115 In the present case there has been no finding concerning whether the payments referred to in [265] were appropriated either by the respondent or by the appellants to any particular obligation. Naturally, if the only debt due by the respondent to the appellants at the time of these payments was the deposit of the $64,000 plus interest (Item 9) then all or any such payments would, by necessary implication, be regarded as having been appropriated by the respondent debtor towards the satisfaction of that obligation. However, if there were more than one deposit which the appellants had with the respondent during the period March to July 1990 when these payments were made, then the question arises as to which one or more of those obligations the payments were to be appropriated.

116 For reasons already given, the respondent had the first right to specify the obligation or debt to which the payments were to be appropriated but, in the absence of any such specification, the appellants had the right to specify the appropriation. In this case the evidence generally establishes that there were several deposit accounts which the appellants had with the respondent over the period during which these payments were made. Indeed, the appellants' success in recovering moneys owing for unpaid balances on these accounts in this action reveals this to be the case but, obviously, it is not open to conclude that these payments were applied in satisfaction of those other accounts when, by the judgment, it was found that there were still amounts due under them in respect of which the appellants were entitled to recover, and did recover, the moneys plus interest owing as debts then due.

117 What has not been examined in the evidence at the trial (no doubt because it was not relevant to any issue raised by the pleadings as they stood during the trial or in relation to issues as they were conducted at trial) was whether or not there were still other deposits which the appellants had with the respondent and which had been satisfied by payments from the respondent before trial. If that had been the case then there remains the possibility, as submitted by counsel for the appellants, that these particular payments had been appropriated either by the respondent or by the appellants towards the satisfaction of those other obligations. Because those other obligations had been treated as satisfied there would have been no occasion to identify the source of the particular payments from the respondent which discharged them.

Special features of the $6,000 credit for shares

118 Of the total of $46,322.31 credit allowed by the learned trial Judge to the respondent against its liability for the $64,000 deposit (Item 9) was a component of $6,000 found to have been applied for the purchase of shares in the respondent in the names of the appellants. This particular credit is, therefore, of a different character from the other three components of the credits allowed because it was found to have been paid to the appellants' use rather than to them personally.

119 To examine the significance of this particular credit it is necessary to look more closely at the findings which her Honour made. On 21 March 1990 the LKJA trust account ledger in the appellants' names (account 346) was debited with the $6,000 which was on that date paid to the respondent for the purchase of shares. By letter dated 13 June 1990 from the respondent to the appellants the respondent acknowledged receipt of an application for shares and enclosed the relevant share certificate. Audit enquiries, however, revealed that the share allotment to the appellants was made on 17 January 1990 but that the shares were not paid for until 20 March 1990 [167]. Plainly, therefore, the shares were treated by the respondent as subscribed and allotted more than two months before the subscription moneys were paid to the respondent and the share certificate and confirmation of the application for shares was not despatched until a further period of about two and a half months had passed. The learned trial Judge did not make any finding which would serve to explain or justify these apparent irregularities and, because they are left unexplained, they reflect adversely upon the respondent and Jamieson.

120 The source of the moneys for the payment of this $6,000 subscription for shares in the respondent were credit balances in the trust account of LKJA for various unsecured and unauthorised loans made in the appellants' names by Jamieson to third parties [172], [173] and [174]. These unauthorised loans made by LKJA in the names of the appellants to those third parties came from deposit (346) of $66,114.63 which the appellants had made with the respondent but which Jamieson had, without their knowledge, transferred to LKJA [171]. With regard to the transfer of this $66,114.63 from the respondent to LKJA by Jamieson her Honour made a number of significant findings, including:

• Jamieson had misrepresented to the appellants that LKJA had received their funds as principal rather than as agent [212].

• The appellants were not aware of the links between deposit (346) and the moneys transferred in and out of LKJA on accounts (524), (525) and (568) [the unauthorised loans to the third parties] and the moneys eventually on deposit with LKJA - [225].

• The respondent failed to establish that the appellants authorised or ratified the redemption of deposit 346 in September 1989 and its transfer to LKJA or any other subsequent transaction into or out of the respondent's accounts held on behalf of the appellants [meaning those transactions involving dealings with part or all of the $66,114.63 credited to the appellants in the trust account of LKJA being the product of the transfer of the $64,000 plus interest from the respondent to LKJA - [226] and [251] (f)].

