FEDERAL COURT OF AUSTRALIA Scott v Bagshaw [1999] FCA 674 JOHN JOSEPH SCOTT v LEITH GORDON BAGSHAW AND JUDITH HAMPTON BAGSHAW AND PHILLIP GREGORY JEFFERSON AND JAY ARSCOTT STEVENSON AS TRUSTEES OF THE BANKRUPT ESTATE OF LEITH GORDON BAGSHAW NG 1061 OF 1998 RYAN, MOORE AND MARSHALL JJ 21 MAY 1999 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 1061 OF 1998 ON APPEAL FROM A JUDGMENT OF A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: JOHN JOSEPH SCOTT Appellant AND: LEITH GORDON BAGSHAW First Respondent JUDITH HAMPTON BAGSHAW Second Respondent PHILLIP GREGORY JEFFERSON AND JAY ARSCOTT STEVENSON AS TRUSTEES OF THE BANKRUPT ESTATE OF LEITH GORDON BAGSHAW Third Respondent JUDGES: RYAN, MOORE AND MARSHALL JJ DATE OF ORDER: 21 MAY 1999 WHERE MADE: SYDNEY MINUTES OF ORDER THE COURT ORDERS: 1. That the appeal be allowed. 2. That the orders of Whitlam J of 21 September 1998 be set aside. 3. That the application be remitted to Whitlam J to determine such of the issues between the parties as may be necessary, in the light of the reasons of the Full Court published this day, to dispose of the action. 4. That the costs of the proceedings before Whitlam J abide the determination by him of the issues referred to in paragraph 3 of this Order. 5. That the respondents pay the appellant's costs of the appeal, such costs to be taxed in default of agreement. Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 1061 OF 1998 ON APPEAL FROM A JUDGMENT OF A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: JOHN JOSEPH SCOTT Appellant AND: LEITH GORDON BAGSHAW First Respondent JUDITH HAMPTON BAGSHAW Second Respondent PHILLIP GREGORY JEFFERSON AND JAY ARSCOTT STEVENSON AS TRUSTEES OF THE BANKRUPT ESTATE OF LEITH GORDON BAGSHAW Third Respondent JUDGES: RYAN, MOORE AND MARSHALL JJ DATE: 21 MAY 1999 PLACE: SYDNEY REASONS FOR JUDGMENT THE COURT 1 This is an appeal from a judgment of a single Judge of the Court dismissing an application whereby the applicant sought a declaration that he was entitled to an equitable charge over two parcels of land, one at Terrigal in New South Wales ("the Terrigal land") and the other at Mildura in Victoria ("the Mildura land") and over the proceeds from the sale of another parcel of land at Para Wirra in South Australia ("the Para Wirra land"). The first and second respondents ("the Bagshaws") are the registered proprietors of the Terrigal land and the Mildura land and the first respondent, Mr Bagshaw, who is presently bankrupt, was formerly the registered proprietor of the Para Wirra land. The third respondents ("the Trustees") are the Trustees of Mr Bagshaw's bankrupt estate. 2 The applicant's amended statement of claim contained these paragraphs: "1. The applicant is the trustee of the Scott Family Trust. … 3. By an agreement made on or about 31 December 1985 Leith Gordon Bagshaw and Judith Hampton Bagshaw (hereinafter "the borrowers"), agreed with the applicant to borrow the sum of $375,399.21. … 5. It was a further term and condition of the said agreement that the borrowers charged their interest in the properties described in schedule 1 hereto with the payment of the said sum and all interest and costs and expenses due under the said agreement. 6. The said agreement by the borrowers to grant the applicant a charge over the said lands securing the said monies was partly performed. Particulars of Part Performance (i) The borrowers provided to Mr Kenneth Livingston, the agent of the applicant, the certificates of title to each of the said properties. (ii) The applicants extended to the borrowers financial accommodation in accordance with the said agreement. (iii) The applicant lodged caveats against the titles to each of the said properties. (iv) The applicant created a written memorandum of the said agreement which was forwarded to the borrowers for execution. (v) The borrowers informed Mr Livingston that they had executed the said memorandum and forwarded it to the solicitors for the applicant. 7. By virtue of the agreement between the parties described in paragraph 5 above and the acts of part performance described in paragraph 6 above the said agreement was effective to create an equitable charge against the said properties in favour of the applicant securing the said loan monies." 3 The properties described in Schedule 1 to the amended statement of claim were the Terrigal land, the Mildura land, the Para Wirra land and a fourth property at 2 Canyon Road, Baulkham Hills which was alleged in paragraph 8 of the amended statement of claim to have been sold in about 1988. The amended statement of claim concluded with these paragraphs: "9. In approximately July 1987 the certificate of title to the land situated at Para Wirra in South Australia being the land described in certificate of title volume 2505, folio 1566 was sub-divided by the borrowers for which purpose the applicant released the said certificate of title to the borrowers. 10. Upon the completion of the said sub-division the borrowers returned to the custody of the applicant the certificates of title for the land into which the said property had been sub-divided being certificates of title volume 4300 folio 637-642. 11. By virtue of the circumstances set out in paragraphs 9 and 10 above the land described in certificates of title volume 4300 folio 637-642 is subject to the same equitable charge as that described in paragraph 7 above. 