FEDERAL COURT OF AUSTRALIA
TRADE PRACTICES - Trade Practices Act 1974 (Cth), s 52 -purchase of shopping centre by applicants - respondent was mortgagee of the shopping centre - vendors of centre were receivers appointed by respondent - respondent provided finance to applicants which enabled applicants to buy the centre - sale of centre alleged to be at an overvalue - whether process of effecting the sale of the centre and approving finance misleading or deceptive course of conduct by respondent.
EQUITY - fiduciary relationships - banker and customer - whether respondent assumed fiduciary responsibility for the applicants - whether fiduciary obligations can be consistent with alleged fiduciary’s own commercial self-interest - where negotiations at arm’s length - where applicants had independent professional advice.
EQUITY - unconscionable conduct - banker and customer - whether applicants under special disability or disadvantage - whether material failure to disclose information.
NEGLIGENCE/BREACH OF CONTRACT - allegations of loss and damage suffered by reason of breach of duty of care by respondent - whether respondent had obligation to provide to the applicants investment advice - whether respondent had obligation to ensure applicants made wise investment decision - whether such obligations are implied in a banker/customer relationship.
Trade Practices Act 1974 (Cth), ss 52, 82
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, cited
Breen v Williams (1994) 35 NSWLR 522, cited
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447, cited
National Australia Bank Ltd v Nobile (1988) ATPR 40-856, cited
Commonwealth Bank of Australia v Smith (1991) 102 ALR 453, distinguished
Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371, cited
Lenin v Australian Bank Limited (unreported, Cole J, NSW SC, 21 June 1991), applied
Meagher Gummow & Lehane, Equity, Doctrines & Remedies 3rd Ed.
Finn, “Contract and the Fiduciary Principle” (1989) 12 UNSWLJ 76
TRUEBIT PTY LTD v
WESTPAC BANKING CORPORATION
NG 456 of 1996
BRANSON J
SYDNEY
27 NOVEMBER 1997
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IN THE FEDERAL COURT OF AUSTRALIA |
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BETWEEN: |
TRUEBIT PTY LIMITED First Applicant
EDMUND JOHN CONROY Second Applicant
JILLIAN CONROY Third Applicant
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AND: |
WESTPAC BANKING CORPORATION Respondent
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DATE OF ORDER: |
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WHERE MADE: |
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THE COURT ORDERS THAT:
1. The application be dismissed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
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IN THE FEDERAL COURT OF AUSTRALIA |
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BETWEEN: |
First Applicant
EDMUND JOHN CONROY Second Applicant
JILLIAN CONROY Third Applicant
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AND: |
Respondent
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JUDGE(S): |
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DATE: |
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PLACE: |
REASONS FOR JUDGMENT
INTRODUCTION
This proceeding is concerned with the conduct of the respondent (“Westpac”) in relation to the purchase by the first applicant (“Truebit”) of a shopping centre in the Gold Coast of Queensland and in respect of the provision of finance by Westpac to Truebit and to the second and third applicants (“Mr and Mrs Conroy”).
In a further amended statement of claim (“the statement of claim”) filed in this proceeding, the applicants allege that Westpac engaged in misleading and deceptive conduct in contravention of Part V of the Trade Practices Act 1974 (Cth) (“TP Act”). Although the statement of claim makes reference to the Fair Trading Actsof New South Wales and Queensland, in the event, no reliance was placed on such legislation.
Further, or in the alternative, the applicants allege that they suffered loss or damage occasioned by breach of duty of care by Westpac and by reason of the breach by Westpac of a term of the agreement by which Westpac acted as their banker that Westpac would exercise reasonable skill, care and diligence in providing them with advice in relation to banking and financial and investment matters. Finally, they allege unconscionability under s 51AA of the TP Act and in equity, and breach of fiduciary obligations by Westpac. An allegation of fraud against Westpac was not pursued.
The relief sought by the amended application which remained of relevance at the conclusion of the hearing is as follows:
“A declaration that:
5.A1 Westpac has, in trade and commerce, engaged in conduct that in unconscionably [sic] and/or in contravention of section 51AA of the Trade Pracices [sic] Act, 1974:
5.1 Westpac holds all interest, charges and other monies received from Truebit and the Conroys in respect of the Biggera Waters Bill Facility, the Biggera Waters Mortgage, the Truebit Charge and the Buena Vista Mortgage and all other moneys paid to Westpac from the proceeds of sale of assets pleaded above on trust for Truebit and the Conroys as the case may be;
5.2 Westpac holds the Biggera Waters Mortgage, the Mosman Mortgage, the Guarantee and the Truebit Charge and all its rights and powers thereunder on trust for Truebit and the Conroys as the case may be;
5.3 Westpac is bound to account to and to pay to Truebit and the Conroys as the case may be all interest, charges and other monies received from Truebit and the Conroys in respect of the Biggera Waters Bill Facility, the Biggera Waters Mortgage, the Truebit Charge and the Buena Vista Mortgage and all other moneys paid to Westpac from the proceeds of sale of assets pleaded above and all other profits made by Westpac therefrom;
5.4 Westpac is liable to pay compensation for breach of duty and obligation and is liable in damages for breach of contract, negligence, and under section 82 of the Trade Practices Act, 1974 and section 68 of the Fair Trading Act, 1987 and section 99 of the Queensland Fair Trading Act, 1989.
6. An order and injunction restraining the Respondent from by itself its servants and agents, acting and conducting itself in contravention of section 51AA and section 52 of the Trade Practices Act, 1974 and section 42 of the New South Wales Fair Trading Act, 1987 and section 38 of the Queensland Fair Trading Act, 1989 in relation to the Securities or any of them or their enforcement of the Securities or any of them.
7. Orders under section 87 of the Trade Practices Act 1974 and under section 72 of the New South Wales Fair Trading Act 1987 and under section 100 of the Queensland Fair Trading Act 1989.
8. Damages under section 82 of the Trade Practices Act 1974 and under section 68 of the New South Wales Fair Trading Act 1987 and under section 99 of the Queensland Fair Trading 1989.
9. Compensation including compensation for breach of fiduciary duty and an account of profits.
10. Damages for breach of contract.
11. Damages for negligence and negligent advice. ”
FINDINGS OF PRIMARY FACT
Mr and Mrs Conroy are long-standing customers of Westpac both personally and through various companies with which they are associated. Their respective parents had also banked with Westpac and its predecessor bank, the Bank of New South Wales.
The branch of Westpac at which Mr and Mrs Conroy generally undertook business banking was the King and George Streets branch. In about June 1991, Maxwell John Carrick (“Mr Carrick”) became Senior Commercial Manager at the King and George Streets branch. In that position, he was responsible within Westpac for the accounts of the applicants.
Mr Conroy obtained a Bachelor of Economics degree from the University of Sydney in 1972. He has at all material times been licensed in New South Wales as a real estate agent and auctioneer and as a valuer of residential property in the County of Cumberland, NSW. He has had many years’ experience in the Sydney metropolitan area in the leasing, management and sale of residential and commercial properties. Mr and Mrs Conroy have in recent years together been involved in property development and investment as the managers of family companies.
From about February 1991, Mr Conroy started looking for investment opportunities in residential or retail property. Mr Conroy gave evidence that, in doing so, he was interested in properties up to a total value of $4 million. He did not draw a distinction between his own money, or that of himself and his wife, and the money of a family investment company Conroy’s Pineapple Crunch (George Street) Pty Ltd (“Pineapple Crunch”).
