|
|
[Home]
[Databases]
[WorldLII]
[Search]
[Feedback]
Federal Court of Australia |
COURT
IN THE FEDERAL COURT OF AUSTRALIACATCHWORDS
Trade Practices - misleading or deceptive conduct - claims under ss. 82 and 87 of Trade Practices Act and accrued jurisdiction - alleged representations as to availability of loan to finance purchase of farming property - summary of principles relating to representations as to future and as to intention or state of mind in s. 52 claims - respondent company found to have contravened s. 52 - whether managing director of company involved in contravention - effect upon claim for damages of 3 year limitation period in s. 82(2) - consideration of when cause of action arose - observations as to when assessment of damages may be referred to Registrar pursuant to Federal Court Rules 0.38 r.1 - whether damages too remote - observations as to test of remoteness applicable to claim under s. 82 - failure of applicants to reduce liabilities by sale of land - whether novus causa interveniens - whether relief sought under s. 87(2)(d) subject to limitation period in s. 82(2) - alleged negligent mis-statement and undue influence - whether Court has jurisdiction to deal with pendent common law claims where trade practices claims statute barred.Practice and Procedure - no case submission by two of three respondents - election not to call evidence - circumstances in which submission may be made - whether submission may only be made if by all respondents - whether distinction between submission of no case in law or on the evidence - effect of election upon right to cross-examine and final address in respect of case by other respondent - observations on question of non-suit in Federal Court.
Trade Practices Act 1974 ss. 52, 75B, 82(2) and 87
HEARING
PERTHORDER
The applicants' claim against the first respondent is dismissed with costs. The applicants' claim against the second and third respondents is dismissed
with costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
DECISION
This is the unhappy story of a long established farming family at Katanning who in 1980 owned property worth some $4,000,000 but who have now lost much of their assets. They say that their loss was caused by the conduct of the respondents in making statements as to the availability of a loan which they required in order to buy a farm for a price just in excess of $1,000,000. The respondents deny any liability to the applicants.2. The statement of claim pleads a number of causes of action. The defences
raise matters of fact and of law. The hearing occupied
5 weeks. To understand
the nature of the applicants' claim against the respondents, it is necessary
to deal not only with the events
surrounding the purchase of Bibiking, the
farm in question, but also to say something of the parties and of their
relationship to
each other. As a matter of convenience, I shall use the term
"applicants" though at times it will be apparent that a reference to
some only
of the applicants is intended.
The James Family
3. The James family have farmed in the Katanning district since early this century. The particular members of the family with whom these proceedings are concerned are Kingsley Frederick David James and Jill Maxine James (husband and wife), together with their children Angus Kingsley James, aged 29 at the time of the hearing, David Maxwell James, then aged 27, and Peter Norman James, then aged 25. Angus Kingsley James is an applicant but seeks relief only against the Bank; a farm bought by him is relevant to the applicants' claim. The youngest son Anthony Robert James, then aged 18, is not an applicant, is not mentioned in the statement of claim and did not give evidence.
4. Yallambee Pty. Ltd. is a family company and, together with Mr. and Mrs.
James, it constituted the partnership of Kingsley James
& Co. Yallambee is the
registered proprietor of some of the land farmed by the partnership. Ockham
Pty. Ltd. is also a family company.
In recent years it conducted the sheep
farming activities of the family as trustee for the James Livestock Trust.
The respondents
5. The first respondent, Australia and New Zealand Banking Group Limited ("the Bank") is sued by reason of the actions of Terrance Bertram Parker who was manager of its Katanning branch from January 1979 until about September 1982.
6. At all material times the second respondent, Tamar Management Pty. Ltd.
("Tamar") carried on business as a finance broker under
the business name of
Market Securities. The third respondent, John Wells, was at all material times
the managing director of Tamar.
The background
7. The events giving rise to this claim began in mid 1980. However, for two reasons, it is necessary to say something of circumstances existing over earlier years. The first reason is that the applicants rely upon their long association with the Bank as throwing light upon the nature of their relationship with the Bank in 1980 and thereafter. Although it will be necessary to develop the point, the applicants say that over the years they had sought the advice of the Bank, in particular the managers of its Katanning branch from time to time, in connection with the purchase of property and had come to rely upon the Bank in regard to such matters. The second reason is that reference to circumstances of the James family before 1980, and in particular those of Mr. Kingsley James, throws light upon the personalities of some of those involved in these proceedings. This in turn helps to explain what took place in 1980 and succeeding years.
