Maher v Commonwealth Banking Corporation [2002] FCAFC 104 Maher v Commonwealth Banking Corporation [2002] FCA 471 NOTE: CHANGES TO THE MEDIUM NEUTRAL CITATION (MNC) The Federal Court adopted a new medium neutral citation (FCAFC) for Full Court judgments effective from 1 January 2002. Single Judge judgments will not be affected and will retain the FCA medium neutral citation. The transitional arrangements are as follows: * All Full Court judgments delivered prior to 1 January 2002 will retain the FCA medium neutral citation. * All Full Court judgments delivered between 1 January 2002 to 30 April 2002 have been assigned parallel medium neutral citations in both the FCA and FCAFC series. * All Full Court judgments delivered from 1 May 2002 will contain the FCAFC medium neutral citation only. FEDERAL COURT OF AUSTRALIA Maher v Commonwealth Banking Corporation [2002] FCA 471 practice and procedure – appeal from orders of primary judge dismissing the proceedings under Order 20 rule 2 Federal Court Rules – appeal allowed LANDLORD AND TENANT – tenancy at sufferance – action of trespass Bankruptcy Act 1966 (Cth) s 58(1) Transfer of Land Act 1958 (Vic) s 42(2) Federal Court Rules Order 20 rule 2, Order 12 rules 1, 3 and 5 Graham v Peat (1801) 1 East 244 applied Burnham v Carroll Musgrove Theatres Ltd & Victoria Arcade Ltd (1928) 41 CLR 540 referred to Fry v Metzelaar [19455] VLR 65 referred to Burke v Dawes (1938) 59 CLR 1 referred to Barba v Gas & Fuel Corporation of Victor (1976) 136 CLR 120 referred to Commercial Bank of Australia Ltd v McCaskill (1897) 23 VLR 10 referred to Robertson v Keith (1870) 1 VLR (E) 11 referred to Sandhurst Mutual Permanent Investment Building Society v Gissing (1889) 15 VLR 329 referred to Chesterfield v Pitisano [1964] VR 709 referred to Hall v Nominal Defendant (1966) 117 CLR 423 applied Wickstead v Browne (1992) 30 NSWLR 1 applied Dart v Norwich Union Life Australia Ltd [2002] FCA 168 applied Halsbury's Laws of England 4th ed Bradbrook and Croft Commercial Tenancy Law in Australia 2nd ed 1996 Hogg Registration of Title to Land throughout the Empire 1920 Dennis Maher v Commonwealth Banking Corporation & Ors V 1097 of 2001 BEAUMONT, SUNDBERG and ALLSOP JJ 16 APRIL 2002 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 1097 of 2001 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: DENNIS MAHER APPELLANT AND: COMMONWEALTH BANKING CORPORATION & ORS RESPONDENTS JUDGES: BEAUMONT, SUNDBERG and ALLSOP JJ DATE OF ORDER: 16 APRIL 2002 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. the appellant be granted leave to appeal; 2. the appeal be allowed; and 3. the orders at first instance be set aside and the matter be remitted to the primary judge for directions and further hearing in accordance with these reasons. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 1097 of 2001 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: DENNIS MAHER APPELLANT AND: COMMONWEALTH BANKING CORPORATION & ORS RESPONDENTS JUDGES: BEAUMONT, SUNDBERG and ALLSOP JJ DATE: 16 APRIL 2002 PLACE: MELBOURNE REASONS FOR JUDGMENT THE COURT: 1 In this matter a notice of appeal has been filed purporting to appeal from an order by the primary judge dismissing the proceedings instituted by the appellant under Order 20 rule 2 of the Federal Court Rules. The notice of appeal contains no grounds of appeal. It appears to have been prepared by the appellant without legal assistance. Under the heading "Grounds" appear the words "from the whole of the decision". 2 We say "purporting to appeal" because when this matter was called on the respondents asserted that leave to appeal was required, the matter being interlocutory. No respondent had moved on notice under Order 52 rule 10. We shall return to this procedural aspect of the matter in due course. 3 The appellant claims to be entitled to possession of premises at 384 Spencer Street, Melbourne. He alleges that the first respondent ("the Bank") unlawfully interfered with his possession and is wrongly proposing to sell the premises. He sues in trespass and conversion, and also alleges contravention of the Trade Practices Act 1974 (Cth), in particular ss 51AA, 52 and 53A. 4 The statement of claim filed with the application was thought to be defective by the Bank, which applied under Order 20 rule 2 for the proceeding to be stayed or dismissed on the basis that it was frivolous and vexatious, and alternatively under Order 11 rule 16 that the statement of claim be struck out for failing to disclose a reasonable cause of action. The appellant thereupon propounded amendments in the form of a "Proposed Amended Statement of Claim", which the primary judge described as the appellant's work, though substantially based on a version prepared by his lawyer. From time to time, the appellant has had legal assistance, but has often appeared for himself. 