Westpac Banking Corporation v Paterson

· there was an antecedent relationship between Mr Paterson and Mrs Jonnie Paterson as ex-husband and ex-wife and thus Mr Paterson had ascendancy over Mrs Jonnie Paterson in such a manner that her will in this matter was suborned;

· that Westpac was sufficiently aware of Mrs Jonnie Paterson's circumstances as to put it on notice that the will of Mrs Jonnie Paterson was suborned by Mr Paterson. It is claimed that Westpac was aware that Mr Paterson had a strong motive to procure the execution of the mortgage and the mortgage was to the benefit of Endormer, that Westpac should have been aware that Mr Paterson would have some influence over his ex-wife and that Mrs Jonnie Paterson had received no independent legal or financial advice; and

· that Westpac is liable for the undue influence of Mr Paterson.

· an order declaring the mortgage to be void so far as it relates to them and Westpac and an order requiring the execution by Westpac of a discharge of the mortgage; and

· a declaration that the mortgage and loan agreement were unjust in the circumstances within the meaning of the Contracts Review Act 1980 (NSW) and that it be set aside.

APPLICATION TO TRANSFER THE PROCEEDINGS TO THE FEDERAL COURT 3 On 23 February 1996, the respondents/cross claimants moved to transfer these proceedings from the Supreme Court of New South Wales to the Federal Court of Australia. On 6 May 1996, Abadee J (pursuant to the cross-vesting scheme) ordered that these proceedings be transferred to the Federal Court. 4 On 16 August 1996 Mr David Paterson and Mrs Jonnie Paterson lodged (in the Federal Court) amended cross claims. Mr Paterson and Mrs Jonnie Paterson allege, inter alia: (a) that from about February 1993 Westpac through its servant or agent Peter Rodd represented that in order for Endormer (a company associated with Mr Paterson) to satisfy AGC's security requirements and for finance restrictions to be relaxed Mr Paterson (and his business partner, Mr Glenn Jarrett) must refinance with Westpac. The cross claimants say that were it not for the representations made by Peter Rodd they would not have increased their exposure to Westpac or Westpac's group by executing the mortgage over their property; and (b) that the mortgage was unjust and unconscionable in the circumstances in which it was obtained by Westpac within the meaning of ss 7 and 9 of the Contracts Review Act 1980(NSW). The cross claimants then repeated their original claims on this issue. 5 On 10 May 1996, Davies J made orders that this matter be heard together with two other proceedings which were related. One of these included the action brought by the company Endormer Pty Ltd, which was controlled, in part by Mr Paterson, against AGC Pty Ltd and referred to, above, in the amended cross claim. 6 On 1 May 1998 a Notice of Motion was lodged by the solicitors, who at the that time were acting for Mr Paterson and Mrs Jonnie Paterson, to have the hearing dates in the Endormer and Westpac proceedings vacated on the basis that Mr Paterson and Mrs Jonnie Paterson required "more time" to finalise their evidence. An order was made adjourning the commencement of the hearing of the proceedings until 6 May 1998. 7 On 6 May 1998 Mr Glenn Jarrett speaking to the Court on behalf of Mr Paterson and Mrs Jonnie Paterson advised that their legal representation had been withdrawn and he sought on their behalf a further adjournment of the hearing until such time as new lawyers could be retained and fully briefed on the proceedings. Orders were made further adjourning the proceedings to 11 May 1998. 8 On 11 May 1998, Mr Paterson and Mrs Jonnie Paterson filed further Notices of Motion in these proceedings seeking a further adjournment of the fixed hearing dates, again based on their lack of success in retaining legal representation. Mr Paterson and Mrs Jonnie Paterson were however represented by counsel in relation to this adjournment application. On 12 May 1998, orders were made that the Westpac proceedings against the Patersons be adjourned to 25 May 1998 for hearing. The Court advised counsel for Mr Paterson and Mrs Jonnie Paterson that should they be unsuccessful in obtaining legal representation by that date they would be required to attend Court in person. 9 On 25 May 1998, Mr Paterson did not appear. Counsel appeared however on behalf of Mrs Jonnie Paterson and Counsel for Westpac was also present. The matter was adjourned to 26 May 1998. On that day the Court made orders that the case against Mrs Jonnie Paterson be adjourned to 29 May 1998 (at which time her case was fixed for hearing on 30 November 1998) and proceedings against Mr David Paterson be adjourned to 28 May 1998. 10 On 28 May 1998, the Court gave judgment and made orders against Mr David Paterson. 11 Proceedings in relation to Mrs Jonnie Paterson commenced on 30 November 1998 and the evidence was completed on 1 December 1998 when the Court made orders that the parties provide written submissions. The Court subsequently sought clarification on matters raised in the written submissions and relisted this matter for further hearing on 26 February 1999. 12 On that day counsel for Mrs Jonnie Paterson filed a Notice of Motion seeking orders that Mrs Jonnie Paterson be allowed to re-open her case to tender further evidence and further that the proceedings be adjourned until the delivery of a judgment of a Full Court of this Court in a related matter (ie. Jarrett v Westpac Banking Corporation - NG 829 of 1998). The Court agreed to adjourn the further conduct of the matter to a date to be fixed after the delivery of the Full Court judgment. 13 These proceedings were subsequently relisted for hearing on 14 May 1999. At that hearing Mrs Jonnie Paterson's motion was dismissed and the Court heard the parties on the written submissions they had filed in the substantive proceedings. The matter was then adjourned and the decision reserved. 14 On 17 June 1999 the High Court gave judgment in Re Wakim & Ors (1999) 163 ALR 270, finding the cross-vesting scheme (by which this matter had been transferred to the Federal Court) constitutionally invalid.