• The $6,000 was paid from such an LKJA account to the respondent on 21 March 1990 - [255].

• This payment by LKJA of $6,000 to the respondent was treated as the payment of moneys held by LKJA on trust for the appellants for the satisfaction of a debt (for the purchase of the shares) due by the appellants to the respondent. As such the rule that a payment made by a third party stranger to a creditor without the authority or subsequent ratification by the debtor does not discharge the debtor's indebtedness to the creditor did not apply - [263] and [264].

• Having regard to Jamieson's dual roles, that payment by LKJA of the appellants' obligation to pay the respondent for the shares was ratified by the respondent so as to extinguish the appellants' debt for the shares - [264].

121 The first point arising from these findings is that there was nothing to establish, nor any finding made to the effect, that the use of moneys standing to the credit of the appellants with LKJA for the purposes of the payment of the purchase price for the shares in the respondent was ever authorised, or ratified by the appellants. This is not surprising, nor can it be regarded as a simple omission because the earlier findings demonstrate that her Honour was satisfied that the appellants did not know of, authorise or ratify the loans by LKJA to the third parties or, indeed, the transfer of deposit (346) of $64,000 plus interest (Item 9) from the respondent to LKJA.

122 Secondly, the relationship arising between the respondent and the appellants as a result of the deposit of the $64,000 was that of debtor and creditors and not trustee and beneficiaries. In those circumstances, I do not consider that it is correct to designate the $66,114.63 standing to the credit of the appellants in the account of LKJA, resulting from the unauthorised transfer of the credit of the original deposit (346) from the respondent to LKJA as trust money held for the appellants. That transfer did not discharge the respondent's indebtedness to the appellants on that deposit nor result in any specific property of the appellants in that deposit (none existing) being transferred to LKJA. Accordingly, although the credit was maintained in a "Trust Account" with LKJA I do not consider that there was any property in that deposit of which the appellants had or retained a beneficial interest. It was never suggested that the appellants had a right to trace these moneys in equity into the hands of LKJA and, the respondent having not been a trustee of the original deposit 346, there is no reason to suppose that the interest in this unauthorised deposit effected by Jamieson and held by LKJA was held on trust for the appellants: see Goff & Jones: "The Law of Restitution" 5th ed, p 16 and 17 and Miller v Race [1758] EngR 129; (1758) 1 Burr 452 at 457 - 458.

123 Third, even if LKJA had used the $6,000 to repay the appellants' debt to the respondent for the purchase of the shares, and the respondent had accepted that payment in discharge of that indebtedness (as found), that would leave LKJA, and not the respondent, with a restitutionary claim against the appellants. It was never suggested or found that the appellants' debt of $6,000 to the respondent for the purchase of the shares was satisfied by any payment (whether authorised or unauthorised) from moneys held by the respondent to the credit of the appellants. As the respondent's entitlement to payment from the subscription moneys due on the shares was satisfied by LKJA there is no reason to conclude that the respondent is entitled to a second credit for the same amount when it is called upon to discharge its liability to the appellants on the original deposit (346), Item 9. Indeed, to do so would result in a double credit being given to the respondent for the same debt.

124 In my view the correct characterisation of what has happened with respect to this $6,000 is that funds of LKJA which were held by that firm in the name of the appellants, but without any authority or knowledge of the appellants, were, unknown to the appellants, and without any ratification by them, used to discharge an independent debt due by the appellants to the respondent and resulted in that debt being discharged. In such circumstances there can be no basis upon which the respondent can be allowed a second credit for that $6,000 when called upon to repay to the appellants its debt due to them for the proceeds of deposit 346. At the most LKJA may have a restitutionary claim against the appellants to the value of the benefit derived by the appellants in having their debt to Albany Finance discharged but, whether restitution would be allowed having regard to the improper dealings by LKJA is a separate matter which does not require examination here.

