Restitution - unjust enrichment - payment of monies by mistake.

Set-Off - equitable set-off - defence - need for set-off to impeach applicant's claim.

Trade Practices Act 1974 s.52

Clerk J.F. and Lindsell W.H.B., On Torts (16th Ed.) para.15-03

Danforth, J, "Tortious Interference with Contract: A Reassertion of

Society's Interest in Commercial Stability and Contractual Integrity",

Derham R., Recent Issues in Relation to Set-Off (1994) 68 ALR 331

Everett D., Security Over Bank Deposits, ABLR 16 (1988) 351

Fridman, G.H.L., "Interference with Trade or Business", Tort Law Review 1 (1993) 19

Liew K.L., "Recovery of Moneys paid under a Mistake of Law: The

Australian Approach", Corporate and Business Law Journal 6 (1993) 157

Meagher, Gummow and Lehane, Equity, Doctrines and Remedies (3rd Ed.)

O'Dair, J, "Justifying an Interference with Contractual Rights", Oxford

Spry, I.C.F., Equitable Set-Offs (1969) 43 ALJ 265

Weaver G., Craigie C., Law Relating to Banker and Customer in Australia, (2nd Ed.)

Associated British Ports v. T.G.W.U. (1989) 1 WLR 939

Barclays Bank Ltd. v. W.J. Sims Son and Cooke (Southern) Ltd. (1980) Q.B. 677

Broad v. Commissioner of Stamp Duties (1980) 2 N.S.WLR 40

Building Workers' Industrial Union of Australia v. Odoc Pty. Ltd. [1991] FCA 87; (1991) 29 FCR 104

CBS Songs v. Amstrad Consumer Electronics Pty. Ltd. (988) AC 1013

In Re Charge Card Services Ltd. (1986) 3 WLR 697

Daily Newspapers Ltd. v. Gardner (1968) 2 WLR 1239

David Securities Pty. Limited v. Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353

Davies and Davies v. Nyland and O'Neill (1975) 10 SASR 76

Edwin Hill and Partners v. First National Finance Corporation Pty. Ltd. (1989) 1 WLR 225

Case note on Edwin Hill (1989) 63 ALJ 705

Eversure Textiles Manufacturing Co. Ltd. v. Webb (1978) Qd R 347

Estate Planning Associates (Australia) Pty. Ltd. v. Commissioner of

Stamp Duites (1985) 2 N.S.WLR 495

Jackson v. Esanda Finance Corporation Limited (1992) 59 SASR 416

James v. Commonwealth [1939] HCA 9; (1939) 62 CLR 339

Re: Just Juice Corporation Pty. Ltd. [1992] FCA 420; (1992) 109 ALR 334

Quinn v. Leathem [1901] UKHL 2; (1901) AC 495

Ranger Uranium Mines Pty. Ltd. v. Federated Miscellaneous Workers' Union of Australia (1987) 54 NTR 6

Westwind Air Charter Pty. Ltd. and Mullins Investments Pty. Ltd. v.

Hawker De Havilland Ltd. (1990) 3 WAR 71

Williams v. Hursey [1959] HCA 51; (1959) 103 CLR 30

Applicant appeared in person. (2, 3, 4 August 1993.)

(2, 3, 4 May 1994)

Solicitors for the Applicant: Messrs B.W. Duckham and Co.

(2, 3, 4 May 1994)

Counsel for the Respondents: C.J. McLure

(2, 3, 4 August 1993)

J.L. Sher

(2, 3, 4 May 1994)

Solicitors for the Respondents: Corrs Chambers Westgarth

(2, 3, 4 August 1993,

2, 3, 4 May 1994)

1. Judgment be entered for the applicant against the first

respondent for damages to be assessed.

2. The first respondent pay the applicant's costs to be taxed.

3. The application be dismissed against the second respondent.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

LEE J The applicant ("Mrs Griffiths") commenced proceedings in this Court against the first respondent ("the Bank") and the second respondent ("Ross") by an application and statement of claim in which it was contended, inter alia, that the Bank, in trade or commerce, had engaged in conduct that was misleading or deceptive and contravened s.52 of the Trade Practices Act 1974 ("the Act") and that the "Bank was aided and abetted in its misleading or deceptive conduct by Ross". Ross was the manager of a branch of the Bank. The application also sought an order for damages against the Bank under a cause of action in tort and a declaration that the Bank had dishonoured, upon presentation, a Bank cheque payable to Mrs Griffiths.

2. The matter came on for hearing on 2, 3 and 4 August 1993 and was adjourned part heard. The trial was resumed and completed on 2, 3 and 4 May 1994. Mrs Griffiths was not represented at the hearing in August 1993 but was represented by counsel on resumption of the adjourned trial.

3. The case presented by Mrs Griffiths at trial did not pursue the claim for relief based on contravention of the Act but sought to establish a right of action against the Bank in tort, namely interference with Mrs Griffiths' contractual relationship with the Auckland Savings Bank ("ASB"). Mrs Griffiths sought an order that the Bank pay "special general and exemplary" damages. The alternative claim did not extend to Ross.