I do not accept the evidence of Mr Conroy concerning the budget of $4 million for the purchase of investment property in July 1991. Uncontradicted evidence discloses that prior to his investigation of Biggera Waters, Mr Conroy, as secretary of Pineapple Crunch, made offers in excess of $7 million for the Noosa Junction Shopping Centre in Noosa, Queensland. On 10 October 1991, again as secretary of Pineapple Crunch, Mr Conroy made an unconditional offer, subsequently withdrawn, of $6.65 million for the Noosa Junction Shopping Centre. Moreover, in March 1992, after the purchase by Truebit of Biggera Waters, Mr Conroy made an offer to purchase another shopping centre in Queensland, the Valley Shopping Centre in Gladstone. The offer was conditional on finance. Mr and Mrs Conroy sought the necessary finance in their own names from Westpac. Westpac declined to provide such finance. It appears that approaches by Mr Conroy to other banks for finance for the purchase were also unsuccessful. However, in November 1992, Mr and Mrs Conroy entered into a contract to purchase land in Brisbane which they regarded as suitable for the erection of townhouses. The purchase price was $500,000.
The above evidence is, in my view, incompatible with Mr Conroy’s evidence that his budget for property investment at about the time of the purchase of Biggera Waters was $4 million. I find that Mr and Mrs Conroy did not have such a budget and that neither of them suggested to any officer of Westpac that they did. I note that in an aide memoire prepared by Mr and Mrs Conroy for a meeting with Sir Robert Norman, which is discussed in more detail below, reference is made to a budget of $4 million. However, whatever Mr and Mrs Conroy may have believed at the time that such aide memoire was prepared, I am satisfied that in 1991 they did not feel restrained by any such budget.
In July 1991, Mr Conroy was in contact with Kelvin Nickalls (“Mr Nickalls”) of Baillieu Knight Frank Gold Coast Pty Limited (“BKF”). The statement of claim alleges that BKF was at this time acting as the agent of Westpac. This allegation was not maintained at the time of final submissions. The evidence plainly demonstrated that BKF was requested by Mr Conroy, or by his consultants, Jackson’s Property Consultants, to negotiate with the vendors of Biggera Waters on Mr Conroy’s behalf. I note that BKF and Jackson’s Property Consultants were appointed by the receivers of General Ford (Aust) Pty Ltd (“General Ford”) as real estate agents for the purpose of the sale of Biggera Waters on about 24 October 1991 (i.e., after the receivers’ acceptance of Mr Conroy’s offer to purchase Biggera Waters) so as to allow them to recover a commission on the sale (see Auctioneers & Agents Act 1971 (Qld) s 76).
Mr Nickalls provided to Mr Conroy by facsimile transmission some information concerning Biggera Waters. A meeting, held early in August 1991 at BKF’s Gold Coast office between Mr and Mrs Conroy, Mr Nickalls and Paul Randall (“Mr Randall”) of BKF, followed. Mr Conroy’s evidence is that at that meeting either Mr Nickalls or Mr Randall said to him words to the effect:
“Biggera Waters has been on the market at $6.6 million for some time and the price is negotiable. Biggera shows a high return of 14.4%. The property has been in receivership for some time with Westpac as mortgagee in possession and KPMG as Receivers and Managers for Westpac.”
Mr Conroy also gave evidence that at this meeting Mr Nickalls said words to the effect:
“The shopping Centre owners went into receivership due to failings of other business ventures such as property developments and importing ventures. The actual Centre is a great Centre.”
At the above meeting, Mr Nickalls handed to Mr Conroy a property investment report on Biggera Waters which quoted a fully let income for the shopping centre of over $1,107,000. Mr Nickalls did not seek to contradict Mr Conroy’s evidence as to what was said at the above meeting and I accept such evidence.
The statement of claim alleges that Mr and Mrs Conroy showed to Mr Carrick the property investment report concerning Biggera Waters and that Mr Carrick “did not question the accuracy of the report”. Mr Conroy did not give evidence that he gave this report to Mr Carrick and the evidence as a whole discloses no reason to think that he did. However, it is plain that he did give to Mr Carrick a report on Biggera Waters prepared by his own consultants, Jackson’s Property Consultants. A copy of this report was annexed by Mr Carrick to the formal application for Westpac to provide finance for the purchase of Biggera Waters. Much of the information contained in the report provided by Mr Nickalls is repeated in the Jackson’s Property Consultants report. However, in the circumstances, nothing was open to be reasonably concluded from Mr Carrick’s apparent failure to question the accuracy of a report prepared for Mr and Mrs Conroy by their own consultant.
Mr Conroy further gave evidence that on his return to Sydney after the above meeting he spoke to Mr Carrick about Biggera Waters, and that Mr Carrick said words to the effect:
“I know the Centre very well, Karen’s [Mr Carrick’s wife] parents live at Runaway Bay. They and their friends prefer shopping at Biggera Waters to Runaway Bay because of the undercover parking and lift access.”
Mr Carrick agreed in cross-examination that sometime in 1991 he told Mr Conroy that his [ie Mr Carrick’s] father-in-law, who lived at Runaway Bay, said that he preferred to shop at Biggera Waters. Mr Carrick, who is disclosed by the evidence to have kept good records of his business dealings with clients, made no note of this conversation. I find, on the balance of probabilities, that a conversation to the effect of that deposed to by Mr Conroy took place between Mr Conroy and Mr Carrick in about mid-August 1991. However, I find that the conversation was in the nature of casual chat and that it did not take place as part of any business dealing between the two men concerning the possible provision of finance by Westpac for the purchase of Biggera Waters.
On 28 August 1991, Mr and Mrs Conroy visited Biggera Waters for the first time. I reject the evidence of Mr Conroy that the reason why they had not visited Biggera on their previous visit to the Gold Coast was that they considered it to be above their budget and they had only decided to pursue it because of what Mr Carrick had said. First, as is mentioned above, their conduct both before and after the purchase of Biggera Waters was inconsistent with their having a $4 million budget. Secondly, Mr Conroy’s evidence concerning the BKF meeting in early August 1991 suggests against their having no interest in Biggera Waters at that time. In addition, Mr Conroy is an intelligent and educated man with considerable experience in the real estate industry. I find it impossible to believe that he would be induced to pursue the possibility of purchasing a shopping centre, which he had been told was on the market at a price of $6.6 million, by anyone telling him, in effect, and at its strongest, that one couple and their friends liked to shop there.
Mr Conroy gave evidence that, in the first week of September 1991, he and Mrs Conroy met with Mr Carrick at the King and George Streets branch of Westpac. A Westpac diary note dated 11 September 1991, which refers to Mr Conroy advising of a matter on 6 September 1991, tends to confirm that Mr Conroy was in contact with Westpac on 6 September 1991. I note, however, that Mr Conroy’s diary for 1991 does not record any meeting with Westpac on this day. Nor is there a Westpac diary note of such a meeting. Indeed, the evidence establishes that on 6 September 1991, Mr Conroy had a meeting in Brisbane to which reference is made below. The likely position, in my view, is that Mr Conroy telephoned Westpac on 6 September 1991.
Mr Conroy’s evidence, supported by Mrs Conroy’s evidence, was that at a meeting on 6 September 1991, Mr Carrick said to them words to the effect:
“Biggera is a sound centre and has a strong cash flow. Westpac likes to look after its own good customers and we like to look after our own and we would like to fund it for you, let me look into it. This is a very good investment and will set you up for life.”
Mr Carrick denied that he said words to the above effect on 6 September 1991 or at all. I accept Mr Carrick’s evidence that, on 6 September 1991, he knew nothing about the cash flow of Biggera Waters and had no idea whether it was a sound shopping centre. Mr Carrick did not strike me as the sort of person who would offer investment advice without having a sound foundation on which to base such advice.
