CATCHWORDS

TRADE PRACTICES - misleading and deceptive conduct - agreement to provide loan to purchase home - failure of Bank to advise customers of termination of loan agreement - whether loss or damage caused by conduct of Bank.

Trade Practices Act 1974 (Cth) s52, s82.

Sellars v Adelaide Petroleum NL (1993) 179 CLR 332

Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514

March v E & M.H. Stramare Pty Ltd (1991) 171 CLR 506

Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 109 ALR 638

Adour Holdings Pty Ltd (in liquidation) v Commonwealth Bank of Australia (1991) 13 ATPR 41-147

Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31

 

No. NG 294 of 1993

MAJOR MINING LIMITED (IN LIQUIDATION) and  WARAWAY PTY LIMITED and FRANCIS JAMES CORBETT and MICHELLE MARIE CORBETT v STATE BANK OF NEW SOUTH WALES

MOORE J

SYDNEY

21 September 1995

IN THE FEDERAL COURT OF AUSTRALIA)

                                  )

NEW SOUTH WALES DISTRICT REGISTRY)        No. NG 294 of 1994

                                  )

GENERAL DIVISION                  )

 

 

 

                   BETWEEN:             MAJOR MINING LIMITED

                                            (IN LIQUIDATION)

 

                                             First Applicant

 

                                         WARAWAY PTY LIMITED

 

                                            Second Applicant

 

                                       FRANCIS JAMES CORBETT

 

                                             Third Applicant

 

                                      MICHELLE MARIE CORBETT

 

                                            Fourth Applicant

 

 

                   AND:        STATE BANK OF NEW SOUTH WALES

 

                                                  Respondent

 

 

 

JUDGE:    Moore J

 

PLACE:    Sydney

 

DATE:     21 September 1995

 

 

                     ORDER OF THE COURT

     THE COURT ORDERS THAT:

     1.   The application is dismissed.

     2.   The applicants pay the respondent's costs.

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)        No. NG 294 of 1994

                                  )

GENERAL DIVISION                  )

 

 

 

                   BETWEEN:             MAJOR MINING LIMITED

                                            (IN LIQUIDATION)

 

                                             First Applicant

 

                                         WARAWAY PTY LIMITED

 

                                            Second Applicant

 

                                       FRANCIS JAMES CORBETT

 

                                             Third Applicant

 

                                      MICHELLE MARIE CORBETT

 

                                            Fourth Applicant

 

 

                   AND:        STATE BANK OF NEW SOUTH WALES

 

                                                  Respondent

JUDGE:    Moore J

PLACE:    Sydney

DATE:     21 September 1995

                    REASONS FOR JUDGMENT

INTRODUCTION

     On 14 May 1993 an application was filed in this Court by Major Mining Ltd ("MM Ltd") and Dr Francis James Corbett seeking, inter alia, damages against the State Bank of New South Wales ("the Bank").  This application became matter G294 of 1993.  It was framed as representative proceedings brought on behalf of Corbett, MM Ltd and the shareholders of MM Ltd.  It alleged breach of s42 of the Fair Trading Act 1987 (NSW) and breach of contract.

     Earlier and related proceedings had been commenced in the Supreme Court of New South Wales by Corbett, his wife and Waraway Pty Ltd ("Waraway") against the Bank.  On 12 July 1993 an order was made transferring those proceedings to this Court under the Jurisdiction of Courts (Cross Vesting) Act 1987.  The transferred proceedings became G 502 of 1993.  On 27 October 1993 Wilcox J made an order consolidating the proceedings and an order that the matters be tried together.  He also ordered that there be determined as a preliminary question all questions concerning the Bank's liability reserving any issue as to the quantum of damages.

     On 4 November 1993 the applicants filed an amended statement of claim.  The applicants then were MM Ltd, Waraway, Corbett and Mrs Corbett.  While the statement of claim was drafted in terms that suggested the proceedings continued as representative proceedings, they did not for reasons it is unnecessary to detail.  The proceedings became, in substance, an application by the four applicants seeking damages under s82 of the Trade Practices Act 1974 (TP Act) as a result of conduct of the Bank allegedly contravening s52 of that Act.

Background in Summary

     The proceedings principally concern events in early 1990 involving the provision of a loan by the Bank to the Corbetts to purchase a property in the Sydney suburb of Cromer.  The Bank agreed to lend the Corbetts the sum of $350,000 to purchase the property which was a new, but not yet complete, house on a large block of land.  Before discussing what I view as the material evidence, it is necessary to set out a chronology of events so that the issues in the proceedings can be identified in a comprehensible way.  This chronology glosses over some of the differences arising in the evidence as to what occurred.

     On 8 February 1990  the Corbetts met Mr Ron Haswell who was then the manager of the Rockdale branch of the Bank.  There was a discussion about the purchase of the Cromer property and Haswell agreed to lend the Corbetts the sum of $60,000 for the deposit on the purchase.  The following day contracts were exchanged between the vendors and Waraway.  On 20 February 1990 the Corbetts again met Haswell and applied for a housing loan in the sum of $350,000 to purchase the Cromer property.  A formal offer of loan was made by the Bank in writing on 23 February 1990 which was accepted in writing by the Corbetts on 2 March 1990.

     At that stage the purchase of the Cromer property was to be financed by the loan of $350,000 and the proceeds of the sale of the Corbetts' home at 5 Epacris Avenue, Caringbah.  On 24 March 1990 the Caringbah property failed to sell at auction.  It did not sell in the ensuing months.  It was thus necessary for the Corbetts to  find another source of funds to complete the purchase.  By 10 April 1990 they had been served with a notice to complete requiring settlement of the sale by 30 April 1990.

     On 26 April 1990 Corbett met Haswell and discussed the possibility of funds of a company called Galdece Pty Ltd ("Galdece") on deposit with the Bank being used to finance the purchase of Cromer.  Galdece was the trustee of the Corbett family trust.  On 27 April 1990 Corbett met with Mr Malcolm  Wood who was the branch manager of the Hurstville branch of the Bank.  The meeting had been arranged by a Mr Spencer who was a business associate of Corbett who banked with the Hurstville branch.  At that meeting there was a discussion about the need for 317AE certificate and whether the loan of $350,000 would be made available to the Corbetts without one.

     On 3 May 1990 the contract for the purchase of the property by Waraway was terminated and the Corbetts entered a contract to purchase it.  On 10  May 1990, the Corbetts applied to the bank for a loan of $600,000 to provide bridging finance to purchase the Cromer property.  This application was refused on 14 May 1990.  A further application was made on 16 May 1990.

     On 17 May 1990 the loan application earlier approved  to lend the Corbetts $350,000 was marked "loan declined" by an officer of the bank.  That this action was taken was not made known to the Corbetts.  On 4 June 1990 the vendor terminated the contract  to sell the property to the Corbetts as a result of their inability to complete.

     Against that background and before considering the evidence in detail, it is appropriate to identify what are the issues in the proceedings because some of the evidence which was led was ultimately, in my opinion, of limited relevance to what was in issue.  The statement of claim identifies two areas where the conduct of the Bank was said to contravene the TP Act.  The first is found in paragraph 15 of the statement of claim which reads:

      Further on 27 April 1990 the respondent made to the applicants the following representations:

 

      (a)   that it was a condition of the loan agreement that the applicants tender to the respondent a s317AE certificate in respect of the Cromer property before the respondent became obliged to advance to the second applicant the third applicant and fourth applicant the sum of $350,000 for the purpose of completing the loan agreement;

 

      (b)   that the respondent was not obliged to and would not advance to the second applicant the third applicant and fourth applicant the sum of $350,000 for the purpose of completing the loan agreement ("the first representations").

 

 

     The reference to "s317AE" is a reference to a section of the Local Government Act 1919 (NSW) under which a compliance certificate is issued when building work is complete.

     It is then alleged that in reliance on these representations, which I will also describe as "the first representations", Waraway agreed to rescind and rescinded a contract and Corbett and Mrs Corbett entered into contracts to purchase the Cromer property.  It is alleged that the applicants relied on the first representations to their detriment.  The making of the first representation is alleged
to be conduct contravening s52 of the TP Act.  In the defence, the first representations are dealt with in paragraph 11 which reads:

      (i)   The Respondent admits that on 27 April, 1990 it notified the third applicant that the evidence it would require under clause 1 (g) of the Standard Loan Facilities would include a certificate under Section 317AE of the Local Government Act but otherwise denies paragraphs 15 and 16 of the Amended Statement of Claim.

 

      (ii)  In further answer to paragraph 15 of the Amended Statement of Claim, the Respondent says:

 

            (a)   there was no loan agreement between the Respondent and the Second Applicant so that, even if the Respondent made the representations referred to in paragraph 15 of the Amended Statement of Claim, the Second Applicant suffered no loss if those representations were in breach of Sections 41 or 42 of the Fair Trading Act;

 

            (b)   on 27 April, 1990 the Third and Fourth Applicants had not entered into a contract for the purchase of the Cromer property and, if they later did so, then it was in the knowledge of the representations alleged in paragraph 15.

 

 

     It can be seen that the Bank does not deny the substance of at least part of the first representations but later denies that the applicants relied on the first representations to their detriment and also denies that it is conduct contravening s52.

     The other conduct identified by the applicants as constituting conduct contravening s52 of the TP Act, when read with s51A, is identified in paragraph 25 which reads:

            "The respondent by its conduct hereinbefore alleged (including its silence alleged in paragraph 22 hereof) made to the applicants and maintained up to and including 4 June 1990 representations that:

 

      (a)   it would advance to the second applicant and/or the third applicant and/or the fourth applicant $350,000 to enable them to complete the purchase of the Cromer property;

 

      (b)   its intention was to advance to the second applicant and/or the third applicant $350,000 to enable them to complete the purchase of the Cromer Property ("the second representations").

 

     I will also refer to these as the second representations.

     It is contended that this conduct was misleading or deceptive and as a result the applicants refrained from "entering into other financial arrangements to finance the purchase of the Cromer property" and refrained from entering into financial arrangements to effect the refinance of the mortgage on the Caringbah property"  This is denied by the Bank in its defence.  It is contended that as a result of the contravening conduct of the Bank, the applicants suffered loss and damage.