5 At a directions hearing on 27 July 2001, the appellant's counsel sought leave to substitute the Proposed Amended Statement of Claim. However the Bank had not been provided with a copy of the proposed pleading, and the hearing had to be adjourned. There was no appearance for the appellant on the resumed hearing. Apparently he had telephoned the primary judge's chambers that morning to say he was unable to attend because of illness. The primary judge was not disposed to adjourn the hearing. He said: "The matter of the pleadings had been before the court on a number of occasions and it was through no fault of the respondents that it had not been dealt with. In any event, I was not completely satisfied Mr Maher's failure to attend was for good reason. The interests of justice seemed to be served best by resolving the matters in dispute, especially in the light of the numerous previous adjournments." 6 His Honour went on to say that he would treat the application to amend the statement of claim as still on foot, rather than dismiss it for non-appearance. He went on to say that in dealing with the application for leave and the Bank's "strike out application" (by which we understand his Honour to have meant the Bank's double barrelled application), he would assume that the facts alleged in the Proposed Amended Statement of Claim were true, as he would be required to do were it an actual pleading. He would also rely on certain facts contained in an affidavit filed by the Bank, which his Honour said were not controversial. 7 The primary judge then dealt with the facts relating to the appellant's claim to be entitled to possession of the premises. The appellant was granted a five year lease, dated 15 March 1995, by the registered proprietor, one Taylor. The appellant went into possession. He produced a copy of the lease to the Bank. At the time of the lease the appellant was an undischarged bankrupt. He remained a bankrupt until 12 December 1999. His interest in the lease thus passed to his trustee in bankruptcy in accordance with par 58(1)(b) of the Bankruptcy Act 1966 (Cth). Nonetheless the appellant remained in possession of the premises. 8 In April 1999 Taylor mortgaged the premises to the Bank as security for certain advances. The mortgage was registered under the Transfer of Land Act 1958 (Vic). Taylor defaulted in his obligations to the Bank and was served with a notice to pay under s 76 of that Act. He did not pay, and the Bank claimed possession of the premises as mortgagee. On two occasions, on 28 July 1998 and 30 September 1999, the Bank took physical possession of the premises. The Bank's possession came to an end when the appellant regained possession by changing the locks. The Bank's brief periods in possession are the acts of trespass alleged by the appellant. 9 The primary judge then noted that while property that, on bankruptcy, vests in the trustee in bankruptcy includes a chose in action, such as an action for damages in tort, there are a number of exceptions in subs 116(2) of the Bankruptcy Act. One of them is the right to recover damages for personal injury or wrong: par 116(2)(g). His Honour referred to cases establishing that a claim in a trespass action for personal annoyance or upset will remain with the bankrupt: Rose v Buckett [1901] 2 KB 449 at 455-456; Millane v Shire of Heidelberg [1936] VLR 8; Bride v Peat Marwick Mitchell [1989] WAR 383 at 392. 10 His Honour then noted that as a result of s 81 of the Transfer of Land Act, when Taylor defaulted under the mortgage he became a tenant at sufferance of the Bank, although he was entitled to receive the rents and profits for so long as the Bank allowed that position to continue: SEAA Enterprises Pty Ltd v Figgins Holdings Pty Ltd (No 2) (1996) V ConvR 54-538. 11 Finally, the primary judge observed that while upon default by a mortgagor, a mortgagee is prima facie entitled to possession of the mortgaged premises, the mortgagee's entitlement is subject to "the interest … of a tenant in possession of the land": par 42(2)(e) of the Transfer of Land Act. 12 Having thus set the scene, his Honour then posed the following issue for determination: "The question at issue, therefore, is whether Mr Maher derives his right to possession as or from a 'tenant in possession' who can defeat the Commonwealth Bank's claim. If the Commonwealth Bank's claim to possession could not be defeated by a tenant in possession, Mr Maher could not succeed in his action for trespass, for the Commonwealth Bank would be entitled to possession of the premises as mortgagee: Nicholls v Ely Beet Sugar Factory[1931] 2 Ch 84, 86." 