New South Wales Court of Appeal Westpac Banking Corporation v Murphy [2005] NSWCA 277 CITATION: This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S): 2 August 2005 JUDGMENT DATE: 18 August 2005 JUDGMENT OF: Santow JA at 1; Ipp JA at 2; Mathews AJA at 3 DECISION: Leave to appeal granted. Appeal allowed. ; Orders made pursuant to this judgment have been varied by judgment [2006] NSWCA 117 dated 15 May 2006. CATCHWORDS: BANKING AND FINANCIAL INSTITUTIONS - Leave to appeal from District Court judge's refusal to order summary judgment in favour of Westpac - merchant facilities arrangement approved by bank on terms and conditions - payment for solicitor's services from client's credit card - was there a contractual arrangement with the bank or an implied term - was there a genuine dispute that some of the transactions unauthorised - position of a bank in disputes between cardholders and merchants - power to charge back transactions - bank's entitlement to recover monies from merchant. LEGISLATION CITED: Service and Execution of Process Act (Cth) 1992 s20 WESTPAC BANKING CORPORATION ABN 33 007 457 141 (Claimant/Cross-Opponent) PARTIES: Ian Cockbill MURPHY (Opponent/Cross-Claimant) FILE NUMBER(S): CA 40009/05 J HOROWITZ (Claimant/Cross-Opponent) COUNSEL: G J C GILBERT/ A D JUSTICE (Opponent/Cross-Claimant) Minter Ellison (Claimant/Cross-Opponent) SOLICITORS: Ian C Murphy (Opponent/Cross-Claimant) LOWER COURT JURISDICTION: District Court LOWER COURT FILE NUMBER(S): DC 4085/04 LOWER COURT JUDICIAL OFFICER: Sorby DCJ IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40009/05 DC 4085/04 SANTOW JA IPP JA MATHEWS AJA 18 AUGUST 2005 WESTPAC BANKING CORPORATION v Ian Cockbill MURPHY Ian Cockbill MURPHY v WESTPAC BANKING CORPORATION Judgment 1 SANTOW JA: I agree with Mathews AJA. 2 IPP JA: I agree with Mathews AJA. 3 MATHEWS AJA: This is an application for leave to appeal from a District Court Judge's refusal to order summary judgment in favour of the then plaintiff, Westpac Banking Corporation ("the Bank"). The defendant in those proceedings ("Mr Murphy") has also sought leave to cross-appeal against the judge's refusal to stay the District Court proceedings under s 20 of the Service and Execution of Process Act (Cth) 1992. 4 From a practical point of view, it will be unnecessary to determine the application for leave to cross-appeal if we find, in favour of the Bank, that summary judgment should have been entered. Accordingly, it is appropriate to deal with that matter first. 5 The Bank's proceedings against Mr Murphy commenced with a statement of liquidated claim filed in the District Court claiming the sum of $68,230.71 together with interest and costs. Following the filing of notice of grounds of defence, the Bank sought summary judgment in respect of the total amount claimed in the proceedings. 6 The dispute between the parties arose as follows. Mr Murphy is a solicitor practising in Victoria. He arranged to provide legal services for Dr Danny-Glen Raiz who lived in the ACT but was involved in litigation in Victoria. It was agreed that Dr Raiz would pay for Mr Murphy's services by means of credit card. Accordingly, on 14 January 2002, Mr Murphy applied to the Bank for merchant facilities that would enable him to debit Dr Raiz's credit card. On 15 January 2002 the Bank wrote to Mr Murphy advising that his application for a manual merchant facility had been approved. The letter continued as follows: "The terms and conditions of your facility can be found in this letter and in the attached: • Merchant Business Solutions Terms and Conditions booklet • Merchant Operating Guide Be sure to read them all carefully before commencing use of your facility. You can accept our offer by commencing to process transactions through the facility. This will demonstrate your agreement to the terms and conditions of the facility, and they will become legally binding." 7 The first document referred to, the Merchant Business Solutions Terms and Conditions, contained, as relevant here, the following section: 6.0 Invalid Transactions 6.1 A transaction is invalid if: (a) the transaction it records is illegal; (b) the price charged to the Cardholder for an item of goods or services is more than the price at which you would supply the item to the Cardholder for cash; (c) the transaction is split into two or more transactions on the same Card to avoid having to obtain an authorisation (each transaction will be invalid); (d) the signature on the voucher or any other Cardholder authorisation on the voucher is forged, obtained by fraud or deception, unauthorised or otherwise invalid; (e) particulars on the voucher are not identical with the particulars on the Cardholder's copy; (f) the Card relating to the transaction is not current at the time of the transaction; (g) the Card is listed on a current warning bulletin or restricted card list we issue to you; (h) the voucher is incomplete or illegible; or (i) you do not observe this Agreement in relation to the transaction. 