Moreover, other evidence tends to support Mr Carrick’s denial. First, Mr Conroy’s diary for 1991 does not record Mr Carrick saying words to the above effect. Indeed, as mentioned above, it does not even record a contact with Westpac on that day, and I note that an inspection of the diary shows that Mr Conroy did, at least on occasions, record in his diary important matters conveyed to him. The “diary notes” kept by Mr Conroy outside of his diary do not include any note of a conversation with Mr Carrick on 6 September 1991.
Moreover, notes prepared by Mrs Conroy, in association with her husband, in February 1996, as an aide memoire for a meeting with Sir Robert Norman, make no reference to any assertions by Mr Carrick as to the soundness of the centre. The late Sir Robert Norman was a former senior executive of Westpac whom Mr and Mrs Conroy visited for the purpose of obtaining advice with respect to their dealings with Westpac. The notes make mention of Mr Carrick’s telling them that Biggera Waters was his parents-in-law’s preferred destination in the Runaway Bay area, but do not mention words to the effect of those alleged by Mr and Mrs Conroy to have been said by Mr Carrick on 6 September 1991. In view of the respective importance of these two statements which are alleged to have been made by Mr Carrick, this omission calls for explanation. The explanations given by Mr and Mrs Conroy respectively are in conflict. Mr Conroy in re-examination explained that it was not until after the meeting with Sir Robert Norman that he appreciated that Mr Carrick’s advice was misleading. This explanation sits uncomfortably with a diary note made by Mr Conroy before the date of the meeting with Sir Robert Norman which is critical of Westpac’s role in the purchase by Truebit of Biggera Waters. Mrs Conroy, on the other hand, gave evidence in cross-examination to the effect that she knew at the time of the meeting with Sir Robert Norman that Mr Carrick had given bad advice by saying that Biggera Waters would set her up for life and that she or her husband might well have told Sir Robert Norman as much.
I find that Mr Carrick did not on 6 September 1991, or at all, say words to Mr and Mrs Conroy, or either of them, to the effect: “Biggera Waters is a sound shopping centre and has a strong cash flow” or “this is a very good investment and will set you up for life”. Mr Carrick acknowledged that at some time he made a statement to Mr Conroy to the effect: “Westpac likes to look after its good or long-standing customers.” I note that Mrs Conroy’s notes do make mention of this representation which again provides indirect support for the conclusion that the other, and more powerful representations, allegedly made on 6 September 1991 by Mr Carrick, were not made.
On Friday 6 September 1991, Mr Conroy had a meeting in Brisbane with Mr Nickalls, Russell Jackson (“Mr Jackson”) of Jackson’s Property Consultants, a firm retained by Mr Conroy to provide him with advice concerning the purchase of a shopping centre, and Geoffrey Grady (“Mr Grady”) of the firm KPMG, which acted as the receivers of General Ford. During this meeting, Mr Conroy offered to purchase Biggera Waters first for the sum of $6.4 million, and later for the sum of $6.6 million. Neither offer was accepted.
Mr Conroy gave evidence that at this meeting Mr Nickalls said words to the effect:
“You must also consider that the adjoining land could be sold immediately, thus in effect reducing the purchase price. That land would be worth in the vicinity of $700,000.00 to $1 million.”
Mr Nickalls did not deny saying words to the above effect and I find that he did.
On or about 9 September 1991, Mr Conroy first spoke to Mr Carrick’s assistant John Minihan (“Mr Minihan”), and then wrote a letter, directed to Mr Minihan’s attention, concerning Biggera Waters. The substantive portion of the letter, which is undated, reads as follows:
“We have, this afternoon, withdrawn any offers previously made on the above property. We do however have a continuing interest in the property and may be inclined to re-commence negotiations again, if the current status of the property could be ascertained. Specifically in regard to
1. Whether the receiver is currently offering the property for sale?
2. If the property is for sale what is the asking price?
We do not wish to compromise the normal procedure Westpac follows in its relation with receivers, however, if it is not inappropriate for you to pass this information on to the appropriate person at Westpac’s Group Loans Management Department and seek some indication of Westpac’s attitude to the sale of this property, we would appreciate it very much, both as customers and shareholders.”
Mr Conroy signed this letter as a Director of Pineapple Crunch. The reply which Mr Conroy received from Mr Minihan was that:
“The receivers are looking after it. It is up to them what they do with it.”
Mr Conroy gave evidence that, in about the second week of September 1991, Mr Carrick telephoned him and said to him words to the effect:
“Westpac is happy to fund the purchase however you should check whether another financier might do it on more favourable terms. However we will be there at the end of the day.”
Mr Conroy’s evidence was that he regarded this statement by Mr Carrick as a serious commitment by Mr Carrick that Westpac would finance the purchase of Biggera Waters without requiring a mortgage of Mr and Mrs Conroy’s house. He further gave evidence that contracts for the sale and purchase of Biggera Waters were exchanged on the basis that Mr Carrick had said that Westpac would fund the purchase of the centre for them. Mr Carrick denies saying words to the effect alleged by Mr Conroy.
Mr Conroy agreed in cross-examination that he, like his wife, would rather not have mortgaged his family home. However, he acknowledged that, on 23 September 1991, he contacted a firm of finance brokers and, on a date before the exchange of contracts for Biggera Waters, wrote to that firm setting out what he needed to borrow in order to purchase Biggera Waters and what security he could offer. Included in the security which he offered was Mr and Mrs Conroy’s home. Under cross-examination, Mr Conroy stated that the reason why he pursued other financiers whom he understood would require a mortgage of his home rather than accepting what he understood was Mr Carrick’s offer of finance from Westpac without a mortgage of the family home was:
“Well, because we didn’t have a formal finance approval from Westpac, we just had an offer from Carrick that Westpac would fund it.”
This answer, in my view, reveals that Mr Conroy was well aware at the relevant time that Mr Carrick did not have authority to bind Westpac to provide finance of the order required for the applicants to purchase Biggera Waters, and was well aware of the significance of his not holding a formal finance approval from Westpac.
Moreover, Mr Conroy acknowledged that the solicitors who represented him in connection with the purchase of Biggera Waters wrote to the solicitors for the vendor on the day before the date of the contract for sale and purchase and advised them that “our client is being financed by Macquarie Bank Ltd” and that “we also understand that our client already has a firm commitment from Macquarie Bank”. In fact, on Mr Conroy’s evidence, which in this regard I accept, he did not make formal application to Macquarie Bank for finance to purchase Biggera Waters until 4 or 5 November 1991. Nonetheless, I find that as at 4 November 1991, the date of the exchange of contracts for the sale and purchase of Biggera Waters, Mr Conroy was acting on the basis that Macquarie Bank, and not Westpac, would provide the finance for the purchase of Biggera Waters. Additional support for this view is found in a Westpac diary note of 8 November 1991 which records:
“We had previously discussed Bank finance and as a guide, I told John a figure of 60% of market value would be the usual limit of our lending. He requires something like $5,000 [ie $5 million] which is more like 70% and was not going to approach us.”
I find that Mr Carrick did not at any time before the issue by Westpac on 27 December 1991 of a formal approval, assure Mr Conroy that Westpac would provide the necessary finance for him to purchase Biggera Waters or say words to the effect: “Westpac is happy to fund the purchase.” I find that Mr Carrick may well have indicated to Mr Conroy that Westpac would be happy to look at funding the purchase. However, whatever may have been said by Mr Carrick to Mr Conroy on this topic, I find that Mr Conroy did not understand it as an offer to provide finance without requiring a mortgage of his family home, or indeed, as any commitment by Westpac to provide finance.