4. In the joint defence of the Bank and Ross, the Bank claimed to "set-off from any amount found to be due and payable to" Mrs Griffiths the indebtedness of Mrs Griffiths to the Bank by in a sum of approximately $865,000. By a cross-claim the Bank sought an order that Mrs Griffiths and one Mr Gray ("Gray"), as joint and several debtors, pay to the Bank the sum sought to be set-off in the Bank's defence to the claim in tort pursued by Mrs Griffiths.

5. At the commencement of the hearing in August 1993 the Bank sought leave to discontinue its cross-claim against Gray. The motion was opposed by Mrs Griffiths and I directed that the hearing of the cross-claim, and the Bank's motion for leave to discontinue, be stood over until completion of the hearing of the principal application.

6. Mrs Griffiths is a citizen of New Zealand. Prior to 1988 she had carried on business as an interior designer. In 1988 she formed a relationship with Gray who, at that time, carried on business in Perth as a car dealer. Mrs Griffiths met Gray in Auckland. In about June 1988, Mrs Griffiths and Gray, as tenants in common, purchased a residential property in Perth ("the Applecross property"). The purchase price was approximately $355,000. Mrs Griffiths stated that she and Gray intended to renovate and resell the property and share equally the profit made on resale. Mrs Griffiths provided the whole of the purchase price from funds borrowed by her from the National Bank of New Zealand Limited ("NBNZ").

7. To meet the cost of the renovations Mrs Griffiths and Gray borrowed $130,000 from the Bank in September 1988.

8. In February 1989 the Bank approved an advance to Mrs Griffiths and Gray of $600,000, the advance to be used to repay loans made by the Bank, and to repay the loan Mrs Griffiths had obtained from NBNZ to purchase the Applecross property. From Mrs Griffiths' point of view the purpose of the loan was to replace the liability Mrs Griffiths had to NBNZ with the joint liability of herself and Gray to the Bank.

9. The discussions which led to the Bank approving the advance involved Gray and not Mrs Griffiths. An officer of the Bank, Ms Chapman, stated she and Ross met with Gray on 16 February 1989 to discuss the application for finance. According to Ms Chapman, Gray said that the assets he and Mrs Griffiths possessed included a deposit in New Zealand in the sum of $100,000. Gray suggested that $100,000 could be deposited with the Bank "by way of security".

10. Apparently some days later Gray signed a memorandum which read as follows:

"I agree to give an undertaking to lodge $100,000 as

part security for Fully Drawn Loan of $600,000 at

Commonwealth Bank Morley W.A.

This money will be lodged upon my return from New

Zealand on (by 31 March 1989).

(The words in brackets handwritten.)

Roy Harry Gray

24/2/89"

11. There was no evidence that Gray had a sum of $100,000 on deposit in New Zealand or that he travelled to and from New Zealand in February/March 1989.

12. By letter, also dated 24 February 1989, addressed to Mrs Griffiths and Gray, the Bank advised that it had approved a fully drawn loan of $600,000 for a term of twelve months "to pay out housing loan, temporary excess on account ... and refinance loan in New Zealand". The letter stated that the loan was subject to the Bank's usual terms and conditions and, in particular, in respect of security, the security was to be to the Bank's satisfaction and "will comprise existing mortgage" over the Applecross property.

13. According to that letter it was not a term of the loan agreement that Mrs Griffiths deposit with the Bank, by way of security, a sum of $100,000 and retain that sum on deposit.

14. On 27 February 1989 a sum of $429,240 (NZ$562,046.86) was remitted by the Bank to the credit of Mrs Griffiths' account with NBNZ at Auckland.

15. On 2 March 1989 a mortgage over the Applecross property, dated 4 October 1988 and granted to the Bank by Mrs Griffiths and Gray, stamped to secure an advance of $2,000, was presented to the Commissioner of Stamp Duties for restamping as a security for advances up to $600,000. The mortgage remained unregistered until 22 March 1989.

16. By March 1989 the renovation of the Applecross property had been completed but further steps were required before the property became ready for resale in about July 1989.

17. The Bank's documentation in respect of the application for the advance consisted of a printed form, Application for Accommodation (Exhibit H), and an authority directing the Bank to disburse the sum of $600,000, inter alia, by remitting part of that sum to New Zealand (Exhibit G). The authority and the application form bore signatures said to be those of Gray and Mrs Griffiths. The authority bore a handwritten date 24 February 1989, and the Bank's date of receipt stamp, 24 February 1989. There is no evidence that Mrs Griffiths executed the authority on that day or that the document was forwarded to her in New Zealand to execute before 24 February 1989.

18. The application bore a handwritten date 24 April 1989, which Ms Chapman recognized as the handwriting of another officer of the Bank, Snook. Ms Chapman confirmed that the date had been altered from 24 April 1989 to 24 February 1989 but could not say by whom, or when, that alteration was made. Mrs Griffiths, in the course of her evidence, put in issue that she had signed either document.

19. According to endorsements entered in her passport, which appears to be a complete record of international movements by Mrs Griffiths up to 13 September 1989, in that matching departure and arrival stamps have been entered in the passport for that period, Mrs Griffiths resided in New Zealand between 10 December 1988 and 31 March 1989 with the exception of periods spent visiting Australia between 2 and 8 January 1989, and 4 and 20 March 1989. A non-immigrant visa was issued by the United States Consulate and entered in the passport at Auckland on 15 February 1989.

