Reid v Commonwealth Bank of Australia

ty Ltd v Lane [2021] NSWCA 150 James v Australia and New Zealand Banking Group [2018] NSWCA 41 John Grant & Sons Pty Ltd v Grant (Supreme Court (NSW), Full Court, 2 November 1953, unrep) Lyall v Edwards (1861) 6 H & N 337; 158 ER 139 McDermott v Black (1940) 63 CLR 161; [1940] HCA 4 Norwich General Trust v Grierson 24 June 1983 noted in [1984] CLY 2306 O'Brien v Bank of Western Australia Ltd [2013] NSWCA 71 Qantas Airways Ltd v Gubbins (1992) 28 NSWLR 26 R W Miller & Co Pty Ltd v Australian Oil Refining Pty Ltd (1967) 117 CLR 288; [1967] HCA 50 Ramsden v Hylton (1751) 2 Ves Sen 304; 28 ER 196 Salkeld v Vernon (1758) 1 Eden 64; (1758) 28 ER 608 Scaffidi v Perpetual Trustees Victoria Ltd (2011) 42 WAR 59; [2011] WASCA 159 Stern v McArthur (1988) 165 CLR 489; [1988] HCA 51 The Mutual Life & Citizens' Assurance Company Ltd v Evatt (1970) 122 CLR 628 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52 Torrens Aloha Pty Ltd v Citibank NA (1997) 72 FCR 581 Turner v Turner; Hall v Turner (1880) 14 Ch D 829 Witherley v Sarsfield (1689) Holt KB 112; 90 ER 960 Texts Cited: Brendan Edgeworth, Butt's Land Law (7th ed, 2017, Thomson Reuters) Bullen & Leake, Precedents of Pleadings (3rd ed, Stevens & Sons, 1868) Edward Tyler, the Hon Peter Young QC and Clyde Croft, Fisher and Lightwood's Law of Mortgage (3rd ed, 2013, LexisNexis Butterworths) J Baker, Collected Papers on English Legal History (Cambridge University Press, 2013) Vol 1 J Bryson, "Common law pleadings in New South Wales and how they got here" (2012) 86 ALJ 452 K Jacobs, "Law and Equity in New South Wales after the Supreme Court Procedure Act, 1957, Section 5" (1959) 3 Sydney Law Review 83 Oxford History of the Laws of England (Oxford University Press, 2010), Vol XI P Herzfeld and T Prince, Interpretation (2nd ed, Lawbook Co, 2020) Category: Principal judgment Parties: Colin Reid (Appellant) Commonwealth Bank of Australia (Respondent) Representation: Counsel: P E King (Appellant) P Jammy (Respondent)

Solicitors: Robert Balzola and Associates (Legal) (Appellant) HWL Ebsworth Lawyers (Respondent) File Number(s): 2021/163352 Decision under appeal Court or tribunal: District Court of NSW Citation: [2021] NSWDC 225 Date of Decision: 27 May 2021 Before: Abadee DCJ File Number(s): 2019/401849