6.2 …. 6.3 We may refuse to accept, or may charge back, any transaction if: (a) the transaction is invalid; (b) the Cardholder claims the transaction is invalid or disputes liability for any reason; (c) the Cardholder asserts a claim for set off or a counter claim. Chargebacks may be processed to your Account up to 12 months after the date of the original transaction." 8 Under clause 7.2(g) of the Terms and Conditions the Bank was authorised to debit the merchant's account with "any other money you owe us under this agreement". Clause 7.3 provided that the merchant was to pay on demand any amount owing under the agreement. 9 Clause 16.3 provided: " You will indemnify us on demand against all losses, expenses and damages we may suffer: (c) arising out of any dispute between you and a Cardholder." 10 Clause 4.1 of the Merchant Operating Guide related to chargebacks. As relevant, it was in the following terms" "4.1 Chargebacks A chargeback is a debit entry to your Account processed by us, and is the reversal of a credit previously made to your Account, in circumstances described in clause 6.3 of your Merchant Business Solutions Terms & Conditions. Chargebacks occur when you are in breach of the terms of our contract, when a cardholder disputes a transaction, or where the transaction is invalid (see clause 6.1 of your Merchant Business Solutions Terms and Conditions). The most common reasons for chargebacks are: • a cardholder claims that the transaction is invalid or disputes liability for any reason. … Transactions which are invalid or which the cardholder claims are invalid or disputed for any reason will be charged back to your account. It will then be up to you to resolve the matter directly with your customer." 11 Pursuant to his arrangement with the Bank, Mr Murphy proceeded to debit Dr Raiz's credit card on a number of occasions. On 9 April 2003 Dr Raiz notified the Bank that he disputed eleven of these transactions, saying that they had not been authorised by him. The transactions in question had taken place between 18 September 2002 and 19 March 2003. The total amount involved was $68,230.71. On 14 April 2003 the Bank wrote to Mr Murphy informing him that the cardholder had disputed these transactions and asking him to provide a copy of an authority signed by the cardholder. On 23 April 2003 Mr Murphy wrote to the Bank enclosing a number of documents including a letter from Dr Raiz to Mr Murphy dated 24 March 2003 which contained the following passages: "In relation to my Credit-Card authority, please do not deduct any further monies from my Credit-Card unless given a fresh authority in writing from me for any such withdrawal. This means that the credit card authority given to you in the past by me is withdrawn and cancelled. You may not act on it again." … "You have been deducting monies directly from my Credit-Card without giving me any opportunity to review or vet any invoices which as you have pointed out is my legal right. When any accounts have been brought into question you have been confrontational and uncooperative. You have always said if there is any form of question about any issue in relation to billing you would remove it from the account. This has never happened." 12 In his letter to the Bank, Mr Murphy requested that the facility be cancelled forthwith. 13 On 9 May 2003 the Bank charged back each of the eleven transactions which had been disputed by Dr Raiz. Payment was sought from Mr Murphy, and in due course the District Court proceedings were commenced. 14 In his Notice of Grounds of Defence, Mr Murphy denied that he had any contractual arrangement with the Bank, but admitted that he had submitted vouchers to the Bank of Melbourne pursuant to an arrangement between them. He asserted that all amounts which had been credited to his account had been authorised by the cardholder by telephone or in writing. He accordingly denied that any charges were unauthorised or that there was any dispute at the time the chargebacks were effected. 15 The Bank, as indicated, then applied to the Court for summary judgment. 