20. Mrs Griffiths returned to Australia on 31 March 1989 and remained there until 3 June 1989.

21. Mrs Griffiths stated that whilst she was in New Zealand, Gray contacted her by telephone from Australia and said that if she brought money to Australia the Bank would like her to "lodge it with them". Mrs Griffiths said that before she left New Zealand she arranged for her solicitor to remit monies to Australia.

22. How that was done is not clear on the evidence. After Mrs Griffiths returned to Australia, NBNZ provided a new loan facility to Mrs Griffiths in April 1989, and on 13 April 1989 a counter cheque in the sum of NZ$133,531.35 was presented for payment as part of the drawdown of that facility. It may be assumed that the sum payable on that cheque in New Zealand currency was equivalent to $100,000.

23. On 13 April 1989 the Bank received $100,000 from Mrs Griffiths on fixed deposit for a term of 180 days pursuant to a Bank term deposit form signed by Mrs Griffiths. Later, the term of the deposit was reduced from 180 days to 30 days.

24. On 19 April 1989 a Bank form (Exhibit 16) was signed by Mrs Griffiths and Gray pursuant to which Mrs Griffiths and Gray agreed that in consideration of the Bank granting certain advances or accommodation, so long as any monies remained, or became owing or payable, to the Bank by them, the Bank was under no obligation to repay the sum held on term deposit and may, without prior notice to them, apply the whole of the deposit towards payment of the monies owing.

25. Mrs Griffiths and Gray attended at the Bank on 8 August 1989 to discuss their financial arrangements. The Bank was informed that the Applecross property had been placed on the market at a price of $1.2M and that it was expected that the property would be sold within two months. Mrs Griffiths gave instructions for the then matured term deposit to be transferred to an account at call described as a Cash Management Call Account ("CMCA").

26. According to the Bank's officers, at that attendance Mrs Griffiths signed another Bank form (Exhibit 13) permitting the Bank to set-off the amount in the CMCA against any indebtedness Mrs Griffiths and Gray may have to the Bank.

"8 August 1989

(Date)

The Manager

Commonwealth Bank of Australia

Morley

Dear Sir

IN CONSIDERATION of Commonwealth Bank of Australia

(the Bank), granting certain advances or

accommodation to Joy Lee Griffiths and Roy Harry

Gray (the Debtor) I/We Joy Lee Griffiths hereby

agree with the Bank that:

1. So long as any moneys remain or may become

owing or payable to the Bank by the Debtor on

any account whatsoever whether as principal or

surety (all of which moneys are hereinafter

called the money owing)

(a) the Bank shall be under no

obligation to repay the

Deposit(s) described in the

Schedule hereto (the said Cash

Management Call Account

hereinafter called the

Deposit);

(b) the Bank may without prior

notice to me/us prepay and

apply the whole or any part of

the Deposit and interest

accrued thereon in or towards

payment of the moneys owing or

any part thereof.

2. This agreement shall not be considered as

wholly or partially satisfied by payment by the

Debtor at any time hereafter of any of the

moneys owing or by any settlement of account or

by the granting to the Debtor of any time or

indulgence or by any other matter or thing

whatsoever.

DATED this 8th day of August 1989.

THE SCHEDULE HEREINBEFORE REFERRED TO

Number Name Branch Amount

709-721 Joy Lee Griffiths Morley $100,000

SIGNED by the said )

) J.G. Griffiths

(handwritten)

in the presence of: )

SIGNED by the said )

in the presence of: )"

28. The signature said to be that of Mrs Griffiths, was not acknowledged by the signature of a witness as provided for in the form. Mrs Griffiths put in issue that the signature was hers. She agreed that the signature appeared to be in her handwriting but it was an unusual signature in that it appeared as "J.G. Griffiths" unlike the signatures on the Cash Management Account Card (Exhibit 14) and the Term Deposit Withdrawal and Repayment Request (Exhibit 18), each signed by her on 8 August 1989, and on which the signatures were "J.L. Griffiths".

29. The Bank adduced evidence from a forensic document examiner, Mr Gregory, who offered the opinion that Exhibits 14, 18 and 13 were in the handwriting of the same person. Mr Gregory stated that he had conducted a macroscopic and microscopic examination of sixteen documents containing admitted and contested signatures of Mrs Griffiths. The witness stated that he had considered "all elements of identification of the signatures, including the design of letters, the relative size of capitals, letter spacing and ratios, alignment and line quality" in forming his opinion. These elements of identification were not presented to the Court to allow the Court to form its own opinion upon them.

30. Having regard to the similarity of the signature on Exhibit 13 to the signatures on the documents received as Exhibit 17 (an acknowledgment of variation of loan repayments endorsed on a letter dated 29 June 1989) and Exhibit 16 - admitted signatures of Mrs Griffiths - and to the likelihood that Exhibit 13 was signed at the same time as Exhibits 18 and 14 if the three documents were presented together to Mrs Griffiths by Ross as stated in his evidence, and to the absence of a positive denial from Mrs Griffiths that the signature is hers, I am satisfied that it is likely that Mrs Griffiths signed Exhibit 13 at the Bank on that day. I find also that it is likely that the documents Exhibits G and H were presented to Mrs Griffiths for signature at sometime in April 1989, after her return from New Zealand, and that those documents were signed by her in circumstances that neither the Bank officers nor Mrs Griffiths can recall.

