed of delegation.
14. Bendigo and Adelaide Bank also tendered the various Sale Notices. In respect of the first loan from Great Southern Finance, the notice was dated 29 November 2005 and addressed to Adelaide Bank Ltd. The notice adhered to the form in Schedule 3. In accordance with that form, it was signed by two persons described as "Authorised Officers". The remaining Sale Notices were purportedly executed on behalf of ABL Nominees. They too adhered to the form of Sale Notice agreed between the parties and appear to have been signed by two persons described only as "Authorised Officers".
15. Before the primary judge, Mr Jaeger made it plain that his sole point on authority was that the transactional documentation had not been properly executed, and in particular, that it had not been shown that the signatories to the Second Deed of Amendment were properly authorised pursuant to the powers of attorney. The submissions did not extend to a challenge to any of the Sale Notices (which made no reference to execution pursuant to a power of attorney). There were the following exchanges during the course of ruling on objections to the principal affidavit relied upon by the plaintiffs: "MARSHALL: Thank you, your Honour. Then the balance of my objections is to deal with what my friend's been waiting to hear about assignment. The point is this. Each of the assignment deeds, the assignor has executed under power of attorney. HER HONOUR: You challenge the power of attorney? MARSHALL: Well what we say is how do you know who that is that has signed it?" [emphasis added].
16. There was then a further exchange: "HER HONOUR: Not really because you're not challenging the fact they payment was made so the purchase of one side is complete. MARSHALL: That's right. Her Honour: What you're doing is challenging the validity of the sale documentation. MARSHALL: Yes. HER HONOUR: By saying it's not properly executed. On one level that may not matter because plainly there's been an assignment that has been perfected by specific performance..(not transcribable).. MARSHALL: I don't know how. Would have thought that if they want to bring some sort of Supreme Court case to get a declaration to say that it's fine but that's not what they've done. They've come to Court saying we're relying on this deed and the convoluted way it operates with offers and acceptances which seem to be proven. HER HONOUR: ..(not transcribable).. and straight forward. The sole point you are taking, which in fairness is still not identified on the pleadings, is that the validity of the power of attorney under which these documents are executed, now on almost any view that should have been pleaded. As a practical matter, what can you do Mr Zahra? ZAHRA: Your Honour, I'd have to take some instructions but I imagine it would be very difficult to even overnight be able to put forward- HER HONOUR: This is all some years ago. This all happened years ago. ZAHRA: It's some years ago. The documents may very well exist and be able to be obtained but it's a process I imagine that would be more like weeks than overnight and in any event, as your Honour has observed, para 11 of the pleading of my client's pleading, pleaded that the first plaintiff acquired all of Great Southern Finance or ABL Nominee's rights, title and interest in the various loans. Even on the amended document which your Honour has just received." [emphasis added.]
17. No point was taken about the efficacy of the individual Sale Notices pursuant to which the six loans were assigned to Adelaide Bank. Consistently with this, no submissions were made as to the effectiveness of the signatures upon the Sale Notices. Indeed, the Sale Notices are not mentioned in her Honour's judgment which occupies 35 single-spaced pages. Rather, the sole point raised at trial was the non-production of the powers of attorney pursuant to which the Second Deed of Amendment and other transactional documents had been executed.