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

HEADNOTE [This headnote is not to be read as part of the judgment] The applicant, Mr Colin Reid, seeks leave to appeal from orders of the District Court of 27 May 2021 by which his proceeding in that court was summarily dismissed (Reid v Commonwealth Bank of Australia [2021] NSWDC 225 (Abadee DCJ)). Mr Reid's claim arose from steps taken by the respondent, the Commonwealth Bank of Australia ("the Bank"), to enforce securities for loans provided by the Bank to three companies, Fundola Pty Ltd, Fretilla Enterprises Pty Ltd, and Gorama Holdings Pty Ltd (together, "the Companies"). The advances were guaranteed by Mr Reid and his then wife, Mrs Reid, albeit on different terms as to the extent of their liability under their guarantees. Mr and Mrs Reid gave separate guarantees by deeds of guarantee both dated 28 October 2003. On 28 October 2003, Mr and Mrs Reid also executed a mortgage over a property they owned at Menangle to secure their liability as guarantors. On 24 January 2012, the Bank brought proceedings in the Common Law Division seeking judgment against Mr and Mrs Reid in the sum of $1,225,291.11. It sought judgment for possession of the Menangle property. On 23 May 2012 Mr Reid and the Companies brought proceedings against the Bank in the Common Law Division. They alleged that receivers appointed by the Bank had sold other mortgaged property at an undervalue. Mr Reid sought relief in respect of his guarantee and mortgage of the Menangle property. The Bank's claim against Mr and Mrs Reid on their guarantees, its claim for possession of the Menangle property, and Mr Reid's and the Companies' claims against the Bank were compromised by separate deeds of settlement entered into by the Bank with Mrs Reid on 10 October 2013 and with Mr Reid on 13 February 2015. Clause 5.1 of the deed of settlement entered into by Mr Reid contained a release. The settlement between Mrs Reid and the Bank provided that the parties would instruct their respective legal representatives to execute a document entitled "Consent Judgment" and provide the document to the Bank's solicitors to be held by the Bank's solicitors "…in escrow until the conclusion of … Proceedings [2012/23914] as against Mr Reid or until there is a default under this Document by Mrs Reid". The document entitled "Consent Judgment" provided for judgment to be given for the Bank against Mrs Reid in the sum of $1,225,291.11 and judgment to be given for the Bank against her for possession of the Menangle property. The Consent Judgment annexed to the deed of settlement with Mr Reid provided for judgment against him in the sum of $1,268,512.22. The deeds of settlement provided that the judgments would not be enforced except from the proceeds of sale against the Menangle property. After the Bank took possession of the Menangle property, the property was vandalised causing substantial damage to the property. The Bank sold the Menangle property for $2.201 million but allowed the purchaser an allowance of $370,000 in respect of the damage to the property. Mr Reid commenced proceedings in the District Court on 21 December 2019. On 28 November 2020 he filed a notice of motion seeking leave to amend the statement of claim. On 2 February 2021 the Bank filed a notice of motion seeking an order that the proceeding be summarily dismissed. Both notices of motion were listed for hearing before the primary judge on 26 May 2021. His Honour dealt with the Bank's notice of motion for summary dismissal. His Honour said that he would deal with the summary dismissal application "…on the basis of Mr Reid's claim as he would want it to be - that is, on the assumption that he was permitted to rely upon his proposed amended pleading". The primary judge summarily dismissed Mr Reid's claim. The principal issues before this Court were: (i) whether the primary judge failed to afford Mr Reid procedural fairness in relation to his motion to amend the statement of claim, and application for an adjournment, (ii) whether the primary judge erred in holding that Mr Reid did not have a triable cause of action in respect of the damage to the Menangle property, (iii) whether the primary judge erred in rejecting Mr Reid's invocation of the National Credit Code, and (iv) whether the primary judge erred in rejecting Mr Reid's invocation of the ASIC Act. Held, granting the applicant leave to appeal and allowing the appeal (per Bell CJ, Leeming JA, and White JA) As to issue (i), per White JA (Bell CJ and Leeming JA agreeing) (i) Mr Reid's submission that he was denied procedural fairness is baseless: at [4], [6], [118]. As to issue (ii), per White JA (Bell CJ agreeing) (ii) There is a triable issue as to whether the release in cl 5.1 applies to Mr Reid's claim that the Bank is liable to account for the $370,000 adjustment allowed to the purchaser on settlement as a result of the damage to the property whilst the Bank was mortgagee in possession: at [2], [131]. Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112; [1954] HCA 23; Burness v Hill [2019] VSCA 94; Salkeld v Vernon (1758) 1 Eden 64: discussed. As to issue (ii), per Leeming JA (Bell CJ agreeing) (ii) The question is whether the Bank's case based on the release is so strong that Mr Reid should not be permitted to go to trial, and that question is not amenable to summary dismissal: at [2], [53], [54]. O'Brien v Bank of Western Australia Ltd [2013] NSWCA 71; Bitannia Pty Ltd v Parkline Constructions Pty Ltd (2006) 67 NSWLR 9; [2006] NSWCA 238; Great Northern Developments Pty Ltd v Lane [2021] NSWCA 150; Coroneo v Australian Provincial Assurance Association Ltd (1935) 35 SR (NSW) 391; Lyall v Edwards (1861) 6 H & N 337; Board of Fire Commissioners of NSW v Dunlop (1930) 31 SR (NSW) 253; The Mutual Life & Citizens' Assurance Company Ltd v Evatt (1970) 122 CLR 628; R W Miller & Co Pty Ltd v Australian Oil Refining Pty Ltd (1967) 117 CLR 288; Directors &c of London and South Western Railway Co v Blackmore (1870) LR 4 HL 610; Ramsden v Hylton (1751) 2 Ves Sen 304; Turner v Turner; Hall v Turner (1880) 14 Ch D 829; Cloutte v Storey [1911] 1 Ch 18; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52; Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251; [2001] UKHL 8 at [25]; McDermott v Black (1940) 63 CLR 161; Scaffidi v Perpetual Trustees Victoria Ltd (2011) 42 WAR 59; [2011] WASCA 159: cited. Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112; [1954] HCA 23; Torrens Aloha Pty Ltd v Citibank NA (1997) 72 FCR 581; Qantas Airways Ltd v Gubbins (1992) 28 NSWLR 26; Butler v St John of God Health Care Inc [2008] WASCA 174; Burness v Hill [2019] VSCA 94; Doggett v Commonwealth Bank of Australia (2015) 47 VR 302; [2015] VSCA 351: discussed. As to issue (iii), per White JA (Bell CJ and Leeming JA agreeing) (iii) The primary judge was correct to reject Mr Reid's invocation of the National Credit Code as misconceived, because the Deed of Settlement was not itself a credit contract: at [2], [6], [148], [151]. As to issue (iv), per White JA (Bell CJ and Leeming JA agreeing) (iv) The primary judge was correct to reject Mr Reid's claims under the ASIC Act. The release in cl 5.1 would apply to such claims and Mr Reid does not plead any facts as to why the Bank, in obtaining the release in cl 5.1 of the Deed of Settlement, engaged in unconscionable conduct, or why, in its application to those claims, the release would be unjust: at [2], [6], [156], [157].

Judgment

1. BELL CJ: I have had the benefit of reading in draft the reasons for judgment of Leeming JA and White JA. I agree with the orders proposed by White JA.
2. Notwithstanding the obscurity attaching to much of the proposed amended statement of claim (which White JA has explained) and the misconceived nature of some of the claims sought to be agitated (including that for money had and received), for the reasons given by both Leeming JA and White JA, the proceedings ought not, in my view, have been summarily dismissed by the primary judge by reason of and reference to the Deed of Settlement of 13 February 2015.
3. As Leeming JA's scholarly judgment explains, equitable doctrine has always been rightly solicitous of the interests of those unintentionally giving up future unknown rights or releasing claims in ways that could not have been contemplated at the time of the compromise. It also guards against the unconscientious exercise of legal rights conferred by releases, whether secured by contract or under deed. While any deed of release or compromise should be interpreted consistently with the guidance supplied by the seminal decision in Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112; [1954] HCA 23, as the judgments of Leeming JA and White JA in this case both demonstrate, consistent with the recent decision of the Victorian Court of Appeal in Burness v Hill [2019] VSCA 94, this is one area in which evidence of the subjective intentions of the parties to a deed of (or contractual) release may legitimately inform the analysis of the operation and efficacy of any release.
4. On a separate matter, I associate myself with White JA's observations at [115] - [118] as to the baseless nature of the claim of denial of procedural fairness by the primary judge raised in the applicant's summary of argument. The raising of such a complaint without a proper foundation is a serious matter which is not only inconsistent with s 56 of the Civil Procedure Act 2005 (NSW) but also with a practitioner's professional obligations. I agree with White JA's observation that the submission asserting a denial of procedural fairness should not have been made
5. LEEMING JA: I agree with the orders proposed by White JA. His Honour's reasons enable me to explain my own reasoning much more concisely than would otherwise be the case. What follows presupposes familiarity with the factual and procedural background.