8. In 1980 Mr. Kingsley James and his family were among the biggest landholders in the Katanning district. Their holdings were divided between Katanning and Dumbleyung, some miles north. I shall not at this stage indicate which of the applicants owned the particular properties to be mentioned; I shall just speak of the applicants. In the Katanning district the applicants owned Avondale, a farm of 880 hectares; Yallambee, a farm of 903 hectares; Rowlands, a farm of 172 hectares; and S.M.P., a farm of 221 hectares. They also owned Brickworks, a small property of 114 hectares and Saleyards, an area of 17 hectares adjoining the town. In the Dumbleyung district they owned Cronins, a farm of 487 hectares and in 1980 they bought Bibiking, a farm of 1,854 hectares. They also owned a house at Middleton Beach, Albany and a home unit in Victoria Avenue, Claremont. In addition they had a substantial number of sheep and cattle and a considerable quantity of plant. The total value of these assets was, in July 1980, in excess of $4,000,000. There were liabilities to the Bank, to Elder Smith Goldsborough Mort Ltd. ("Elders") (the company with which the applicants dealt for stock purchases and sales) and under various mortgages and hire purchase contracts. These liabilities amounted to about $500,000.
9. It is advisable now to say something in more detail about the various entities in which the James family carried on business and the identity of owners of particular areas of land.
10. The farming partnership of Kingsley James & Co. was established by oral agreement on 1 June 1964. The original partners were Mr. and Mrs. James. Yallambee Pty. Ltd. was admitted as a partner on 1 August 1964. On 20 October 1966 the three partners executed formal deeds of partnership which are still current. Yallambee is a partner to the extent of one-half and Mr. and Mrs. James are partners to the extent of one-quarter each. The Kingsley James Family Trust was established by a deed of trust executed on 6 November 1975. The trustees are Mr. and Mrs. James and the beneficiaries are their children. At some time in the 1970s the partnership of Bullock Hills Grazing Co. was established with Mr. and Mrs. James, Angus James and David James as partners. It ceased operations on 31 March 1982. This partnership was used mainly in connection with leased property at Wooroloo in the late 1970s. It owned sheep which it sold in 1982.
11. The evidence did not disclose precisely when Yallambee Pty. Ltd. was incorporated. Its original directors were Mr. and Mrs. James. On 6 April 1982 David and Peter James were appointed additional directors. Mr. Kingsley James is the holder of one A class share, Mrs. James the holder of one B class share and Angus, David, Peter and Anthony hold C class shares. Ockham Pty. Ltd. was incorporated on 12 February 1980. The original directors were Mr. and Mrs. James. Again on 6 April 1982 David and Peter James were appointed additional directors. Mr. and Mrs. James each has one share in the company. Ockham is the trustee of the James Livestock Trust established on 18 March 1980, which trust acquired the livestock of Kingsley James & Co. In 1981 the trust also took over harvesting and cropping operations. The beneficiaries of the James Livestock Trust are Mr. and Mrs James and their children.
12. The interests in the various farms and other landholdings referred to were as follows. In Yallambee Mr. James held a half interest and Mr. and Mrs. James held the other half as trustees for the Kingsley James Family Trust. In Brickworks, Mr. and Mrs. James held a half interest each. In the Albany house Mr. and Mrs. James held an half interest each. Yallambee Pty. Ltd. was the owner of Saleyards, Rowlands, Avondale and S.M.P. Mr. Kingsley James was the sole owner of Cronins. Mr. James, Mrs. James, David and Peter each held a quarter interest in Bibiking.
13. Mr. Kingsley James was the driving force in the James family. There is no doubt that he was interested in the acquisition of land. In part this was due to the fact that he had four sons and wished to be able to provide land for them. But I am also satisfied that he was influenced by a sense of empire building. There was prestige attaching to the ownership of large areas of farmland and I am not being critical of Mr. James in saying that he enjoyed that prestige. When Bibiking came on the market in 1980, it had a particular attraction for him. It adjoined land which the family was already farming. Another consideration was that Bibiking had once belonged to Mr. James' grandfather and he was anxious that it should not be lost to the family.