The reasons of the primary judge

1. The primary judge addressed this point at pages 15-21 of her reasons. Her Honour recorded that there was no issue as to the various payments made by the assignee, or the efficacy of the transfer of business pursuant to the Financial Sector (Business Transfer) Restructure Act 1999 (Cth), or as to Mr Jaeger receiving notice of the assignments.
2. The primary judge then addressed the various transactional documents (of which there were seven, commencing with the Second Deed of Amendment), but made no mention of any of the Sale Notices. That is no criticism; it reflected the nature of the submissions her Honour was called upon to resolve. The primary judge then proceeded on the basis of what had been common ground between the parties, which was that each of those documents was required to satisfy the applicable provision governing legal assignments of choses in action (s 12 of the Conveyancing Act 1919 (NSW) or its equivalents elsewhere).
3. Her Honour then referred to the presumption of regularity and the assumption in s 129(3) of the Corporations Act 2001 (Cth), and by reference to what was said in Henderson v Queensland (2014) 255 CLR 1; [2014] HCA 52 at [89]-[90] observed that the defendant had adduced no relevant evidence to displace the presumption of ostensible authority. Her Honour also referred to the statements of Mr Flamer-Smith, the principal witness called by the Bank, who had not been required to attend for cross-examination, and who had given descriptions of the various lenders' rights to Adelaide Bank. The primary judge concluded that she was satisfied that the presumption should apply to treat the document as properly executed and binding on the respective companies. Her Honour concluded that she was "satisfied that the relevant assignments were made".

The submissions on appeal

1. During his oral submissions in support of the appeal, senior counsel for Mr Jaeger recognised that none of the transaction documents themselves purported to effect an assignment. To the contrary, at most, the documents set up a mechanism whereby the service of a Sale Notice could constitute an offer to assign various choses in action constituting the loans and rights in connection with the loans and the offer could be accepted by the payment of the stated Purchase Price.
2. Senior counsel appreciated, with respect correctly, that even if his written submissions in support of the appeal based on deficiencies in the execution of the Second Deed of Amendment and the other "transactional" documents were accepted, that would be no answer to Bendigo and Adelaide Bank's claim if the acceptance of the Sale Notices gave rise to a valid assignment to Adelaide Bank.
3. In those circumstances, Mr Jaeger submitted that he should be permitted on appeal to advance substantially the same point as had been advanced at trial, but in relation to the Sale Notices which purported, so it was said, to effect an assignment of the loans on which he was sued. He submitted that the position was all the stronger, because the Sale Notices stated merely that the two individuals were "Authorised Officers" and did not, in contrast with the Second Deed of Amendment, identify that they were executed pursuant to a power of attorney.
4. Mr Jaeger also sought to advance a further argument, which was outside the scope of the notice of appeal, and had never been advanced to the primary judge (although the submission had been flagged in a paragraph of his written submissions in this Court in reply). The submission was that in relation to the third, fourth, fifth, sixth and seventh loans, the consideration paid by Adelaide Bank did not conform to the relevant Sale Notices. As articulated in oral submissions, by reference to the third loan, the point was that the consideration (some $16 million) was not received by ABL Nominees but instead by Great Southern Finance.
5. In response, Mr Dick SC, who appeared in this Court but not at first instance, submitted that none of this should be permitted because these were points which, it could readily be inferred, could have been the subject of evidence had they been taken below. He relied on the principles in Suttor v Gundowda and Coulton v Holcombe. In the latter, the joint judgment said at 7-8: "The powers of an appellate court with respect to amendment are ordinarily to be exercised within the general framework of the issues so determined and not otherwise. In a case where, had the issue been raised in the court below, evidence could have been given which by any possibility could have prevented the point from succeeding, this Court has firmly maintained the principle that the point cannot be taken afterwards: see Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438 ..."
6. Mr Jaeger accepted that the test for being permitted to raise points on appeal not raised at trial was as stated above. He also accepted that in relation to the new submission, based upon the consideration for the loans being paid otherwise than to ABL Nominees, the respondents might have been able to adduce evidence to meet it. He did not seek to amend the notice of appeal. He maintained that there was no prejudice in being permitted to challenge the efficacy of the Sale Notices on appeal.