Mr Conroy further gave evidence that, in mid-September 1991, Mr Carrick said to him words to the effect:
“The undercover parking and lift are a big attraction of the Biggera Centre. The land across the road isn’t necessary to the Centre as people have the multi-level car park”
and
“the sale of this redundant land could bring the purchase price of the centre within Westpac’s acceptable lending ratio or the sale of the land could fund some of the necessary upgrading”.
These statements by Mr Carrick are said by Mr Conroy to have encouraged him to increase his offer for Biggera Waters.
Mr Carrick denied ever telling Mr Conroy that the vacant land adjacent to Biggera Waters was not required or necessary for the successful operation of Biggera Waters. Mr Carrick’s evidence was that Mr Conroy informed him that the vacant blocks were used by shoppers for parking, but that the Gold Coast City Council was not happy with this. I accept this evidence which is consistent with the fact that the zoning of the vacant land at all relevant times was “Residential B”.
I find that Mr Carrick may well have, at some time, told Mr Conroy that the undercover parking and lifts were an attraction of Biggera Waters. However, I find that he did not at any time express a view as to the desirability or otherwise of the sale of the vacant land. I am not satisfied that anything said by Mr Carrick encouraged Mr Conroy to increase his offer of $6.6 million for Biggera Waters.
On 16 September 1991, Mr and Mrs Conroy offered to purchase Biggera Waters for $6.8 million. This offer was rejected on 18 September 1991.
On 2 October 1991, Mr Jackson provided to Mr Conroy by facsimile transmission a single sheet, apparently received by him from KPMG, which purports by reference to rentals received and the rental value of vacant areas to calculate a value for Biggera Waters of $7,251,314. The methodology utilised in calculating the figure of $7,251,314 is apparent on the face of the sheet.
By letter dated 4 October 1991, Mr Conroy submitted to the receivers and managers of General Ford an offer to purchase Biggera Waters for $7.15 million. This offer was accepted, and contracts naming Truebit as the purchaser of Biggera Waters were exchanged on 4 November 1991.
Mr Conroy gave evidence that he believed, and relied on, the investment report concerning Biggera Waters that he received from Mr Nickalls and the statements made to him by Mr Nickalls, Mr Carrick and Mr Grady. I understand him to have included in his reference to statements made by Mr Grady the single sheet referred to above which he described as a valuation. It was for this reason, he asserted, that, on 4 October 1991, he and his wife submitted an offer of $7.15 million to purchase Biggera Waters.
Mrs Conroy’s evidence as to the offer which she and her husband made to purchase Biggera Waters for $7.15 million is to a somewhat different effect. By an affidavit sworn on 28 May 1997, Mrs Conroy gave evidence of Mr Carrick having said to her in September 1991 words to the effect: “Biggera will be a much better investment than Westpac shares”, and that in response to her asking if he was sure: “I am sure. Biggera will set you up for life.”
I accept Mr Carrick’s denial that he ever told either of Mr and Mrs Conroy that Biggera Waters was a sound investment and that its purchase would set them up for life. I do not accept that the above conversation to which Mrs Conroy deposed took place. In view of Mrs Conroy’s assertion that:
“I placed a considerable weight on Mr Carrick’s comments when discussing whether to proceed with the purchase with my husband. These comments particularly influenced my decision because Mr Carrick had stated that the Biggera investment was much better than the shares we held with his own employer and bank”,
the absence of any reference to the alleged statement by Mr Carrick in the statement of claim in this matter is of particular significance. I regard Mrs Conroy’s evidence as to this alleged statement as, at best, the result of a reconstruction in her mind of the events of 1991 in an endeavour to help explain the taking of what proved to be a disastrous investment decision, and, at worst, a fabrication.
In paragraph 3 of an affidavit sworn on 10 July 1997, Mrs Conroy refers to an affidavit sworn earlier by her husband, and to the paragraphs of that affidavit in which Mr Conroy deposed to Mr Carrick having said words to the effect that he knew Biggera Waters well, and that his parents-in-law and their friends preferred to shop there rather than at Runaway Bay because of the undercover parking and lift access; that Biggera Waters was a sound centre with a strong cash flow; that Westpac liked to look after its customers and would like to fund it for the Conroys; and that Biggera Waters was a good investment and would set the Conroys up for life; and that the land across the road wasn’t necessary and could be sold. In Mrs Conroy’s affidavit, she goes on to state:
“In offering to purchase Biggera Waters Shopping Centre and in deciding to proceed with that purchase I relied on the representations made by Mr Carrick referred to in paragraph 3 above.”
As is mentioned above, I find that Mr Carrick did not say to either Mr or Mrs Conroy that Biggera Waters was a sound centre with a strong cash flow, or that Biggera Waters was a good investment and would set Mr and Mrs Conroy up for life, or that the land across the road wasn’t necessary and could be sold.
On or shortly after 28 November 1991, Mr and Mrs Conroy submitted a formal application to Westpac for finance to enable the purchase of Biggera Waters to be completed. By letter dated 27 December 1991, Westpac confirmed its approval of a commercial bill discount facility by way of a bill acceptance line or fixed rate bill discount line for $6.2 million in order to assist with the purchase of Biggera Waters. The offer was addressed to Pineapple Crunch and named Truebit as the borrower. The offer required the security of a registered Queensland bill of mortgage by Truebit over Biggera Waters and a registered mortgage over Mr and Mrs Conroy’s home at 6 Buena Vista Avenue, Mosman, NSW.
Mr Conroy gave evidence that the first time that he became aware that Westpac did, or even might, require a mortgage over his Mosman home was when he and Mrs Conroy met with Mr Carrick during the second week in November 1991. He stated that on that occasion Mr Carrick said to him words to the effect:
“The property 6 Buena Vista Avenue, Mosman may need to be included as security on the loan.”
Mr Conroy’s evidence, not expressly confirmed by Mrs Conroy, was that Mrs Conroy said words to the effect:
“I am very concerned that this property should be included as security. It was never intended to be included and Contracts have been exchanged on the basis that Westpac would lend on the security of the Centre”
and Mr Carrick replied:
“This will set you up for life.”
A Westpac diary note records a meeting apparently between Mr and Mrs Conroy and Mr Carrick on 8 November 1991. This diary note includes the following passage, which has been set out in part above:
“We had previously discussed Bank finance and as a guide, I told John a figure of 60% of market value would be the usual limit of our lending. He requires something like $5,000 which is more like 70% and was not going to approach us. He has enquired of at least two other lenders and they must have required family home also as security. I advised him if he was prepared to do this, we would be pleased to consider. Although Mrs Conroy is a little reluctant to mortgage the family home, she would prefer to have it with a familiar lender, like us.”
The words allegedly said by Mrs Conroy as to the basis on which contracts were exchanged are, on my findings, contrary to the fact. I find that they were not said. I have already found that Mr Carrick did not at any time say to Mr and Mrs Conroy that the purchase of Biggera Waters would set them up for life.