     Thus it can be seen that the case of the applicants concerns two matters.  The first is the representations made by the Bank about the need for a 317AE certificate which will entail a consideration of what was said to and by representatives of the Bank about the purchase of the Cromer property and whether the Bank's intimation that a 317AE certificate would be required had any foundation having regard to the nature of the arrangements for the loan that had earlier been made between the Corbetts and the Bank.  It is then necessary to consider what impact or effect, if any, this had on the applicants.   The second is the provision of the loan of $350,000.  On the evidence as a whole, there can be no issue that the Bank agreed to provide the funds, and did not provide them.  Further there can be no issue that notwithstanding its earlier agreement to provide them, the Bank subsequently decided that the funds would not be provided but did not inform the Corbetts of that decision.  The real issue is what, if anything, flows from that in terms of liability under the TP Act.

Evidence in Detail

     The following is a detailed account of events concerning the offer by the Bank to provide the loan to purchase the Cromer property and the ultimately unsuccessful attempts by the Corbetts to complete the purchase.  Except when I recount the evidence given by various witnesses on contentious matters, this account represents findings of fact I have made.  Some findings are made by reference to uncontentious evidence, much of it documentary.  Events or facts in issue I deal with on that basis.

     Corbett was a practicing dentist whose business interests include the exploration for mineral resources with a view to their exploitation.  In 1988 he was a shareholder in MM Ltd and chairman of the board of directors.  MM Ltd was established to explore and develop mining tenements though at that time MM Ltd was expending funds for that purpose and deriving no income from that business activity.  The Corbetts operated a family trust through a trustee company, Galdece.  In 1988 Galdece had approximately $200,000 deposited with the National Australia Bank.  It was necessary for MM Ltd to obtain funds to maintain its exploration activities and Corbett had discussions with Mr Neil Sanders who was then the manager of Rockdale branch of the Bank, from October 1987 to November 1989.

     An understanding was reached that the Bank would provide a loan by way of an overdraft to MM Ltd and that the Corbetts would use the Bank, rather than the National Australia Bank, for their personal and business banking.  These events occurred in late 1988 and early 1989.  The funds advanced to MM Ltd, initially $150,000, were secured in March 1989 by way of a second mortgage over the property at 5 Epacris Avenue, Caringbah.  Corbett and Mrs Corbett were the registered proprietors of that property.  At the time of the creation of the second mortgage, there was a first mortgage to the National Australia Bank securing a loan of $25,000.

     By February 1990, Corbett had decided to buy a property at 70 Northcott Avenue, Cromer which was being offered for sale for $600,000.  It constituted 6 acres of land adjoining Cromer Golf Course and on the land was built a house which was not then complete.

     On 8 February 1990 Corbett and his wife met Haswell at the Bank's premises in Rockdale.  There were diverging accounts of what was said at that and subsequent meetings involving Corbett and Haswell.  I will shortly deal with each version and make findings as to what occurred.

     However I should at this point make some observations about Corbett as a witness and the conduct of the proceedings generally.  Counsel appearing for the applicants was, I was informed, briefed shortly before the first day of the hearing.  It was apparent that the applicants' case was not then prepared for trial, or at least prepared in a way that would have permitted the hearing to proceed in an entirely orderly way.  I intend no criticism of counsel by these remarks.  However one apparent consequence of counsel being briefed late was the ultimate abandonment of an affidavit sworn by Corbett which had been filed with a view, presumably, of providing Corbett's evidence in chief.  Counsel for the Bank foreshadowed extensive objections to it and in due course, by agreement and with my concurrence, Corbett gave all his evidence orally.

     During the hearing and, relevantly, when he gave evidence, Corbett's behaviour was, on a number of occasions, erratic.  I was informed several times by his counsel and him that he was ill.  On one occasion he absented himself, when he might have been giving evidence, to see a doctor.  The following day his counsel sought to tender a medical certificate explaining his absence but after I indicated that I accepted Corbett was ill, the tender was not pressed.  On the fifth day of the trial, Corbett said he was extremely unwell and his counsel said he was suffering from vertigo.  Later that morning  I adjourned for a short period because Corbett said things were going round and round and he needed to take a tablet for his vertigo.

     As a witness Corbett often failed to answer the question or answered it and volunteered additional material that he thought might assist his case.  In cross-examination he was argumentative, blustering and on a number of occasions sarcastic and rude to counsel for the Bank.  The following extract from transcript illustrates some of what I am saying.  It relates to Corbett's cross-examination about his failure to complain about the use by the Bank of funds of Galdece to satisfy debts owing by Corbett and Galdece.  Corbett viewed this transaction as one the Bank was not authorised to make.  The transcript reads:

      "You did not write to the bank or you did not go and see Mr Haswell and say - - -?---I say it's an unauthorised transaction.

 

      You did not write to the bank or go and see Mr Haswell and say, "Wait a minute, I've got this letter and you're not entitled to do this"?---I told the bank officer.  Who do you want me to speak to?  The baker across the road?

 

      Would not you think it appropriate to approach the bank manager with whom you had your dealings if you understood - - -?---What's that, Mr Harris, because I'm not feeling very well.  Look, this whole, this has lead to the dislocation of our life, right, the alienation of my family, the shoddy way that your client has sullied my name all around town and you're going on with the same imputations, you know, within my present state of health.  I just don't feel that I can - can I have a break please, your Honour, I feel unwell?

 

      Why do you feel unwell?---Because I have the flu you twit."

 

 

     The last exchange was between counsel for the Bank and the witness.  There is no doubt that Corbett was not well during the period he gave evidence.  However, even allowing for that, his demeanour was of someone who had a conviction he had been wronged by the Bank and a conviction that his recollection of the events was right and any contrary recollection of others was wrong.  He gave evidence with a view to demonstrating that his version of events was right and that the Bank's witness was wrong.  The questions he was asked were often treated by him as a convenient vehicle for him to do so.  In my opinion he did not present as a credible witness and I do not accept as correct his version of events in preference to any differing version unless the other version is demonstrably wrong or Corbett's version is corroborated by evidence from another witness or documentary evidence.

     I return to the evidence of the meetings in early 1990 when arrangements for the loan of $350,000 were first made.  Corbett's evidence in chief was initially that in early February 1990 he went to the Rockdale Branch and asked for an appointment to see Haswell and, as a result, saw him immediately.  Corbett said that he told Haswell a shareholder in MM Ltd had told Corbett that a patient of the shareholder was selling a house at Cromer at an appreciable discount to its realisable value.  Haswell asked what was needed and Corbett said a loan to him and his wife to effect the transaction.  Haswell then looked at a file, did some calculations and said there was plenty of security to carry it out.  Corbett said that was fine.  According to Corbett the next occasion the matter was discussed was when Haswell rang Corbett at his dental surgery shortly after the meeting and volunteered that Corbett "would be right for $350,000". Corbett said that it was Haswell who first nominated the sum of $350,000.  Corbett's account of the conversation was that he then said he would arrange for a bank guarantee to be covered by a cash security and that he and his wife would call at the bank to complete the loan application.

     Later in his evidence in chief he said that at the second meeting, when particulars for the loan application were taken by Haswell, he, Corbett told Haswell he should send a valuer out.  Haswell then said "I don't think it is necessary for that Frank.  The amount we are lending is well within the lending margins of the bank in relation to purchase price and after all in the absence of the "DA" we are treating this as land value only."  Corbett informed Haswell there was no development application for the property and also that, in Corbett's view, the land had a larger potential value than the contract price.  Corbett said he was going to send valuers out.  He told Haswell that he was paying the owner-vendor to take the building to lock up stage for security purposes.  In relation to valuation Haswell had said "Don't worry we're treating this whole transaction as land value only."

     In cross-examination Corbett accepted that at the first meeting there was no discussion that the Cromer property would be bought by a nominee of the Corbetts.  He agreed that he told Haswell that the property was being bought by him and his wife.  It was not true, Corbett said, that there was no reference at this meeting that the purchase being on behalf of or for the assistances of MM Ltd.  He claimed that Haswell never said it was dangerous to exchange contracts to purchase Cromer before they had sold the Caringbah property.  After clarifying whether this evidence related to the first or second meeting Corbett adhered to what has just been set out as occurring at his first meeting.  Corbett also disagreed that there was no mention at this meeting of Galdece or its funds.

     It appears from an answer given in cross-examination that Corbett says that at the second meeting on 20 February 1990 he told Haswell that there was a "DA" required by Council and that he, Corbett, was paying to have the building brought up to lock up stage.  Corbett later said in evidence in relation to what occurred at this second meeting:

      "And you said to him, "What has been built doesn't appear to have had Council approval?" - I said to him, "There will be a Council development application required which the Council has indicated to me will be forthcoming.

 

      So you told him that what was there did not have Council approval? - That's correct."

 

 

     Mrs Corbett gave evidence about the meetings with Mr Haswell.  She appeared to be attempting to give an honest account of what she could recall.  In her affidavit sworn on 18 February 1994 she denies that at the first meeting Haswell said, as he deposed to in an affidavit of 28 January 1994, that the loan would be subject to the Bank's usual requirements and conditions.  Her affidavit took the form of deposing to certain facts and denying assertions of fact in other affidavits.  She does not deny in her affidavit that at that meeting her husband said that they needed to borrow $350,000 nor that Haswell said that it was not a good idea to go ahead with the purchase of Cromer before they had a buyer for the Caringbah property.  In her affidavit she said that Haswell said:  "I think Neil has got his sums wrong.  There is plenty of security here Frank."  In her affidavit she did not deny Haswell's account in his affidavit of what occurred in the second meeting on 20 February 1990.

     In her oral evidence in chief she said she recalled the first meeting vividly.  She agreed there was no suggestion made that the property would be bought by anyone other than her and her husband.  She could not recall whether there was any discussion as to whether the house was only partly complete.  She said that she and her husband indicated that they proposed to put their home at Caringbah on the market and the purchase of Cromer would be financed by the loan from the Bank and the proceeds of the sale of Caringbah.  She could not recall whether Haswell said anything about not buying before their existing property had been sold.  She later accepted that at this meeting there was no discussion about the Cromer property being bought to give comfort to MM Ltd.

