COMMONWEALTH BANK OF AUSTRALIA v TERREY & ORS [1999] NSWSC 417

New South Wales Supreme Court CITATION : COMMONWEALTH BANK OF AUSTRALIA v TERREY & ORS [1999] NSWSC 417 CURRENT JURISDICTION : COMMON LAW FILE NUMBER(S) : 10080/1996 HEARING DATE(S) : 28-29 April 1999 JUDGMENT DATE : 5 May 1999

COMMONWEALTH BANK OF AUSTRALIA PARTIES : ACN 123123124 v ANDREW SCOTT TERREY, KATHLEEN PATRICIA TERREY, LISA REID AND RICHARD JOHN MCLEAN JUDGMENT OF : Master Malpass

PLAINTIFF: NO APPEARANCE COUNSEL : FIRST DEFENDANT: MR T J MORAHAN FOURTH DEFENDANT: MR M B DUNCAN PLAINTIFF: NO APPEARANCE SOLICITORS : FIRST DEFENDANT: D'ANGELO FOURTH DEFENDANT: DEFENDANT IN PERSON CATCHWORDS : Indemnity under Deed; Duress or undue influence; Anshun estoppel; Failure to mitigate loss. ACTS CITED : District Court Rules, Pt. 1 r. 4, Pt. 12 r. 4C, 4C (2) Macquarie Bank Ltd v National Mutual Life Assurance of Australia Limited & Ors (1996) 40 NSWLR 543. CASES CITED : Port of Melbourne Authority v Anshun Pty Limited 147 CLR 589. Tanning Research Laboratories Inc v O'Brien 169 CLR 332. DECISION : SEE PARAGRAPH 29

THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

MASTER MALPASS

WEDNESDAY 5 MAY 1999

10080 of 1996 COMMONWEALTH BANK OF AUSTRALIA v ANDREW SCOTT TERREY AND ORS

JUDGMENT 1 These proceedings were commenced by the Commonwealth Bank of Australia (the Bank) against Andrew Scott Terrey, his mother (Kathleen Patricia Terrey), his wife (Lisa Reid) and Richard John McLean. The first three defendants were the registered proprietors of a property known as 9 Wyomee Avenue West Pymble. They had given a mortgage dated 31 May 1991 to the Bank for the purposes of securing financial accommodation advanced to McLean Terrey and Associates Pty Ltd (the Company). The first and fourth defendants had been directors of the Company. The Company had ceased trading in August 1992 and its affairs had been placed in the hands of some accountants. Some of the outstanding debts had been met by realisation of the Company assets. Some of the debts had been paid by the first defendant himself. There remained outstanding creditors (including the Deputy Commissioner of Taxation). The Deputy Commissioner was threatening to liquidate the Company. This situation led to the execution of a Deed made between the first and fourth defendants (the Deed). It was made on 25 June 1993. A copy of it is Exhibit 2. 2 The claim brought by the Bank was founded on default under the mortgage and certain guarantees. Default was not in issue. A demand had been made on about 3 February 1994. This demand led to the first defendant commencing proceedings against the fourth defendant in the District Court. A copy of the District Court pleadings comprise Exhibit 1. There is a Statement of Liquidated Claim issued on 21 February 1994. There is a Notice of Grounds of Defence filed on 26 May 1995. There is a Notice of Cross-claim filed on the same date. There was lack of prosecution of both the Claim and the Cross-claim which resulted in the proceedings being disposed of pursuant to Part 12 rule 4C of the District Court Rules. 3 Two Cross-claims were brought in these proceedings. The first of the two Cross-claims has no present significance. The Second Cross-claim was brought by the first defendant against the fourth defendant. It is the matter which is now being litigated before the Court. 4 Following the failure of the Company, there was a falling out between the first and fourth defendants. The first defendant ran his own business. The fourth defendant had a Private Investigator's Licence (previously he had been in the Police Force for many years). The claim made by the Bank against the fourth defendant was settled. It appears that this took place in about 1997. 5 In the proceedings against the first, second and third defendants, the Bank was seeking both a judgment for possession and a judgment in a monetary sum. As a matter of fact, the first defendant has taken the position of assuming the liability for the three defendants (as a matter of law there was joint and several liability). At the time of the making of the initial demand, the first defendant was not in a position to pay the moneys then owing. Further, he took the stance that because of the contractual relationships existing between himself and the fourth defendant the fourth defendant had the responsibility for paying principal and interest falling due under the mortgage. At an early stage in the proceedings, the first defendant made an offer of $50,000.00 in settlement of the proceedings. This offer was rejected by the Bank. In 1997, he made an offer in the sum of $75,000.00. This offer was ignored by the Bank. The proceedings were fixed for hearing to take place on 1 and 2 March 1999. The sum then due and payable under the mortgage was $107,451.21 (there was also the potential liability for the Bank's legal costs and disbursements). The first defendant made a further offer of $75,000.00. This offer was accepted by the Bank. The first defendant effected compliance with the Terms of Settlement by the payment of the sum of $75,000.00 from borrowed funds. 6 Although the proceedings brought by the Bank have been settled, the Second Cross-claim still remained for determination. As the fourth defendant was then inter alia unrepresented, the Second Cross-claim was stood over on his application for hearing at a later date. Thereafter, it was further fixed for hearing to take place on 28 April 1999. On that day, the fourth defendant was represented by counsel. Counsel had only recently received instructions in the matter. When the matter came on for hearing, it was in a state of some disarray. Ultimately, it was stood over to 29 April 1999. 7 This adjournment allowed amendment of pleadings, the furnishing of particulars, the preparation of further affidavits and it gave counsel for the fourth defendant further opportunity to prepare his client's case. The hearing took place on 29 April 1999. 8 The first defendant proceeded on the Amended Second Cross-claim filed in Court on 29 April 1999. The fourth defendant proceeded on the Defence which was also filed in Court on that day. The first defendant relied on three affidavits. One was sworn by the first defendant himself. Two were sworn by his solicitor (Mr D'Angelo). The fourth defendant relied on an affidavit which he had sworn on 28 April 1999. He tendered two exhibits. Both parties were cross-examined. The oral evidence of the first defendant included material given by way of reply to the affidavit sworn by the fourth defendant. 9 The first defendant claims indemnity under the Deed. It contains inter alia the following provisions:- "1. McLean agrees to assume responsibility for the paying of the principal and interest in respect of the mortgage secured over the premises owned by Terrey, Lisa Reid and Kathleen Terrey (hereinafter referred to as 'the Owners') in the sum of Fifty Two Thousand Dollars ($52,000.00) for and on behalf of McLean Terrey & Associates Pty Limited such premises being situate at 9 Wyomee Avenue West Pymble and will indemnify the Owners from and against all suits, claims actions and demands which may be made by the mortgagee against the Owners.