14. Many of the purchases in which Mr. James was involved were short term in
the sense that the purchase price was not spread over
many years. This caused
the family liquidity problems. and it is apparent that Mr. James often looked
to the Bank to provide financial
assistance in connection with these
purchases. It is interesting to note that soon after his arrival in Katanning
Mr. Parker made
the following comments in his diary note of 20 February 1979:
"Notwithstanding previous comments in file and
difficulties encountered with conduct of accounts, it15. Unfortunately farming purchases were not at an end. It was the purchase of Bibiking in 1980 and the circumstances surrounding its purchase that lead to the unhappy financial situation in which the applicants now find themselves. The opinion expressed by Mr. Parker in his evidence that Mr. James was disposed to make a purchase and then approach the Bank for help in finding the purchase price has much force.
is quite clear that these past problems arose through,
1) James burning desire to establish a large
enterprise for his family (esp. sons),
2) lack of long term finance available at times of
purchase and
3) non-acceptance by customer of Bank guidance that he
should not proceed with intentions.
All this has resulted in stretching of resources that
could have lead to more disasterous results. However,
apart from the intended future (long term) purchase of
a property which has been leased for many years,
farming purchases are at an end now that James senior
is planning the take-over of operations by sons".
16. From Mr. Parker's evidence, it is clear that the Bank was torn between a concern for the state of the applicants' finances, in particular the size of its indebtedness to the Bank from time to time, and what was seen to be the valuable connection of a customer who was so well known in the area and who could advance the position of the Bank. Mr. Parker's diary notes contain expressions of irritation at the failure of Kingsley James & Co. to get its financial affairs in order and to improve its liquidity, coupled with a desire not to lose the prestige associated with having the applicants as customers.
17. All these matters played some part in the events of 1980, 1981 and 1982. It is part of the applicants' case that, by reason of their association with the Bank in the years preceding 1980, they had come to rely upon the Bank for advice in financial matters relating to the conduct of their farming operations. This is a submission that needs to be approached with some care.
18. I do not accept that the applicants looked to the Bank for advice as to
what properties they should buy or how they should conduct
their farming
operations. Indeed, given the long farming history of the James family, it
would be surprising if they looked to the
branch manager of a bank for farming
advice. As already mentioned, their stock sales and purchases were conducted
through Elders,
not through the Bank. The applicants not only owned stock;
they were stock traders. Their account with Elders was a very large one,
so
large apparently that it was attended to by the company's head office in
Adelaide rather than in Perth. The Bank was concerned
with the extent of the
applicants' stock trading because of its effect on their liquidity and no
doubt because it would rather have
seen the money going through the
partnership account at the Bank. The applicants certainly sought the help of
the Bank from time
to time in connection with the purchase of land for farming
and, in that sense, in connection with their farming operations. But
it was
advice of a financial nature that they sought, advice as to how they might
fund what they proposed. And very often it was
advice that was not sought
until after they had entered into a purchase. To say that the applicants
relied upon the Bank in connection
with their farming operations is too broad
a proposition and one that is not supported by the evidence.
The witnesses
19. On the applicants' side, the principal witnesses were Mr. Kingsley James and Mr. David James. The Bank's principal witness was Mr. Parker. On some matters there was a conflict between the evidence of the James and that of Mr. Parker. On other matters there was little dispute as to what had occurred but the parties invited the Court to draw different inferences. The second and third respondents did not call evidence. At the conclusion of the applicants' case, counsel for those respondents made a no case submission. To do so, they elected not to call evidence. The no case submission was rejected. My decision rejecting the submission was delivered on 2 December 1985; my reasons for doing so are attached as an appendix to these reasons for judgment.