     In relation to the second meeting with Haswell on 20 February 1990 Mrs Corbett agreed in cross-examination that there was no discussion that the property would be bought by anyone other than her and her husband.  While the question and answer are slightly ambiguous, she also accepted that the discussion was on the basis that the property was being purchased for them to live in.  She said there was some discussion about the purchase of the Cromer property providing additional security for the Bank and providing comfort for the Bank regarding the Corbett loans.

     Mr Haswell's account of what occurred at the meeting of 8 February 1990 is contained in his affidavit of 28 January 1994.  As it concerns that meeting it reads:

      "2.   I recall that on or about 8 February, 1990 Frank and Michelle Corbett came in to see me at the Bank.  They did not have a prior appointment.  Mr Corbett said words to the effect of:

 

                  "We need $350,000 to complete the purchase of a property at Cromer:"

 

            I took some particulars from him and he then said:

 

                  "We need to give the vendor an answer this afternoon and put down a deposit".

 

            I said to him:

 

                  "Yes, we would be prepared to lend you $350,000 subject to the Bank's usual requirements and conditions.  You will, of course, have to sell your own home to finance the purchase before settlement. However, I don't think that it is a good idea that you should go ahead with this purchase if you do not yet have a buyer for your own home".

 

            He said:

 

                  "Yes, I understand that, but we wish to go ahead immediately.  We should have no trouble getting about $415,000 for our own house".

 

            I then did some calculations and said:

 

                  "Even then you will be short".

 

            He said:

 

                  "Don't worry, I will find the extra money.  Will you please just allow us to write a cheque for the deposit".

 

            I said:

 

                  "Alright, but it will be on your own head" or words to that effect.

 

      3.    I refer to paragraph 7 of the Affidavit of Francis James Corbett sworn 20 November, 1993 in these proceedings and say:

 

            (a)   There was no discussion at the meeting concerning the possibility of the Cromer property being purchased in the name of a nominee:  Mr. Corbett with his wife sitting beside him, said to me words to the effect:

 

                  "We have seen a property at Cromer we wish to buy.  We think it is very cheap, but we have to act quickly".

 

            (b)   I did not say that there was "plenty of security" for the proposed loan and I did not suggest that the loan should be for $350,000.00, although the amount of the loan was discussed.

 

            (c)   Mr Corbett did not say to me that the main purpose of the purchase of the Cromer property would be to underpin the activities of Major Mining Limited and we had no discussion concerning Major Mining Limited or any of its activities.  There was no reference to the "overall security debt ratios" being improved by the purchase of the Cromer property.  Our discussion only lasted about 10 or 15 minutes and related solely to the possibility of the Bank lending Mr and Mrs Corbett an amount of $350,000 to purchase a house at Cromer and making an immediate short term loan to enable them to pay the debt [sic] for the purchase."

 

 

     The italicised portions in bold are the passages denied by Mrs Corbett in her affidavit.

     In cross-examination Haswell was first asked about his "initial discussions" with Corbett though it is not clear whether this is a reference to the first meeting on 8 February 1990 or the meeting twelve days later.  He did accept that after the first and before the second meeting he contacted Corbett and told him the bank would lend $350,000.  In relation to those "initial discussions" Haswell accepted that Corbett told him that there was a house on the property that was incomplete and that once he, Corbett, got Council approval for the development application it would be worth a lot more than he was paying for it.  Haswell later said that the deal was that Corbett was going to sell his house at Caringbah.  Haswell indicated in re-examination that he could not recall any discussion at the first meeting that the house was incomplete.  This suggests his earlier evidence commencing "initial discussions" related to the meeting on 20 February 1990.  He also said, and I accept, that Corbett left the meeting on 8 February 1990 with a bank cheque for $60,000 for the deposit but a day or two later swapped that cheque for a cheque for $30,000.

     Between the meeting of 8 February 1990 and 20 February 1990 Corbett and Haswell spoke by phone.  I have already recounted each person's account of what was said.  It is to be remembered that contracts were exchanged on 9 February 1990 between the vendors of the Cromer property and Waraway.

     Haswell's account of the second meeting of 20 February 1990 in his affidavit of 28 January 1994 was:

      "4.   Mr and Mrs Corbett came in again to see me on 20 February 1990.  This meeting had been arranged by appointment and the purpose of it was for a formal Application for Housing Finance for the proposed Cromer purchase to be completed.  Annexed hereto and marked "A" is a copy of the Application which I filled out by hand during my discussion with Mr and Mrs Corbett on that day.  As we sat in my office, I asked them questions and wrote down the information on Annexure "A" in accordance with the answers they gave to my questions.  Again, there was no mention during this meeting of the property being purchased by any entity other than Mr and Mrs Corbett - the Bank only makes housing finance loans available to persons to purchase houses in which they reside.  If I had been told that the Cromer property was to be purchased by a company then I would not have completed the Application for Housing Finance but would have completed a form for an application for investment finance.  At no time did Mr or Mrs Corbett say to me words to the effect that the intention in purchasing the Cromer property was to benefit the Bank or the shareholders of Major Mining Limited:  we had no discussion about Major Mining Limited except for completing an approximate value of Mr Corbett's investment in the company and an approximate amount of company debt which he had secured by a mortgage over his existing home.

 

      5.    I recall that during the meeting on 20 February, Mr Corbett said to me words to the effect:

 

                  "The house is only half built and what has been built does not appear to have had Counsel [sic] approval," or words to that effect.

 

            This was the first that I was aware that the house on the property was not complete, other than some minor works to be completed and had not been approved by the Council.  I said:

 

                  "You should be very careful to make sure that you can get Council approval before you have to settle:  the Bank would not be prepared to lend you the money unless the house had Council approval", or words to that effect.

 

            Mr Corbett said:

 

                  "I know some people in the Manly Council and I should be able to get the approval", or words to that effect.

 

            During our discussion, we spoke about the source of the balance of the money which would be required by Mr and Mrs Corbett to purchase the property.  Mr Corbett said to me words to the effect:

 

                  "The rest of the money will come from the proceeds of the sale of our Caringbah property"."

 

 

     None of this was put in issue by Mrs Corbett in her affidavit or oral testimony.  In his cross-examination Haswell said that when he spoke of Council approval he meant a 317AE certificate.  He acknowledged that at the time his understanding was that such a certificate was issued in relation to completed buildings.  He said he knew that Corbett needed to expend funds to bring the property up to a stage of lock-up.

     It is not in issue that during the course of the meeting of 20 February 1990 Haswell filled out a document entitled
"Application for Housing Loan" from information supplied by the Corbetts.  It was a standard form document comprising 28 questions, the answers to which could be recorded by either ticking a multiple choice answer or entering information into a box.  It was signed by Corbett and Mrs Corbett at the meeting.  Much of the language of the standard form is consistent with it being an application for a loan to purchase a home, that is, a house to be occupied by the recipients of the loan.

     Question 19 was "Is this application to build your home?" and the form provided space to provide, not so much an answer to that question, but particulars of various matters that flowed from that question being answered affirmatively.  The particulars included the builders name and his or her details and the contract price.  There was also a provision that, if ticked, indicated that attached to the form was either council approved plans and specifications or unapproved plans and specifications.  There was a line through this section of the form.  Question 20 was "If buying an existing home have you selected a home already" and was answered affirmatively.  The price was identified as $600,000.

     Question 25 required an answer to: "Please specify the various components of the cost of your home and how you intend to fund the total cost."  The purchase price is repeated, the legal fees and stamp duty identified as $27,000 with a total cost identified at $627,000.  The method of funding is identified as "housing loan, $350,000" and "proceeds from sale of existing home $277,000".

     Haswell was cross-examined about the manner in which question 19 was filled out and his answers were, in substance, that with the benefit of hindsight the form did not, in that respect, entirely accommodate the circumstances surrounding the loan being sought by the Corbetts.

     I will shortly express findings as to what happened at these meetings.  However it is first necessary to recount other findings I have made.  The housing loan was made in circumstances where the financial arrangements between the Bank and the Corbetts were somewhat complex and also somewhat strained.  In February 1989 the Bank agreed to advance a loan  of $150,000 to MM Ltd secured by a mortgage over the property at 5 Epacris Avenue, Caringbah.  A mortgage was executed by the Corbetts in March 1989.  In late April 1989 the Bank approved a loan of $100,000 by way of overdraft to Corbett which was to be secured by moneys deposited with the Bank by Galdece.  A document providing that security was signed by Corbett and Mrs Corbett on 2 May 1989 as directors of Galdece.  At the same time a loan of $20,000 by way of overdraft to Galdece was approved by the Bank.  It was secured in the same way and at the same time as the Corbett overdraft.  A further advance of $40,000 was made available to MM Ltd in July 1989 for which the Corbetts provided security.  By November 1989 the Bank was requesting MM Ltd to reduce its indebtedness.  In a letter dated 22 February 1990, Haswell wrote to Corbett about the loan for $350,000 to purchase the Cromer property.  However the letter also dealt with indebtedness of Corbett, Galdece and MM Ltd.  The letter read:

      "Dear Mr Corbett

 

      We refer to recent discussions regarding the proposed purchase of a dwelling at Cromer and confirm that the application is well in hand and we will be able to advance $350,000 on interest only basis over a 5 year period as requested and Letter of Offer will be forwarded as soon as possible.

 

      As discussed we will require funds to be deposited to the account of major mining to place account within arrangements at present the account is Overdrawn $207,000 while the limit is $170,000.

 

     

      The Galdece account has credit funds amounting to $213,130 but these funds are advanced against by way of Galdece debt and F J Corbett debts which amount to $255,838 and we request you refrain from drawing cheques on the Galdece account the F J Corbett debt is also not to increase and provision will need to be made for accruing interest.

 

      It would appear prudent to release sufficient funds from the credit account to adjust the F J Corbett account and this regard you might drop in for a short discussion when next in the Branch.

 

      As you are aware we have a shortage of security margins with the purchase of the new house (most of this is caused by your mortgage to cover the major mining debt) and accordingly we will be unable to grant a Bank Guarantee for the $54,000 approximately [sic] Mining Leases and we suggest you make other arrangements in this regard.