12. The borrowers have failed to repay the said monies. 13. By virtue of the terms of the said equitable charge the applicant is entitled to have appointed by this Honourable Court a receiver to each of the properties described in schedule 2 hereto to cause the said properties to be sold and to pay to the applicant the monies outstanding under the said loan agreement after the payment of the costs and expenses of the said receivership and to pay any balance thereafter to the second and third respondents in accordance with their entitlements. 14. The applicant seeks the relief contained in the amended application filed in these proceedings. SCHEDULE 1 1. 1/39 Beaufort Road, Terrigal, certificate of title volume 15281 folio 226. Registered proprietors from 31 December 1985 to the present Leith Gordon Bagshaw and Judith Hampton Bagshaw as joint tenants. 2. 2 Canyon road, Baulkham Hills, certificate of title volume 14286 folio 139. Registered proprietors from 31 December 1985 to 1 June 1988 Leith Gordon Bagshaw and Judith Hampton Bagshaw as joint tenants. 3. 1110-1112 Benetook Avenue, Mildura, certificate of title volume 8366 folio 640. Registered proprietors from 31 December 1985 to the present time Leith Gordon Bagshaw and Judith Hampton Bagshaw as joint tenants. 4. Property situated at Para Wirra, South Australia, certificate of title volume 2505 folio 116 and volume 4099 folio 253. Registered proprietor Leith Gordon Bagshaw absolutely. SCHEDULE 2 1. 1/39 Beaufort Road, Terrigal, certificate of title volume 15281 folio 226. Registered proprietors from 31 December 1985 to the present Leith Gordon Bagshaw and Judith Hampton Bagshaw as joint tenants. 2. 1110-1112 Benetook Avenue, Mildura, certificate of title volume 8366 folio 640. Registered proprietors from 31 December 1985 to the present time Leith Gordon Bagshaw and Judith Hampton Bagshaw as joint tenants. 3. Property situated at Para Wirra, South Australia, certificate of title volume 2505 folio 116 and volume 4099 folio 253. Registered proprietor Leith Gordon Bagshaw absolutely." 4 In the first respondent's defence to that amended statement of claim it is pleaded: "3. In answer to paragraph 3 of the Amended Statement of Claim the First Respondent does not admit that there was an agreement between the Applicant and the Second Respondent." 5 By paragraphs 4, 5 and 6 of the same defence by way of further answer to paragraph 3 of the amended statement of claim it is denied that Livingstone was authorised to act as agent for Mr Bagshaw to make any agreement between him and Mr Scott. It is further denied that any of Annexures "A", "C" and "N" to an affidavit of Livingstone sworn 9 February 1995 were signed by Mr Bagshaw or that the originals of any of those documents "do now exist or have ever existed". As well paragraph 5 of the same defence pleads that, insofar as Mr Scott relied on a further fourteen identified documents annexed to the same affidavit of Livingstone, it is denied that the firm of Hardings, solicitors, had been instructed to act as Mr Bagshaw's agent in making any agreement with Mr Scott or had been authorised by Bagshaw "to create any documents on his behalf". 6 By paragraph 31 of his defence to the amended statement of claim, the first respondent admitted that payments totalling $341,000 were made from the J Scott and J Slattery Clearing Account at the North Sydney Branch of the Commonwealth Bank to "Hardings", or "Hardings Trust Account". Paragraph 31 continues: "31.2 Says any moneys paid from the Scott & Slattery Clearing Account to or for the First Respondent were payments made by or on account of 31.2.1 Kenneth Livingstone and or in the alternative; 31.2.2 Unknown clients of Kenneth Livingstone; and that the First Respondent has never been indebted to the applicant. 31.3 Says any moneys paid from the Scott & Slattery Clearing Account on behalf of Ophix were payments made pursuant to a debtor/creditor relationship between Ophix and Livingstone only. 31.4 That all moneys lent to the First Respondent have been repaid." 7 The second respondent's defence to the amended statement of claim was in similar terms although shorter in form while for the third respondent paragraphs 1, 3, 4, 5, 7, 8, 9, 10, 11, 12 and 13 of the amended statement of claim were not admitted. The remaining paragraphs of the third respondent's defence deny that Mr Scott acquired any interest in Torrens Title land, and assert that any claim which he may have had is statute-barred or rendered unavailable by laches. Finally, it is pleaded that insofar as Mr Scott's claim relates to a debt provable in bankruptcy, the action could not be commenced without leave. 