20. Mr. Kingsley James seemed to find difficulty in answering questions directly. I do not suggest that he was not doing his best to answer questions truthfully but I think the loss of so much of what he had built up over the years was a great blow to him and he found it hard to be objective about what had occurred. Mr. David James returned from agricultural college at the end of 1978. He was keen to put into practice what he had learned and, when the question of buying Bibiking arose, the original intention was that the purchasers would be Mr. David James and his brother Peter. Bibiking was referred to in evidence as something of a showpiece and its price of more than a $1,000,000 might seem to reflect this. Mr. David James must have felt the loss of Bibiking as a bitter blow and in some respects, particularly when relating his dealings with Mr. Parker, his evidence was coloured by that loss. Angus James generally was a straightforward and credible witness. So too was his brother Peter, though his involvement was peripheral. Other witnesses were called on behalf of the applicants and I shall refer to them in the course of these reasons.
21. The first respondent called only two witnesses, Mr. Parker, and Mr. Ian
Jelley, a valuer. Mr. Parker had the advantage of diary
notes extending over
the relevant period. Nevertheless his recollection of most events was clear
and he was careful and considered
in his answers to questions asked in a
lengthy examination and cross-examination. Speaking generally, I accept Mr.
Parker's evidence
though, as will appear, there are one or two aspects of his
conduct that I find puzzling. The explanation may lie in the ambivalent
position he assumed of trying to protect the interests of the Bank and at the
same time keep the James family as customers. Also
it appears that, until the
Bank demanded the sale of the James' farms, Mr. Parker was very friendly with
Mr. Kingsley James and more
latterly with Mr. David James. This may have lead
him to extend undue tolerance to the James in their dealings with the Bank.
Bibiking
22. The James family first learnt that Bibiking might be for sale in May
1980. This is not to say that Bibiking came on the market
at that time or
indeed at any time, for the evidence suggested that its owners' dealings were
with the applicants only. Bibiking
Pty. Ltd. was the registered proprietor of
the farm. There was no precise evidence as to the directors or shareholders of
the company
but the evidence was that Bibiking "belonged" to Mr. Phillip James
(a brother of Mr. Kingsley James) and his son Kim. Mr. Kingsley
James said
that at the time he learned Bibiking might be for sale, he was "fairly well
committed". This was something of an understatement.
In a diary note of 6 May
1980, Mr. Parker commented:
"Following lengthy and frank discussions with Kingsley23. "AA" referred to "advance application", meaning an application submitted by a branch of the Bank to its head office seeking an advance for a customer. A number of these were submitted by Mr. Parker on behalf of the James during 1980 and 1981. An advance application did not always involve additional financial assistance; sometimes it simply sought an extension of time for repayment of advances already made.
and David today it was quite obvious from the cash flow
produced that their liquid position was deteriorating
and the picture for 1981 could be quite bleak. David
is fully aware that this situation has been caused
through extensive stock trading, something that was
pointed out to Kingsley by the Bank last year - this
appears to have been finally acknowledged by Kingsley.
Accordingly, they have asked for time to consider
re-arranging their farming operation to a basic flock -
this could take some time (say by end 1980) and would
no doubt need support of ANZ. The ultimate benefits
are obvious using other customers operations as a
guideline and after considering the value of land and
assets (resources) available to customers. AA
submitted requesting extension of existing facilities
for some 6 weeks pending firm proposals from
customers".
24. Notwithstanding this somewhat dismal prognosis, Messrs. Kingsley and
David James decided to approach the Bank to see whether
it would assist in the
purchase of Bibiking. There is evidence from the applicants that Mr. David
James first approached Mr. Parker
on his own. This was done at the suggestion
of Mr. Kingsley James who said he wished the Bank to make a decision on the
merits of
the application, without any embarrassment that might flow from his
presence. Mr. Parker said he had no recollection of being approached
initially
by Mr. David James. Nothing turns on this aspect for it is clear that Mr.
Kingsley James participated in the applicants'
discussions with the Bank from
an early stage and that he was the dominant figure in dealings with the Bank.
It is significant that
the diary note of 6 May 1980 makes no mention of
Bibiking. It is hard to imagine that, if any formal approach had been made to
Mr.
Parker by that date, it would not have been reflected in a diary note so
concerned with the liquidity position of the applicants.
