Consideration - the prima facie case issue
55 The trial judge correctly identified the principles governing the determination of the question whether he could be satisfied that Mrs Goater, as the debtor, had a counter-claim, set-off or cross demand under s 40(1)(g) of the Act. However, in our opinion, his Honour erred in his consideration and determination of that question. In substance, his Honour considered that Mrs Goater's statement of claim, as filed in the District Court, established a genuine claim with reasonable prospects of success. But he did not consider the legal, and particularly, the factual merit of her claim. Thus, he could not have weighed those considerations with the justice of allowing the bankruptcy proceedings to continue: Guss 171 ALR at 606 [40].
56 The problem with Mrs Goater's case was that the various versions of arrangements that she alleged that she (and Mr Goater) had with the Council lacked coherence with the material in the evidence in respect of what payments they both had to make, and had made, to reduce the arrears so as to make incorrect what Ms Treloar had written in the 6 November email to the bank.
57 First, Mrs Goater's pleaded case centred on the Council's alleged misrepresentation of her and Mr Goater's default in compliance with an arrangement to pay instalments of $500 to reduce arrears of their water rates. But she gave or relied on evidence of several different versions of the applicable arrangement. In any event, none of those answered the difficulty that no payments that she and her husband had made to the Council, after the $2,270 paid on 3 September 2013, specified to the Council in the electronic funds transfer advice or otherwise any allocation by them.
58 In Cory Brothers & Company Limited v The Owners of the Turkish Steamship "Mecca" [1897] AC 286 at 293, Lord Macnaghten said:
When a debtor is making a payment to his creditor he may appropriate the money as he pleases, and the creditor must apply it accordingly. If the debtor does not make any appropriation at the time when he makes the payment the right of application devolves on the creditor. (emphasis added)
59 However, a mere intention to appropriate a payment that the debtor does not communicate to the creditor is not sufficient, and the creditor is free to apply the money, when received, as it chooses: Leeson v Leeson [1936] 2 KB 156 at 161 per Greer LJ, 162-163 per Greene LJ, with both of whom Talbot J agreed. Nonetheless, in Knysh v Corrales Pty Ltd (1989) 15 ACLR 629 at 633-634, Morling, Pincus and Lee JJ explained that the debtor's intention to appropriate a payment can be inferred from all of the circumstances, even though the debtor does not expressly state that intention at the time of making the payment; see too Caltabiano v Electoral Commission of Queensland (No 1) [2010] 1 Qd R 100 at 114-116 [28]-[38] per Muir JA, 130-132 [107]-[110] per Fraser JA, 135 [129]-[130] per Fryberg J.
60 No payment that Mrs Goater and her husband made after 3 September 2013 and before 6 November 2013 specified that they required it to be appropriated to the payment of the water rates arrears. Nor did Mrs Goater point to the availability of any evidence from which such an inference could be drawn. The ambiguous payment notification "T & S Goater" that the Council's bank statement recorded with its receipt of $500 on 3 November 2013 did not amount to an appropriation to any particular account, much less that for water rates.
61 Secondly, even if it were arguable that the Council should have allocated some payments to the reduction of the liability for water rates (which we do not consider that it was), the material on which Mrs Goater relied (assessed liberally, as Ebert 104 CLR at 350 required) did not establish that there was a prima facie case that she (and her husband) had acted in accordance with any version of the arrangements that she alleged. Indeed, the existence of the various alternate arrangements and the circumstances in evidence suggested that the nature of whatever counter-claim, set-off or cross demand on which Mrs Goater relied lacked clarity and coherence.
62 Relevantly, Mrs Goater's assertion that she had sufficiently established a claim for the purposes of s 40(1)(g) depended on two matters. First, she had to establish that the 6 November email was inaccurate in the way she alleged. Secondly, if she did, she had to demonstrate that the inaccuracy had caused the bank to act to assert a legal right it had to take enforcement action against them. However, as the Court of Appeal found, when the bank acted on the 6 November email, it did so in breach of the FOS agreement and its powers as mortgagee. Thus, the bank's action was a breach of contract. It was not entitled to act against Mr and Mrs Goater on the basis of anything that had occurred in the arrangements they had with the Council. Accordingly, the bank's enforcement action had no legal basis regardless of the accuracy of the contents of the 6 November email.