125 The conclusion which is material in the present litigation is that the respondent should not have been allowed a second credit for this $6,000 as against the appellants' claim for the recovery of the deposit the subject of Item 9. This examination of the position has not extended to a consideration of whether, if otherwise, the payment of this $6,000 by LKJA to the respondent resulted in a credit to which the respondent was entitled, it could be regarded as having been appropriated to, or could be set off against, the respondent's liability to repay the proceeds of the deposit Item 9 in full. As there has been no evidence or finding to show that it was ever intended to be appropriated, or was appropriated for that purpose, that would also result in the conclusion that the respondent was not entitled to a credit for this $6,000 as against this component of the appellants' claim. The reasons for this conclusion are set out in more detail elsewhere.

126 In the light of the evidence at the trial and the findings by the learned trial Judge, I consider that the only conclusion which can be drawn in this regard is that there was no specific appropriation made by the respondent at the time of these three payments and credit in March, July and August 1990 to apply them in reduction of the $64,000 deposit or interest due upon it. Insofar as the contemporary records of the respondent indicated, if there was any appropriation intended by the respondent, it was towards the satisfaction of false deposits which had been improperly raised by Jamieson but, even then, there is no evidence to suggest that such a designated appropriation was communicated by the respondent to the appellants. Consequently, it could not be binding upon the appellants.

127 That left the appellants free to appropriate the payments received at their own discretion to any one or more of the debts then due to them by the respondent and to do so at any time. There is no finding or evidence to show that the appellants ever appropriated any of these payments towards the satisfaction of the deposit account for $64,000 plus interest. Indeed, the institution of this action, including the claim for the recovery of Item 9 plus interest, is an indication that, as far as they were aware, the appellants had not appropriated any payments towards the satisfaction of that particular debt. As previously noted, one of the advantages for a plaintiff suing in debt, is that the establishment of the debt then casts the onus upon the defendant of proving repayment. This means that, in a situation where there are several debts outstanding by the respondents to the appellants at the time of these payments, the onus requires the respondent to show not only that the payments have been made but that they have, or could only have, been appropriated towards the discharge of this particular obligation sued upon.

128 There was no evidence directly dealing with any such express choice or appropriation and this suggests that no such specific appropriation occurred. However, at [261] to [265] of the reasons of the learned trial Judge, her Honour seems to have inferred that, in effect, the payments were appropriated towards the discharge of the $64,000 deposit account. His Honour did so, on the basis that the appellants had not sued for or suggested the existence of any other outstanding obligations by the respondent in these proceedings and that, therefore, these payments must be taken to have been intended to satisfy, at least in part, the obligation under the $64,000 deposit account. However, this does not follow because, if there had been other debts due by the respondent to the appellants at the time these payments were made and if the payments had been appropriated towards the satisfaction of those other debts then, naturally, the appellants would not seek to recover those other debts because they would be regarded as having been paid. This could happen because the payments were appropriated by the respondent towards those other debts or, in the absence of any appropriation by the respondent, the appellants themselves could have appropriated them towards those other obligations. Either way those obligations would have been discharged and there would have been no occasion to examine them, nor the method of their discharge, in the course of the current action.

129 To the extent that the learned trial Judge drew an inference that the payments were intended by the respondent, had the true circumstances been known, to be applied in reduction of the $64,000 deposit plus interest, it must follow, ex hypothesis, that such a specified appropriation was never communicated by the respondent to the appellants and was not accepted by the appellants. Equally it must follow from the appellants' pursuit of the recovery of this deposit by these proceedings and, in the absence of evidence to the contrary, that the appellants never treated those payments as being appropriated towards this particular account.

130 In my respectful view, this can only lead to the conclusion that the evidence at the trial does not justify a finding that any of these payments was appropriated towards the satisfaction, in whole or in part, of the respondent's indebtedness on the deposit account for $64,000 plus interest. No such appropriation was made by the respondent in any manner communicated to the appellants, and no such appropriation was made by the appellants. In that case the respondent has failed to prove that the $64,000 deposit account plus interest was partially discharged by any of such payments because the onus of doing so rested upon it.

131 That does leave the question of what these payments were for and whether or not, perhaps, the appellants may have derived an undeserved windfall from these payments. While that is a possibility, it is no more than a possibility. If it has occurred it is due entirely to the failure of the respondent to discharge the onus of proof resting upon it.