31. The relevant diary note made by the Bank officer, Mr Merenda, who was present with Ross, Mrs Griffiths and Gray on 8 August 1989, referred to a "fresh S45 ... attached" and instructed staff to "Please process new S45". "S45" was the Bank description of the Bank forms, Exhibits 13 and 16. No evidence was given on the point, but the instruction to "Please process new S45" may have referred to an internal procedure of the Bank, described as a "security stop", by which the Bank imposed a bar on withdrawal transactions on an account unless the transaction is referred to and approved by the branch of the Bank at which the account is held. The action is a unilateral step by the Bank. The consent of the customer is not obtained and the customer is not advised that a "security stop" has been imposed.

32. The Bank paid to Mrs Griffiths, as it became due, the interest earned on the term deposits but interest payable on the monies deposited in the CMCA was credited to that account and not paid to Mrs Griffiths as it accrued. In fact, the accrual and entry of interest on that account was overlooked by the Bank until December 1989.

33. In October 1989 Mrs Griffiths withdrew $20,000 from the CMCA. Notwithstanding that a "security stop" was in place, the withdrawal was completed without the transaction being referred to Ross as branch manager. The withdrawal was made by Mrs Griffiths at a Sydney branch of the Bank.

34. By letter to Mrs Griffiths and Gray dated 19 January 1990, Ross requested that the sum of $20,000 withdrawn from the CMCA in October 1989 be "re-deposited" as soon as possible. Mrs Griffiths had left Australia and returned to New Zealand on 19 January 1990. A copy of the letter was forwarded to her at a New Zealand address. A request for "replacement" of the sum of $20,000 withdrawn from the CMCA was made in another letter from Ross to Mrs Griffiths and Gray dated 8 March 1990.

35. Mrs Griffiths returned to Perth on about 25 April 1990 and on 3 May 1990 Mrs Griffiths and Gray met with Ross. At that meeting the lack of a buyer for the Applecross property at the price at which it was offered for sale was discussed and the hope expressed by Mrs Griffiths and Gray that a reasonable offer would be received shortly. At that meeting Ross suggested that the amount standing to the credit of Mrs Griffiths in the CMCA be applied to meet the interest that had accrued on the loan debt. Ross recorded the following response to that suggestion in his diary note of the meeting:

"To this we received a flat 'No' from (Mrs Griffiths)

who claimed these funds were hers and would not be

released voluntarily for this purpose".

36. It does not appear that "re-deposit" or "replacement" of the sum of $20,000 was discussed with Mrs Griffiths at that meeting.

37. Mrs Griffiths returned to New Zealand on 8 June 1990 and remained there until 31 July 1990, except for the week 17-25 June 1990 during which Mrs Griffiths visited her daughter in Sydney.

38. On 19 June 1990 Mrs Griffiths attended at a Sydney branch of the Bank and withdrew $90,000 from the CMCA. The withdrawal instruction was not referred to Ross as branch manager. The withdrawal was processed and a Bank cheque payable to Joy Griffiths and drawn in an amount of $90,000 was handed to Mrs Griffiths. On the same day Mrs Griffiths attended another branch of the Bank and presented the Bank cheque for payment. She requested that the sum payable to her be transferred to her account with ASB in New Zealand. A sum of NZ$119,619 was forwarded to ASB by telegraphic transfer on that day.

39. On about 9 July 1990 ASB, at the request of the Bank, and upon the Bank indemnifying ASB against any action or claim for loss in connection with such a payment, paid to the Bank a sum equivalent to the amount credited to Mrs Griffiths' account with ASB on 19 June 1990, less a deduction for charges in a sum of approximately $864.

40. On 28 July 1990 Mrs Griffiths and Gray attempted unsuccessfully to sell the Applecross property by auction. The Bank, exercising its power of sale under the mortgage, attempted to sell the property by auction on 17 November 1990 and again the property was passed in. The Bank sold the property by private treaty on 20 November 1990 for a price of $360,000.

41. Mrs Griffiths now claims that by requesting ASB to pay to the Bank the sum credited to her account by telegraphic transfer on 19 June 1990, and by offering to indemnify ASB in respect of any liability it may have to Mrs Griffiths in consequence of withdrawing that sum from Mrs Griffiths' account, the Bank intentionally interfered with Mrs Griffiths' contractual relations with ASB and caused her loss.

42. In its defence to that claim, the Bank pleaded, in effect, that it was entitled to act as it did because it had stopped payment of its cheque or, alternatively, it had paid by mistake the monies withdrawn from the CMCA and paid to Mrs Griffiths. Further, the Bank claimed that it was entitled to set-off the indebtedness of Mrs Griffiths under the loan agreement against any sum found to be due and payable to her by reason of the Bank's conduct.