63 Mrs Goater gave evidence in her affidavit that she had made an arrangement with the Council on 2 September 2013 to pay off the remaining water rate arrears by monthly instalments of $500 after the initial payment of $2,270. She annexed Ms Treloar's email of 4 September 2013. That email evidenced that, independently of any arrangement at that time, Mr Goater paid $500 to reduce the council rate arrears and that Ms Treloar had suggested that the couple approach SR Law to make an arrangement about paying off the significant balance of those arrears.
64 Significantly, at no point in her affidavit did Mrs Goater suggest that any other relevant arrangement was in place by 6 November 2013 than the payment of monthly instalments of $500 to reduce the water rates, despite her annexing to it the 6 November email that asserted the existence of a second arrangement of monthly instalments of $500 to reduce the council rate arrears. Instead, she said, without elaboration, that from 3 September 2013 to, relevantly, 3 November 2013 she and her husband had made six payments totalling $6,540.75 in various amounts, for "water, council rates and sundry payments". She said that she and her husband had been paying "$500 per month and whatever extra we could afford … to catch up with the rates owing".
65 Next, in par 14 of her draft statement of claim Mrs Goater alleged, for the first time, that in early September 2013, she and her husband had made two arrangements with the Council to pay separate monthly instalments of $500 to reduce the water rates and Council rate arrears. She then pleaded, in par 17, that an agreed variation to the earlier arrangements had occurred on about 8 October 2013 so that, relevantly (as at 6 November 2013), the second of the $500 monthly instalments would be apportioned as to $250 for council rate arrears and the balance for "burial costs", without giving any particulars of what the burial costs were (e.g. whether the $250 was to reduce the judgment on which the bankruptcy notice was based or to pay for new or other burials). Mrs Goater's pleading then alleged that the 6 November email had wrongly represented that, first, Mr and Mrs Goater had not paid the monthly instalments of $500 for water rate arrears under the 8 October 2013 arrangement pleaded in par 17 and, secondly, the Council would be pursuing legal action against them without a proper basis. Mrs Goater repeated all those allegations in her filed statement of claim.
66 A further version of the arrangements emerged from the evidence tendered in the appeal, namely that on 5 September 2013, Mr Goater agreed in writing to pay "$500 pm [scil per month] on both rates and water". Initially, Mrs Goater argued that the word "both" conveyed that payment of only one amount of $500 each month would satisfy that arrangement and that they could pay at any time within the month. We reject that argument. The reference to "both rates and water" is at best ambiguous on the face of things. In the context of the evidence, however, there is no room for doubt; it means each of rates and water. In the first place, as at 3 September 2013 an arrangement for the payment of the water debt at $500 per month was already in place. Then, Ms Treloar's email of 4 September 2013 set in train a process that resulted in the making of an additional arrangement for payment of the rate arrears on 5 September 2013. On the question of timing, the notion that the arrangements allowed flexibility in the time for payment is both inconsistent with the conduct of Mr and Mrs Goater and inherently unlikely. Mr and Mrs Goater made payments on 3 October 2013 and 3 November 2013 conformably with a requirement to pay on the third day of a month and indicative of their own understanding of the arrangements. It is inherently unlikely that the arrangements were so loose that they allowed Mr and Mrs Goater flexibility as to when in any month they could pay any instalment. That is because commercial common sense requires that the debtor and the creditor alike should know the due date for payment. The reference to "3rd monthly" gave that certainty: viz: the payments were due on the third of each month.
67 Last, the 6 November email itself identified that Mr and Mrs Goater had made two arrangements in September 2013, each requiring a monthly payment of $500, to reduce respectively the arrears for council rates, that had been met, and for water rates, that had not been met.