 

      Yours sincerely

 

      RON HASWELL

      MANAGER

 

     On 6 March 1990 a pro forma document containing instructions concerning the purchase and mortgage on the Cromer property were sent to the Bank's solicitors.  It was filled out on Haswell's instructions.  It identifies under a heading "purpose" that the purpose of the loan was:  "assist purchase of home 70 Northcott Road, Cromer".  At the foot of the page was a heading "Use this space for any type of action
not listed above".  There was then an entry:  "The purchase of property at Cromer is subject to sale of property at Caringbah, please refer to customers solicitor before proceeding."  On the last page there is a heading which is partly obliterated but it includes the word "Requirements".  There is then a list of documents and boxes which, if ticked, indicate the document is "required" or, in contrast, simply "if available".  The former is ticked for survey certificate and the latter for building certificate, pest certificate and section 149(2) certificate.  Haswell accepted that by looking at this page a building certificate was not identified as a pre-requisite for the sale.

     On 2 March 1990 the Corbetts signed a loan acceptance they had been sent by letter dated 23 February 1990.  The application identified, as part of the "Loan Details" the customers as Corbett and Mrs Corbett, the purpose of the loan "to assist purchase land and dwelling at 70 Northcott Road, Cromer", and the security was described as "registered first mortgage over land and dwelling at 70 Northcott Road, Cromer.  Registered Proprietors:  Corbett: F.J. & M.M.".  The Corbetts signed the document and in so doing agreed to the Loan Details and standard conditions which included clause 16 which I refer to later.

     What emerges from this evidence as to the first two meetings is as follows which represent findings I have made.  The findings are made principally by reference to the evidence of Mrs Corbett and Haswell which generally I accept.  The differences between them are not material and represent the differing recollections of two people of conversations that took place several years ago.  Corbett and his wife approached Haswell for a loan for the deposit to purchase the Cromer property.  The Corbetts made no mention of Waraway at the meeting on 8 February 1990 nor of MM Ltd.  They spoke to Haswell of the purchase by them of a home which would replace their existing home which they would be selling to finance the purchase.  They were thus indicating to Haswell that they would be going to live in the new home because they were proposing to sell their existing home.  Haswell told the Corbetts that the funds would be made available only if they had sold their Caringbah house.  I reject Corbett's evidence that the amount of the final loan was not discussed at that meeting and the sum of $350,000 was volunteered by Haswell in a subsequent telephone call.  Haswell says Corbett identified that amount in the opening conversation and this was not denied by his wife in her affidavit.

     At the meeting on 20 February 1990 there was no discussion about the purchase of the Cromer property by a nominee of the Corbetts.  However, Corbett told Haswell, for the first time, that the Cromer property was not then complete.  Corbett also said that he was going to have building work done to bring the property up to lock-up stage though the discussions between the Corbetts and Haswell continued on the basis that the Cromer property was one in which the Corbetts would live.  Corbett indicated to Haswell that he was aware Council approval was necessary but that he was taking steps to obtain the necessary approval from the Council.  Haswell told Corbett council approval was necessary for the Bank to lend the money.  He did not, however, mention a 317AE certificate.  Corbett told Haswell that the property would be worth a lot more than they were paying for it once that approval was obtained.

     There was some discussion about the position of MM Ltd.  I do not accept Haswell's evidence that he had no discussion with the Corbetts at this meeting about MM Ltd except for completing an approximate value of Corbett's investment in the company.  It is to be remembered that in his letter of 22 February 1990, Haswell referred to the discussions concerning the purchase of the Cromer property in the first paragraph and in the second paragraph said: "as discussed we will require funds to be deposited to the account of major mining"  This paragraph suggests, and I find, that the discussions in relation to MM Ltd were more extensive than deposed to by Haswell.

     It does not follow, however, and I do not accept, that at this point there was any discussion about the development of the Cromer property as an investment other than Corbett indicating once Council approval was obtained the property would be worth more than he and his wife were paying for it.  The entire transaction continued to be portrayed by Corbett as one involving the purchase by the Corbetts of a home in substitution for the Caringbah home which they were selling.  This is reflected in the way in which the loan application itself is filled out and, in particular, the reference to the method of funding for the purchase as the loan and the proceeds from the sale of the existing home.  The terms in which the instructions to the Bank's solicitors issued shortly after were framed on Haswell's instructions, referring to the purchase of the Cromer property being subject to the sale of the Caringbah property, is consistent with the meeting having been conducted on this basis.

     It must be accepted that in late April 1990, in a document to which I shortly refer, Haswell made reference to the purchase of the Cromer property for profit.  However I am satisfied that Haswell did not have an understanding that the Corbetts were not buying the property as a new home in substitution for their existing home as a result of the meeting on either 8 February or 20 February 1990.

     Corbett and Haswell met again on 26 April 1990.  On 24 April 1990 Haswell had written to the Corbetts recording that the Bank had that day debited Corbett's cheque account with "commitment interest" of $1,130.50 for the housing loan of $350,000.  This interest was later refunded.  At this stage a notice to complete had been served by the vendors on the then purchaser, Waraway.  Settlement had to be effected by 30 April 1990.  In the period between the 26 April 1990 meeting and the February meetings there had been two letters written to Corbett concerning his financial relationship with the Bank.  One was a letter dated 8 March 1990 which read:

      "Dear Mr Corbett

 

      Further to our letter of 22 February, 1990 we advise the position of Accounts at this Office is :-

 

      * GALDECE PTY LIMITED         -     MONEY MARKET           $213,130CR

 

      * GALDECE PTY LIMITED         -     LIMIT $70,000           $75,625DR

 

      * GALDECE PTY LIMITED         -     MAXIMISER ACCOUNT          $491CR

 

      * MAJOR MINING                -     LIMIT $170,000         $224,114DR

 

      * CORBETT: F.J.               -     LIMIT $100,000         $181,197DR

 

      As can be seen, your Accounts are well in excess of arranged limits despite the fact we have returned various cheques for lack of funds and we again urge you not to draw further Cheques unless arrangements have been made or funds have been deposited.

 

      The position has been reached whereby our Head Office is calling for a full review of your Accounts and as pointed out on several occasions, your debts are not to increase.

 

      Yours sincerely,

 

      RON HASWELL

      MANAGER

 

      ENQ:  JUDI FERRINGTON"

 

 

     The second was a letter dated 20 March 1990 which read:

      "Dear Sir

 

      We refer to your recent advisings that $50,000 was to be deposited to your account by the end of February and a further $100,000 by mid March.

 

      The account is Overdrawn $179,915 while the limit is $100,000 and no further drawings are being permitted on the account until such times the promised funds arrive.

 

      You will appreciate the position of your accounts is causing concern and unless you take some positive steps to rectify the situation we will have to look at out relationship as Bankers for any future dealings.

 

      The matter is now in your hands and we suggest you treat the position in a responsible and serious manner.

 

      Yours sincerely

 

      RON HASWELL

      MANAGER

 

      ENQ:  JUDI FERRINGTON"

 

 

     Corbett's account of the meeting of 26 April 1990 with Haswell was not a consistent one.  He was asked on several occasions about it in his evidence in chief.  At one point he gave the following account of the meeting after having given evidence that the family home in Caringbah had not sold at auction and thus not provided funds for the purchase of the Cromer property:

      "Did you have any other source of funds that you believe could have been used to make up the funds necessary to effect the Cromer sale?---Yes.

 

      What were they?---The funds about [sic] our family company.

 

      Galdece Pty Limited?---That's correct.

 

      And in relation to those, did you do anything about those funds?---Yes, I discussed - I called in to see Ron.

 

      That is Mr Haswell?---That's right, yes, on the basis - I reminded him of the basis on which those funds were deposited at the bank.

 

      MR HARRIS:  I object.

 

      MR STEWART:  Well, what did you say, you see, you will have to give us the conversation in the first person?---I said to Ron, I intended to use the Galdece funds for the settlement of the property and he expressed some doubt as to the availability of those funds.

 

      What did he say?---Ron said his main concern was just the physical carrying out of the transaction in such a shorter time close to the settlement date.  You see ---

 

      And was the settlement date anticipated in early May?---I think it was the first or the third of May, yes.

 

      Did you talk to Mr Haswell in this vein on or about 26 May [sic]?---I did.  That is what I said.  I went to the bank and I raised these matters with him.

 

      And what did he say about the Galdece funds?  Do you remember what his words were, to the best of your knowledge?---Well, to the best of my recall, he said they wouldn't be available for the purposes of settlement which alarmed me.

 

      And having alarmed you, what did you - did you say to him anything about that, in spite of that?---Well what did I say - I said something to him, you know, I said that those funds were always deposited with the bank with the intention of supporting the Corbett activities.

 

      Was that the total of the conversation you had with him on or about 26 April 1990?---No.

 

      What else did you discuss?---As I said, he expressed the difficulty in any event of carrying out the transaction due to the, getting the actual paper work completed before the completion date and that alarmed me immensely.

 

      Did you respond to that?---I did.  I - to respond to him?

 

      Well, did you respond to him or not at that time?---Told him I wasn't too happy about it.

 

      Did you express that?---I did.

 

      What did you say?---I said I can't see any problem and I said it should be done."

 

 

     The reference to 26 May was plainly intended to be a reference to 26 April and, in my opinion, was understood by the witness to be a reference to April.  At a later point in his evidence in chief Corbett said this of that meeting:

      "Was anything discussed about the $350,000?---No.  No.  He only referred to the difficulty in completing the paperwork for the $350,000 in that period."

 

 

     In the cross-examination of Corbett the following appears:

      "You went up to see Mr Haswell on 26 April, did not you?---On the 26th I saw Ron Haswell, yeah.

 

      And you said to him, "would you be prepared to release the Galdece funds so that we can complete the purchase at Cromer" and he said, "No".  Do you remember that?---No, it's not what I remember.

 

      You said to him, "If I can get somebody else to put up some other security to substitute for the Galdece deposit will you release that Galdece deposit so that I can use that to complete the Cromer purchase", that is what you said to him, is not it?---That conversation occurred subsequently.

 

      Why did you go and see him on that day?---To arrange for settlement.

      But you had not even signed the mortgages?---I had lawyers and the bank had lawyers.

 

      Then why did you need to go and see him?---Because I wanted to just confer that we were settling on the Monday.  He put a big song and dance on it about it all being too difficult; the paperwork and it is almost sort of a physical impossibility, there was a lot of work involved and I was astounded by his attitude, his evasiveness and I was agitated and irritated by it.