The applicants place reliance on the conduct of Westpac in relation to the preparation, submission and approval by Westpac of the application for the provision of finance to facilitate the purchase of Biggera Waters by Truebit. They contend that such conduct is to be seen as cumulative upon the conduct of Mr Carrick of which they make complaint. In their outline of final submissions, they identify the relevant conduct of Westpac in this regard as follows:
“2.2 The preparation, submission and approval by the Bank of the Applicant’s application for finance in the course of which
. the Bank failed to provide and consider and to take proper steps to provide relevant information concerning valuation, offers, competitive shopping centres actual or potential and the effect of sale of the vacant land on Biggera Waters,
. the Bank deliberately chose not to do so,
. the Bank dealt with, considered and granted the Applicants’ application for finance in its own interests not as banker financier to the Applicants its clients (which would have been permissable [sic] and expected and the normal course) but in its own interests as outgoing mortgagee/lender exercising power of sale in a receivership and in the interests of another customer,
. the Bank would not have otherwise put forward, and recommended or approved the Applicants’ application for finance.
The Bank is responsible for the totality of the conduct of its relevant officers.
2.3 The Bank as the Applicants’ banker financier thereafter facilitated and effected settlement of the purchaser of Biggera Waters by the First Applicant at the end of January 1992 and took as security the mortgages of Biggera Waters and the second and third Applicants’ Clifton Gardens Mosman property.
2.4 The Bank thereafter failed to disclose and concealed its conduct in paragraph 2.2 above, and affirmed its entitlement to act as it had done, by requiring further security (the Truebit Equitable Charge), by granting further accommodation, by failing to prevent the Applicants expending capital for improvements to Biggera Waters, by permitting the incurring of further indebtedness on the relevant accounts, and by requiring certain action concerning Biggera Waters, knowing the Applicants did not have and could not obtain funds to enable Biggera Waters to prevent its value as security or otherwise deteriorating.”
The fact that the conduct alleged in the above paragraphs took place was not seriously contested by Westpac. What was contested was its relevance in the context of this proceeding. The conduct of “the Bank” referred to in the above paragraphs was not conduct which it was contended that Mr Carrick had engaged in; the information which it is suggested ought to have been provided to Mr and Mrs Conroy was not known to Mr Carrick; it was not Mr Carrick who granted the applications for finance.
However, there were officers of Westpac who knew more about Biggera Waters than Mr Carrick did. In particular, James Ronald Christie (“Mr Christie”), who was, between 1989 and 1992, a manager with Loans Management, Group Credit Policy and Control in Sydney, held quite detailed information concerning Biggera Waters. Within the portfolio of accounts for which Mr Christie had responsibility was the account of General Ford, the registered proprietor of Biggera Waters. Mr Christie was therefore the officer of Westpac who received the reports of the receivers and managers appointed to General Ford. He also sought and obtained professional valuations of Biggera Waters and conducted credit reviews of General Ford.
Reports from the receivers and managers dated 14 March 1989, 26 May 1989 and 22 August 1990 are in evidence. The report dated 14 March 1989 contains a summary of the then current offers to purchase Biggera Waters. The offer prices range between $9.6 million and $7.5 million. The highest of these is shown to be subject to special terms, including being subject to finance, but an offer of $8.05 million is shown which is not subject to special terms. The receivers and managers did not recommend acceptance of this offer if higher offers could result in an agreement for sale and purchase being reached. Their recommendation in that eventuality was that
“the property be withdrawn from the market and prepared for sale.”
An annexure to the report of 26 May 1989 shows three offers to purchase Biggera Waters, all for a price of $8.25 million, but with the terms of offer not finalised. In the body of the report, the receivers and managers report:
“While we continue to receive expressions of interest in the property, we are experiencing great difficulty in finding an offeror willing to commit himself to a contract on acceptable terms. We recommend that unless we receive a suitable offer by 31st May, 1989, the property be withdrawn from the market until all of the problems with it are remedied (see “Certificate ofClassification”).”
The report of 22 April 1990 makes no reference to a certificate of classification. It seems reasonable to assume that no problems remained in that area. The report notes that “in recent days, Hillier Parker have received six (6) new expressions of interest”. The schedule referred to in the report as showing details of the expressions of interest is not itself in evidence.
In the meantime, by report dated 4 December 1989, Hillier Parker (Queensland) Pty Ltd (“Hillier Parker”) had reviewed their valuation of Biggera Waters Shopping Centre with the adjacent land and varied such valuation downwards from $7.78 million to $7.6 million. Annexed to that report was a schedule of anticipated capital works requirements for Biggera Waters. The schedule has the following opening paragraph:
“In an effort to retain the current position of the shopping centre in the marketplace, certain capital works will be required to enable [Biggera Waters] to compete with its newer opposition of:-
Runaway Bay
Australia Fair
Labrador Park
Harbour Town (Proposed)
Paradise Point
Helensvale (Proposed)
We comment briefly upon our perception of enhancement works either of a cosmetic or necessary nature. No costings have been sought in the majority of cases at this time.”
By letter dated 6 December 1989, the receivers and managers of General Ford had forwarded for Mr Christie’s attention a copy of an updated valuation of Biggera Waters prepared by Jones Lang Wootton. The valuation, which was of the shopping centre with the adjacent land, was $8.0 million.
On 8 December 1989, Biggera Waters failed to sell at auction, being passed in at $6.5 million. By letter dated 3 January 1990, forwarded for Mr Christie’s attention, the receivers and managers confirmed telephone advice that Westpac as mortgagee had no objection to the receivers and managers entering into a contract for the sale of Biggera Waters (presumably the shopping centre and adjacent vacant land) for the sum of $7.2 million.
A letter, dated 30 March 1990, from the receivers and managers, again forwarded for Mr Christie’s attention, indicates that the offer of $7.2 million referred to in the letter of 3 January 1990 was not accepted “pending the resolution of a more favourable offer” in the amount of $7.534 million. It seems that neither offer resulted in a contract of sale and purchase.
By letter dated 24 September 1990 from Hillier Parker to KPMG Peat Marwick, Hillier Parker advised the receivers and managers as follows:
“We have been considering the state of enquiry and the prospect of a revised sale strategy and are confident that real interest can be regenerated in [Biggera Waters] were it offered on alternate terms.
Due to the configuration of the centre and adjacent vacant lands, we are of the opinion that if the vacant land was excised from the sale proposal, the resulting yield would escalate to a level which would encourage reconsideration by prospective purchasers.”
The letter goes on to express the view that an aggregate price of $7 million for the shopping centre and the adjacent land would be fair and reasonable in a declining marketplace.
In March 1991, Jones Lang Wootton valued the shopping centre plus the adjacent land at $6.6 million. Their valuation report commented on significant competition in the locality from “better presented centres with superior access and major tenants”. In March 1991, Hillier Parker also revised their valuation of Biggera Waters. They commented on Biggera Waters being an “older style shopping centre” and identified “major limitations to the value of the property” being its age and design, including the design of the carpark, the relatively short unexpired lease term of the major tenant and increasing competition from other shopping centres in the area. They placed a value of $5.75 million on the shopping centre and $0.5 million on the adjacent vacant land.
Mr Christie’s evidence, which I accept, was that, in about March 1991, he held the view that the valuations of Biggera Waters which he received in March 1991 were a little under the true market value of the shopping centre, which he did not believe had declined to the extent reflected in the valuations. He made handwritten notes at the time on the valuation of Hillier Parker in which he calculated the value of Biggera Waters, at somewhere between $7.0 million and $7.26 million by using lower capitalisation rates than those used by Hillier Parker.
Biggera Waters again failed to sell at auction in March 1991. At this time the reserve was set at $6.6 million and the highest bid received was $4.7 million. On 1 May 1991, Mr Christie recommended to Westpac that Biggera Waters be taken off the market and retained for up to four years before being sold, with the receivers and managers continuing in their management role until further notice. This recommendation received official approval, subject to six-monthly reviews of the position, on 15 May 1991.