8 It is not disputed that between October and December 1985 certain moneys were paid for the benefit of the Bagshaws from a bank account styled the "J Scott and J Slattery Clearing Account". The relevant circumstances surrounding the operation of that account were described by the learned primary Judge in these terms: "Mr Scott is an accountant who, many years before the events in question, used to employ Mr Livingstone. A company called Ophix Finance Corporation Pty Ltd, which was owned and controlled by him and a Mr John Slattery, ran a deposit-taking and money-lending business. Ophix operated a bank account for this purpose with the Commonwealth Bank at North Sydney styled the J Scott and J Slattery Clearing Account, of which the applicant and Mr Slattery were the signatories. Ophix maintained a separate ledger account for each client. At the time of the advances to the Bagshaws, Mr Livingstone was a client. He deposited funds with Ophix. In order to withdraw moneys from the account, Mr Livingstone was supplied with blank cheques signed by Mr Scott, who did not know the intended payee or the amount of any cheque. Amounts paid were debited to Mr Livingstone's ledger account. Mr Scott said that he was aware Mr Livingstone was depositing other people's money in the Clearing Account, but he never knew whether, as between Mr Livingstone and those persons, deposits were loans to Mr Livingstone or repayments to Mr Livingstone. He was adamant that he did not know the sources from which the deposits were made. So far as debits in Mr Livingstone's ledger account were concerned, such entries merely reduced the amount of money owing by Ophix to Mr Livingstone. Mr Scott said that he knew no details of payments made to or on behalf of the Bagshaws until Mr Livingstone produced to him a schedule of such payments for the purposes of this litigation. So far as he was concerned, such transactions represented a withdrawal of funds standing to Mr Livingstone's credit in the Clearing Account." 9 As well as a photocopy mortgage dated 31 December 1985 which the learned primary Judge regarded as "extremely suspicious" and to which he attached no weight, there were in evidence several documents suggesting that a loan or loans had been made by Mr Scott or "the Scott Family Trust" to, at least, Mr Bagshaw. Those documents included a photocopy of a deed of loan agreement apparently executed by Mr Bagshaw which commenced with the recital: "THIS DEED made the 19th day of September, One thousand nine hundred and eighty five, BETWEEN LEITH GORDON BAGSHAW of 16 Woodridge Place, Baulkham Hills (hereinafter called the 'Borrower') of the First Part AND THE SCOTT FAMILY TRUST of 21 Pound Avenue, Frenchs Forest (hereinafter called the 'lender') of the Second Part WHEREAS the Lender has agreed to advance to the Borrower the sum of SIXTY THOUSAND DOLLARS ($60,000.00) upon the terms and conditions hereinafter appearing." 10 As well, Hardings who had acted for Mr Bagshaw for some time wrote to him on 7 November 1985 a letter which commenced: "Further to our letter of the 15th October we confirm your telephone advice that the title deeds in relation to the Terrigal property when received by us from the Registrar General are to be forwarded to Ken Livingstone. We understand that they form part of the security for an advance to you by the Scott Family Trust." 11 A cash statement prepared by Hardings in relation to the purchase of the Mildura land and forwarded to Mr and Mrs Bagshaw on 14 January 1986 included the entries: "19.11.85 By Scott Family Trust re advance 25,000 6.12.85 By Scott Family Trust re advance 160,000" 12 Furthermore, there was in evidence a photocopy letter dated 9 October 1985 apparently signed by Mr Bagshaw which was in these terms: "Mr J Scott 249 Miller Street NORTH SYDNEY NSW 2060 Dear Mr Scott, I confirm that I seek additional funds to allow capital expansion and investment. I acknowledge that I have already signed a loan agreement dated 19th September, 1985 and confirm that I acknowledge the rate of interest will be 19% per annum computed quarterly for all additional money advanced. I also have had this explained to me by Ken Livingstone and fully understand my obligations. I agree, that subject to the final draw down of money advanced, to execute documents, deeds and papers as required. Such amounts advanced may be directed to be paid to third parties or nominees on my behalf and I indemnify you for such amounts plus interest at the stated rate of nineteen (19%) per centum per annum computed quarterly. I acknowledge a cheque handed to me this day for Ten Thousand Dollars ($10,000.00) in favour of my Solicitors 'Hardings'. I expect that in view of projections, these advances will only be on a short term basis and thank you for your assistance. I will not let you down with my undertakings. Yours faithfully," 13 Another photocopy letter dated 4 March 1990, also apparently signed by Mr Bagshaw, acknowledged: "TO: Mr John J Scott C/- 21 Pound Avenue FRENCHS FOREST NSW 2086 Dear John, I, LEITH GORDON BAGSHAW of 16 Woodridge Place, Baulkham Hills in the State of New South Wales, acknowledge that money has been advanced, expenses paid and interest accrued at a rate of nineteen (19%) per centum per annum to and on behalf of Devebo Pty Limited by you. Notwithstanding a charge created by you over the assets of Devebo Pty Limited of which I am a Director, I HEREBY GIVE YOU my personal guarantee for the repayment of all advances (past and those proposed) plus any expenses paid and interest accrued relative to the operation of Devebo Pty Limited." 