13 His Honour noted that the appellant claimed to be entitled to possession under the terms of the lease from Taylor. But, as his Honour pointed out, the appellant's rights under the lease passed to his trustee in bankruptcy. His Honour then noted that the appellant claimed that the trustee was the "tenant in possession", and that he derived his rights from the trustee, as a licensee. His Honour then set out those parts of the Proposed Amended Statement of Claim that bore on this question. "1. The applicant is and was at all material times (except as Pleaded (sic) herein), in lawful possession of premises situate and known as 384 Spencer Street, Melbourne and more particularly described as the land and all improvements thereon contained in Certificate of Title Volume 0894 Folio 782 ("the Premises"). Particulars [not reproduced] 1A. The applicant was an undischarged Bankrupt as at 15 March 1995. 1AA In 1996 the applicant disclosed to the Trustee of his bankrupt estate that he was living in the premises and that he held a lease of same. Particulars The applicant communicated that he was residing at the premises verbally to Mr Ed Marsh of the Insolvency Trustees Service of Australia in 1996 contemporaneous with a court case involving the Trustee and Julieanne Maher. 1B The applicant was discharged from Bankruptcy in December 1999. 1C The trustee in bankruptcy of the applicant has not disclaimed the lease pursuant to the provisions of the Bankruptcy Act. 2. Pursuant to the terms of the lease between the applicant and the registered proprietor of the premises, the applicant is and was at all times material, entitled to possession of the premises to the exclusion of all others… 2AA Since the commencement of the lease the applicant has duly paid all rent due under the lease. 2A In the alternative to paragraph 2, at all material times … the applicant was, and [is] entitled to remain in possession of the premises by licence of the trustee of his bankrupt estate. Particulars The applicant's licence to occupy the premises arises by implication from the fact that the Trustee of his bankrupt estate knew of the lease did not disclaim it or seek to assign it and allowed the applicant to remain in possession of the (premises [sic] during the time the applicant paid the rent under the lease. The applicant communicated that he was residing at the premises verbally to Mr Ed Marsh of the Insolvency Trustees Service of Australia in 1996 contemporaneous with a court case involving the Trustee and Julieanne Maher…" 14 The primary judge regarded it as central to the assertion that the trustee was a tenant in possession that he knew of the existence of the lease. His Honour dealt with the "knowledge" claim as follows at [20]: "In the particulars to paragraph 1AA, Mr Maher sets out the basis of [the trustee's awareness of the lease]. Mr Maher claims he told his trustee in bankruptcy that he was residing at the premises. But as Mr Maher would know, informing the trustee that Mr Maher lives at a particular address does not convey any information about the nature of that occupancy. Thus the evidence that Mr Maher proposes to lead at trial to prove his asserted fact (knowledge of the lease), cannot establish that fact." 15 On this basis, his Honour concluded that the manner in which the appellant proposed to prove his case in trespass did not show an arguable case that the trustee was the tenant in possession of the premises. As the trade practices claims were dependent on establishing that the Bank was not entitled to possession, they also failed for the same reason. 16 The appellant's conversion claim related to certain personal chattels that were in the premises during the two short periods when the Bank had possession of the premises. These chattels were household items that, because of the exemption in par 116(2)(b)(i), did not pass to the trustee. His Honour did not consider that the Bank's entry into possession of the premises was sufficient to establish a conversion of the chattels that were in there at the time. He said: "There must be some conduct on the part of the Commonwealth Bank to show an intention to deprive Mr Maher of his chattels: Thorogood v Robinson (1845) 6 QB 769. There is no allegation to that effect, and it seems improbable that such an allegation could be made. It follows that the conversion claim is also hopeless." 