16 At the hearing of the application, no point was taken on behalf of Mr Murphy as to the existence of a contract between himself and the Bank. Nor could it have been. The documentary material clearly showed that the Bank (which sometimes traded as the Bank of Melbourne) was the contracting party in this case. The defence that was urged before his Honour was that Clause 6.3 of the Merchants' Terms and Conditions served to authorise a chargeback only in the event of a genuine dispute between the cardholder and the merchant. The existence or otherwise of a genuine dispute in this case could only be resolved by evidence. It followed that there was an arguable defence in the case, and it was therefore inappropriate for summary judgment to be entered. 17 This submission found favour with Judge Sorby. On 9 December 2004 he dismissed the motion for summary judgment upon the basis that a possible defence could be raised that there was no "real" dispute between Mr Murphy and the cardholder and that the actions taken by the Bank were therefore not warranted. 18 At the hearing of the application before us, Mr Silbert, who appeared for Mr Murphy, pointed out that the disputed transactions spanned a period of approximately six months. He submitted that it was "eminently reasonable" to conclude that the transactions had been authorised and that the dispute alleged by the cardholder was not a genuine one. Mr Silbert conceded, however, that this could only provide Mr Murphy with an arguable defence if an implied term was to be read into clause 6.3(b) of the Terms and Conditions to the effect that it is only if the Cardholder "reasonably" disputes liability under a transaction that the Bank is authorised to charge back in respect of that transaction. 19 This concession reveals the fundamental flaw in the submissions mounted on behalf of Mr Murphy. For there is no warrant for implying such a term into the otherwise clear wording of clause 6.3(b). No business efficacy would be enhanced by doing so. To the contrary, it would deprive the clause of its very clear intent, namely to enable the Bank to step back from disputes between cardholders and merchants which can then be played out between the principal disputants. Indeed this case provides a good illustration of the efficacy of this approach. Mr Murphy's primary dispute is with Dr Raiz, not with the Bank. The Bank only became involved because its credit card facilities were used in the transactions between these individuals. It otherwise had no interest in the nature of the dispute or its outcome. It would be onerous in the extreme if the Bank were to be required to verify the "reasonableness" of disputes before apparently disputed transactions could be reversed and left to the principal parties to resolve. Moreover it would be contrary to the clear terms of clause 6.3(b). 20 This was the only matter of defence raised before Judge Sorby or in the written submissions before us. In his oral submissions, Mr Silbert raised as a possible further issue that the Bank had no power to charge back the transactions given that Mr Murphy's account had already been closed when it purported to do so.. However on analysis, this was shown to be nothing more than a pleading point. Mr Silbert conceded that, even without a charge back, the Bank would have been entitled to recover from Mr Murphy the amounts involved in the disputed transactions. The only problem was that the Bank's case in the District Court was not pleaded in this manner. 21 In my opinion there is no arguable defence in this case. It is therefore an appropriate case for ordering summary judgment. 22 In the result I would grant leave to appeal, allow the appeal and order that summary judgment be entered in favour of the Bank. I would order that Mr Murphy pay the Bank's costs of the application and appeal. 23 This order effectively disposes of the proceedings and makes it unnecessary to determine the cross-application, in which Mr Murphy sought leave to appeal from his Honour's refusal to stay the proceedings. This matter was the subject of extensive written submissions but was not otherwise elaborated at the hearing before us. However the matter of costs remains. It is clear that his Honour, in refusing the stay, applied an erroneous test. This was, to a significant extent, the fault of Mr Murphy's then counsel, who failed to draw his Honour's attention to s 20 of the Service and Execution of Process Act. Nevertheless, insofar as costs have been incurred in the preparation of the cross-application, (as opposed to the application) I think it appropriate that each party should pay its own costs. Please Note: Orders made pursuant to this judgment have been varied by judgment [2006] NSWCA 117 dated 15 May 2006. ********** 16/05/2006 - - Paragraph(s) 16/05/2006 - - Paragraph(s) 28/06/2006 - - Paragraph(s) 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. 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