Numerous peripheral issues raised by the parties

1. The District Court rightly dismissed many aspects of Mr Reid's claim summarily. I agree with what White JA has said concerning the complaint of a denial of procedural fairness, the claim that the Bank could be liable for money had and received, the claim based on the National Credit Code, and the fact that any claim based on statutory unconscionability was barred by the release if the Bank was able to rely on the release.
2. The real issues in this application were much narrower. They turned on the belated discovery by Mr Reid that an allowance of $370,000 had been made by the Bank to the purchasers following the vandalism of the mortgaged property, and whether the release given by Mr Reid earlier, in February 2015, was an answer to his claim that the Bank account for that allowance. There was no opposition from the Bank to Mr Reid reading, in support of the application for leave, an affidavit attesting to his not knowing of the damage to the property and his not intending when executing the deed to release any such liability (affidavit sworn 5 June 2021, paras 11-13).
3. In oral submissions, the Bank sought to side-step needing to rely on the release. The Bank sought to establish that, even if it were liable to account for the $370,000, Mr Reid's total indebtedness exceeded that amount such that he had suffered no loss. This was the first point raised by the Bank in response, and it was sought to be developed extensively, after which there was the following exchange: "JAMMY … The essential point that we have made since the inception is that Mr Reid has demonstrated no loss that he has suffered as a result of the conduct that he complains of. WHITE JA: That's not the basis upon which the judge decided it, is it? I thought the judge decided it on the basis of the construction of the release. Is that right? JAMMY: He did. … WHITE JA: Is it not the case that he summarily dismissed the proceedings because of his construction of the release? JAMMY: That's correct. WHITE JA: And there's no notice of contention? JAMMY: There's no notice of contention. But what has been said repeatedly is that at times that the bank accepted that Mr Reid suffered loss and at times it has been said the Court found that Mr Reid suffered loss. Neither of those form any part of the judgment."
4. The following four points may be made about this submission. 1. First, the matter was set down as a concurrent hearing of the application for leave and the appeal. If the Bank wished to defend the decision on a basis other than as the primary judge had decided, it should have filed a notice of contention. It failed to do so. 2. Secondly, it is true that there was no finding that Mr Reid suffered loss. But there was likewise no finding that Mr Reid had not suffered loss. Such a finding was an essential element to the Bank's submission in this Court. 3. Thirdly, the Bank had sought and obtained summary judgment based on the operation of the release. If the Bank had sought to rely upon a notice of contention to sustain the summary dismissal of Mr Reid's complaint that it had to account for $370,000, then it is to be expected that very clear evidence would be adduced of his indebtedness. 4. Fourthly, the Bank's oral submissions in this Court were based upon the proposition that the consent judgments obtained by the Bank and held by it in escrow as part of the separate compromises with each of Mrs Reid and Mr Reid reflected not the total indebtedness of each of them, but only half of that indebtedness. Thus it was put that: "the amount that was owing to the bank and the security that it held from Mr and Mrs Reid exceeded both of those amounts, the 1.8 million which would have been the lower of the two purchase price, and the 2.2 million which was the actual purchase price before the discount. We know that from a number of sources. At its most simple we know that Mr and Mrs Reid, each individually, consented to judgments in an amount of $1,225,291.11 in Mrs Reid's case and $1,268,512.22 in Mr Reid's case." But it was not established that the sum of the two consent judgments established the total indebtedness. As was pointed out during the hearing, (a) the judgments reflected a compromise and (b) it was also possible that Mr and Mrs Reid were each liable, at least in part, for the same indebtedness, permitting the Bank to obtain separate judgments against each of them, although the rules against double recovery would prevent full execution of both judgments. Other documents suggested that, at least at one stage, the Bank regarded the total indebtedness as less than the sum of the two consent judgments. It is inappropriate in this interlocutory appeal to say more than that nothing in the Bank's elaborate submissions on this issue persuades me that there should not be a grant of leave, or that the summary dismissal of Mr Reid's claim may safely be upheld on this alternate basis.

Did Mr Reid's release entitle the Bank to summary judgment?

1. Mr Reid gave the following release: "Mr Reid … release[s] and discharge[s] the Bank from all liability for damages or loss and from all sums of money, accounts, actions, proceedings, claims, demands, costs and expenses whatever which Mr Reid … has or had or at any time in the future may have against the Bank for or by reason or in respect of any act, cause, matter or thing arising out of or in connection with or incidental to the Loans, the Loan Agreement, the Property, the Sale, the Mortgage, the Guarantee, the Bank Proceedings, the Family Court Proceedings, the Companies' Proceedings, or in any way relating to the matters referred to in the recitals."
2. Was the release an answer to Mr Reid's claim insofar as he had not contemplated that the events giving rise to the cause of action might occur? This raises questions of principle which are of general application. The consequences of the admission into evidence of Mr Reid's affidavit, and the Bank's decision to proceed summarily, were that the issue falls to be determined upon the assumption that Mr Reid had not considered, when he executed the release, that any vandalism might occur after the Bank took possession of the property or that the Bank would give a discount of $370,000 to the purchasers, and thus did not know of the factual substratum to any cause of action that the Bank account for that amount.