14 Of particular significance is the following photocopy letter purportedly signed by Mr Bagshaw and dated 22 October 1992, well after the transactions to which the earlier correspondence had related: "Mr J Scott 249 Miller Street NORTH SYDNEY NSW 2060 Dear John I refer to representations relative to proposals in respect of both the Adelaide and Mildura Properties. I acknowledge receipt of the following deeds and undertake to return these upon demand. I expect that I will need them for about 8 weeks and further acknowledge that by the handing over and my receipt of the deeds in no way waives my liability for the money advanced for which the deeds were lodged as deposited deeds as part of your security. Mildura Property Volume 8366 - Folio 640. Adelaide Property - Previously Volume 2505 Folio 116 now Lot 1702 – Volume 4300 Folio 637 " Lot 1703 – Volume 4300 Folio 638 " Lot 1704 – volume 4300 Folio 639 " Lot 1705 – Volume 4300 Folio 640 " Lot 3276 – Volume 4300 Folio 642 " Lot 3281 – Volume 4300 Folio 641 I acknowledge the above deeds from Ken Livingstone and I am confident to now trade out of my financial situation." 15 None of the respondents admitted the making of any loan by the applicant to Mr or Mrs Bagshaw. Accordingly, the applicant was required to establish, as a first step in the proof of the cause of action pleaded, the making of a loan to either or both of the Bagshaws. It was held at first instance that the applicant had failed to discharge that onus, noting that Mr Scott and Mr Livingstone had contradicted each other on the fundamental issue and that the Bagshaws had not given evidence. His Honour's summary of Mr Scott's evidence was in these terms: "Mr Scott confirmed that he had never lent moneys to the Bagshaws or a company called Devebo Pty Ltd at Mr Bagshaw's request. He did not know that Mr Livingstone or anyone else had requested security documents from Mr Bagshaw. Mr Scott was guarded about agreeing to a bald proposition that he had no knowledge of any transaction being conducted by Mr Livingstone. He said he had no specific knowledge, he knew no details, and he certainly had not given any authority to Mr Livingstone to enter into transactions on his behalf. Mr Scott first saw copies of the documents relied on in his case, including Exhibit 10, after this proceeding was commenced. It did not concern him that the name of the Scott Family Trust was used in documents, notwithstanding that it was no longer in existence. He knew that he was named as the applicant in this proceeding, but regarded himself as a nominee or agent for Mr Livingstone. Mr Scott agreed that he had also lodged a proof of debt in Mr Bagshaw's bankruptcy with the trustees, although he explained that he had told them he was not, in fact, a creditor. Mr Scott said that he was maintaining this proceeding on behalf of Mr Livingstone. Most importantly, Mr Scott completely resiled from the statements in an earlier affidavit which suggested that moneys were advanced by him to the Bagshaws. He explained that he had been confused. Mr Scott was at pains to convey his role in this litigation as that of a mere nominee for Mr Livingstone and said that he expected to account to Mr Livingstone for moneys recovered." 16 The contradictory evidence of Mr Livingstone that Scott had been the principal lender and that he, Livingstone, had merely been Scott's agent, was rejected by the primary Judge. That rejection was based on several reasons, the combined effect of which was that Livingstone had acted in relation to the preparation and execution of documents including the giving of instructions to a solicitor, Mr Austin of Hardings, in a way which was more consistent with his having been a principal rather than an agent. His Honour concluded this part of his finding by observing: "In the witness box Mr Livingstone maintained his mantra that he was a mere agent for Mr Scott. I am bound to say, however, that I found him a most unimpressive witness. He was most likely a middle man of some sort in some of these advances, but I am satisfied that the hapless Mr Scott has been offered up as a principal simply because he was the signatory on the Clearing Account." 17 His Honour's strictures on Livingstone's credibility do not appear to go to the extent of rejecting his oral evidence that when he was asked by Bagshaw for financial assistance he said that he would telephone Scott "and see if in fact Scott could lend the money to him". To similar effect, Livingstone testified under cross-examination that when he discussed the advance of moneys to purchase the Terrigal land he told Bagshaw "Scotty will require a mortgage on that particular property or words to that effect". That confirmed Livingstone's assertion in an affidavit sworn 9 February 1995 that: "I said to Bagshaw words to the effect: 'Scott will want to hold the deeds to the unit as security'. Bagshaw replied with words to the effect: 'Yes, I will give them to you as soon as I have settled'." 18 At the time of the purchase of another property at Kenyon Road, Baulkham Hills, according to Livingstone, Bagshaw asked "could Scotty help?" We assume that it was the recollection of those passages from the evidence, perhaps in conjunction with the documentary references which we have collected, that led the learned primary Judge to conclude in the passage last quoted that "Mr Scott has been offered up as a principal" by Livingstone to Bagshaw. At all events, in the absence of any evidence at all from Bagshaw, we are unable to impute to his Honour a finding that Scott or the Scott Family Trust had never been nominated to him as the lender. 