 

      But your solicitors had refrained from sending you the mortgage documents until you got your bridging finance arranged, that is correct, is not it?---As I understand it, the lawyers are looking after that aspect of it.

 

      And you had not signed  any mortgages at that time, had you?---Not that I was aware of.

 

      And you had not paid any stamp duty on the contract or the transfer or the mortgage"---I don't see what that has got to do [sic] it but so be it, yes.

 

      And the reason that you went to see Mr Haswell was to try to see if you could have the Galdece funds released because you did not have sufficient funds to be able to purchase the Cromer property?---That's not so.

 

      And that was because you had not sold your house?---That's not so.  There was never any condition of the loan agreement that we had to sell out house.  We were selling one house and buying another house.

 

      By the way, at this meeting on 26 April with Mr Haswell there was again no mention of Waraway Pty Limited, was there?---I can't specifically recall ..."

 

 

     Notwithstanding these answers, the following answer is given shortly after:

      "Because he would not release the Galdece moneys to you?---He said it was impossible.  Even if they were available, he said, it would still be impossible to settle on Monday.  There is too much paperwork, it physically can't be done.  He was evasive."

 

 

     Later in cross-examination he said:

      "Okay, so you went to see Mr Haswell whenever it was on 26 April, you understood that the bank would be advancing $350,000 but you would have to come up with an additional $247,000 approximately to be able to pay the stamp duty and legals and complete the purchase?---Yes that's so.

 

      And you were going up to see Mr Haswell to ask him if that money could be released from the Galdece deposit?---I went in to see Mr Haswell.

 

      And that was the purpose of the visit, was not it?---I went into his office.

 

      To see whether the Galdece funds - - -?---I didn't go up to his office.

 

      I am sorry?---That part of the branch hadn't been completed at that stage, they were still on the ground floor.  I went into his office for that reason, yes.

 

      And when you came out of his office you knew that he was not going to make those funds available?---No I didn't know that, he introduced the doubt into my mind.

 

      Well this is three business days, less than three business days before the settlement of this property is due to take place, do you accept that?---I do.

 

      And you have gone up to the bank because you need $247,000 and you have gone up to see whether Mr Haswell will release funds in deposit in the name of Galdece of about $220,000 to enable you to complete the purchase?---That's correct which is what I had deposited on the bank.

 

      Now he gave you a definite answer when you saw him, he said to you that money would not be released?---No he didn't give me a definite answer and he introduced the doubt into my mind, he'd given me an equally indefinite but comforting answer some time before, namely "Neil's got this arithmetic wrong, there's plenty of security here, Frank".  You see all I needed to do was to raise another mortgage which was eventually done anyhow by bank on the unsold property at Caringbah and I go and settle and we're not here then, that's how nonsensical it is."

 

     The evidence in chief of Haswell concerning the meeting of 26 April 1990 was:

      "I recall that on 26 April, 1990 when I had a meeting with Mr Corbett in which he said to me words to the effect:

 

            "Our house did not sell at auction and we have no interested buyers.  Settlement of the Cromer property is set down for Monday, 30 April, but we do not have the funds to complete it.  We need an additional $220,000 which is about what Galdece has lodged as security with you for the other debts (Galdece Pty Limited was a company of which Mr and Mrs Corbett were the directors and shareholders and had lodged $220,000  with the Bank as security for other loans made available by the Bank to Mr Corbett)".

 

      He continued:

 

            "I think I can obtain a third party mortgage from somebody who owns a property worth about $300,000.  Would you be prepared to accept that security in the place of the Galdece deposit and release the Galdece funds to me so I can complete the Cromer purchase".

 

      I said words to the effect:

 

            "There is no guarantee but we will assist you if possible."

      He said:

 

            "I will report back to you on the substitute security" or words to that effect.

 

      He said nothing during this discussion concerning Waraway Pty Limited or Major Mining or any Company.  He did not tell me that the contract for the purchase of the Cromer property had been entered into in the name of Waraway Pty Limited.  I made a note of our conversation after it had concluded."

 

 

     He was not cross-examined about this evidence.

     The following day, 27 April 1990, Haswell signed a report concerning the account of Galdece.  It read:

      "In-operative account of Frank Corbett - well known pain in the neck - see also "major Mining".  F.J. Corbett has over ... (the word is unclear) himself and has spent large sums of money over many years trying to establish his company in mining ventures - hoping to list a company - if and when this happens should have plenty of shares to sell.

 

      Interest and fees are mounting and overall debt structure is high - latest venture in purchasing a dwelling at Cromer for profit has turned sour as he was unable to sell his dwelling and is contracted to settle.

 

      Galdece has cash cover and no problems here but it is his own account and other company account I am worried about." (emphasis added)

 

 

     Plainly Haswell was then aware that the purchase of Cromer was for profit and he was cross-examined about what this meant.  Haswell said it related to getting money back from a golf course that was nearby for access arrangements and that he, Corbett, was possibly going to get $100,000 from some friend by selling a portion of the land.  Haswell was not cross-examined about when and how he came to know of these matters.  In a question from me he said he couldn't recall when he was told by Corbett these things.  Counsel for the applicants then asked:

      "Can we take it, however, that your knowledge of those matters came to you quite early in the piece following the application for the loan being approved?---I couldn't honestly recall, sir".

 

 

     Notes Haswell made of the meeting referred to the arrangement with the golf course in the following terms:

      "The $50,000 promised from another source did not eventuate and the $100,000 provided was in fact funds Cromer Golf Course had stated they would give full right of way and obviously would not hand over until Corbett had unqualified possession of the property."

 

 

     I accept Haswell's account of what occurred at the meeting of 26 April 1990.  It is consistent with some of what Corbett said though inconsistent with other things he said.  I find that this meeting was arranged by Corbett for the purpose of endeavouring to arrange further funds to complete the purchase of the Cromer property once it was apparent that funds would not be realised from the sale of the Caringbah property.  Corbett spoke to Haswell about using the Galdece funds then on deposit with the Bank.  I find that Haswell indicated to Corbett that he would consider this question but could not guarantee that these funds would be made available.  It is to be remembered that at this stage Haswell had written to Corbett twice in March expressing concern about the financial position of Corbett and related accounts.  It is thus likely, and I find, that Haswell was then not anxious to accommodate Corbett's request and could well have given the appearance of procrastinating in the way described by Corbett. However I am not satisfied, as Corbett alleges at one point in his evidence, that Haswell indicated any difficulty about the provision of the loan of $350,000 for the settlement that was
due to the following week.  It is likely that at this meeting Corbett was more expansive about the reasons for the proposed purchase of the Cromer property.  It is thus at least possible that at this meeting Corbett made clear to Haswell the means by which he might make a profit from the purchase by selling a portion of the property back to the vendor and providing the golf course with a right of way for a substantial consideration.  If that be so, then Haswell was armed with this knowledge when he wrote the memorandum the following day.

     On 27 April 1990 Corbett met with Wood, the manager of the Hurstville Branch of the Bank.  The meeting had been arranged by Spencer who was a business associate of Corbett.  Spencer banked with the Bank at its Hurstville Branch.  Spencer's account of the meeting was that after telling Wood that Corbett was short of funds to complete the purchase, Spencer said he had sufficient funds to facilitate the completion of the deal.  I will set out shortly the evidence of Spencer as to what funds he then had.  The three of them then discussed ways of financing the purchase.  Wood then made a phone call, spoke to someone, then looked at Corbett and said "Frank, you haven't got a loan":  Spencer then said that Corbett blubbered a bit, went a bit strange and then asked "What do you mean - what do you mean I haven't got a loan".  Wood then responded by saying something along the lines that the Bank was requiring a 317AE certificate to which either Spencer or Corbett or both said that it was for land value only and everything else was a bonus.  Wood then clarified the position and hung up.  Spencer and Corbett were confused and Spencer terminated the meeting because Corbett looked agitated and was not well.  Spencer said that he understood what a 317AE certificate was.  Spencer did not agree that he was in a position to lend the whole of the purchase price of the land at that time.  After the meeting he offered to introduce Corbett to other financiers and that he, Spencer, was sure he could get finance from another source without a 317AE certificate.  Corbett thereafter did not directly contact him for assistance.  This account was not challenged in cross-examination.

     It is desirable to set out in detail Spencer's evidence concerning his capacity to provide part or all of the purchase price and his willingness to do so as this later assumes some significance and was in issue.  It is to be found in the following extracts from the transcript:

      "What happened?---I approach Mr Wood saying that I believe that Dr Corbett had an exceptionally good deal on the table and that through some - and I can't give my opinion I guess again - but through some mishap or other that he required funds to complete - funds to the tune of approximately a quarter of a million dollars.  I said to Mr Wood I believe that I have sufficient funds in your establishment to facilitate the completion of this deal and whereby become a partner in it.

 

      How much did you have, roughly?---From memory it was very difficult to extract it from the bank but it was in the vicinity of between 4 and 700,000 cash.  I had it on 24 hour call.  90 day bills they were, sorry, 90 day bills.

 

      What happened after that, after you sought that?---Malcolm Wood said, look there are various ways of doing it.  We can use security over your funds, second mortgages, etcetera and we're all very excited that this was at this stage going through.  It looks all very very positive."

 

 

     and:

      "Was there anything further said at that time?---Well, yes, we went outside of the bank and I said to Frank, I still reckon we can do it, you know.  If we can't use the State Bank we'll do it some other way.  I've got financiers and I've got backing.  What else have you got on this property, let's have a look, what have you got?  He said, I've got reports, engineers, architectural reports.  There may have been a valuation....

 

      Am I speaking to quickly for the reporter?

 

      When you say possibilities, you mean possibilities about your personal involvement or that of your companies in the purchase of 70 Northcott Street, Cromer?---Indeed, in the possibility of a profit.

 

      That would be of course in conjunction with Dr and Mrs Corbett?---Absolutely, yes.  At this stage I believed he had exchanged.

 

      ...

 

      If the bank loan had remained on foot, that is the 317AE certificate had not been required, how did you envisage your participation?---Well, the prior basis would have been more like a 50/50 deal, obviously, a restructured deal I think.  But on that basis, with the bank in tow, a third, possibly a third, approximately a third.

 

      A third equity?---A third equity each of course, to me or my company.