68 Here, Mrs Goater made an appropriation to reduce the council rate arrears by paying $500 on 3 September 2013 and identifying that purpose in a way that appeared on the Council's bank statement recording receipt of the electronic fund transfer payment. But no appropriation appeared on any of the Council's bank statements after 3 September 2013, albeit that its bank statement recording its receipt on 17 October 2013 of $4,823.75 was not in evidence. Indeed, the corresponding computer entry for the 17 October 2013 payment in Mr and Mrs Goater's building society statement did not contain any appropriation in the computer generated record of that electronic funds transfer to the Council, leaving aside their handwritten notations on that document that did not form part of the electronic funds transfer. Nor did Mrs Goater give evidence or otherwise explain that she or her husband had communicated to the Council an appropriation or appropriations of that payment to the Council at or before the time it was made.
69 On the evidence before the Full Court, in addition to the fact that Mrs Goater still owed about half of the judgment debt for burial fees, there were two arrangements in place. We would infer that, had this occurred, the Council would have understood that a single payment of $500, that was not accompanied by a specific appropriation or direction, made on the third of a month had to be appropriated to satisfy one of the two arrangements for reducing either the water or council rate arrears, and that the Council was not free itself to appropriate such a payment to reduce another debt. But, Mr and Mrs Goater had not appropriated either of the $500 payments that they made on 3 October 2013 and 3 November 2013 respectively. Accordingly, the Council was free to appropriate each payment, as it did, to the reduction of the larger arrears of council rates rather than to the smaller arrears for water rates. The 3 November 2013 payment of $250 was not referrable to any arrangement and the Council was entitled to appropriate it, as it did, to reducing the arrears of council rates.
70 In those circumstances, although Ms Treloar could have expressed the 6 November email to the bank more carefully, Mrs Goater did not establish a prima facie case that it conveyed a negligent or misleading representation as to Mr and Mrs Goater having, first, failed to comply with the arrangement for payment of arrears of council rates and, secondly, since making the September 2013 arrangement, not having made any payment to reduce their arrears of water rates. There was no material before the trial judge or us to show any inaccuracy in what Ms Treloar had written in respect of the unpaid judgment debt or the Council's entitlements to enforce its legal rights, or its stated intention that it would pursue "legal action" in respect of that judgment debt.
71 The trial judge made no analysis of the legal or factual merit of what Mrs Goater's claim was, having regard to the material in evidence before him. Rather, his Honour simply accepted that the filed statement of claim was genuine and, apparently on that basis only, found that it had a reasonable prospect of success.
72 In our opinion, that finding was erroneous. The nature of Mrs Goater's claim was that the substance of the 6 November email misrepresented the position as to their compliance with arrangements that she and her husband had made with Council.
73 As we have found, the material in evidence, and Mrs Goater's various inconsistent assertions about the nature of both the arrangements and their compliance, or lack of compliance, with them suggested that Mrs Goater's claim lacks sufficient legal or factual merit to justify setting aside the bankruptcy notice under s 40(1)(g) of the Act: Guss 171 ALR at 606 [39]-[40].
74 Nor did Mrs Goater's claim based on a breach of confidence or of the implied undertaking have sufficient legal or factual merit to justify his Honour's decision to set aside the bankruptcy notice.
75 Mrs Goater's email to the Council of 6 November 2013 (which we infer that she sent with her husband's authority on behalf of both of them), told Ms Treloar to "give Rohan from … [the] bank whatever information he needs". Ms Treloar's subsequent 6 November email to the bank commenced with the words "As per our phone conversation, and Shirley Goater's authorisation to give you information with us". There was no evidence to suggest that Mr Goater had not authorised Mrs Goater to give that authority to the Council on his behalf in the circumstances where both of them had a joint obligation under the FOS agreement to provide information to the bank. The whole of the circumstances suggest that he did give that authority. Accordingly, in our opinion, Mr and Mrs Goater authorised the Council to make the disclosures in the 6 November email to the bank of all of the information that they had or may have provided earlier under compulsion.