19 The learned primary Judge then went on to express in these terms the legal consequences of the findings he had made: "Counsel for the applicant opened that it was not disputed that ultimately some of the funds advanced were those of Mr Livingstone or his clients. But he submitted Mr Scott was entitled to recover those advances and enforce the remedies of an equitable chargee. In his closing address counsel, faced with the unequivocal evidence of his client, described Mr Scott as the nominated lender and mortgagee and contended that his case may be conducted as a claim by Mr Scott for debt. I find this an astonishing argument. It suggests that, if, for example, X lends Y the sum of $1,000 by handing Y a bank cheque for that amount, the bank manager who signed the cheque may claim for the moneys lent. In the end (and counsel was in a difficult position) the contradiction in the evidence of these two key witnesses was said to represent no more than a difference in what they 'believed' to be the case. Ultimately, however, counsel was driven to submit that Mr Livingstone was, in fact, acting as agent for Mr Scott. The applicant bears the onus of establishing that fact. He has not succeeded. Particularly having regard to his own denial, I find that Mr Scott did not lend any moneys to the Bagshaws." 20 His Honour then rejected an argument advanced on behalf of the applicant, Mr Scott, that the respondents were estopped from denying that the Bagshaws borrowed moneys from him. The reasons for judgment then concluded with these paragraphs: "If no debt is owing to Mr Scott, he can have no charge to realize. No authority was cited for the proposition that Mr Scott may sue as a nominated chargee. There is no evidence to suggest that Mr Scott is the assignee of any debts owing by the Bagshaws. Whoever the lenders to Mr and Mrs Bagshaw are, whether Mr Livingstone, one of his clients or anyone else, no piece of evidence indicates they have divested themselves of any of their rights and vested them in Mr Scott. Counsel referred to Troncone v Aliperti (1994) 6 BPR 97455 as an example of the kind of limited equitable interest that might support a caveat. In the present case, however, Mr Scott plainly has no equity whatsoever to enforce. His role in instituting this proceeding smacks of overt maintenance. If any lenders have rights against the Bagshaws, Mr Scott would have no interest in any suit they might bring. The position of parties such as tutors and next friends is entirely exceptional. In any event, counsel for Mr Scott does not submit that his client is bringing this suit on behalf of anyone else. The respondents have raised many other points in defence of Mr Scott's claims. However, in my view, this very odd case may be disposed of on this one critical point. The proceedings is dismissed with costs." 21 On the hearing of the appeal, Counsel for the appellant contended that the facts supported a conclusion that the Bagshaws had agreed to borrow moneys from Scott and to charge their various parcels of land with repayment of the loan. It was sought to overcome the difficulties created by Mr Scott's evidence by asserting that, although on Scott's side, "all of the agreements and undertakings were made by Livingstone, they were made in Scott's name and Livingstone was acting in the terms of the authority he had from Scott to use Scott as his nominee in transactions of that sort". However, the evidence of Mr Scott does not support the proposition that he had given, before the making of the loan, any authority, general or otherwise, to Livingstone to enter into loan contracts on his, Scott's, behalf. 22 At best for the appellant, it seems that Mr Scott did no more than acquiesce, after the event, in Livingstone's use of his, Scott's name or the name "the Scott Family Trust", to designate the lender in the transactions with the Bagshaws. The question then arises whether that was sufficient to constitute Scott a lender to the Bagshaws, either as a principal in his own right or as trustee for some undisclosed beneficiaries. It is clear that the moneys advanced to the Bagshaws through the "J Scott and J Slattery Clearing Account" were not Scott's moneys either legally or beneficially. They were Livingstone's moneys either beneficially or as trustee for certain of Livingstone's clients from whom they had been derived in order to contribute to Livingstone's credit in the ledgers of Ophix Finance Corporation Pty Ltd ("Ophix") which, in turn, enabled Livingstone to draw on the J Scott and J Slattery Clearing Account. 23 In this context, Counsel for the appellant submitted that it was not to the point that the moneys advanced to the Bagshaws may have been provided by clients of Livingstone. An analogy was sought to be drawn with an action by a bank to recover moneys advanced to a borrower which were ultimately derived from the Bank's depositors. Similarly, it was said that Scott's position was wholly analogous with that of an accountant or solicitor collecting the moneys of several clients and advancing them in his name. The flaw in those analogies is that the bank, accountant or solicitor enters into the loan transaction as principal whether the moneys are lent as trustee or from funds to which the lender is beneficially entitled. In the present case, however, Mr Scott denied having lent any money to the Bagshaws in any capacity. The question thus becomes whether, upon accepting that denial, the learned primary Judge was bound to hold that the appellant had not established that he was a party to a loan agreement with the Bagshaws. 