43. Neither Mrs Griffiths' claim for a declaration that the Bank had dishonoured the Bank cheque, or the Bank's defence that it had duly stopped payment of that cheque, accorded with the facts admitted in the pleadings and accepted at trial. Those facts established that Mrs Griffiths purchased the Bank cheque by use of the funds withdrawn from the CMCA and that the Bank cheque was presented for payment and negotiated on 19 June 1990. The funds obtained from negotiation of the cheque were, on Mrs Griffiths instructions, converted to New Zealand currency and remitted by the Bank to ASB. Furthermore, the sum remitted by the Bank was received by ASB and credited to Mrs Griffiths account with ASB whereupon ASB became indebted to Mrs Griffiths in that sum pursuant to the contractual terms of their banker/customer relationship.

44. With regard to Mrs Griffiths' claim in tort with ASB, the root of the tort of interference with a contractual relationship is an act which intentionally interferes with the contractual rights of another and causes damage to that person. (See: Clerk J.F. and Lindsell W.H.B., On Torts (16th Ed.) para.15-03.)

45. It is not a necessary element of the tort that the act of interference be an unlawful act. (See: Williams v. Hursey [1959] HCA 51; (1959) 103 CLR 30 per Fullagar J at p 77.) A broader liability under a tort which extends to interference with the trade, business or commercial prospects or the economic interests of another may require conduct that is itself unlawful. (See: Fridman G.H.L., "Interference with Trade or Business", Tort Law Review 1 (1993) 19; Danforth J, "Tortious Interference with Contract: A Reassertion of Society's Interest in Commercial Stability and Contractual Integrity", Columbia Law Rev. 81 (1981) 1491.) Deliberate interference with contractual relations is actionable if done without justification. (See: Quinn v. Leathem [1901] UKHL 2; (1901) AC 495 per Lord McNaghten at p 510; James v. Commonwealth [1939] HCA 9; (1939) 62 CLR 339 per Dixon J at p 370; Daily Newspapers Ltd. v. Gardner (1968) 2 WLR 1239 per Lord Denning MR at p 1250; Edwin Hill and Partners v. First National Finance Corporation Pty. Ltd. (1989) 1 WLR 225; Associated British Ports v. T.G.W.U. (1989) 1 WLR 939; CBS Songs v. Amstrad Consumer Electronics Pty. Ltd. [1988] UKHL 15; (1988) AC 1013 per Lord Templeman at pp 1057-1059.))

46. Justification has been treated as a defence to the tort rather than absence of justification being required to be proved to establish a necessary element of the tort. (See: Building Workers' Industrial Union of Australia v. Odco Pty. Ltd. [1991] FCA 87; (1991) 29 FCR 104.) The particulars of the defence of justification are not fixed. (See: Case Note on Edwin Hill (1989) 63 ALJ 705; O'Dair R., "Justifying an Interference with Contractual Rights", Oxford Journal of Legal Studies 11 (1991) 227; Heydon J.D., Economic Torts (2nd Ed.) p 38 et seq.; Davies and Davies v. Nyland and O'Neill (1975) 10 SASR 76; Ranger Uranium Mines Pty. Ltd. v. Federated Miscellaneous Workers' Union of Australia (1987) 54 NTR 6.) The scope of the defence may depend upon the nature of the actionable acts and the circumstances in which they were committed but it may be said that where there has been interference to advance a private commercial interest or right, to the detriment of the contractual rights of another, justification for that conduct will depend upon whether the interferor has sought, bona fide, to protect an equal or superior right to that of the interferee.

47. A test of the standing of the right sought to be promoted would be whether it was capable of supporting injunctive relief to restrain the other party from exercising the contractual rights subjected to interference.

48. In the present case, albeit by implication, it was submitted that the right of the Bank to obtain restitution of the funds it had paid to Mrs Griffiths was capable of sustaining the plea of justification.

49. As explained later in these reasons, it is my conclusion that an action for restitution did not lie but if that finding is in error, and the Bank had been able to pursue such a claim, injunctive relief, if any, would have been available on other grounds only and not upon reliance on a right to the funds in the ASB account equal, or superior, to the contractual right of Mrs Griffiths in respect of those monies.

50. It was not submitted by the Bank that its actions did not, or could not, amount to the tort of interference with contractual relations. The Bank was aware of the contractual relationship between ASB and Mrs Griffiths and acted with the intent of persuading ASB to breach obligations to Mrs Griffiths arising thereunder.

51. Evidence of the persuasion directed to ASB by the Bank is found in the indemnity offered by the Bank to meet the damages for which ASB may be liable if ASB acted as requested by the Bank. The Bank was prepared to procure a breach of the contract between ASB and Mrs Griffiths by indemnifying ASB against any liability it may have to Mrs Griffiths for non- performance of contractual obligations. Persuaded by the terms of the Bank's request, which, no doubt, claimed an entitlement to the sum, and by the indemnity offered, ASB withdrew from Mrs Griffiths' account the sum requested by the Bank and remitted it to the Bank.

52. The Bank's conduct knowingly violated Mrs Griffiths' contractual rights. The Bank was not entitled to make demand upon ASB for the payment of those funds and the conduct was an actionable wrong at the suit of Mrs Griffiths.