17 For these reasons the primary judge dismissed the proceeding. 18 With respect, we have difficulty with this approach. 19 While the pleading was less than a model, it stated in the particulars to paragraph 2A that the trustee knew of the lease. Also, in paragraph 1AA the appellant pleaded that he disclosed to the Trustee that he was living in the premises and that he held a lease of same. His Honour limited the effect of both those matters by the particulars to paragraph 1AA in the manner set out in [14] above. 20 The Federal Court Rules do not require, without an order of the Court, particulars of actual knowledge: Order 12 rules 3 and 5, subject to the over-riding requirement of Order 12 rule 1, which would include such matters as surprise. There is nothing in the form of the proposed amended pleading which would have prevented Mr Maher from calling the trustee in his case to say (if it were the case) that he, the trustee, knew of the lease and had permitted the appellant to remain. Thus, it was wrong to dismiss summarily the proceedings on the basis that the only evidence which would be or could be brought at a final hearing was in terms of the particulars to paragraph 1AA. 21 Secondly, we do not agree that the particulars contained under paragraph 1AA could not in any circumstances convey to the trustee some information about the nature of the appellant's occupancy. Even assuming, as his Honour did, that the evidence to be led by Mr Maher would comprise a communication which did not expressly advert to the basis of his tenure at the premises, one would need to understand some other things before one could conclude that the trustee took nothing from the communication about the tenure. The conversation or letter may have occurred in the context of an enquiry about assets. The trustee may well have understood that if the appellant were living at these premises he either owned them or had some form of tenure. In these circumstances, the trustee could be seen to be put on enquiry about the tenure of the appellant. Without knowing what evidence the trustee would give, which, as we have said, would be open to be given on the pleadings, one cannot conclude, we think, that the appellant could not prove at a final hearing that there was some consensual arrangement between him and the trustee to enable it to be said that he derived his possession through a tenant in possession for the purposes of par 42(2)(e) of the Transfer of Land Act. 22 Further, even if it be the case that there was no consensual arrangement between the trustee and the appellant, the pleading is adequate to lead to the legal conclusion that the appellant entered the land by lawful title – with the consent of Taylor – and that he thereafter remained in physical possession without either statutory authority or without obtaining the consent of the person then entitled – the trustee by operation of par 58(1)(b) of the Bankruptcy Act. Such can be described as a tenancy at sufferance: Halsbury's Laws of England (4th Ed) Vol 27(1) [176], at footnote 2 citing Coke. 23 It has been held that a tenant at sufferance may maintain an action of trespass by virtue of his possession: Graham v Peat (1801) 1 East 244; cited in Halsbury, supra at [177]. 24 The tenant at sufferance has been described as a "mere fiction": Bradbrook and Croft Commercial Tenancy Law in Australia. There, the authors state that it is not truly a tenancy at all. Two cases are cited for this proposition: Burnham v Carroll Musgrove Theatres Ltd & Victoria Arcade Ltd (1928) 41 CLR 540, 550; and Fry v Metzelaar [1945] VLR 65, 67. 25 In Burnham's case Isaacs J said at 550: "It is a basic truth that, setting aside the so-called fictional tenancy by sufferance, the relation of landlord and tenant is created only by agreement." 