Mr Christie was advised by the receivers and managers of each of Mr and Mrs Conroy’s offers to purchase Biggera Waters. He took the view that the offers to purchase for a price of $6.3 million, $6.4 million and $6.6 million were too low and he advised Mr Grady that such offers were not acceptable to Westpac. Mr Christie responded negatively to an enquiry made by Mr Nickalls on behalf of Mr Conroy as to whether Westpac would be prepared to offer finance at a concessional rate if Mr Conroy raised his offer for Biggera Waters. Mr Christie told Mr Nickalls that Westpac was not prepared to do any deals with Mr Conroy.
Mr Christie was essentially unresponsive to an enquiry made by one of Mr and Mrs Conroy’s branch bankers (on the evidence it is not entirely clear who made the enquiry, or indeed, if it was made twice) at Mr Conroy’s request. Mr Christie did not give any indication of a price at which Westpac would be willing to sell Biggera Waters and advised that Mr Conroy should deal with the receiver. Mr Christie took the view that he should remain at arm’s length from Mr Conroy in any dealings concerning Biggera Waters. He understood his duty to be to get the best price for the shopping centre for both the mortgagor, General Ford, and Westpac. I note that the undated letter set out above, written by Mr Conroy to the attention of Mr Minihan on or about 9 September 1991, suggests that Mr Conroy was aware of the normal procedures adopted by Westpac when a receiver appointed by it was negotiating a sale of a property to a customer of Westpac, namely that the arm of the bank dealing with the receiver would not ordinarily provide information to the arm of the bank dealing with the customer, or, indeed, to the customer.
After being advised on 7 October 1991 of the offer made by Mr Conroy to purchase Biggera Waters for $7.15 million, Mr Christie submitted a written recommendation to the Westpac General Manager, Group Credit Policy and Control, that the offer be accepted. This document drew attention to the unsuccessful auction of the property, the unsuccessful attempts to sell by private treaty, the need for an estimated $0.5 million to be spent on the shopping centre in the short term and the likelihood of increased competition affecting the operation of the shopping centre. It described the offer of $7.15 million as “more than reasonable in the present economic climate”, and noted that it was “within striking distance of the $7.20 we had said we would look to a subsidiary paying had we been able to foreclose on the property”.
Mr Christie’s recommendation received approval on 17 October 1991.
The applicants allege that Westpac, by the conduct of Mr Carrick and Mr Christie, used the applicants to establish a false market price for Biggera Waters; that is, that Westpac deliberately acted in a manner calculated to induce Mr and Mrs Conroy to make an offer to purchase Biggera Waters at a price which Westpac knew to be financially unrealistic. This allegation is not, in my view, supported by the evidence. I accept the evidence of Mr Christie, which is supported by contemporaneous business records of Westpac, that Westpac was not in late 1991 pressing to sell Biggera Waters. I also accept his evidence that he did not consider that the value of Biggera Waters had dropped to the extent indicated by the formal valuations which he had received in March 1991. Some significance can, I consider, be attached to the fact that Westpac had contemplated selling Biggera Waters to one of its subsidiaries for $7.2 million.
I find that Mr Christie, whilst he regarded the offer of $7.15 million for Biggera Waters as a good offer from Westpac’s point of view in October 1991, did not regard it as an unrealistic price. In this regard I note that Gregory Robert Fraser, registered valuer of Southport, Queensland, prepared a written valuation of Biggera Waters for Westpac on the instructions of Mr Conroy in connection with Mr and Mrs Conroy’s application for finance. In his valuation report, which is dated 15 January 1992, he stated “[w]e believe the sales evidence supports the purchase price and have valued the property accordingly”. Cliff William Allard, also a Queensland based valuer, undertook a valuation of Biggera Waters on behalf of Truebit for Westpac as at 27 October 1992. He valued Biggera Waters at $8.0 million.
As is mentioned above, after failing to receive finance from other sources, on or about 28 November 1991, Mr and Mrs Conroy made a formal application to Westpac for finance to allow the completion of the purchase of Biggera Waters. Westpac confirmed approval of such finance by letter dated 27 December 1991.
Mr and Mrs Conroy accepted Westpac’s offer to finance the purchase of Biggera Waters, and the sale and purchase of the centre was completed on 29 January 1991. The purchase has proved disastrous from the applicants’ point of view.
CREDIBILITY
It is appropriate for me to record my views as to the respective credibility of the principal witnesses who gave evidence in this proceeding.
As is apparent from my above findings, I entertain reservations as to the credibility of each of Mr and Mrs Conroy. They were both willing, in my view, to tailor their evidence to advance what they saw as their interest in the litigation. Mr Conroy conceded that he had done so by initially refusing to acknowledge that he had retained Mr Jackson to provide him with advice in respect of the proposed purchase of a shopping centre. I do not doubt that each of Mr and Mrs Conroy has been under considerable stress as a result of the events that lie behind this litigation. There may be a real extent to which they have, as a consequence, reconstructed events in their minds to shift responsibility for such events to Westpac. I have found it necessary to treat their evidence cautiously. In a number of instances, as is recorded above, I have rejected their evidence.
By contrast, I have accepted the evidence of the witnesses called on behalf of Westpac. Much of their evidence was able to be supported by contemporaneous documentation. In particular, I found Mr Carrick to be a careful witness and one willing to make concessions.
TRADE PRACTICES ACT
Paragraph 15 of the statement of claim pleads that in reliance upon certain advice, statements, promises and representations of Westpac, Mr and Mrs Conroy:
“15.1 purchased the whole of the issued capital of Truebit and caused themselves to be appointed directors of Truebit;
15.2 caused Truebit to offer to purchase Biggera Waters from Westpac for $7.15 million;
15.3 caused Truebit to exchange contracts for the purchase of Biggera Waters on or about 4 November, 1991;
15.4 made and caused Truebit to make enquires [sic] from other financiers and then to make an application for financial assistance from Westpac;
15.5 agreed and caused Truebit to agree to accept a commercial bill facility for $6.2 million from Westpac upon certain terms and conditions;
Particulars
Westpac Letter of Approval 27 December 1991.
15.6 caused Truebit to complete the purchase of Biggera Waters and to execute Bill of Mortgage Registered No L324877D (the “Biggera Waters Mortgage”) and caused and procured Edmund John Conroy to execute Guarantee dated 24 January 1992 (the “Guarantee”); and
15.7 executed Memorandum of Mortgage Registered Number E918388 (the “Mosman Mortgage”) over their property at 6 Buena Vista Avenue, Mosman in the State of New South Wales (the “Mosman Property”).”
Paragraph 16 of the statement of claim pleads that in reliance upon the same advice, statements, promises and representations of Westpac, Truebit:
“16.1 offered to purchase Biggera Waters from Westpac for $7.15 million;
16.2 exchanged contracts for the purchase of Biggera Waters on or about 4 November, 1991;
16.3 made an application for financial assistance from Westpac;
16.4 agreed to accept a commercial bill facility for $6.2 million from Westpac upon certain terms and conditions (which represented an advance by Westpac of 87% of the purchase price of Biggera Waters) (The “Biggera Waters Bill Facility”); and
Particulars
Westpac Letter of Approval 27 December 1991.”
The “advice, statements, promises and representations” of Westpac identified by the statement of claim for the purposes of paragraphs 15 and 16, above are those referred to in paragraphs 11 and 13 of the statement of claim.