76 If we are wrong in that conclusion, we offer the following observations about difficulties with the way in which Mrs Goater made this claim. If a party to litigation (or a third party to it) who discloses documents or information under compulsion by reason of a rule of court (such as the rules relating to discovery or subpoenas), a specific order or otherwise (such as a request to a party seeking taxation of a bill of costs to produce documents to the taxing officer to support a claimed expense: Bourns Inc v Raychem Corp [1999] 3 All ER 154 at 170 at h-j per Aldous LJ with whom Brown P and Thomas LJ agreed), the party obtaining disclosure cannot use the documents or information, without leave of the Court, for any purpose other than that for which it was given unless it is received into evidence (Hearne v Street (2008) 235 CLR 125 at 154-155 [96]-[97], 158-160 [106]-[108] per Hayne, Heydon and Crennan JJ with whom Gleeson CJ at 131 [3] and Kirby J at 142-143 [46]-[49] agreed) or if the person making the disclosure consents to or authorises such a use of the documents or information so disclosed for another purpose.
77 Ordinarily, a statement in open court by a party obliged to give discovery or by a person answering a subpoena to produce that the party or person has no documents of a particular description to discover or produce might not be thought to attract an obligation constraining the further use of such a statement on any person present in the court room.
78 Mrs Goater's claim that the Council breached any obligation of confidence or the implied undertaking is inconsistent with her express authorisation, which appears to have been given also on Mr Goater's behalf, on 6 November 2013 for Ms Treloar to give the bank whatever it needed.
79 There was no evidence that as at 6 November 2013 either the Council or Ms Treloar was aware of the terms of the FOS agreement, and in particular, its provisions relating to the information concerning the financial arrangements that Mr and Mrs Goater had with the Council and their degree of compliance with them. It may not be a defence to an allegation, in a charge of contempt of court, that the Council's disclosure was a breach of the implied undertaking, for such a charge is one of strict liability. However, when Mrs Goater gave her written authority to Ms Treloar to give the bank whatever information it needed, Ms Treloar had Mrs Goater's express authority (and that of Mr Goater) to disclose to the bank matters relating to the Local Court proceedings, including information obtained by the Council from Mr and Mrs Goater under compulsion in the course of those proceedings, if the bank asked for that information.
80 Moreover, the cause of the bank's actions leading to the eviction of Mr and Mrs Goater being wrongful was, as the Court of Appeal held, the bank acting outside its legal rights. Thus, if there were arguably any wrongful communication of information by the Council in the 6 November email about matters that Mr and Mrs Goater disclosed at Moree Courthouse, (as opposed to the Council rate arrears and their lack of compliance with payment arrangements) it is unlikely that they would be awarded any substantial equitable compensation based on the disclosure to the bank of confidential information that would equal or exceed the amount claimed in the bankruptcy notice. In addition, it is difficult to think (but not necessary further to discuss) that any confidentiality or implied undertaking applies to subsequent disclosure or use of the fact that a person subpoenaed or required by a court order to produce documents described in the subpoena or order answered the subpoena or requirement by stating that the person had no such documents.
81 There was no material in evidence to demonstrate any, let alone a prima facie, case that the Council had gone beyond giving the bank the information that it wanted, including whatever might have been discussed between Ms Treloar and Mr [Rohan] Dalal, in accordance with the authorisation in Mrs Goater's earlier email. While it is not necessary to adduce "the admissible evidence which would make out a prima facie case before a court trying the issues that are involved in [the] counter-claim …": Ebert 104 CLR at 350, the material in evidence before us is insufficient to support the case on which Mrs Goater founded her claim under s 40(1)(g).
82 For these reasons, the trial judge erred in setting the bankruptcy notice aside. We are not satisfied, having regard to the material before his Honour, as supplemented by the further evidence of the arrangement that we admitted by consent on the appeal, that the claim relied on by Mrs Goater has sufficient legal or factual merit to justify, in all of the circumstances, setting aside the bankruptcy notice under s 40(1)(g) of the Act: Guss 171 ALR at 606 [39]-[40].
83 It is not necessary in the circumstances to deal with the other grounds of the Council's appeal.