26 In Fry's case Martin J in setting out the defendant's contentions cited the fourth edition of Foa on Landlord and Tenant which said: "Any tenant… who holds over or continues in possession after the end of his term without, either the assent, or dissent of his landlord is generally called a 'tenant at sufferance,' and his estate an 'estate at sufferance,' but, in as much as this relationship cannot arise by contract for, immediately the tenant assents to it, it becomes a tenancy at will, it wants the essential characteristics of all real tenancies and is indeed, a mere fiction of the law to prevent what would otherwise be an act of trespass" 27 The question, however, is not whether as a matter of property law, or by way of jurisprudential analysis a tenancy at sufferance is properly characterised as a tenancy, but whether there was a sufficiently arguable proposition that the tenure described by Halsbury and Coke as a "tenancy at sufferance" was within the purview of the phrase "tenant in possession" for the purposes of par 42(2)(e) of the Transfer of Land Act. That, ultimately, is a question of the meaning of par 42(2)(e), by reference to cases, no doubt, such as Burke v Dawes (1938) 59 CLR 1, 8, 12-13, 17-18 and 24; Barba v Gas and Fuel Corporation of Victoria (1976) 136 CLR 120, 140-41; Commercial Bank of Australia Ltd v McCaskill (1897) 23 VLR 10; Robertson v Keith (1870) 1 VLR (E) 11; Sandhurst Mutual Permanent Investment Building Society v Gissing (1889) 15 VLR 329; and Chesterfield v Pitisano [1964] VR 709. 28 Whilst this issue may be one suitable for separate trial, we do not think that the proposition that a tenancy at sufferance existed as between the appellant and the trustee was so hopeless as to warrant, if adverted to, its disposal under Order 20 rule 2, and in this respect we refer to the variously expressed views of Latham CJ, Starke J, Dixon J and Evatt J in Burke v Dawes, supra at 8, 12-13, 17-18 and 24, respectively. In particular, we note that Evatt J, in discussing the width of par 42(2)(e), cited Hogg Registration of Title to Land Throughout the Empire (1920) where that author said: "the interest of a tenant has been construed so as to include every kind of occupation, from tenancy at will to a right to the fee simple, so that the enactments saying the rights of those in possession – adversely or non-adversely – in effect provide for all cases of possession, whether it be that of a mere intruder or a person claiming as of right under a title good at law or in equity." 29 Nor do we think it appropriate that we embark on a final analysis of these cases on an appeal from an order made under Order 20 rule 2. 30 The person who had a leasehold interest in this land was the trustee. He was not a party to the proceedings. The orders of the Court may affect the interests of the trustee. We were informed by counsel for the respondent that the trustee had been informed of the proceedings. It is perhaps his absence that leads to the lacuna in knowledge as to whether the trustee knew of facts which would transform the appellant's initially lawful possession into a sub-tenancy at will or a licence (if consent to possession were given) or into a state of trespass (if the trustee had denied consent for the appellant to remain). 31 In all these circumstances we do not think that it was appropriate to dismiss Mr Maher's application under Order 20 rule 2. We think his Honour was in error in limiting the effect of the pleadings in the way he did; and, further, there was a second arguable basis for the application of par 42(2)(e) of the Transfer of Land Act. It may well be that the existing pleading should have been struck out and that leave to file the proposed amended pleading should not have been given for reasons argued before his Honour. We do not have reasons of his Honour about these matters However, we do not think that his Honour should have dismissed the proceedings summarily on the basis of the reasons he gave. 32 The respondents say that leave to appeal is required. In that contention they are correct: Hall v Nominal Defendant (1966) 117 CLR 423, 440; Wickstead v Browne (1992) 30 NSWLR 1, 11; and Dart v Norwich Union Life Australia Ltd [2002] FCA 168 at [2]. 33 Given the views we have expressed, and notwithstanding the absence of a notice of motion for leave, we think it appropriate to: (a) grant the appellant leave to appeal and (b) allow the appeal. 34 We think it appropriate that formal steps be taken to ascertain the trustee's view as to the litigation, such that any residual interest which he may have in the land, or otherwise, might be dealt with and so that he will be bound by the result. 35 The orders at first instance should be set aside and the matter remitted to the primary judge for directions and further hearing in accordance with these reasons. I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Beaumont, Sundberg and Allsop. Associate: Dated: 16 April 2002 The appellant appeared in person Counsel for the Respondent: R D Shepherd Solicitor for the Respondent: G S Ray Date of Hearing: 13 February 2002 Date of Judgment: 16 April 2002