Grant v John Grant & Sons Pty Ltd

1. The High Court's decision in Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112; [1954] HCA 23 was prominent in the parties' submissions to the primary judge and in this Court. There are many parallels between that litigation and the present proceedings, some of which require an appreciation of procedure in the Supreme Court of New South Wales in the mid-twentieth century.
2. Grant was an appeal from three judgments on demurrers to three replications made by the plaintiff company to Mr Grant's plea based on a release. The litigation came from the Supreme Court of New South Wales, prior to the enactment of the Supreme Court Act 1970 (NSW), and can only be understood in light of an understanding of the pre-Judicature procedure which was involved.
3. The company had brought an action against Mr Grant to recover £5,480 2s 10d constituting ten amounts of money either received by him or else paid in relation to work done erecting his house at Seaforth. The significance of its description as an "action" was that it was brought on the common law "side" of the Court, in accordance with the procedure by the Common Law Procedure Act 1899 (NSW). In response, Mr Grant filed a plea. His plea relied upon a release in the following terms: "Each of the parties hereto hereby releases the other and others of them from all sums of money and accounts and civil actions proceedings claims and demands whatsoever which any of them at any time had or has at or prior to the completion against the other for or by reason or in any [sic] respect of any act, cause, matter or thing and without limiting the generality thereof the H C Grant family releases the defendants in the hereinbefore recited litigation from all costs in respect of the said litigation." It may be noted that that release was entered into after the causes of action had arisen (and in fact following earlier litigation culminating in Grant v John Grant & Sons Pty Ltd (1950) 82 CLR 1; [1950] HCA 54).
4. Mr Reid's proceeding was commenced in the District Court, a court of limited jurisdiction. The grants of equitable jurisdiction conferred upon that Court were discussed in Great Northern Developments Pty Ltd v Lane [2021] NSWCA 150 at [83]-[100], and the details need not be repeated here. The principal substantive grants are s 134 of the District Court Act 1973 (NSW) qualified by its various subject matters and limits, s 6 of the Law Reform (Law and Equity) Act 1972 (NSW) which authorises giving effect to equitable defences, and s 149 of the Civil Procedure Act 2005 (NSW) which applies when a proceeding is transferred to the District Court. As White JA points out, Mr Reid's claim as a former mortgagee was explicitly for an account, which fell within s 134(1)(h). That provision confers jurisdiction in proceedings for certain equitable claims or demands for recovery of money or damages, whether liquidated or unliquidated, in an amount not exceeding the Court's jurisdictional limit, and substantially expanded the equitable jurisdiction of the District Court. The District Court would formerly (prior to 1997, when s 134(1)(h) was enacted) have lacked jurisdiction to hear and determine Mr Reid's complaint against his mortgagee, and indeed had Mr Reid proceeded by way of action in the Supreme Court prior to 1972, his action would have been dismissed no differently from that brought by Mr Coroneo in Coroneo v Australian Provincial Assurance Association Ltd (1935) 35 SR (NSW) 391.

The significance of the three replications including one equitable replication

1. John Grant & Co Pty Ltd filed three replications to Mr Grant's plea based on the release. The first and second identified contentions at common law why the release from, inter alia, all "civil actions, claims and demands" which any party to the deed "had or has at or prior to the completion" did not answer its claim. The first was that the release applied only to disputes involving groups of, not individual, family members, which had been listed in the recitals to the deed. The second was that there had not, at any relevant time, been a "dispute" between the company and Mr Grant concerning the ten payments made in relation to the Seaforth house. These gave rise to the reasons bearing upon the construction of a release. The third was based on equity. The facts pleaded in support of the third replication included that the company did not know that it had any cause of action against Mr Grant in respect of the ten payments and that it did not intend by its execution of the deed to release Mr Grant in respect of those payments.
2. Section 97 of the Common Law Procedure Act 1899 (NSW) provided that "[t]he plaintiff may, in answer to any plea, reply facts avoiding such plea upon equitable grounds". This permitted an equitable defence to a common law action, but only when a court of equity would have granted an absolute, perpetual and unconditional injunction (this requirement - a consequence of the role of juries in the trial of many actions - would shortly be relaxed by amendments made by the Supreme Court Procedure Act 1957 (NSW). This reform and the previous procedure are discussed in K Jacobs, "Law and Equity in New South Wales after the Supreme Court Procedure Act, 1957, Section 5" (1959) 3 Sydney Law Review 83). The 1899 Act was a consolidation, and the ability to rely on an equitable defence had been introduced by ss 48-51 of the Common Law Procedure Act 1857 (NSW), re-enacting ss 83-86 of the Common Law Procedure Act 1854 (UK).
3. This third replication resembled the relevant part of paragraph 7 of Mr Reid's reply filed in the District Court, which maintained that a court exercising equitable jurisdiction would prevent reliance upon the release as an answer to the claims against the releasee.

The decision of the Full Court

1. Mr Grant demurred to each of the company's replications. Mr Grant's demurrers followed a procedure which, while it had long since been abolished in England, continued in New South Wales until 1972: see J Bryson, "Common law pleadings in New South Wales and how they got here" (2012) 86 ALJ 452. A demurrer was a mechanism whereby the Full Court could resolve a question of law arising on the pleadings. As summarised in Bullen & Leake, Precedents of Pleadings (3rd ed, Stevens & Sons, 1868) at pp 819 and 820: "Demurrer is the formal mode in pleading of disputing the sufficiency in law of the pleading of the other side. … The effect of a demurrer is, that the party demurring thereby confesses on the record that for the purposes of the demurrer all the matters of fact pleaded are to be taken to be true (1 Wms Saund 337 n 3); but denies that they are sufficient in their legal effect to constitute the right or defence which is maintained by the other side. An issue in law is thus raised which is decided by the Court after argument."
2. Mr Grant's demurrers to the company's replications were heard by a Full Court comprising Street CJ, Owen and Herron JJ. Judgment was delivered by Street CJ on 2 November 1953. The judgment is unreported. The Full Court found in Mr Grant's favour on the first demurrer, but for the company in respect of the second and third. Street CJ reproduced the following passages from Pollock CB, Martin B and Wilde B in Lyall v Edwards (1861) 6 H & N 337 at 347, 348; 158 ER 139 at 143, 144, where, similarly, demurrers had been brought following a replication on equitable grounds to a plea of release. Pollock CB had said: "It is a principle long sanctioned in Courts of equity, that a release cannot apply, or be intended to apply to circumstances of which a party had no knowledge at the time he executed it, and that if it is so general in its terms as to include matters never contemplated, the party will be entitled to relief."
3. Martin B had said: "The replication is founded on the equitable doctrine that if a release is given for a particular purpose, and it is understood by the parties that its operation is to be limited to that purpose, but it turns out that the terms of the release are more extensive than was intended, a Court of equity will interfere and confine it to that which was in the contemplation of the parties at the time it was executed."