On the other hand,
the diary note of 9 May 1980 begins:
"Kingsley & David, could they look at our assistance if25. Before saying anything more of the diary note of 9 May, something should be said of the way in which Mr. Parker kept his diary. He was required by bank practice to make a note of interviews and of conversations of any importance. At the end of the day he dictated these notes on to a dictaphone and they were then typed on to the diary sheets of the customers concerned. The handwritten notes were destroyed. It was his practice to dictate notes at the end of the day, even on Friday. However he conceded that there were occasions when he was unable to follow this practice. It also appeared from some of the diary notes that, where several discussions took place in the course of a day or so, a diary note might represent a summary of the events of those days. It was also possible that, in typing a diary note, a typist might inadvertently record the date of typing rather than the date on which the diary note was dictated. If this happened, it was infrequent and in any event was only likely to throw the diary note out by one day unless a weekend intervened. With these qualifications, the diary notes reflectedwhat took place on the dates they bore. However they were not and did not purport to be a verbatim account of every thing that was said.
they purchased brother Phil's farm."
26. I return now to the meeting recorded in Mr. Parker's diary note of 9 May 1980. At that time the price being asked for Bibiking was unknown. Mr. Kingsley James made an assessment of the likely price, based on his knowledge of the farm and of the area generally. He thought it would be in the vicinity of $750,000. Mr. Parker recorded that "Subject to firm proposals in hand to change style of operation (see prev D/N), advised that they could look at our favourable consideration." I am satisfied that the diary note reflects what was discussed that day and that it was envisaged that the vendors might carry $350,000 on mortgage, that Mr. Kingsley James might sell 650 acres of Rowlands for $200,000 or thereabouts and that the Bank might lend $200,000. These figures were necessarily conjectural at that stage.
27. But the suggested method of financing is of some importance because of evidence by David James that early in May, when he saw Mr. Parker, the latter spoke of petro dollars and off shore loans as a means of funding the purchase of Bibiking. David James gave evidence that at that time Mr. Parker rang someone called Charles and asked for "John". In John's absence, Mr. Parker gave Charles some details of the James' requirements in order to buy Bibiking. It was the applicants' case that John was John Wells, the third respondent and that Charles was his father. I think it unlikely that when the purchase of Bibiking was first raised with Mr. Parker, overseas finance was mentioned or that there and then Mr. Parker tried to contact Mr. Wells. The method of finance mentioned in the diary note of 9 May 1980 made outside funding unnecessary. It was only when it became clear that Mr. Phillip James was not prepared to carry any finance (and there is a diary note to this effect on 13 June 1980), that the question of borrowing from an outside source would have arisen. The James were inevitably vague about dates on which certain events occurred. I am satisfied that it was not until June 1980 that outside funding was discussed with Mr. Parker and that he made an attempt to locate a finance broker or some such person who might be able to assist the applicants.
28. This conclusion is supported by Mr. Parker's diary note of 13 June 1980
which records a call by Mr. David James seeking guidance
on the purchase of
Bibiking for a price now mentioned as likely to be $950,000. The note records
Mr. David James as saying "Vendors
are not prepared to carry finance". It also
records
"Customers have been in touch with Bunbury mortgage29. There is no mention in the diary note of the second or third respondents. Moreover, it was only in June that the applicants became aware that the vendors of Bibiking would not carry any of the purchase price, thus making it necessary to consider funding from a source other than the Bank. While Mr. Parker had, in May, discussed the possibility of the Bank lending $200,000 or thereabouts, it was apparent to all concerned that the Bank was not interested in lending all or most of the purchase price.
brokers, $400,000 interest only x 3 years can be
arranged . . . Telephoned Neville Quartermaine (branch
customer), who can put us in touch with a Merchant Bank
who would be prepared to find up to $1.5M, interest
only (13.25% p.a. x 5 years)."
30. Mr. Parker gave evidence that after 13 June he spoke to about twelve
finance brokers to see if they could find the necessary
funds for the purchase
of Bibiking. The first mention of Market Securities or Mr. Wells in a diary
note is that of 14 July 1980 which
reads:
"We have commenced negotiations on James's behalf withThat would suggest an approach by Mr. Parker to the second and third respondents some time before 14 July; in all the circumstances, I do not think it was until after the middle of June.
Market Securities John Wells, telephone 3222288, who
are mortgage brokers and have been requested to find a
direct lending source".
31. It must also be appreciated that it was not until 7 July 1980, on the occasion of a family funeral, that Mr. Kingsley James and Mr. Phillip James agreed on a price for Bibiking of $1,065,000.