24 It was not necessary for the appellant to establish that he knew and approved of the making of the loan at the time when it was made. All that he had to prove was that the loan had been made and that he, as the nominated lender, was entitled to enforce repayment of the loan. Thus, in Roscoe's Evidence in Civil Actions 20th Edn p 557 under the heading "Action for Money Lent" it is stated that: "In an action for money lent, the plaintiff will have to prove the loan of his money. ... But if the plaintiff can show any money transactions between the defendant and himself from which a loan may be inferred, or any application by the defendant to borrow money at the time, this, coupled with the payment, will be evidence of a loan." 25 In the present case, on the facts found by the learned primary Judge, the appellant did show an application, at least by Mr Bagshaw, to borrow money, and the execution of some security documents together with the payment of various advances. In those circumstances, it was incumbent on the respondents to show, contrary to what appeared, for example, in the letters dated 4 March and 9 October 1985, that the money admittedly received by way of loan had been lent by somebody other than the applicant. That the respondents bore this onus was obscured by the pleadings because, in answer to paragraph 3 of the amended statement of claim, the first and second respondents merely "did not admit" that there was an agreement between the applicant and the second respondent and denied that Livingstone or the solicitors, Hardings, had any authority from Mr Bagshaw to make an agreement on his behalf with Mr Scott. Had the defences complied with O 11 rr 10, 13(3) and 18 of the Rules of this Court, they would have indicated specifically the lender whom the respondents contended was entitled at common law to receive, and sue for, repayment of the loan. 26 As we have already noted, the learned primary Judge, in the course of his reasons, expressed doubts about the authenticity of a copy mortgage dated 31 December 1985 as to which he said: "Clive Austin is a solicitor who was intermittently retained to act on the purchase of the lands in question and on the somewhat desultory attempts to lodge caveats on behalf of the Scott Family Trust. It is quite plain from Mr Austin's oral testimony and from an examination of his relevant files that overwhelmingly his instructions came from Mr Livingstone. Many of the documents in this case resemble pakapu tickets. In particular, a photocopy of a mortgage dated 31 December 1985 that Mr Livingstone said Mr Bagshaw signed is extremely suspicious. No explanation was provided as to the whereabouts of the original. In the absence of such evidence, no weight may be attached to it." 27 The photocopy mortgage to which his Honour referred was apparently prepared by Mr Austin of Hardings and intended to be collateral to an unsigned photocopy agreement of the same date, also prepared by Hardings and expressed to be between Mr and Mrs Bagshaw as borrowers and the "Scott Family Trust" as lender. It purported to bear the signatures of both Mr Bagshaw and Mr Scott. It was not suggested that Mr Scott's signature had been forged. His Honour found it unnecessary to resolve whether the signature on the photocopy mortgage purporting to be that of Mr Bagshaw was authentic but those documents served another purpose as a contemporaneous indication that the "Scott Family Trust" had been nominated by Livingstone as the lender. The same purpose was served by the deed of loan agreement of 19 September 1985, letters dated 4 March 1985, 9 October 1985 and 7 November 1985 and the Hardings cash statements all of which have been set out earlier in these reasons. 28 The discrepancy to which the learned primary Judge pointed between the evidence of Mr Scott and Mr Livingstone did not bear on whether Scott, as nominated lender, had the right to sue to recover the moneys lent. It went, rather, to the question of whether Livingstone had lent the moneys as agent for Scott and with his authority. It was not suggested by either witness that Scott had any beneficial interest in the moneys lent. If Livingstone, even without authority, nominated Scott or the Scott Family Trust as the principal lender or as trustee for various unidentified persons beneficially entitled to the loan moneys, Scott obtained a legal title to the chose in action upon ratification of the nomination as discussed below, or upon doing an act inconsistent with a disclaimer of the office of trustee. Allowing an action to be instituted in his name implied acceptance of the trust; see Montford v Cadogan (1816) 19 Ves 635; 34 ER 651 where it was acknowledged that the alleged trustees were not bound by any covenant but it was held by Lord Eldon LC at 638, that, by commencing an action in their names many years previously, "they have in Equity undertaken to execute the trusts exactly as if they had so executed the instrument". 