15 The capacity of the Federal Court to hear and determine this proceeding purportedly arose because of the provisions of two pieces of legislation:

The Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth), s 9 of which, relevantly states:

"9(1) Nothing in this or any other Act is intended to override or limit the operation of a provision of a law of a State relating to cross-vesting of jurisdiction. (2) The Federal Court, the Family Court or the Supreme Court of a Territory may: … (b) hear and determine a proceeding transferred to that court under such a provision."; and The Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW), s 4(1) relevantly stating: "4(1) The Federal Court has and may exercise original and appellate jurisdiction with respect to State matters." 16 A majority of the Court in Re Wakim concluded that the Commonwealth Parliament did not have a power conferred by s 9 above to consent to the vesting of state jurisdiction in federal courts, nor to confer that power itself. Further, the State Legislature had no power to confer its jurisdiction on federal courts. 17 The consequences of that decision to this matter are of some importance. 18 The matter was a proceeding transferred to this Court by virtue of the NSW Cross-Vesting Act (above) - but s 9 of the Commonwealth Cross-Vesting Act, which purports to confer jurisdiction on the Court to hear and determine such matters, is unconstitutional. Therefore to the extent that the hearing of the matter is dependent on this provision, it is beyond the jurisdiction of the Court. Westpac has submitted that the Court has jurisdiction to hear the matter because the cross-claim, as amended, raises federal matters and those federal matters arise out of, or are related to the same common substratum as the state matters. 19 If, at the time of transfer, the amended cross claim (referred to above) had been filed, it may be that the proceedings with accrued jurisdiction could have been validly transferred to the Federal Court. However, the amended cross-claim was not filed, in the Federal Court, until August 1996 some months after the transfer. 20 Counsel for Westpac concedes that one generally looks to the pleadings, principally, to determine the scope of the matter but submits that one could take into account that a motion to amend the pleadings had been filed. He argued that the Court should examine the matter broadly and not technically. However he concedes that leave to amend which was required was not given at the time of the transfer. 21 The respondent submits that the question of the jurisdiction of the Court at the date of transfer cannot be fixed at a later date after amendments to the pleadings. I agree with that submission. 22 As this matter has not proceeded to judgment, it is not saved, as are the orders made against the first respondent by the Federal Courts (State Jurisdiction) Act 1999 (NSW). The unfortunate conclusion I have reached is that the Court has no jurisdiction to determine the proceedings against the second respondent and I make a declaration to that effect.

I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice O'Connor.

Counsel for the Applicant/ T G R Parker Cross Respondent:

Solicitor for the Applicant/ Allen Allen & Hemsley Cross Respondent:

First Respondent/ Not represented First Cross Claimant:

Counsel for the Second Respondent/ C R de Robillard Second Cross Claimant:

Solicitor for the Second Respondent Gunnar Mollenbeck & Associates Second Cross Claimant:

Date of Hearing: 30 November 1998, 1 December 1998, 26 February 1999, 14 May 1999

Date of Judgment: 10 September 1999