53. Before turning to the defence of equitable set-off raised by the Bank, it is necessary to analyse the contractual position of the Bank and Mrs Griffiths in respect of the sum deposited in the CMCA.

54. As the title of the account indicated, monies standing to the credit of Mrs Griffiths in that account were payable on demand. At the time the account was commenced by a deposit of the sum of $100,000 on 8 August 1989, Mrs Griffiths and the Bank made a further written agreement on that day, the terms of which have been set out earlier in these reasons. The purpose of the agreement was to modify the rights Mrs Griffiths had obtained as a customer who had deposited funds in a CMCA.

55. Counsel for the Bank did not submit that the effect of the further agreement was the creation, in favour of the Bank, of an equitable charge over monies standing to the credit of Mrs Griffiths in the CMCA but did submit that the matter was not free from doubt.

56. Apart from the impossibility of the indebtedness of the Bank being made the subject of a lien or charge in favour of the Bank, the further agreement contained no terms which indicated that an instrument of security was created. (See Broad v. Commissioner of Stamp Duties (1980) 2 NSWLR 40; Estate Planning Associates (Australia) Pty. Ltd. v. Commissioner of Stamp Duties (1985) 2 NSWLR 495; Jackson v. Esanda Finance Corporation Limited (1992) 59 SASR 416; In Re Charge Card Services Ltd. (1986) 3 WLR 697; Everett D., Security Over Bank Deposits, ABLR 16 (1988) 351; Weaver G., Craigie C., Law Relating to Banker and Customer in Australia, (2nd Ed.) p.9671 et seq.)

57. In its terms the further agreement qualified the Bank's obligation to repay on demand the sum credited to the CMCA and provided the Bank with the right to make repayment of all or part of that sum by applying those monies to payment of the monies owing to the Bank by Mrs Griffiths, without any instruction from Mrs Griffiths so to do.

58. It was not a term of the further agreement that Mrs Griffiths not make demand for repayment of the monies standing to her credit in the account, nor was it a term of the agreement that no monies would be paid from the account other than by way of set-off. It may also be noted that the further agreement did not limit Mrs Griffiths' right to assign her interest in the account.

59. By making payment from the CMCA subject to the right of set-off of the Bank the further agreement restricted Mrs Griffiths' right to obtain the discharge of the Bank's indebtedness to her by withdrawing the sum standing to her credit in that account.

60. It follows from the foregoing that upon presentation to the Bank by Mrs Griffiths of a demand for withdrawal of a sum of $90,000 on 19 June 1990, the Bank was not obliged to meet that demand. However, repayment was made in the terms demanded by the withdrawal. By direction of Mrs Griffiths, the funds repaid to Mrs Griffiths were applied to the purchase of a Bank cheque from the Bank. Later that day the Bank cheque was presented to the Bank for payment. By direction of Mrs Griffiths, the funds obtained from negotiation of the Bank cheque were converted to New Zealand currency and transmitted by telegraphic transfer to Mrs Griffiths' account with ASB in New Zealand. Upon receipt of the funds transferred to it, ASB credited the funds to Mrs Griffiths' account and became indebted to Mrs Griffiths accordingly.

61. As at 20 June 1990 the banker and customer transactions between the Bank and Mrs Griffiths by way of withdrawal of funds from the CMCA and purchase of the Bank cheque; presentation of the Bank cheque for payment and negotiation thereof; and remittance of funds to New Zealand by telegraphic transfer, had been completed. The Bank had no proprietary interest in the funds standing to Mrs Griffiths' credit in the CMCA, legal or equitable, and the funds transmitted to ASB and standing to Mrs Griffiths' credit in an account with ASB would not have been traceable at the instigation of the Bank.

62. In its defence the Bank pleads that the sum of $90,000 withdrawn from the CMCA and used to purchase the Bank cheque was paid to Mrs Griffiths by mistake. Further, the Bank pleads that at all material times Mrs Griffiths knew that the monies in the CMCA were to secure monies advanced to her by the Bank, that the Bank would not knowingly consent to a withdrawal of those monies, and that the Bank had paid those monies to her by mistake.

63. As stated earlier, the Bank's pleading would appear to raise, by implication, a defence of justification for the tortious conduct alleged against the Bank by Mrs Griffiths.

64. The plea of the Bank appears to contend that Mrs Griffiths was unjustly enriched by the payment by mistake of monies standing to her credit in the CMCA and that the Bank was justified in conducting itself as it did to redress the detriment it had suffered by reason of its mistake.

65. The first two elements of knowledge on the part of Mrs Griffiths pleaded by the Bank would be relevant only if Mrs Griffiths had contended that upon receipt of the monies, and in good faith, she had altered her position in reliance upon the payment of the Bank. But, in any event, the monies in the CMCA did not constitute a security for the monies advanced by the Bank to Mrs Griffiths and Gray, and at all times whilst monies were held to her credit in that account Mrs Griffiths was entitled to make demand for the repayment of monies held at call. The monies credited to the CMCA were not the subject of a security in the sense of a lien, pledge, or charge and there was no contractual arrangement between Mrs Griffiths and the Bank that the monies would be deposited by her indefinitely and not withdrawn. The monies in the CMCA represented a "security" to the Bank only to the extent that the Bank had a contractual right to set-off the monies in that account against Mrs Griffiths' indebtedness to the Bank as a borrower.