Resolution of the appeal

1. Mr Jaeger's concession was properly made. There is no reason to doubt that in the large transactions pursuant to which the third, fourth, fifth, sixth and seventh loans to Mr Jaeger, and many millions of dollars of other loans were purchased, there would be documents explaining why funds were provided to companies other than ABL Nominees, which had not been tendered in light fo the absence of this point having been raised at trial. Indeed, omitted from the description above is reference to a "Side Letter" pursuant to which the third and later Sale Notices were issued. The side letter expressly contemplated the provision of funds to ABL Nominees or at its direction.
2. What is more, the submission falls outside the notice of appeal, and although that point was squarely made during the hearing, no application was made to amend.
3. That is sufficient to dispose of the new submissions based on the recipient of the consideration following acceptance of the offers in the third and subsequent Sale Notices.
4. It is also sufficient to dispose of a further point, namely, that the conditions precedent to the various Sale Notices had not been shown to have been satisfied, which was made in the written submissions in reply and was not sought to be developed orally.
5. The restrictions upon the determination on appeal of points not raised at trial are also a complete answer to the submission, likewise only made in this Court and not to the primary judge, that the respondents had not demonstrated the validity of the various Sale Notices and in particular the authority of the "Authorised Officers" who signed them.
6. But even if that were not so, it may without difficulty be inferred that the persons who signed the Sale Notices were authorised. One of the signatures on the first Sale Notice is readily identified as that of Mr Bruno Romeo. Although it appears not to have been appreciated until pointed out during the hearing by Sackville AJA, Mr Romeo was described in one of the Product Disclosure Statements as the finance manager who was "responsible for the operations and functions of Great Southern Finance Pty Ltd in providing finance facilities to investors and securitisation of its loan portfolio". It may confidently be inferred that Mr Romeo was authorised to assign in equity Mr Jaeger's debt (and the loans made to other borrowers) to Adelaide Bank. It is to be recalled that the essence of securitisation is the transfer of a large number of bundled loans in equity to a purchaser. The fact that the identity of the other Authorised Officer is obscure does not matter, even if the balance of Mr Jaeger's submissions were well-founded. The only point sought to be made by Mr Jaeger was non-compliance with s 12 of the Conveyancing Act or its equivalent. Although the Loan Sale and Servicing Deed included a form which required two authorised officers to sign a Sale Notice, there is no requirement of two signatures to effect a legal assignment of a chose in action. The statute provides that "writing signed by the assignor" is sufficient.
7. The identities of the "Authorised Officers" who signed the later Sale Notices are unclear. However, that merely serves to emphasise the reality of the prejudice to the respondents if Mr Jaeger is permitted to advance a challenge for the first time that the authority of those signatories had not been established. It would be grossly unfair to allow the appeal on that basis.
8. The foregoing addresses the parties' submissions on appeal. But there is a further and more fundamental reason why the belated challenge to the Sale Notices must fail. The Sale Notices do not purport to effect an assignment. They employ a different mode of dealing, namely, an offer to assign which, when and if it be accepted by the payment of the stipulated consideration, will constitute a specifically enforceable agreement to assign. Although the distinction was raised by the Court at the commencement of the appeal, its significance was not taken up by either party.
9. The requirement of signed writing in s 25(6) of the Judicature Act and its Australian counterparts applies to assignments of choses in action. It does not apply to agreements to assign. The distinction is basal. It is the difference between contract and conveyance. It is reflected in Lindley LJ's protest at the commencement of his judgment in Commissioners of Inland Revenue v Angus (1889) 23 QBD 579 at 594 that the Commissioners were "inviting us to destroy the distinction between an agreement to convey property and a conveyance of property".
10. The assignment of a legal chose in action was treated as effective in practice in a variety of ways as explained by Windeyer J in Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 26-27; [1963] HCA 21. However, until the Judicature legislation, the assignee could not sue in the assignee's own name. Only by compliance with s 25(6) of the Judicature Act and its counterparts could there be a legal assignment of a legal chose in action. In contrast, valuable consideration was not necessary in order to effect either a legal or an equitable assignment of a chose in action.
11. An agreement to assign a chose in action was entirely different. Conceptually, the distinction is between a conveyance and a promise to convey. Practically, the character of the dealing was critical. If valuable consideration were provided, the assignment was effective at equity, irrespective of compliance with the statutory mechanism for assignments, and the assignor was regarded as a trustee of the chose. However, if valuable consideration were not provided, then a promise to assign was ineffective: it did not engage the statutory mechanism, and it would not be enforced in equity.
12. The distinction was central to Windeyer J's luminous judgment in Norman at 30-31: "In short, there is no reason at all why a person should not give away any beneficial interest that is his: the classic statement is that of Knight Bruce LJ in Kekewich v Manning (1851) 1 De G M &G 176; 42 ER 519; see too In re McArdle (dec'd) [1951] 1 Ch 669. It is, of course, necessary that the transaction should take the form of, and be intended as, an immediate transfer of the beneficial interest of the assignor, as distinct from an agreement to assign it. The distinction is critical, for consideration is always necessary to attract the support of equity to a transaction that is a contract rather than a conveyance."
13. Indeed, the distinction was vital to Norman's case, which concerned (on the view his Honour took of the facts) a voluntary assignment of part of a debt. Windeyer J concluded his analysis at 33: "An agreement to assign will be effective as an equitable assignment if it be for value; for then equity looks on that as done which ought to be done. But this does not mean that there cannot be in equity an actual assignment of a chose in action as distinct from an agreement to assign. I think there can, and that it can be by way of gift."
14. The Sale Notices were not assignments, rather, they were offers to assign, which offers were accepted, for valuable consideration moving from Adelaide Bank. Section 205 did not apply to them. Irrespective of any non-compliance with s 205, Adelaide Bank having paid valuable consideration, it was treated as the owner of the choses in action in equity. Thereafter, Bendigo and Adelaide Bank became the equitable assignee when the scheme of arrangement was approved. It is not necessary to examine the position after Mr Jaeger received notice, for it was accepted that it was sufficient if Bendigo and Adelaide Bank was an equitable assignee.
15. Accordingly, even if Suttor v Gundowda were not a complete answer to the appeal, no error has been identified in the conclusion by the primary judge that Mr Jaeger's attack upon the validity of the assignments should be rejected.