29 Counsel for the appellant specifically contended that Mr Scott had been entitled to ratify the conduct of Livingstone and exercise the rights which the agreement concluded by Livingstone, concededly without Scott's authority, purported to confer on Scott. That submission accords with the principle stated in these terms in Bowstead on Agency 15th Edn p 58: "The only person who has power to ratify an act is the person in whose name or on whose behalf the acts purported to be done, and it is necessary that he should have been in existence at the time when the act was done, and competent at that time and at the time of ratification to be the principal of the person doing the act; but it is not necessary that at the time the act was done he was known, either personally or by name, to the third party." 30 In Lyell v Kennedy (1889) 14 App Cas 437, the defendant had, for many years, as agent of the owner of land received and paid into a separate bank account rents from various tenants of the land. On the owner's death, the defendant continued to receive the rents asserting that he was acting as agent and receiver for the true heir, whoever that might be, of the deceased owner. The defendant acted in that way until 1880 when he claimed the property on his own account as more than twelve years had elapsed since the owner's death. In 1881 an assignee of the owner's heir brought action against the defendant for possession of the land and an account of the rents and profits. It was held that, by bringing action within a reasonable time after the heir was ascertained, the plaintiff had ratified the unauthorised acts of the defendant in receiving the rents. On this aspect of the case, the Earl of Selborne, with whom the rest of their Lordships agreed, said, at 461: "It is enough, in my judgment, if the agency is ratified within such a time as is reasonable under the circumstances between the true owner and the assumed agent. In this case the ratification took place as soon as was reasonably possible after the co-heiresses had been ascertained, and hardly more than a year after the last of an uninterrupted series of acts by the respondent upon the footing of agency. That, in my opinion, was enough. The present question is not with the tenants; they have regularly paid rent in respect of their tenancies, and they cannot have any claim, under the 8th or any other section of the statute, against the reversioner, if he is entitled to take, and does take, the benefit of their payments. Whether he is or is not entitled, as against the respondent, to an account of those rents, and to receive future rents, is a question with which the tenants (so long as they are protected against a double claim) have no concern. There is not here a jus tertii, complete before ratification, as there was in Lord Audley v Pollard Cro Eliz 561 and Bird v Brown 4 Ex 786. Those cases are good law, but I think them inapplicable to a question between the self-constituted agent and the ratifying principal." 31 A recent authority for the proposition that a contract may be ratified by bringing an action against the other party is supplied by Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1987) 8 NSWLR 270 per McHugh JA at 282. 32 Similarly, in our view, who was entitled beneficially to receive the loan moneys when repaid was a question with which Mr Bagshaw and Mrs Bagshaw (if she was a borrower) had no concern (so long as they were protected against a double claim). It will be remembered that the first respondent, by paragraph 31.4 of his defence, has pleaded that all moneys lent to him have been repaid. It remains open to Mr Bagshaw to establish that defence by proving payment to Livingstone or Hardings as agent even if, as the evidence before the learned primary Judge suggested, Mr Scott, as the nominated lender, acquired, at least upon ratifying the nomination, the legal title to the chose in action. 33 With respect, we consider that the issue is not illuminated by the analogy drawn by the learned primary Judge between the present case and a loan advanced by payment of a bank cheque where, it is said, the bank manager who happened to sign the cheque could not be allowed to sue for repayment of the loan. The analogy is inapt because, in his Honour's illustration, the bank manager is not nominated in any way as the lender. The signature on the bank cheque may be indecipherable and there is nothing to put the borrower on notice that he or she is contracting with, and obliged to make repayment to, the bank manager. In the present case, however, there is a considerable body of evidence, none of it contradicted by Mr Bagshaw, that Mr Scott or the "Scott Family Trust" had been nominated as the lender and had been acknowledged as such by Mr Bagshaw. In particular, under cross-examination at first instance, Mr Scott unequivocally said: "I'm the nominee for Livingstone in respect of the loans made to Bagshaw and his Devebo." Because of Mr Scott's apparent acceptance of the Trust, or his ratification of Livingstone's nomination of him as lender, it is not to the point that Mr Scott was unaware of the nomination when it was made. 34 That analysis explains why, as his Honour noted, "there is no evidence to suggest that Mr Scott is the assignee of any debt owing by the Bagshaws". No evidence of an assignment was necessary because Mr Scott was nominated as the original lender. Upon his adoption of the nomination by signing loan documents or, at the latest, by instituting these proceedings in his own name, he became entitled, without any assignment, to enforce payment of so much of the loan as remained owing. 