66. With regard to the pleading that Mrs Griffiths knew that the Bank had paid the monies from the CMCA to Mrs Griffiths by mistake, the mistake of which it is said Mrs Griffiths had knowledge, was the failure of a Bank officer to follow the procedure instituted by a "security stop" notice of the Bank.

67. The "security stop" was created by the Bank and was an internal instruction. Mrs Griffiths was not advised by the Bank that it had issued such an instruction to its officers. It follows that Mrs Griffiths had no knowledge of the mistake alleged and relied upon by the Bank.

68. The mistake relied upon by the Bank is the neglect of an officer of the Bank to follow the Bank's instructions. The Bank's internal instruction that there be no withdrawal transaction upon the CMCA did not affect Mrs Griffiths' entitlement to receive and hold monies from that account. The "security stop" was not created to give effect to a term of the contract. It was a step taken by the Bank to protect, and keep valuable, its contractual right of set-off. Mrs Griffiths was entitled to demand payment of the amount held in the CMCA and the Bank was entitled to elect to make payment by a set-off against Mrs Griffiths' indebtedness to the Bank. It may be accepted that the demand for withdrawal tendered by Mrs Griffiths would not have been met by payment to her of the monies demanded had the instructions of the Bank been followed by Bank staff but the payment made by the Bank was not a payment made by mistake to a person not entitled to receive it, thereby unjustly enriching that person. It was a payment made in consequence of the neglect or failure of the Bank to follow a Bank instruction which, had it been followed, may have led to the exercise by the Bank of a contractual right of set-off.

69. By reason of the terms of her contract with the Bank, Mrs Griffiths would have been aware that the Bank was entitled at any time to set-off the monies held in the CMCA against Mrs Griffiths' joint and several liability to the Bank to repay the loan advanced to her and Gray. Mrs Griffiths would have been aware also that the Bank could effect such a set-off without notice to her and may have speculated whether demand for repayment of the monies would trigger the exercise by the Bank of its right of set-off.

70. If the Bank is to establish justification for persuading ASB to breach its contractual obligations to Mrs Griffiths, it must show, at least, that at the time it acted it had a right of action at law to obtain an order against Mrs Griffiths for restitution of the sum by which she had been unjustly enriched. Such an order is not made in exercise of a judicial discretion to do what is fair or just, and to establish a right to obtain such an order the Bank must show the existence of a relevant mistake of fact or law.

71. As Mason CJ, Deane, Toohey, Gaudron and McHugh JJ said in David Securities Pty. Limited v. Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353 at p 379:

"Accordingly, it is not legitimate to determine

whether an enrichment is unjust by reference to

some subjective evaluation of what is fair or

unconscionable. Instead, recovery depends upon the

existence of a qualifying or vitiating factor such

as mistake, duress or illegality. As this Court

stated in Westpac Banking Corporation (1988) 164

CLR 662 at p.673:

'In other words, receipt of a payment

which has been made under a fundamental

mistake is one of the categories of

case in which the facts give rise to a

prima facie obligation to make

restitution, in the sense of

compensation for the benefit of unjust

enrichment, to the person who has

sustained the countervailing

detriment.'

As La Forest J stated in Air Canada v. British

Columbia (1989) 59 DLR (4th) 161, at p 192, the

two species of mistake (i.e., fact and law) should

be 'considered as factors which can make an

enrichment at the plaintiff's expense "unjust" or

"unjustified"'.

The respondent's submission that the appellants

must independently prove 'unjustness' over and

above the mistake cannot therefore be sustained.

The fact that the payment has been caused by a

mistake is sufficient to give rise to a prima facie

obligation on the part of the respondent to make

restitution. Before that prima facie liability is

displaced, the respondent must point to

circumstances which the law recognizes would make

an order for restitution unjust (Westpac Banking

Corporation (supra)). There can be no restitution

in such circumstances because the law will not

provide for recovery except when the enrichment is

unjust. It follows that the recipient of a

payment, which is sought to be recovered on the

ground of unjust enrichment, is entitled to raise

by way of answer any matter or circumstance which

shows that his or her receipt (or retention) of the

payment is not unjust."

72. Notwithstanding that pursuant to its contractual arrangement with Mrs Griffiths the Bank was not obliged to pay to Mrs Griffiths monies that, but for that term, would be payable to her on demand, payment of those monies in the manner demanded carried with it the entitlement to retain the monies received.

73. It was not open to the Bank to say that such an entitlement had been set aside by reason of the failure of the Bank to exercise a contractual term included for its benefit but which, by reason of inadvertence, was not addressed at the time of payment.

74. An analogy may be drawn with the payment, upon presentation, of a customer's cheque overdrawing the customer's account, the payment being made without reference by Bank staff to the absence of a contractual arrangement for presentation and payment of such cheques. Upon meeting the customer's instruction to pay according to the order of the cheque presented, the transaction is complete. (See: Barclays Bank Ltd. v. W.J. Simms Son and Cooke (Southern) Ltd. (1980) QB 677 per Goff J at p 699.) That would be so even if the customer were the holder of the cheque presented for payment.