Paragraph 11 contains allegations that Westpac “advised, stated and represented” certain matters on 11 July 1991 by its agent Baillieu Knight Frank. As is stated above, I am satisfied that Baillieu Knight Frank was not on 11 July 1991, or at any relevant time, the agent of Westpac in connection with any matter related to this proceeding.
Paragraph 13 of the statement of claim reads as follows:
“In the period between August and October 1991 the Conroys on a number of occasions, consulted Westpac through Carrick at Westpac’s King and George Streets Branch, Sydney, in his capacity as Senior Manager, Commercial Business, and requested Westpac’s advice as to whether they could and should purchase Biggera Waters. Westpac by Carrick and / or by Mr. J R Christies [sic] (“Christie”), Manager, Loans Management Division of Westpac, advised, stated, warranted, promised and represented to the Conroys:
13.1 That Carrick was personally familiar with Biggera Waters;
13.2 That Biggera Waters was a good sound shopping centre with a strong cash flow;
13.3 That Westpac would advance and continue to advance to the Conroys funds sufficient and adequate to fund the purchase development and commercially viable operation of the Centre by the Conroys;
13.4 That part of the land at Biggera Waters was not required or necessary for the successful operation of Biggera Waters as a shopping centre and could be sold to reduce the level of borrowing to Westpac’s preferred lending ratio.
13.5 That Biggera Waters was available for sale at a price which would ensure a reasonable commercial rate of return of approximately 14.4% per annum on the purchase price with a fully let net income of $1,107,000;
13.6 That Westpac was prepared to sell Biggera Waters for $7.15 million which was a reasonable and fair market price; and
13.7 That Biggera Waters was substantially fully let and there were no substantial problems in maintaining the lease and occupancy rates.”
Neither Mr or Mrs Conroy gave evidence that they consulted Westpac through Mr Carrick “and requested Westpac’s advice as to whether they could and should purchase Biggera Waters”. I find that they did not do so. However, I find that Mr Carrick did advise Mr and Mrs Conroy that he was personally familiar with Biggera Waters. There was nothing in this advice which was misleading or deceptive or likely to mislead or deceive. As to the other matters set out in paragraph 13 of the statement of claim, I find that neither Mr Carrick, nor any other officer of Westpac expressly so advised, stated, warranted, provided or represented to Mr and Mrs Conroy.
However, as is mentioned above, the applicants place reliance upon a course of conduct of Westpac in relation to the process by which Westpac prepared and approved Mr and Mrs Conroy’s application for finance, and facilitated and effected settlement of the purchase of Biggera Waters.
The preparation, submission and approval by Westpac of the applicants’ application for finance took place after contracts naming Truebit as the purchaser of Biggera Waters, and Mr and Mrs Conroy as guarantors of Truebit’s performance, were exchanged on 4 November 1991. It was not until approximately 28 November 1991 that Mr and Mrs Conroy submitted a formal application to Westpac for finance to enable the purchase of Biggera Waters to be completed. No evidence was given by Mr or Mrs Conroy to the effect that they would have failed to honour their obligations under the contract, and caused Truebit to fail to honour its obligations under the contract, if Westpac had provided to them in late November or December 1991 the information concerning Biggera Waters which they now assert that it should have provided to them. I find that they would not have done so. I note that the affidavit evidence of Mr Conroy explicitly states that, at the time of a conversation he had on 18 December 1991, he felt that he and Mrs Conroy were committed to the purchase of Biggera Waters. Moreover, even if it be assumed that, by the course of conduct of Westpac in relation to the preparation, submission and approval of Mr and Mrs Conroy’s application for finance, Westpac “advised, stated, warranted, promised and represented” to Mr and Mrs Conroy the matters identified in sub-paragraphs 13.1-13.7 of the statement of claim, it would be impossible for me to find that any of the things done by Mr and Mrs Conroy earlier than about 28 November 1991 were done in reliance on such course of conduct, that is, that the applicants suffered any loss or damage by such course of conduct (s 82 of the TP Act).
Important matters which, it is alleged by paragraphs 15 and 16 of the statement of claim, were done by Mr and Mrs Conroy and Truebit in reliance on advice provided by Mr Carrick or representations to be implied from the conduct of Messrs Carrick and Christie include:
(a) the purchase by Mr and Mrs Conroy of the whole of the issued capital of Truebit and their appointment as directors of Truebit;
(b) the offer of Truebit to purchase Biggera Waters for $7.15 million; and
(c) the exchange of contracts on 4 November 1991 for the sale and purchase of Biggera Waters.
Each of these matters was done before 28 November 1991. I find that none of them was done in reliance on any representation or conduct of Westpac.
The additional conduct of Mr and Mrs Conroy and Truebit alleged by paragraphs 15 and 16 of the statement of claim to have been undertaken in reliance on conduct of Westpac is as follows:
(a) the making by Mr and Mrs Conroy and Truebit of inquiries of other financiers and the making of an application to Westpac for financial assistance for the purchase of Biggera Waters;
(b) the acceptance by Mr and Mrs Conroy and Truebit of a commercial bill facility for $6.2 million from Westpac on certain terms and conditions;
(c) the completion of the purchase of Biggera Waters and the execution of the Biggera Waters Mortgage and a guarantee by Mr Conroy dated 24 January 1992; and
(d) the execution of the memorandum of mortgage over the property at 6 Buena Vista Avenue, Mosman.
The above conduct, I find, was not done in reliance on conduct of Westpac, but rather by reason of the fact that Truebit and Mr and Mrs Conroy had caused unconditional contracts for the sale and purchase of Biggera Waters to be exchanged on 4 November 1991. They were unsuccessful in obtaining finance from any financier other than Westpac. Their acceptance of Westpac’s offer of finance was, I find, consequential upon their need to meet the legal obligations arising under such contract, and was not undertaken in reliance upon any representation to be implied from the conduct of Westpac as to the financial wisdom of the purchase of Biggera Waters.
The claim of the applicants pursuant to ss 52 and 82 of the TP Act must fail.
FIDUCIARY DUTY
In addition to their claim based upon alleged misrepresentations made by Westpac, the applicants have claimed relief based upon an alleged breach of fiduciary duty by Westpac. In their outline of submissions, the claim based on fiduciary duty is put this way:
“... in the circumstances, the Bank assumed a fiduciary duty or responsibility to the Applicants, notwithstanding its own commercial self interest as lender to the Applicants, creating an expectation in the Applicants that it would give favourable consideration to and deal with their application for finance for Biggera Waters in their interests on all the information reasonably available to it and in the interests of the Bank as their financier, but not in the interests of the Bank as outgoing mortgagee/lender to another customer exercising power of sale in a receivership and in the interests of another customer, General Ford (Australia) Pty Ltd (in receivership). Performance of this duty to the Applicants does not involve breach of any duty to the other customer.”
It is plain that the categories of fiduciary relationships are not closed (Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 esp per Gibbs CJ at 68, Mason J at 96-97 and Dawson J at 141-142). As Kirby P, as he then was, pointed out, in Breen v Williams (1994) 35 NSWLR 522 at 543:
“As society becomes more complex, it is both necessary and appropriate for courts of equity to recognise new fiduciary obligations and to protect incidents of new or changing relationships... .”
However, the central nature of a fiduciary relationship is well established. It was expressed by Mason J in Hospital Products Ltd v United States Surgical Corporation at 96-97 as follows:
“The critical feature of these [ie fiduciary] relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. The expressions “for”, “on behalf of” and “in the interests of” signify that the fiduciary acts in an “representative” character in the exercise of his responsibility, to adopt an expression used by the Court of Appeal.”