The appeal to the High Court

1. Each side appealed or cross-appealed from the overruling or allowance of the demurrers. It is important to recognise two things about the High Court's judgment. The first is that the High Court's decision is somewhat narrower than that of the Full Court. The second is that the appeal arose on a demurrer, and the only issue was the adequacy of the pleading, although it is also true that very many rules of substantive law have in the past been determined in appeals on pleadings.
2. The High Court distinguished the position at law from that in equity (this was natural in light of the appeals which had been brought from the judgments on each demurrer).
3. At law, if the release did not as a matter of construction extend to the particular claim, it could be no answer to that claim. The company's first and second replications were to the effect that the terms of the release should not be construed so as to extend to the ten claims for payments of money or money's worth to Mr Grant. Those replications invoked the "wide-ranging rule of the common law", to which Kitto J referred in R W Miller & Co Pty Ltd v Australian Oil Refining Pty Ltd (1967) 117 CLR 288 at 294; [1967] HCA 50, that releases are to be construed narrowly, with general words confined to those things which were "specially in the contemplation of the parties at the time when the release was given": Directors &c of London and South Western Railway Co v Blackmore (1870) LR 4 HL 610 at 623. Lord Westbury added that "a dispute that had not emerged, or a question which had not at all arisen, cannot be considered as bound and concluded by the anticipatory words of a general release."
4. Equity would intervene in broader circumstances. It was clear that equity would permit evidence being adduced of parties' subjective understanding of "the existence, character and extent of the liability in question and the actual intention of the releasor": Grant at 130.1. Nor was it necessary, in order to establish an entitlement to relief in equity, to establish that the release did not apply as a matter of construction at law. This is the force of the reasoning at 128.7-129.3 ("the Court of Chancery did not consider too nicely, before granting relief … whether in truth the court of law would interpret the release as [applying]"). This is an example of Chancery's auxiliary jurisdiction not turning upon establishing the inadequacy of the remedies at law. It also reflects the fact, noted at 130.9, that equities are "not the products of completely rigid categories".

Was a release construed differently in equity?

1. The joint judgment of Dixon CJ, Fullagar, Kitto and Taylor JJ did not doubt the reasoning in Lyall v Edwards reproduced above. It also endorsed statements in the authorities to the effect that what equity did was to construe the release, doing so by reference to the parties' subjective intentions. The joint judgment endorsed what had been said by Malins VC in Turner v Turner; Hall v Turner (1880) 14 Ch D 829 at 834 that the general words of a release did not extend to a matter not known when it was executed: "In a case of this kind it is the duty of the Court to construe the instrument according to the knowledge of the parties at the time, and according to what they intended, and not to extend it to property which was not intended to be comprised within it. … [I]t has always been the rule of this Court to construe releases and documents of that kind with regard to the intention of the parties, and to refer in such cases to the state of the property which was known at the time." (emphasis added)
2. The joint judgment also endorsed and reproduced what was said by Farwell LJ in Cloutte v Storey [1911] 1 Ch 18 at 34: "It is not in accordance with principle or authority to construe deeds of compromise of ascertained specific questions so as to deprive any party thereto of any right not then in dispute and not in contemplation by any of the parties to such deed." (emphasis added)
3. The statements by Malins VC and Farwell LJ are difficult to read other than as statements of how a deed of release is construed. The statement by Wilde B from Lyall v Edwards reproduced above is to the same effect. On the other hand, the passage in Martin B's reasons in Lyall v Edwards is differently framed: to "interfere and confine" a broadly worded release is suggestive of preventing the unconscientious exercise of a legal right. Pollock CB's formulation of principle is ambiguous on this point.
4. The passage in the joint judgment in Grant concludes with a reference to "the equity to have the general words of a release confined to the true purpose of the transaction ascertained from the scope of the instrument and the external circumstances". The judgment concludes with the statement, "It is under that principle that the facts alleged in the third replication bring the case": at 130.8. One view of the position is that the High Court's careful language accommodates both ways of formulating equity's approach to a release.

Burness v Hill

1. The Victorian Court of Appeal was required to consider whether a release applied to one party's right of marshalling. It did so on the basis that neither party was aware of a right of marshalling when the release was executed. The Court dealt carefully with submissions which distinguished between the legal and equitable principles articulated in Grant. Their Honours said at [78]: "The trustees' second contention challenges that finding, on the basis that the trial judge erred in taking Hill's subjective intention into account in construing the words of the release. The emphasised words in the summary of the equitable principle in Grant, which we have set out at paragraph [74] above, are directly inconsistent with the second contention; which must therefore fail. Specifically, the trial judge was justified in referring both to Hill's subjective intention and the fact that Hill was ignorant of his marshalling claim at the time he entered into the terms of settlement."
2. The passage from Grant reproduced at [74] to which their Honours referred was: "From the authorities which have already been cited it will be seen that equity proceeded upon the principle that a releasee must not use the general words of a release as a means of escaping the fulfilment of obligations falling outside the true purpose of the transaction as ascertained from the nature of the instrument and the surrounding circumstances including the state of knowledge of the respective parties concerning the existence, character and extent of the liability in question and the actual intention of the releasor." (emphasis in Burness v Hill)
3. It would seem that their Honours read Grant as permitting a party's subjective intention to inform the construction of a release. The Court rejected the submission that the trial judge had "erred in taking Hill's subjective intention into account in construing the words of the release".

When will it be unconscientious to take advantage of the terms of a release?