75. Furthermore, if, contrary to my finding, it may be said that the payment to Mrs Griffiths by the Bank was caused by a mistake sufficient to give rise to a prima facie obligation on the part of Mrs Griffiths to make restitution, the payment was made for good consideration, namely the release of the Bank from its indebtedness to Mrs Griffiths, and, therefore, the benefit of the payment would not bear the character of an unjust enrichment.

76. An action for restitution by the Bank would not be an action to recover monies paid to another by mistake of fact or law. It would be an action to restore the extent of the Bank's indebtedness to Mrs Griffiths to make it available for the exercise of the Bank's contractual right of set-off. Valuable consideration having been provided by Mrs Griffiths, an action for restitution of the sum paid to her for that consideration could not succeed. (See: David Securities at pp.379-380; Liew K.L., "Recovery of Moneys paid under a Mistake of Law: The Australian Approach", Corporate and Business Law Journal 6 (1993) 157.)

77. As stated earlier, it may be accepted that the Bank would not have elected to pay to Mrs Griffiths the monies demanded by her if the demand had been referred to Ross as manager of the branch where the CMCA was situated, but that did not prevent consideration arising by a corresponding reduction of the Bank's indebtedness, albeit an indebtedness able to be reduced by the Bank by the exercise of a contractual right of set-off.

78. I now turn to the defence of equitable set-off sought to be relied upon by the Bank.

79. The Bank, in its defence, claims that Mrs Griffiths is indebted to it as a borrower in the amount of the principal sum and interest for which judgment is sought by way of cross-claim.

80. The claim of defence of set-off is made pursuant to O.11 r.12 of the Federal Court Rules. The text of O.11 r.12 follows O.18 r.17 of the Rules of the Supreme Court (U.K.). The rule does not create a defence. (See: Spry I.C.F., Equitable Remedies (4th Ed.) at pp.175-177.) It recognizes a procedure to be followed where a respondent's claim to a sum of money may be relied upon as a defence to an applicant's claim and set-off against that claim. In the present matter the right of set-off relied upon is an equitable set-off in that the Bank seeks to set-off a debt against Mrs Griffiths' claim for damages.

81. To stand as a defence to an applicant's claim, the set-off relied upon must have an equitable foundation that makes it appropriate for the claim of set-off to be treated as a complete or partial defence to the applicant's claim. The equitable base for the defence must be the extent to which the claim of set-off has a connection with the applicant's claim and challenges or questions the gist of the applicant's claim in the manner of a true defence. That is to say, the nature of the claim of set-off must be such as to "impeach" the applicant's claim. (See: Re: Just Juice Corporation Pty. Ltd. [1992] FCA 420; (1992) 109 ALR 334 per Gummow J at pp.350-352; Spry I.C.F., Equitable Set-Offs (1969) 43 ALJ 265; Meagher, Gummow and Lehane, Equity, Doctrines and Remedies (3rd Ed.) para.3710; Derham R., Recent Issues in Relation to Set-Off (1994) 68 ALR 331; Westwind Air Charter Pty. Ltd. and Mullins Investments Pty. Ltd. v. Hawker De Havilland Ltd. (1990) 3 WAR 71.)

82. In the present case the Bank's claim to repayment of the loan advanced to Mrs Griffiths and Gray, and interest thereon, does not impeach or raise any equity with respect to Mrs Griffiths' claim in tort. The Bank's claim, although it is part of the transaction which led to the Bank's conduct, now the subject of the applicant's claim in tort, has no relationship to the applicant's claim other than the proximity referred to. It is truly a cross-claim and not a matter of defence to the applicant's claim.

83. An analogy may be found in the restriction of equitable set-off in an action of a dishonoured bill of exchange. (See: Eversure Textiles Manufacturing Co. Ltd. v. Webb (1978) QdR 347.)

84. An action in tort for intentional interference with contractual relations may bring an entitlement to aggravated or exemplary damages in addition to damages for consequential loss. A claim in debt which does not impinge upon that claim for damages will not be recognized in equity as a defence by way of set-off and must stand apart to be prosecuted by way of cross-claim.

85. However, in such a case it may be appropriate to stay execution of any judgment obtained by an applicant pending determination of the cross-claim. In the present matter Mrs Griffiths claimed consequential losses and exemplary damages and the Court was informed that proceedings had been commenced in New Zealand by Mrs Griffiths against ASB seeking damages. Appearing on her own behalf for a substantial part of the trial, the case presented by Mrs Griffiths failed to deal with these aspects and counsel appearing for Mrs Griffiths in the latter part of the trial did not address upon them.

86. I am satisfied that the appropriate order should be that Mrs Griffiths is entitled to an interlocutory judgment for damages to be assessed on the claim in tort for intentional interference with contractual relations, and that the assessment await completion of the proceedings Mrs Griffiths has commenced against ASB in New Zealand.

87. The application against Ross must be dismissed, but no separate defence was undertaken on his behalf and it may be assumed that at all times he has been idemnified by the Bank in respect of any separate costs he may have incurred.

88. I will receive submissions from the parties in respect of any order for costs of the respondent Ross. It will be ordered that the Bank pay Mrs Griffiths' costs to be taxed.