 

      Right, and how would you have secured that interest if you had paid the balance, that is the $250,000?---How would I have secured the balance?

 

      Yes?---Through either a cash withdrawal to the vendor's solicitor or maybe - a lien over one of my properties.  I had a number of equitable - equity in properties.

 

      No, and how would you have secured your interest in Cromer?---I am sorry, I see what you mean, yes.  Various ways, a caveat perhaps or an unregistered second, deed of trust.  We would have worked something out.

 

      Did you ever make an offer to Mr Corbett to pay that or to provide that $250,000?---Absolutely.

 

      And how did you do that, and what fashion did that take?---What fashion did it take - along the lines of Frank - I'm in, you know?

 

      Did you indicate how long the money would be available?---Yes, yes, definitely.  The - I'll make you the offer, Frank, of the shortfall but the money's got to work so the offer is only there for a short time.

 

      Would you yourself have required a 317AE certificate?---Not at all.

 

      If the bank had been prepared [sic] $350,000 without the certificate what would you have done in relation to providing the balance?---Give him a cheque real quick."

 

 

     and:

      "And when you went to see Mr Wood that was with the intention of your, initially, of your advancing possibly 250,000 to Mr Corbett or alternatively investing $250,000 into the project; is that right?---Yes, that's right.

 

      When you left the bank after Mr Wood had made the telephone call and spoken to Mr Corbett you said that you said to Mr Corbett, "we don't need the State Bank, I've got financiers".  Is that right?---Yes.

 

      Now at that stage I think your evidence was that you had about 400 to $700,000 actually invested with the bank in any event.  Either your money or your company's moneys, is that right?---Yes that's right.

 

      So that you were in a position I take it to invest or lend in fact anything up to the whole of the purchase price of this land at that time?---No.  No, I wouldn't say that.  I respect my risk....inaudible....I wouldn't.

 

      You were in a position to increase your investment - - -?---Yes.

 

      - - - beyond $250,000?---Yes, yes.

 

      And in addition to that you said to Mr Corbett, as I understand your evidence, on the footpath outside the bank immediately after this meeting or in the car at the car park, you said to him, "look, I've got financiers, I'm sure that we can get the finance from some other source without 317AE certificates", is that right?---Yes, that was right.  Frank might have stayed at the bank though.

 

      Did you leave it with him on that day that he would come back to you if he required your assistance or involvement in some way?---Basically, yes.

 

      And did he ever contact you again after that time seeking your assistance of involvement?---Not directly, no.  Well, I thought he'd either got it from the bank eventually or the whole thing had fizzled up and I'd reinvested my money which he knew was on offer for a short time.

 

      And is not it the fact that you did not hear about this again for some years I think?---No, I don't think so, no, I kept in touch - we had a mutual friend and I can just hear Frank going down and down and down and I didn't like to be depressed by another person such as that.

 

      I see, and can I ask you then in your opinion this property was easily resaleable at $600,000?---Very."

 

 

     and:

      "Were you ever warned by Mr Wood about going - involving yourself in the purchase of a property with a 317AE?---No, not all.  We just sat there in front of Mr Wood and said, it's only land value, you can still buy it, what the heck.  He'll get one and I think we were proven right.  The damned thing sold for a fortune and on it went."

 

 

     At one point in the preceding transcript an answer of Spencer was not recorded fully and it related to his capacity to lend the whole of the purchase price at the time.  I have listened to the tape and what is recorded as "inaudible" is not clear.  What is clear from the transcript is that Spencer did not accept that he was in a position to invest or lend the whole of the purchase price.  Also what is plain from this evidence is that Spencer at no stage indicated that the reference to a 317AE certificate dampened his enthusiasm for the transaction.  There is nothing in his evidence to suggest that he was "scared off" to use the language of Corbett.  The Bank did not challenge in cross-examination Spencer's evidence as to the funds he then had deposited with the Bank.  No Bank records were produced to do likewise.  Wood was not asked, and thus did not deny, Spencer's account that there was a discussion between Spencer, Wood and Corbett about means of obtaining the funds, in addition to the $350,000 necessary to settle the purchase, using Spencer's funds either directly or as security.  While Spencer's evidence was somewhat vague and in some respects ambiguous, I am prepared to accept that he was both willing and able to provide the balance of the purchase price had the Bank been called upon to honour the loan agreement and provided $350,000.  I am satisfied that this willingness continued after the meeting with Wood.

     Wood's account of the meeting of 27 April 1990 was firstly in his affidavit which relevantly read:

      "At the meeting Mr Corbett did most of the talking.  He said words to the effect:

 

            "We want to buy a property at Cromer that we believe is significantly underpriced."

 

      We discussed the property and I recall him saying:

 

            "There will be problems in obtaining a Section 317AE Certificate but I believe I can make the necessary arrangements with the Council to get one.  But we need to exchange contracts urgently and also to settle urgently.  Your Rockdale branch has agreed to lend $350,000 and they know all about the property."

 

 

     He deposes to the telephone call and then says:

      "I then said to Corbett and Spencer:

 

            "Do you understand the significance of a Section 317AE Certificate?  Our solicitors would require a number of documents to be handed over on settlement including that certificate.  How would you be able to complete at settlement?"

 

      I then said to John Spencer:

 

            "Do you fully understand your involvement in this deal?  You'll have to risk your waterfront home at Kangaroo Point without the knowledge that you will be able to obtain a Section 317AE Certificate for the Cromer property."

 

      There was then some discussion between Spencer and Corbett and I said to both of them:

 

            "You should go to the Council and find out why the Section 317AE Certificate will not issue and see if these problems can be overcome.  See if the Council will give you something in writing to say that a Section 317AE Certificate will issue if the problems are overcome.

 

      Either Mr Corbett or Mr Spencer then said words to the effect:

 

            "Alright, we'll go to the Council and see what can be done."

 

 

     In cross-examination Wood denied saying "Frank you haven't got a loan".  He also said he did not indicate that without the 317AE certificate the Bank would not loan the money to Corbett.  Notwithstanding what appears in his affidavit, he also said in cross-examination that he did not indicate that the Bank may not loan the money to Corbett in the absence of such a certificate, though in a later question it appears he was drawing a distinction between the provision
of the loan and the settlement of the transaction.  He said:

      "The bank would be looking for in the context of refusing the loan in the absence of that certificate?---No, to enable settlement to proceed.

 

      Well, what do you mean by that?---Well, from my bank training, we were - we placed the documentation in the hands of the solicitor and they had to get certain requirements, mortgages, council certificates and everything, to enable the loan to settle."

 

 

     A supplementary question was asked by counsel for the applicants:

      "Did Dr Corbett give you the impression that he was surprised about the significance you put on the certificate? - No sir".

 

 

     Corbett's account was that they discussed the property and Wood made a phone call.  After completing the call Wood said if there was not a 317AE certificate the loan would not be available for settlement purposes.  Corbett then said he was aghast and that he said to Wood that he had informed the Bank that "there was a DA approval being put in for the property" and a later version "that should all be taken care of because the council has already been informed of what we're doing and anything of compliance along these lines shouldn't be a problem".  He clarified this later by saying that he said to Wood:  "That shouldn't be any problem because the council has been informed on all these matters of development" and "I don't think that should be any problem forthcoming".

     In cross-examination he said he was not told that the Bank was not obliged to and would not advance the sum of $350,000 and Corbett repeated that he was told that a 317AE certificate was required for getting funds for the purposes of settlement.  Corbett said he did not realise a 317AE certificate was a compliance matter which "followed subsequently a DA".

     Corbett asserted that the statement about a 317AE certificate scared Spencer off and had it not been made "he would have gone and settled the property with (Corbett) forthwith".  Corbett agreed that Spencer offered to introduce him to other financiers who would not be bothered about a 317AE certificate and that he never took up the offer.  Corbett later said that following the meeting with Wood he went, the same day, to the offices of the relevant council, Warringah Shire Council, when he was "informed of (his) confusion between a 317AE and a DA application".

     While there were differences in the recollections of Wood, Spencer and Corbett as to what occurred at the meeting on 27 April 1990 their evidence on material matters did not differ markedly.  It is clear that Wood made a telephone call as a result of which he said to Corbett and Spencer that the funds to be provided by the Bank under the loan agreement with the Corbetts would not be provided upon settlement unless there was a 317AE certificate.

     Completion did not take place on 30 April 1990, and the contract with Waraway was terminated on 3 May 1990.  On the same day Corbett an Mrs Corbett contracted in their own names to purchase the Cromer property as a result of an agreement reached between the vendors solicitors and those acting for the Corbetts.  Haswell wrote to Corbett on 3 May 1990 about his general financial position in terms consistent with the letters written in March.  The 3 May letter read:

      "Dear Mr Corbett

 

      RE:   CORBETT:  F J

            GALDECE PTY LIMITED

            MAJOR MINING LIMITED

      -------------------------------

 

      We refer to previous correspondence and discussions and advise the position of the above accounts is:-

 

      F J CORBETT             LIMIT $100,000    DEBT $190,792

      GALDECE PTY LTD         LIMIT $70,000     DEBT $99,732

      MAJOR MINING PTY LTD    LIMIT $170,000    DEBT $233,282

 

      As can be seen all of the accounts are out of arrangements and although your practice is returning a good cash flow we are not receiving any funds and the position has been reached whereby some satisfactory arrangements for the repayment of debts will have to be made.

 

      Our Head Office require a proposition to be put forward within the next ten (10) days and your co-operation in this matter is urgently sought.

 

      Yours sincerely

 

      RON HASWELL

      MANAGER"

 

 

     At the foot of the letter is a note in Haswell's handwriting which reads:

      "Called - is in a financial mess - has contracted to purchase property Cromer, paid deposit and cannot find balance - run out of time and is paying $2,500 p/w to keep vendor at bay.

 

      Has someone interested in purchasing the Cromer property and is to provide signed contract for $750,000 ... we can look at $500,000 ODL while s'ment is effected.

 

      This is a hopeless case - Major Mining has no repayment capacity until it is listed and frankly I don't want any association with Corbett - Stuck with him."

 

 

     Haswell was cross-examined about this letter.