1. The Court of Appeal said at [81]: "the third (equitable) principle does not depend on proof of some unconscientious conduct by the releasee - here, Love. Rather, in a case such as the present, the equitable principle applies to restrict the general words to the things which were specifically in the contemplation of the parties when they signed the terms of settlement. The equitable principle applies here because both Hill and Love were ignorant of Hill's marshalling claim at that time, and Hill could thus not have intended to release his unknown claim. In those circumstances, and given the ambit of the dispute between the parties in the County Court proceedings, and of the retainer, it would be unconscientious for Love (or the trustees) to rely on the general words of the release as applying to Hill's marshalling right." (footnote omitted)
2. Burness v Hill holds that, for the release in that case, the ignorance of both parties of Mr Hill's right to marshall, coupled with the ambit of the dispute which was the subject of the release, made it unconscientious for Mr Love to rely on the general words of the release. It is to be borne steadily in mind that Burness v Hill was an appeal following a trial, when findings had been made as to the construction of the release and the parties' intentions when it was executed.
3. That is not inconsistent with the statement in Grant that it is possible to draft a release which extends to claims which are unknown. There is a stream of authority to that effect. One decision which is often cited to that end, and was relied on by the primary judge, is Doggett v Commonwealth Bank of Australia (2015) 47 VR 302; [2015] VSCA 351, where Whelan JA said at [63] that Grant: "is not authority for the proposition that a release can only ever apply to matters then known to the parties. It is possible to enter into an arrangement which does settle 'all conceivable further disputes'. The equitable principles articulated in Grant v John Grant restrain a party from unconscientious reliance on legal rights. Particular circumstances may reveal that it would be unconscientious to allow the general words of a release to be relied upon. Grant v John Grant was such a case. But there will be no room for the application of those equitable principles if it is clear that the parties intended the general words of a release to encompass all conceivable further disputes." (footnote omitted)

Application to the issues arising in this appeal

1. In the present case, the question is not whether Mr Reid can evade the operation of the release. Nor does this appeal raise for determination the proper construction of the release, which may be informed by contextual considerations not presently in evidence and which may be controversial. The only question is whether the Bank's case based on the release is so strong that Mr Reid should not be permitted to go to trial. That question falls to be determined on the basis that Mr Reid did not contemplate that the vandalism might occur or the $370,000 allowance be given, and had no intention to release the Bank from a claim in respect of such matters.
2. It may readily be seen that that question is not amenable to summary dismissal. The allowance of $370,000 is large - considerably more than 10% of the selling price. It arose out of what may be taken to be highly unusual circumstances - claims of serious vandalism to the property while the Bank was in possession and after contracts had been exchanged. The circumstances in which that occurred are not known and may be contentious. The deed does not expressly mandate a sale, although it is plain that that is its intent, and it is arguable that when it is construed in context a substantial allowance made without notice to Mr Reid for the vandalism may be outside its proper construction. Alternatively, if not, it is also arguable that it would be unconscionable for the Bank to rely upon the release. The basis upon which the release came to be executed, and what the Bank thereafter did, will be the subject of evidence at trial. It cannot confidently be concluded, in advance of trial, that facts could never emerge in light of which it would be unconscientious for the Bank to rely on the release.
3. That is sufficient to resolve the interlocutory appeal which has been brought by Mr Reid. I am also conscious that there may be a trial of the issues mentioned above, which suggests caution in expressing views about the parties' conduct at this stage.
4. It will be necessary for Mr Reid to amend his pleadings in light of this Court's reasons. However, it is best for further procedural steps to be governed by the District Court. The orders proposed by White JA should be made.
5. WHITE JA: The applicant, Mr Colin Reid, seeks leave to appeal from orders of the District Court of 27 May 2021 by which his proceeding in that court was summarily dismissed (Reid v Commonwealth Bank of Australia [2021] NSWDC 225 (Abadee DCJ)).

Mr Reid's claims in the District Court

1. Mr Reid commenced proceedings in the District Court on 21 December 2019. He sought: 1. The sum of $370,000 together with interest from 25 July 2015. 2. An account of and in relation to the sale of the Menangle property. 3. Delivery up and cancellation of the security documents or other documents asserted by the Bank in taking the monies as 'adjustments' of the settlement account in respect of the Menangle property on or about 25 July 2015. 4. Damages. 5. Alternatively, equitable compensation. 6. Further or alternatively the relief sought herein under the National Credit Code. 7. Interest. 8. Costs. Amount of claim $ 370,000.00 Interest $ 106,247.88 Filing fees $ 693.00 Service fees $ 45.00 Solicitors fees $ 768.00 TOTAL $ 477,753.88

1. On 28 November 2020 he filed a notice of motion seeking leave to amend the statement of claim. The proposed amended statement of claim included a claim for: "Compensation and such other orders as provided for under ASIC Act sections 12GF and 12GM (1) and (7)."
2. On 2 February 2021 the Bank filed a notice of motion seeking an order that the proceeding be summarily dismissed. Both notices of motion were listed for hearing before the primary judge on 26 May 2021. His Honour dealt with the Bank's notice of motion for summary dismissal. His Honour said that he would deal with the summary dismissal application "…on the basis of Mr Reid's claim as he would want it to be - that is, on the assumption that he was permitted to rely upon his proposed amended pleading" (at [15] and [39]).
3. The primary judge cited and applied the decision of this court in O'Brien v Bank of Western Australia Ltd [2013] NSWCA 71 where Macfarlan JA, with the concurrence of Beazley P and Ward JA, observed that on a summary judgment application the real issue is whether there is an underlying cause of action or defence, not simply whether one is pleaded. Consistently with that approach, his Honour had regard also to further proposed amendments to the statement of claim indicated by Mr King of counsel, who appeared for Mr Reid, in the course of argument.
4. Mr Reid's proposed amended statement of claim pleaded that the allowance the Bank made to the vendor of $370,000 in respect of damages to the property was a sum payable to it as moneys had and received by the Bank to Mr Reid's use (para 23). Alternatively, he pleaded that it was an implied term of the mortgage (described as "any agreement comprising the security by which the Bank purported to enter into possession as mortgagee or otherwise") that the Bank would account to him for moneys it received as mortgagee (para 24). Mr Reid also pleaded that this was an implied term of the Deed (para 25). He alleged that it was also an implied term of the Deed that the Bank would maintain the Menangle property in repair after taking vacant possession pending sale as mortgagee in possession (para 25A). He pleaded that the Bank had failed to account to him for all moneys received by it as mortgagee (para 26A). He also pleaded that the Bank's failure to maintain the Menangle property in repair pending sale as mortgagee in possession caused him loss and damage (para 28A).