132 In my view the appellants are entitled to recover in these proceedings the whole of the undischarged debt of $64,000 plus interest and to do so on the footing that the particular payments that were made were never appropriated towards that liability. If it should subsequently be established that there were no other obligations which the respondent owed to the appellants at the time to which these payments were appropriated, then the result will be that these were payments which have been made by the respondent to the appellants for no consideration, or that they were payments made by mistake, in the belief that they would be appropriated towards the partial discharge of one particular obligation, in circumstances where there was no duty for them to be so applied, and where they were not so applied. That would leave open an action by the respondent for the recovery of those payments by way of restitution. Indeed, such a claim might have been advanced by a counterclaim in the present proceedings, but that was not done. That there may be a successful limitation defence to any such restitutionary action contemplated by the respondent is no reason to treat the payments which had been made as being appropriated towards this particular obligation when the evidence in the case does not prove that this was so.

133 It is now necessary to return to the appellants' submission that tender of part payment of a debt need not be accepted by the creditor even in partial satisfaction of the debt: Young v Queensland Trustees Ltd (supra). This is a rule which must be applied with care. Where a creditor retains the money tendered without specifying to the debtor a refusal to appropriate it towards the partial discharge of the debt in respect of which it was tendered, there must be a very strong inference that it has been accepted in partial discharge of that obligation because, otherwise, the retention of the money plus the assertion that the whole of the debt remains payable would give rise to an unjustifiable benefit for the creditor. If that were the situation in the present case, I consider that any appeal court would be reluctant to interfere with an implicit finding by a trial Judge that the payment was appropriated by the creditor, or accepted by the creditor, as having been appropriated towards the partial discharge of that particular obligation. However, this process of reasoning depends very greatly upon the assumption that the particular debt, in this case the $64,000 deposit plus interest, was the only debt owed by the respondent to the appellants at the time the payments were made. If there were other debts owing, particularly debts which were not examined in these proceedings, then the possibility of the appropriation of the payments to those other obligations cannot be ignored, especially, as in this case, where there is no evidence of the appropriation of the particular payments towards the particular account on either side. To make a finding against the appellants as creditors in this situation that, in the absence of evidence upon which an inference of appropriation can satisfactorily be made, the payments must have been appropriated towards partial discharge of this liability is, in my respectful opinion, to reverse the burden of proof on the issue. Accordingly, I consider that the findings by the learned trial Judge that the amounts totalling $46,322.31 referred to in [265] of the reasons must be brought to the credit of the respondent and cannot stand. I would allow the appeal in this respect.

134 This means that the principal sum outstanding in August 1990 was $46,322.31 greater than recognized by the judgment after trial. Compound interest must be calculated upon that at quarterly rests at the rates prevailing from then until judgment. I consider that the parties should be given an opportunity to bring in an agreed minute to establish the component of interest to be added as a result of this finding and, failing agreement, for the matter to be determined by a Master upon an inquiry.

135 This conclusion also means that the question whether or not the finding that $24,744.08 was repaid on 31 August 1990 was correct or not is of much diminished significance (ground 2 in notice of appeal). If, as I have concluded, the respondent failed to show that it had been repaid then that is simply another reason to refuse credit for that amount. If, however, it is concluded that it was paid then, for the reasons which I have described, it should not be credited as having been made in reduction of the liability of the respondent in respect of the deposit Item 9.

Findings on cross appeal and notice of contention

136 It is now necessary to return to the respondent's notice of contention and cross-appeal and its submission that the repayments of $46,322.31 can be treated, in this appeal, as a set-off against the respondent's liability under Item 9, or that the learned trial Judge was in error in refusing the respondent's application to reamend its defence to plead, in the alternative proposed in par 3B of the minute of amended defence, that they could be set-off against any liability otherwise established against the respondent. Those submissions must be examined on the basis of the conclusion that the respondent has, by this point, failed to prove that the payments were accepted by the appellants in partial reduction of the debt arising from deposit Item 9 or that the payments have been appropriated, either by the respondent or by the appellants to effect a reduction of that liability.