35 The same analysis also negates the suggestion by the learned primary Judge that Mr Scott's "role in instituting this proceeding smacks of overt maintenance". If, as we have inferred, Mr Scott or the "Scott Family Trust" was nominated as lender as trustee for those who contributed to the loan funds, he had a legitimate commercial interest in instituting proceedings for the recovery of those funds. In Re Tosich Construction Pty Ltd; Ex parte Wily (1997) 23 ACSR 126 Lindgren J adopted this definition of "maintenance" from Halsbury's Laws of Australia Vol 6 para [110-7135]: "Assistance or encouragement by a person who has neither an interest in the litigation nor any other motive recognised as justifying the interference, to a party to the litigation." 36 In the present case, Mr Scott is a party to the litigation as applicant. He derived his capacity to be such a party from the nomination by Livingstone of himself or the "Scott Family Trust" as lender to the Bagshaws. That gave him an interest to pursue the proceedings notwithstanding that he had no beneficial interest in the moneys advanced. That interest would provide a complete answer to a defence that his institution of the proceedings was pursuant to an agreement, presumably with Livingstone, involving maintenance. 37 It will be apparent that, for the reasons which we have endeavoured to explain, we are unable to agree with the learned primary Judge that the case could be disposed of on "the one critical point" which he identified. That conclusion does not depend on a rejection of his Honour's assessment of the respective credibility of Scott and Livingstone. Rather, it derives from our understanding of the legal effect of accepting Scott's evidence when that evidence is viewed against the documentary evidence of the nomination of himself or the "Scott Family Trust" as lender and the undeniable fact that the present proceedings have been instituted in his name with his informed authority. Because we are persuaded to allow the appeal for these reasons, we do not find it necessary to consider the alternative contention advanced on behalf of the appellant that the respondents are estopped from denying that Mr Scott was the lender in each of the loan transactions in issue. 38 It is true that our conclusion has the result that the appellant is permitted to maintain an action which might result in his enforcing securities or receiving repayments in respect of loan funds to which he concededly made no contribution at all from his own moneys. As we have already pointed out, Mr and Mrs Bagshaw have no concern with the identity of those persons, beneficially entitled to the loan funds, who can call on Mr Scott to account for any fruits of the action. Nor, as the action is presently constituted, is the Court concerned with those matters. It will be for the trial Judge to decide whether it is necessary or appropriate to join as parties to the action those, as yet unidentified, persons with equitable rights to the funds of which Mr Scott claims to be the bare legal owner. Likewise, it is a matter for the trial Judge to decide whether any final orders should be framed in a way to protect the equitable interests to which we have just referred. 39 It was contended, particularly on behalf of the second respondent, that there are other grounds, independent of that relied on by the primary Judge, which support the dismissal of the application, at least against the second respondent. However, it seems to us that the availability of each of those other grounds turns on finding of fact which have not been made. They include findings as to the execution of various documents, alleged acts of part performance and the scope of Mr Austin's retainer to act for Mr and Mrs Bagshaw on the acquisition of the various parcels of land and the financing of those acquisitions. Although at first inclined to invite this Court to make findings of fact for itself on all remaining undecided issues, Dr Birch of Counsel for the appellant eventually acknowledged that it might be necessary for the matter to go back to the trial Judge for those findings to be made. Accordingly, we shall allow the appeal, set aside the order below and remit the application to the learned primary Judge to determine such of the remaining issues as may be necessary, in the light of these reasons, to dispose of the action. The respondents must pay the appellant's costs of the appeal. I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court. Associate: Dated: Counsel for the Appellant: Dr C Birch Solicitors for the Appellant: Church & Grace Counsel for the First Respondent: Mr G A Stevens Counsel for the Second Respondent: Ms E Cohen Counsel for the Third Respondent: Mr S Tilmouth QC with Miss J Oakley Solicitors for the Third Respondent: Camatta Lempens Pty Ltd Date of Hearing: 5 March 1999 Date of Judgment: 21 May 1999