Primary Judge's Reasons

1. The primary judge correctly stated: "[64] I accept that the application is not to be determined in accordance with any deficiency in the form of Mr Reid's action. I also accept that the power to summarily terminate his action is exceptional and accordingly must be exercised with great care and, to that end, the onus practically falls upon the applicant for the order to demonstrate, with a high degree of certainty, the eventual outcome."
2. The primary judge said: "An arguable cause of action? [66] There is force to the CBA's contention that the content of the Deed is such that it leaves no room for the implied contractual terms which Mr Reid has signified, in his current pleading and proposed amended pleading presently before the Court. In particular, as the CBA submits, cl 4.3(j) of the Deed expressly makes provision for payment of a kind to Mr Reid after the sale of the property. Otherwise cl 4.3(k) indicates that subject to the payments it expressly agreed to make to Mr Reid, it could deal with the sale, and its proceeds, as it liked. It is difficult to ascribe any intention to the parties that Mr Reid was entitled to anything more following the sale. [67] Further, although it might not be regarded purely as a 'commercial' transaction, the deed of compromise was certainly entered into at arm's length, with the parties having the opportunity to obtain independent legal advice. Further, in circumstances where no party suggests that the Deed, as a whole, is ineffective or should be set aside, it is even harder to see any role that the law of restitution may play [8] . It is difficult, conceptually, to avoid the conclusion that any on-going equitable obligations would have to be accommodated to the provisions of the Deed. [68] Contrary to the submission advanced by Counsel for the CBA, on the premise that there is an implied term, or terms, as Mr Reid contends, it is not inarguable that he would not have proved a loss; even if the deed did provide for what payment he might receive on the sale of the property. Subject to the release, which I am about to come to, there is no indication in the Deed to exclude remedies in common law for breach of the Deed. [69] There is an arguable, if perhaps barely arguable, basis for entitlement which, subject to what follows, would not warrant summary dismissal."
3. But his Honour held that any such claim was barred by the release in cl 5.1 of the Deed of Settlement. His Honour also held that it was not arguable that Mr Reid could overcome the release by recourse to s 76 in the National Credit Code. In this respect, his Honour said: "[78] Section 76 of the National Credit Code only is engaged on the application of a 'debtor, mortgagor or guarantor'. It was common ground that although Mr Reid was both mortgagor and guarantor that was only in relation to a credit facility that he did not rely upon with reference to the Code. [79] I agree with the CBA's submission that it is not enough to point to extrinsic material to indicate that, at one point, Mr Reid may have been contemplated as a 'borrower'. Section 76 speaks of 'debtor' and the provision generally is to be construed distributively, so that it is a debtor who may bring an application in relation to a contract, a mortgagor in relation to a mortgage or a guarantor in relation to a guarantee. 'Debtor' is defined (by s 204 of the National Credit Code) to mean "a person (other than a guarantor) who is liable to pay for (or to repay) credit, and includes a prospective debtor". Mr Reid did not fit that description."

Denial of procedural fairness?

1. Although not a draft ground of appeal, Mr Reid contended that the primary judge had not afforded him procedural fairness by summarily dismissing his motion to amend the statement of claim before deciding the Bank's motion for summary dismissal, and by refusing an application for an adjournment.
2. A submission that a judge has denied a party procedural fairness is serious. It should not be made lightly (Daley v Donaldson [2022] NSWCA 96 at [52], Leeming JA). The judge made it clear that he addressed the Bank's application for summary dismissal on the basis that he would consider Mr Reid's claim as it was pleaded in the proposed amended statement of claim and as elaborated in Mr King's submissions. He did not dismiss Mr Reid's application to amend before deciding the summary dismissal case. He dealt with the Bank's summary dismissal application on the basis that if Mr Reid could demonstrate an arguable claim, either from the statement of claim as filed, or from the proposed amendments, or as his counsel sought to articulate his claim in argument, the Bank's application would fail. This was favourable to Mr Reid.
3. No submission was advanced on appeal that the primary judge was bound to grant an adjournment. The statement of claim had been filed on 12 December 2019. Mr Reid had had more than ample opportunity to plead a coherent and triable claim.
4. Mr Reid's submission that he was denied procedural fairness is baseless. It should not have been made.