137 To allow such an alleged set-off in such circumstances would be to force an appropriation on the creditors which was never made at the time and the submission must, for that reason alone, be rejected. Equally, if the repayments made had been, or might have been, appropriated towards the satisfaction of other debts due by the respondent to the appellants there would be no basis to recognize any right of set-off against the respondent's liability under Item 9. One simply does not reach the position where any set-off could be considered or allowed when:

• the respondent has failed to prove that the payments were accepted or appropriated towards the reduction of its liability under Item 9; or

• the respondent has failed to prove that it had no other liability or liabilities to the appellants at the time of these payments to which they could have been appropriated, except its liability in respect of Item 9; or

• there is no equity to require that the payment should be treated as a set-off rather than a payment made by mistake in respect of which a restitutionary claim could have been made, if made in time.

138 Furthermore, I consider that the learned trial Judge was correct in concluding that these payments did not meet the requirements of a set-off in law or equity "in the technical sense": see per Kennedy J in Hazcor Pty Ltd v Kirwanon Pty Ltd (supra). If the payments have not been shown to have been accepted or appropriated in reduction of the respondent's liability to the appellants in respect of the deposit Item 9, that, of itself, reveals that the payments do not impeach the title of the appellants to recover that deposit. The position is only strengthened in this regard where there is a possibility that the payments which were made have been treated as discharging other separate liabilities of the respondent to the appellants which were not in any way scrutinized at the trial. There was simply no basis for a set-off in the circumstances alleged and the respondent's contentions in this regard must be rejected.

139 In my opinion the learned trial Judge was correct, for the reasons which she gave, in treating the relationship between the respondent and the appellants as akin to that between banker and customer and therefore implying a term into the contracts of deposit that the principal and accrued interest was only repayable upon demand. That being the case, no cause of action in favour of the appellants accrued before demand was made and, as the latter was within six years of the commencement of the proceedings, the Limitation Act defence was correctly rejected. That conclusion also disposes of the respondent's cross appeal which, in my view, must be dismissed.

140 It follows from these conclusions that I consider that the learned trial Judge erred in the exercise of her discretion to permit the respondent to amend its defence, after the completion of the evidence and the delivery of reasons for decision so as to introduce a new defence in the form of par 3A pleading that the deposit of $64,000 (Item 9) had been repaid in part by the four alleged payments totalling $46,322.31. While it was open to her Honour to make a finding that such payments had been made, having regard to the way the trial was conducted, I do not consider that it was open at that stage of the proceedings to allow a plea that such payments had resulted in part repayment of the deposit Item 9. The reason for this is because, to constitute such a partial repayment, it would be necessary for the respondent to have proved that the payments were made and accepted by the appellants in reduction of that particular liability, or that, otherwise, they had been appropriated by the appellants towards the reduction of that liability. No attention to the question of such appropriation was given at the trial nor, having regard to the lateness of the amendment, were the appellants given an opportunity to plead by way of reply that any such payments, even if established, would not constitute a satisfaction of that liability. Neither did they have an opportunity in the course of the trial to address any such issue or to adduce evidence on the question of whether or not there had been such an acceptance or an appropriation of the alleged payments. At such a late stage of a long and complicated case an amendment which would require the appellants to be given an opportunity to replead and adduce further evidence on an issue upon which the respondent bore the onus of proof could not be justified. However, even on the basis that the amendment was correctly permitted, it remains the case that the respondent has not proved that any of the three payments or credit was accepted or appropriated in reduction of this particular liability and, accordingly, the amendment should not have been allowed.

141 As I consider that the appellants should succeed in this appeal in relation to Item 9 of their original claim, I consider that they should have also been entitled to their costs of pursuing those aspects of their claim at trial. The learned trial Judge dealt with the issue of costs on the basis that the appellants had recovered only $28,177.69 principal out of a claim for the recovery of principal totalling $161,344.89 (disregarding interest), the effect of my conclusions is that the principal recovered has increased from $28,177.69 to $74,500. While this is still less than half of the amount originally sued for it is apparent that a substantial portion of the trial was occupied with the issues arising from the claim made for the recovery of the deposit of $64,000 (Item 9) and the respondent's contentions that this had been in part repaid upon which the appellants now emerge successful. In these circumstances it is necessary to reconsider the claim for costs afresh, having regard to the greater overall success achieved by the appellants in the action.