Two final points

1. Two further points should be made. First, Bendigo and Adelaide Bank maintained that it had not been necessary to plead more than it had done in relation to the assignment of the loans. The allegation is reproduced in [5] above. The Bank's pleading was required to contain a summary of the material facts: UCPR r 14.7. Contrary to the Bank's submission, more should have been alleged. It was material, in particular, to know whether the assignment upon which it relied was legal or equitable. If equitable, then a question would arise as to parties: if the assignment were merely effective in equity, the assignor would ordinarily be a necessary party. There is nothing technical about this; if an assignment is effective only in equity, then the debtor (who might be unaware that it has occurred) would obtain a full discharge by payment to the assignor and should not be vexed by the possibility that by paying the assignee it does not obtain a discharge from its creditor (who would remain the legal owner of the debt). Further, had Bendigo and Adelaide Bank pleaded all the material facts establishing its entitlement to sue Mr Jaeger, it is likely that the confusion which surrounded the commencement of the trial and indeed the written submissions on appeal and parts of the oral hearing of the appeal would have been reduced.
2. Secondly, the primary judge also rejected a submission made by the respondents that Mr Jaeger was bound by a settlement of representative proceedings in the Supreme Court of Victoria to acknowledge the validity of the assignments. By notice of contention, the respondents sought to challenge her Honour's rejection of this submission, which was based on her conclusion that it had not been shown that Mr Jaeger had participated in the settlement. The entirety of the appeal having failed, there is no occasion to address the notice of contention.

Orders

1. For those reasons, I propose that the appeal be dismissed, with costs.
2. PAYNE JA: I agree with Leeming JA.
3. SACKVILLE AJA: I agree with the orders proposed and reasons of Leeming JA.

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