In Meagher Gummow & Lehane, Equity, Doctrines & Remedies 3rd Ed. at pp 130-131, the position is put as follows:
“The distinguishing characteristic of a fiduciary relationship is that its essence, or purpose, is to serve exclusively the interests of a person or a group of persons; or, to put it negatively, it is a relationship in which the parties are not each free to pursue their separate interests.”
There is thus an inconsistency between the notion of Westpac assuming a fiduciary duty to the applicants in respect of its treatment of their application for finance and the maintenance of Westpac’s “own commercial self interest as lender”. Moreover, there is a commercial, and possibly conceptual, unreality surrounding the contention that Westpac was entitled to consider the applicants’ application for finance both in the applicants’ interest and in Westpac’s own interest as the proposed lender to the applicants, but not in Westpac’s interest as the mortgagee/lender exercising through a receiver the power of sale in respect of Biggera Waters.
As Professor Finn, as he then was, pointed out in “Contract and the Fiduciary Principle”(1989) 12 UNSWLJ 76 at 96, Australian case law has favoured an approach to the customer/banker relationship based on unconscionable dealing rather than fiduciary principles: see, for example, Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; National Australia Bank Ltd v Nobile (1988) ATPR 40-856.
This is not to say that a bank will never assume fiduciary responsibilities towards a customer. Commonwealth Bank of Australia v Smith (1991)102 ALR 453 shows that circumstances can arise in which a fiduciary relationship will exist between a bank and its customer. The Full Court of this Court, in that case, at 476-477, said:
“A bank may be expected to act in its own interests in ensuring the security of its position as a lender to its customer but it may have created in the customer the expectation that nonetheless it will advise in the customer’s interests as to the vendor of a proposed investment. This may be the case where the customer may fairly take it that to a significant extent his interest is consistent with that of the bank in financing the customer for a prudent business venture. In such a way a bank may become a fiduciary and occupy the position of what Brennan J has called “an investment adviser”: Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371 at 384-5.
...
The present case ... is not one where one would properly describe the parties as acting in a commercial transaction at arm’s length and each with the assistance of fully independent professional advice. Such considerations would be of significance in tending to show the absence of a fiduciary relationship ... . The starting points for consideration of the present problem are the findings that Mr Dungow [a bank officer] assumed the role of introducing the parties and bringing them together, that he acted as the respondents’ financial adviser in the matter, and that they evinced complete faith in him.”
In contrast to the circumstances out of which the litigation in Commonwealth Bank of Australia v Smith arose, the negotiations between the applicants and the receiver of General Ford in this case were conducted at arm’s length and with the applicants enjoying the benefit of fully independent professional advice. Mr Conroy had retained Mr Jackson of Jackson’s Property Consultants, a person recommended to him as a commercial agent with experience in shopping centres in south-east Queensland, to advise him in respect of the proposed purchase of Biggera Waters. Mr Conroy also retained a firm of solicitors to verify, ahead of the exchange of contracts, information provided by the agents for the vendor. Mr Conroy retained a firm of finance brokers to assist him in raising the finance necessary for the purchase of Biggera Waters.
Mr Conroy, as is mentioned above, was aware that it was in Westpac’s interest to obtain the highest purchase price possible for Biggera Waters, and he was also aware of Westpac’s practice not to disclose to a person in the position of the applicants, information obtained from the receiver of property available for sale where the Bank was the mortgagee of the property.
Neither Mr nor Mrs Conroy, nor any person on behalf of Truebit, explicitly sought financial advice from Westpac in respect of the proposed purchase of Biggera Waters, nor did Westpac do anything to create in the minds of Mr and Mrs Conroy the expectation that it would advise in the applicants’ interest as to the wisdom of the purchase of Biggera Waters. Indeed, Mr Conroy was advised that he should deal directly with the receivers.
I find that Westpac neither knew, nor ought reasonably to have known, that the applicants were relying upon it to advise them with respect to the proposed purchase of Biggera Waters. Indeed, I find that the applicants did not rely on Westpac in this regard; nor did they assume that Westpac was acting in their interest. Rather they relied on Mr Conroy’s judgment and that of the professional advisers retained by them. Mr Conroy gave evidence that he regarded himself as an astute investor in property; he had provided to Westpac a curriculum vitae which highlighted his formal qualifications and his experience in real estate and as an investor.
The case of the applicants so far as it relies upon an asserted fiduciary relationship between them and Westpac must fail.
UNCONSCIONABLE CONDUCT
For the same reasons, in my view, the claim based upon alleged unconscionable conduct must also fail. The applicants were under no special disability or disadvantage in their dealings with Westpac. I am not able to conclude in the circumstances of this case that any failure by Westpac to make disclosure of information known to it concerning Biggera Waters, which was, after all, information of the kind which ought to have been available to the applicants’ own professional advisers, amounted to misrepresentation or unfair dealing by Westpac (see Commercial Bank of Australia v Amadio.)
FAILURE TO MAKE DISCLOSURES
The statement of claim pleads that Westpac had an obligation to make certain disclosures to the applicants, and to advise them against the purchase of Biggera Waters, independently of the asserted fiduciary relationship between them. This pleading was not sought to be supported in final submissions.
BREACH OF CONTRACT/NEGLIGENCE
The statement of claim further pleads that Westpac had agreed to provide to each of the applicants “advice in relation to banking and financial and investment matters, including the sale and purchase and financing of the purchase of Biggera Waters”, and that Westpac failed to exercise reasonable care, skill and diligence in the giving of such advice.
In Lenin v Australian Bank Limited (unreported, Cole J, NSW Supreme Court, 21 June 1991), approval was given to the following propositions:
“1. A loan from a bank to a customer in a commercial context is a transaction in which, generally speaking, the bank is entitled to seek and obtain the best terms it can ... .
2. Generally speaking, the bank is entitled to have regard solely to its own commercial interest. It is not the obligation of the bank to satisfy itself that the borrower has made a correct or wise commercial decision based upon a full understanding of all risks ... .
3. Generally speaking, a customer wanting a loan goes to a bank to ask for it, not to seek advice. There can be no liability for a failure to tender advice unless there be a duty to advise ... .
4. There is no duty on the bank to advise arising simply from the relationship between banker and customer... .”
The evidence in this case does not support a finding that Westpac agreed expressly or impliedly to provide to the applicants advice in respect of investment matters, including the sale, purchase and financing of Biggera Waters. The claim based on an alleged breach of such contract must therefore fail, as must the claim based on Westpac’s alleged failure to exercise reasonable skill, care and diligence in the giving of such advice.
OTHER MATTERS
The statement of claim includes allegations concerning alleged conduct by Westpac later than the date of the completion of the contract for the sale and purchase of Biggera Waters. By the time of final addresses, such contract was apparently relied on by the applicants only as showing a consistency of conduct by Westpac, and not as supporting any independent entitlement of the applicants to relief. That is, it was relied upon as evidence consistent with the applicants’ case and thus tending to give credibility to the version of events propounded by them. It is thus not necessary for me to have independent regard to such allegations.
CONCLUSION
The application will be dismissed.
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I certify that this and the preceding thirty-one (31) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Branson |
Associate:
Dated:
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Counsel for the Applicant: |
Mr J. Garnsey QC, with Mr B. Burke |
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Solicitor for the Applicant: |
Nicholas Eddy & Company |
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Counsel for the Respondent: |
Mr R. Chesterman QC, with Mr J. Sheahan |
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Solicitor for the Respondent: |
Allen, Allen & Hemsley |
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Dates of Hearing: |
21, 22, 23, 24, 25, 28, 29 July 1997 |
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Date of Judgment: |
27 November 1997 |