142 Consistently with the principles in Permanent Building Society v Wheeler (No 2) (1993) 10 WAR 569 I consider it is appropriate to recognize that the appellants failed, in significant respects, in the other claims which they advanced but that, nevertheless, they achieved a substantial success in circumstances where the claims upon which they were ultimately successful always remained in issue and where, having regard to the unfortunate history of the respondent due to the conduct of Jamieson, it was unusually difficult to establish how their accounts had been treated.

143 By ground 9 of their notice of appeal the appellants seek an order for the payment of 80 per cent of their taxed costs of the action from the respondent and, in all the circumstances, I consider that this would be appropriate and that an order in that regard should be made. However, I see no reason to reconsider or vary the decision of the learned trial Judge (supplementary reasons [15] and [19] that there should not be any special costs orders) and, therefore, I would decline to make any special orders or allowances for costs without, in any way, detracting from the ability of the taxing officer to allow all reasonable costs considered appropriate in the circumstances, including the powers available to the taxing officer under RSC O 66 r 18. It also follows from this conclusion that I consider that the cross appeal with regard to costs should be dismissed.

144 In view of my conclusion that the appeal should be allowed and the consequent need to reconsider the appellants' entitlement to the costs of the trial in the manner just outlined, it is unnecessary to address the issue of the competency of the appeal against the costs order on the basis that the appeal is from an order for costs alone.

145 For these reasons I consider that the appellants' appeal should be allowed and that the judgment entered on 29 July 2003 should be set aside. In lieu thereof I consider that the Court should order, declare and adjudge that:

(a) the order granting the respondent leave to amend its defence as proposed by its minute of further amended defence dated 23 June 2003 should be set aside and the application for leave to amend the defence should be dismissed;

(b) the appellants are entitled to recover against the respondent:

• the sum of $64,000 being the deposit made by them with the respondent on 21 June 1989 referred to as "Item 9" in the action, together with compound interest thereon calculated from 21 June 1989 until the date of judgment 29 July 2003 at the rates prevailing on like deposits for the respondent from time to time during that period but compounded quarterly;

• the appellants are entitled to the sum of $10,500 being the deposit made by them with the respondent on 3 December 1992 referred to as "Item 11" in the action, together with compound interest thereon calculated from 3 December 1992 until the date of judgment 29 July 2003 at the rates prevailing on like deposits for the respondent from time to time during that period but compounded quarterly;

(c) the parties have liberty to bring in an agreed minute of the interest accruing on the above two components of the appellants' claims until the date of judgment within 28 days from today in which case a single Judge of this Court

may fix the aggregate amount of the judgment to be entered in favour of the appellants, for principal and interest, as at 29 July 2003. In the absence of agreement as to the amount of interest accruing on the two components mentioned until the date of judgment being recorded within 28 days, the issue of the calculation of the interest payable shall be referred to a Master of this Court for inquiry and the result of the inquiry shall be reported to a single Judge of this Court to allow such a final determination to be made;

(d) the respondent do pay to the appellants 80 per cent of their costs of the action to be taxed;

146 LE MIERE J: I have had the advantage of reading in draft the reasons for judgment of E M Heenan J. I agree that the appeal should be allowed and the cross-appeal dismissed for the reasons stated by his Honour. I agree with the orders proposed by his Honour.

• The Cross-Appeal and Notice of Contention

• Amendment to Defence After Trial
• Costs
• Item 9
• Item 11
• Item 13
• Judgment after trial and late amendment of defence
• Issues on the appeal and cross-appeal
• Notice of contention
• Background
• Item 13
• Findings in respect of items 9, 11 and 13
• The Item 11 claim
• The Item 13 claim
• The appeal in relation to Item 9 - the deposit of $64,000 of 21 June 1989
• The $24,744.08 "repayment"
• Other aspects of Item 9
• Special features of the $6,000 credit for shares
• Findings on cross appeal and notice of contention
• Limitation defence
• Amendment to defence after trial
• Costs
• Summary