Consideration: the first claim

1. In Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112; [1954] HCA 23 the plaintiff sued to recover moneys alleged to be payable as a result of work done or money spent for the benefit of the defendant between September 1948 and August 1950. The defendant pleaded a release contained in a deed dated 5 December 1951 arising from any claims which any of the parties to the deed at any time had against any other of the parties in respect of any act, cause, matter or thing (at 115). The defendant pleaded the release as an answer to the plaintiff's claim. By the first and second replications, the plaintiff denied that at any material time there had been a dispute between the family groups concerning the money claimed in the action. By the third replication the plaintiff pleaded that when it executed the deed of release it did not know that any of the moneys it now claimed in the action were owed by the defendant and did not know that it had any claim or cause of action against the defendant in respect of such moneys (at 115-116). The plurality (Dixon CJ, Fullagar, Kitto and Taylor JJ) observed that the first and second replications were pleaded on the footing that at law, as distinguished from equity, the general words of the release did not apply to the claim. The third replication was based on equitable grounds (at 121).
2. In relation to the third replication the plurality said (at 129): "No doubt it is possible a priori that the release was framed in general terms in the hope of blotting out, so to speak, all conceivable grounds of further disputes or claims between all or any two or more parties to the deed, whether in respect of matters disclosed by a party against whom a claim might be made or undisclosed, of matters within the knowledge of a party by whom a claim might be made or outside it. If so the case would fall within the exception which, in the passage already cited, Lord Northington made from his proposition that a release ex vi termini imports a knowledge in the releasor of what he releases, namely the exception expressed by the words 'unless upon a particular and solemn composition for peace persons expressly agree to release uncertain demands' (Salkeld v. Vernon (1758) 1 Eden 64). But there is not in the contents of the deed enough to evince such an intention."
3. Speaking in relation to the release of existing claims, the plurality in Grant v John Grant and Sons Pty Ltd, did not say that a plaintiff, against whom a release is pleaded by way of defence, has an equity to restrain the defendant's unconscientious reliance upon the general words of a release. To the contrary, but speaking in the context of the release of existing claims, their Honours said (at 129-130): "From the authorities which have already been cited it will be seen that equity proceeded upon the principle that a releasee must not use the general words of a release as a means of escaping the fulfilment of obligations falling outside the true purpose of the transaction as ascertained from the nature of the instrument and the surrounding circumstances including the state of knowledge of the respective parties concerning the existence, character and extent of the liability in question and the actual intention of the releasor. The facts stated in the third replication if true would show that the plaintiff company did not know of the defendant's liability it now seeks to enforce, did not intend to release it as part of the transaction and did not know of any intention on the part of the defendant that it should be released. The allegation that the defendant knew of the obligation but did not inform the plaintiff company may be introduced as bearing upon the unconscientiousness of the defendant's reliance upon the general words of the release, but it does not seem to be essential to the application of the governing principle of equity."

Consideration: the second claim

1. In his pleading of claims under the National Credit Code and the ASIC Act, Mr Reid sought to reopen his and the Companies' claims in proceeding 2012/164364 that were the subject of the release in cl 5.1 of the Deed of Settlement. He did not seek rescission of that Deed. He did not offer to repay the $100,000 paid to him pursuant to cl 4.3(i) and (j). The primary judge noted that at one point Mr Reid submitted that the settlement deed itself constituted a credit contract. The primary judge rejected that argument (at [76]).
2. The proposed amended statement of claim identified the contract between the Companies and the Bank pursuant to which credit was advanced on account 06 2815 1058733 as a relevant credit contract in respect of which relief was sought under the National Credit Code. The primary judge rejected Mr Reid's standing to apply for such relief as he was not the "debtor" under that contract (see his Honour's reasons at [79] quoted at [109] above).
3. The contrary is arguable. But this is of no moment unless the release in cl 5.1 of Mr Reid's Deed of Settlement can be set aside.
4. Mr Reid invokes s 76(1) of the National Credit Code. That section provides: "(1) The court may, if satisfied on the application of a debtor, mortgagor or guarantor that, in the circumstances relating to the relevant credit contract, mortgage or guarantee at the time it was entered into or changed (whether or not by agreement), the contract, mortgage or guarantee or change was unjust, reopen the transaction that gave rise to the contract, mortgage or guarantee or change."
5. If it is open to Mr Reid to avoid the effect of the release in cl 5.1 of the Deed of Settlement by seeking to reopen the terms, or the Bank's conduct, of the bill facility the subject of account 06 2185 10587333 then I do not accept that it is unarguable that Mr Reid would not have standing to apply for the reopening of that contract under s 76(1). It is not self evident that where, for example, a debtor under a relevant credit contract is wound up and the liquidator who is without funds declines to seek to reopen a transaction that a guarantor would not have standing to do so: (see James v Australia and New Zealand Banking Group [2018] NSWCA 41 at [22], [68] as to a guarantor's right to rely on a breach of a duty owed by the creditor to the principal debtor in realising a security as reducing or discharging the guarantor's liability to the creditor).

Conclusion

1. For these reasons Mr Reid should have leave to appeal and the appeal from the order for summary dismissal of his proceeding should be allowed. He has an arguable claim for relief in respect of his claim that on the taking of accounts in respect of the Bank's sale of the Menangle property the Bank is required to account for the adjustment of $370,000 allowed to the purchaser. He also has an arguable claim, that has not yet been pleaded, that the Bank is not entitled to retain from the proceeds of sale more than the compromised debt of $1,268,512.22.
2. On the materials before this court Mr Reid does not have an arguable claim to reopen his claim in proceeding 2012/164364. But that does not warrant the summary dismissal of his proceeding.
3. The primary judge did not err in dismissing with costs Mr Reid's notice of motion seeking leave to amend his statement of claim in accordance with the proposed amended statement of claim. Parts of that pleading are untenable. The pleading is diffuse. Mr Reid's statement of claim requires amendment, but not in accordance with the document propounded before the primary judge.
4. I propose the following orders: 1. Grant the applicant leave to appeal from the orders of the District Court made on 27 May 2021. 2. Order that within seven days the applicant file a notice of appeal in the form of the draft notice of appeal behind Tab 5 of the White Book and dispense with service of the notice of appeal. 3. Allow the appeal with costs. 4. Set aside the orders of the District Court of 27 May 2021, save for the order dismissing the appellant's notice of motion dated 28 November 2020 with costs. 5. In lieu thereof order that the respondent's notice of motion filed in the District Court dated 2 February 2021 be dismissed with costs. 6. Remit the proceedings to the District Court. 7. Order that within 28 days the appellant file and serve in the District Court any proposed notice of motion seeking leave to amend the statement of claim.

Endnote

1. A fourth company, Dorgal Holdings Pty Ltd, also joined the proceeding as fifth plaintiff, but its position is not currently relevant.

Amendments 29 March 2023 - - [9(4)] - "of" deleted

• [44] - "John Grant & Co Pty Ltd v Grant" corrected to "Grant v John Grant & Sons Pty Ltd"
• [45] - pinpoint reference corrected from "[2]-[3]" to "[3]-[4]" DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 29 March 2023