     Haswell  had written to the secretary of MM Ltd two days earlier in a letter dated 1 May 1990 which read:

      "Dear Sir

 

      We refer to our letter of 11 December 1989 and subsequent discussions regarding the conduct of the Account and point out the debt is increasing due to non payment of interest.

 

      The attached Statement shows a debit balance of $233,282.04 while the established limit is $170,000.  The position is entirely unsatisfactory and we must now insist that funds be lodged to place the matter within arrangements.

 

      Should you be unable to attend to this within ten (10) days of writing, we request you call as a matter of urgency to advise how you intend to adjust and also how the Account is to be conducted in the future.

 

      Your immediate co-operation is requested.

 

      Yours sincerely

 

      RON HASWELL

      MANAGER"

 

 

     On the same day, 3 May 1990, Haswell wrote a report to the Regional Manager, Sanders concerning the accounts of Corbett, Galdece and MM Ltd.    Sanders was aware of the Corbett accounts from his period as manager at Rockdale between October 1987 and November 1989.  Sanders had been instrumental in bringing Corbett's banking business to the Bank from the National Australia Bank.  It appears from evidence given in earlier proceedings in the Supreme Court of New South Wales, which Haswell adopted in these proceedings, that as early as late February 1990, Haswell had formed the view that it might be inappropriate to lend the Corbetts the $350,000 in view of the problems the bank was having with their various accounts.  I return to the report of 3 May and set out some of what the report says:

      "Bank agreed to Fixed Rate Housing Loan of $350,000 to assist purchase House and six (6) Acres at Cromer the deal being Corbett had to find funds from own resources $100,000 which were to adjust all accounts including Major Mining and proceeds from the sale of his House were to provide the balance.

 

      ...

 

      To add further to the mess Corbetts House sale was not tied up legally and purchaser pulled out - subsequent Auction did not sell for the $410,000 he wanted and has no funds to complete the purchase of the Cromer property.  Settlement was set down for last Monday, have been unable to contact Corbett and as he is unable to complete the purchase it would appear we will rescind the previous decision to assist.

 

      ...

 

      Customers have been a problem ever since transferring from National Australia Bank and can see nothing but problems ahead as it is very difficult to hold a sensible conversation with Corbett."

 

 

     Haswell gave evidence that:

      "As at 3 May you determined, with Mr Sanders, had you that the loan ought to be rescinded?  Is that right?  Yes."

 

 

     This is a reference to an intention to terminate the loan agreement.

     While Haswell said that he believed that at some stage a letter was written to the Corbetts that the loan agreement of $350,000 had been terminated, which it actually was on 17 May 1990, no such letter or a copy of it was produced and I accept that no such letter was sent.

     On 9 May 1990, the Bank's solicitors wrote to the Corbett's solicitors asking when completion was expected.  I do not view this letter as significant as the evidence does not suggest it was written on express instructions from any officer of the Bank and is likely to have been done as standard procedure by the Bank's solicitors.

     At about this time, and certainly after the memorandum of 3 May 1990, Haswell wrote a file note in which he says, in relation to the Cromer property, that "security ... is valued at land value only" and there is an earlier reference to "Val(uation) C.A. Allan ... $750,000 80% - 600,000".  While it is clear that at that time, in the context of considering whether to provide $600,000 to complete the purchase of Cromer, Haswell was treating the Cromer property on the basis of a land valuation of a Mr C Allen provided by Corbett of $600,000.  I do not infer, however, that this approach to the Cromer property had been adopted by Haswell in his earlier discussions with the Corbetts in February 1990 when agreeing to the loan of $350,000.  Indeed the valuation itself is dated 30 March 1990.

     On 14 May 1990 Haswell wrote to the Corbetts declining an application they had made on 10 May 1990 requesting a loan of $600,000 to purchase the Cromer property.  A further written request for a loan of $600,000 was made to the Bank in a letter dated 16 May 1990.  By then the nature of the transaction had changed markedly.  The written request by Corbett for a loan of at least $600,000 to settle the purchase was on the basis that an offer had been made for a third party to purchase the Cromer property for a price "in the order of $800,000".  Corbett attached to his written request a letter from a real estate agent setting out the offer though the agents letter is expressed in somewhat vague and ambiguous language.  In his written request Corbett said exchange was imminent and that the contract price would be $650,000 with a payment to the Corbetts of $150,000 cash "for advancing the DA and project management".  From at least this time onwards the focus of Corbett was to buy and on-sell the Cromer property.  He persisted in these efforts even after the second contract was terminated.  The funds sought by the letter of 16 May 1990 were not provided.  There is in evidence a Bank file note written by Ms Judith Ferrington who was a bank officer at the Rockdale Branch during early and mid 1990.  As is apparent from letters I have already set out, Ferrington was involved in administering the various accounts associated with Corbett.  The note would have been written after 17 May 1990 and before 29 May 1990 and it includes the following:

      "Security at 70 Northcott Road, Cromer has been sold for $800,000 - we are awaiting exchanged contract then, accommodation will be given to Corbetts by way of bridging finance - submission to follow in due course".

 

 

     I accept that at this stage, that is mid to late May 1990, the officers of the bank involved in managing the Corbett accounts, Ferrington, Haswell and Sanders, had not rejected the prospect of the Bank providing bridging finance to enable Corbett to buy the Cromer property to onsell it.  However it is reasonably plain that the finance, if made available, would have been made available only if Corbett secured a purchaser who had contracted to buy it.  He failed to do so.

     On 4 June 1990 the vendors terminated the contract with the Corbetts.  Prior to the termination of the contract on 4 June 1990 Corbett had endeavoured without success to obtain finance for the entire transaction elsewhere.

Conclusion - The First Representations

     There was no term in the loan application signed by the Corbetts nor in the document accepting the offer of the loan, including the attached terms and conditions, which contained an express requirement that the settlement of the loan would only take place if a 317AE certificate was provided.  The discussion between Haswell and Corbett at the meetings of 8 or 20 February 1990 did not involve Haswell saying there was such a requirement even though he mentioned Council approval in a discussion with Corbett.  The instructions from the Bank to their solicitors made clear that such a certificate was not then intended to be a pre-condition for settlement of the loan by the Bank.  It follows, in my opinion, that the statement by Wood that such a certificate would be required for the loan funds to be provided on settlement either overstated the position as it then existed or involved a unilateral attempt to alter the terms upon which the loan had been agreed.  It is highly probable that it is the former and resulted from a misunderstanding on Wood part of what the Rockdale branch of the Bank would require.

     In either event it involved a misrepresentation of the Bank's actual position or a misrepresentation of the Bank's legal obligations.  It had the effect of inducing Corbett to believe that the loan funds would not be made available without the certificate.  It is, in my opinion, conduct contravening s52 of the TP Act.  The real issue is what flows from that.

     The cause of action of the applicants is a statutory application for damages under s82 of the TP Act.  As a first step it is necessary for the applicants to establish, relevantly, conduct contravening s52.  However the statutory cause of action is founded on loss or damage.  As Mason CJ and Dawson, Toohey and Gaudron JJ said in Sellars v Adelaide Petroleum NL (1993) 179 CLR 332 at 348:

            "Under s82(1), as under the common law, an applicant can only recover compensation for actual loss or damage incurred, as distinct from potential or likely damage.  Loss or damage under s82(1) is "the gist of the action" under s52.  The Act draws a clear distinction between loss or damage which may be recovered under the section and the likelihood of loss or damage which may be prevented or, if not prevented, reduced by one of the remedies under s87.

 

            In the context of contraventions of s52(1) in the form of misleading conduct constituted by misrepresentations, acts done by the representee in reliance upon the misrepresentations amount to a sufficient connexion to satisfy the concept of causation.  And, if those acts result in economic or financial loss, it will ordinarily be recoverable under s82(1).  So, in a case such as the present, the applicant is entitled to recover "a sum representing the prejudice or disadvantage [the applicant] has suffered in consequence of his altering his position under the inducement"."

 

 

     It is thus necessary to ask in these proceedings what loss or damage the applicants suffered as a result of the first representations.  They must show a causal link between the contravening conduct and loss or damage suffered.  I am presently prepared to assume the Corbetts suffered loss as a result of the failure to  settle the purchase of the Cromer property.  The applicants bear the onus of establishing their case and it is necessary for them to prove loss caused by the contravening conduct on the balance of probabilities:  see Sellars (supra) at 356.  In Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514, the majority comprising Mason CJ and Dawson, Gaudron and McHugh JJ, made clear at 525 that the word "by" expresses the notion of causation and s82(1) "should be understood as taking up the common law practical or commonsense concept of causation recently discussed by this Court in March v E. & M.H. Stramare Pty Ltd (1991) 171 CLR 506, except in so far as that concept is modified or supplemented expressly or impliedly the provisions of the Act":  see also Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 109 ALR 638 in which Lockhart J said:

      "The use of the preposition "by" in s82(1) is important; it indicates the requirement that there be a sufficient cause or link between the respondent's conduct and the recoverable loss or damage:  Brown v Jam Factory Pty Ltd (1981) 35 ALR 79 at 88; Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd (No 2) (1987) 16 FCR 410 at 418; 75 ALR 271.  "By" is used in s52(1) in the sense of "by reason of" or "as a result of": Munchies Management Pty Ltd v Balperio (1989) 84 ALR 700; (1989) ATPR 40-926 at 50,037.  Loss or damage must directly result from or be caused by the respondent's conduct.  The respondent's conduct must be the real or direct or effective cause of the applicant's loss; it must have been "brought about by virtue of" the conduct which is in contravention of s52:  Elders Trustee & Executor Co Ltd v EG Reeves Pty Ltd (1988) 20 FCR 164; 84 ALR 734;"

 

 

     Further, as Deane J said in March, supra at 524:

      "None the less, the question of whether the conduct is a 'cause' of injury remains to be determined by a value judgment involving ordinary notions of language and common sense."

 

 

     On one view of the applicant's case as pleaded, the reliance by the Corbetts on the first representations led them to enter the contracts personally in lieu of their nominee, Waraway.  I have considerable difficulty in understanding how that act of reliance on the contravening conduct could have caused any loss or damage at all.  As I shortly discuss the loan was offered to the Corbetts personally and it was on the basis that they would become the registered proprietors.  Even if the contract with Waraway could be treated, de facto, as with the Corbetts one must ask:  what occurred to the Corbetts detriment by them entering a contract in a personal capacity?  Much, though not all, of the money Corbett spent in trying to develop the property had been spent and the deposit had been paid.  It may be accepted that by entering the contract to purchase themselves, the Corbetts exposed themselves to personal liability under the contract.  If that be the point of distinction, the Bank rightly points out that that occurred with the knowledge that Wood had made the first representations.  The evidence does not establish that the change in the identity of the purchasers was caused by the first representations.

     The gravamen of the applicants complaint is that the purchase was not settled on 30 April 1990.  However I am not satisfied on the balance of probabilities that because of the contravening conduct involved in making the first representations, the Corbetts failed to settle the purchase of the Cromer property on 30 April 1990 or at all.

     The Bank sought to rely on documentary evidence demonstrating that at least in the period January to June 1990 the Corbetts were neither directors nor shareholders in Waraway.  It appears share transfers were signed on 8 February 1990 but the transfer was not noted in ASC records.  What occurred in that respect and the relationship between the Corbetts and Waraway is not material having regard to the view I take of the fact that Waraway can be treated, for a period, as the putative purchaser of the Cromer property.  I must accept, as the Bank points out, the contract for the purchase of Cromer was with Waraway and the Bank had no obligation to provide loan funds to that company.  Plainly the loan was made to the Corbetts and was made on the basis that they would be the registered proprietors of the Cromer property.  The loan was to assist them to buy a home.  So much is apparent from the offer of loan accepted by the Corbetts personally and the instructions from the Bank to its solicitors.  However, it may be accepted that in the absence of the first representations concerning the 317AE certificate the then existing contractual arrangements could have been modified, as they ultimately were, to effect the sale to the Corbetts personally and not Waraway.

     Of greater significance, however, is the question of whether the Corbetts had any real capacity to settle the purchase on 30 April 1990 in any event and assuming the contractual arrangements could have been modified in the way just discussed.  I accept that in late April 1990 Spencer would have been in a position to provide the funds that would otherwise have been available had the Caringbah property been sold.  Corbett asserts that Spencer was scared off by the statement made by Wood concerning the 317AE certificate but no evidence to the same effect was given by Spencer.  As I earlier found the tenor of Spencer's evidence was that he was initially, and continued to be, supportive of the arrangement and was prepared  to partly finance the purchase himself and to assist Corbett find other financiers for the purchase.  I accept that Corbett could have attempted to settle the purchase on 30 April 1990 on the basis that Spencer would have provided the residue of the purchase price.

     Corbett also said that he could have raised funds by selling all or some of the assets of MM Ltd.  However this evidence was vague and lacked detail.  This contention was not supported by any evidence that would sustain a finding that any interest Corbett had in MM Ltd or assets of MM Ltd were either of a value that would have provided the residue of the purchase price or that it was readily negotiable in the way suggested by Corbett in his evidence.

     However the fact of greatest significance was that in late April 1990 the Corbetts had not sold their home at Caringbah.  It had been made clear to the Corbetts at the meetings on 8 February and 20 February 1990 that the loan funds would be made available by the Bank to supplement funds flowing from the sale of their existing home.  This requirement was expressed in the instructions to the Bank's solicitor prepared at Haswell's direction.  It does not presently matter whether this requirement had any legal foundation.  It is sufficient that it was viewed as a matter of significance by officers of the Bank.

     On 27 April 1990 Haswell expressed, with justification, significant reservations about Corbetts financial position.  On 3 May 1990 he wrote the memorandum to Sanders adverting to the possibility that the housing loan should be cancelled.  On and from 23 April 1990 the Bank was able to terminate the agreement.  Under the terms and conditions of the loan agreement the interest rate was fixed and Clause 16 of the terms and conditions provided:

      "16.  Notwithstanding Clauses 12, 13 and 14 and where the interest rate is fixed, the Bank reserves the right to terminate the loan offer if the approved Loan is not settled within two months of the Offer Date."

 

 

     The loan agreement identified the offer date as 23 February 1990.

     Had Corbett secured through Spencer the funds necessary to supplement the $350,000 the Bank had agreed to lend to settle the purchase, he presumably would then have asked the Bank to complete the agreement.  A question would then have arisen, in my opinion, in the mind of Haswell, at least, whether the right afforded by clause 16 should be exercised to terminate the loan agreement.  So much can be inferred from the opinion expressed by Haswell in his notes of 27 April and
3 May 1990.  It is probable, in my opinion, the loan agreement would have been terminated because the Caringbah property was then not sold and Corbett's financial affairs were then perceived as a significant and growing problem for the Bank.  Haswell and Sanders were plainly concerned about the Bank's exposure to Corbett and his level of indebtedness including the indebtedness of Galdece and MM Ltd.  It is improbable that the Bank would have permitted a situation to arise where Corbett incurred further debt by purchasing another asset when he had not sold the property which was intended to provide a significant portion of his funds for the Cromer property.

     I do not accept that, had the first representations concerning the 317AE certificate not been made by Wood, Corbett would have settled the purchase on 30 April 1990.

     The question that then arises is whether the first representations had any other effect that might have caused any loss to Corbett or the other applicants.  It is to be remembered that not long after the contract to sell to Waraway was terminated and the Corbetts personally contracted to purchase the property, they applied to the Bank for finance for the entire purchase price.  It is unlikely that they did so believing that there was some insuperable impediment to securing funds from the Bank resulting from the representation by Wood that funds would not be provided without a 317AE certificate.  By mid-May 1990 the question of a 317AE certificate had faded into insignificance and was not a factor influencing the conduct of Corbett in his pursuit of the Cromer property.  He was then wanting to buy the property with the entire purchase price provided by the Bank so that he could on-sell it.  It had then ceased to be a transaction in which the Corbetts were buying a home to live in partly with the loan of $350,000 supplemented by the proceeds of the sale of their existing home.  In my opinion it cannot be said from that point onwards the first representations concerning the 317AE certificate had any bearing on what Corbett did or had any bearing the failure of Corbett to effect the purchase by himself and his wife.  The ultimate failure of the transaction was not the result of the first representations.  That contravening conduct of the Bank did not cause the applicants any loss or damage.

Conclusion - The Second Representations

     It is clear from the findings I have made that having approved the loan of $350,000 to the Corbetts to purchase the Cromer property and informed the Corbetts of that approval, the Bank subsequently decided that the funds would not be provided.  The case of the applicants was put on the general footing that it was the entire transaction in offering the loan from February 1990 and subsequently withdrawing it that was conduct contravening s52 of the TP Act and the applicants rely on s51A.  They refer, in particular, on the judgment of Burchett J in Adour Holdings Pty Ltd (in liquidation) v Commonwealth Bank of Australia (1991) 13 ATPR 41-147.  However the conduct of the Bank in the present proceedings in offering the loan and entering the agreement to lend $350,000 was, in my opinion, unexceptional.  It may be accepted that at an early stage Haswell thought that the loan should not have been offered.  However I am not satisfied that had the Corbetts sold their home, the Bank would not have honoured their commitment to provide the agreed funds.

     There is, however, one aspect of the Bank's conduct that warrants further consideration and it concerns the decision to terminate the loan agreement.  This decision was not communicated to the Corbetts.  The Bank was probably entirely justified, at least in a commercial sense, in deciding to withdraw from the agreement to provide the funds because of the apparently increasingly difficult financial situation of the Corbetts and related businesses and the failure of the Corbetts to sell their Caringbah home.  At the time, 17 May 1990, it was entitled to terminate the loan agreement.  However in the context of considering s52 of the TP Act the Bank was, in my opinion, plainly obliged to inform the Corbetts of that decision.  It is now settled that if a corporation fails to disclose facts or matters that failure may, in context, constitute conduct which is misleading or deceptive for the purposes of s52.  As Black CJ said in Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 32:

      "In this case, as in every case in which s52 is relied upon, this was a question of fact that could only be determined - as the judge did determine it - having regard to all the relevant circumstances.

 

      Silence is to be assessed as a circumstance like any other.  To say this is certainly not to impose any general duty of disclosure; the question is simply whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive or that is likely to mislead or deceive.  To speak of "mere silence" or of a duty of disclosure can divert attention from that primary question.  Although "mere silence" is a convenient way of describing some fact situations, there is in truth no such thing as "mere silence" because the significance of silence always falls to be considered in the context in which it occurs.  That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed."

 

 

     The failure of the Bank to inform the Corbetts of its decision to withdraw from the agreement to provide the loan of $350,000 might, in other circumstances, constitute conduct contravening s52.  The silence of the Bank might have left the Corbetts continuing to believe the loan was available at least until the second contract was terminated by the vendors on 4 June 1990.

     However, as I have just discussed, by the time the Bank made the decision on 17 May 1990 to decline the loan, the nature of the transaction had changed materially.  The Corbetts were trying to finance the purchase by entirely different means and for a different purpose.  Haswell and Saunders were aware of this.  Whether the Corbetts knew or not that the $350,000 was no longer available was no longer material.  I find it difficult, in these circumstances, to see how the conduct of the Bank of not informing the Corbetts of the decision to decline the loan is deceptive or misleading conduct.  It is not, in my opinion, conduct contravening s52 of the TP Act.

     Even if it were it must be remembered that the statutory cause of action of the applicants is brought under s82 of the TP Act.  As earlier discussed the gist of that action is loss or damage.  As a matter of fact, the Corbetts never sought to be provided with the funds which the Bank had earlier agreed to lend.  It would, in my opinion, have only been in those circumstances that the Corbetts would have, in the context of the facts as I have found them, arguably suffered loss as a result of the undisclosed decision to withdraw from the agreement to provide the funds.  Thus the Corbetts have failed to establish any loss resulting from any contravening conduct.

     The application for damages under s82 has not been made out.  I dismiss the application with costs.

I certify that this and the preceding fifty seven (57) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Moore.

Associate:                   ......................

Dated:                       ..../..../....

                         APPEARANCES

Counsel for the Applicants:           Mr C Stewart

Solicitor for the Applicants:              Dennis & Co

Counsel for the Respondent:           Mr C Harris

Solicitor for the Respondent:              Simpson & Harrison Solicitors

Dates of Hearing:                     25, 26, 27, 28 and 29 July 1994, 14, 15 and 16 November 1994 and 23 March 1995.