32. However there was at the end of June a telephone call made by Mr. Parker to the James who were then in Perth. The details of that phone conversation are in dispute to some extent and there is an aspect of the conversation which is not in dispute but which I find puzzling. Mr. Parker rang at about 8.30 or 9.00 p.m. on a Friday. I am satisfied that it was Friday, 27 June 1980. He had tried to contact Mr. Kingsley James at the farm but was told that Mr. and Mrs. James and David were at their unit in Claremont. Mr. Parker spoke first to Mr. Kingsley James and said that he had some good news. "He had been speaking to Wells and it looked as if he was going to raise the money to buy Bibiking, to get the loan". He suggested to Mr. James that he buy some offer and acceptance forms from Sands & McDougall, stationers, and gave directions as to where that business was located. Mr. James added that Mr. Parker mentioned "a merchant banker or an overseas loan" and, referring to the purchase of Bibiking, said that it was a "goer". In cross-examination Mr. James conceded that, though he thought Mr. Parker had mentioned Mr. Wells by name, that may not have been so and that Mr. Parker may have just said that a broker was confident he could raise the necessary money.
33. It is common ground that Mr. Parker then spoke to Mr. David James. His
evidence was:
"I think he said he had been speaking to Wells and thatIn cross-examination Mr. James stated that his recollection was that Mr. Parker said that Mr. Wells would look into the matter and he (Parker) thought that he (Wells) would not have much of a problem to get the loan. Mr. James added:
he had the money. I think he said that he had the
money from - or he had found the source from overseas
or he had found a lender. I cannot recall. But he
definitely said it is a goer and we had the money".
"Yes. He told me that the lender required us to sign it34. Mr. Parker recalled making an after hours phone call about the time in question but he was unable to recall the purpose for which he rang. He thought that the "good news" might have been related to a family inheritance. I am satisfied that Mr. Parker rang in connection with the purchase of Bibiking. Quite apart from the evidence of the James to this effect, there is no doubt that Mr. Parker suggested the purchase of offer and acceptance forms as there is no doubt that on the next morning the James bought forms at Sands & McDougall. I accept that Mr. Parker mentioned that it was likely that money would be forthcoming for the purchase of Bibiking but I am not satisfied that he mentioned Mr. Wells as the source of that finance. The matter is one of credibility rather than an essential element in the case because no purchase price had then been agreed for Bibiking, the applicants made no use of the offer and acceptance forms and no contract was signed for the purchase of Bibiking until 15 July 1980.
up, get a signed offer and acceptance . . . You need to
get it signed up, not subject to finance because the
lenders wanted to make sure that you were in a position
to take the money".
35. I mentioned earlier a puzzling aspect of the telephone conversation. It is this. It is hard to understand why Mr. Parker should have been as adamant as he was that the James acquire offer and acceptance forms. No purchase price for Bibiking had been agreed and there was no particular hurry about the matter. More importantly however, to suggest that the applicants enter into a form of offer and acceptance for the purchase of Bibiking when, on all sides, the amount of money the purchasers would require and the terms of any loan that would be acceptable to them were still ill-defined, was to say the least imprudent. Mr. Parker said that although he could not recall telling the James, during this conversation, to sign an offer to buy Bibiking, he could not deny having said it. It was imprudent advice to give and equally it would have been imprudent to accept such advice. The applicants may not have been skilled in financial matters but they were experienced in the buying of properties and, even had Mr. Parker asserted that finance was available, it would have been an extraordinary action for the applicants to execute an agreement to buy Bibiking without having some particulars of the finance available to them.
36. Mr. Parker's explanation was that it was never in his mind that the applicants would enter into an unconditional contract for the purchase of Bibiking. That suggestion he said, was "silly". The offer and acceptance form was expressed in terms "subject to finance" so that the purchasers would be protected in the event that finance was not forthcoming. Whatever was in Mr. Parker's mind, I am satisfied that he did not make it clear to the applicants that they should protect themselves by completing the "subject to finance" provision. In any event it is hard to see how they could do so since they did not know with any certainty what money was forthcoming and when it would be available. On the other hand I am not persuaded that he told the applicants in positive terms to execute an unconditional offer to purchase. I accept Mr. Parker's denials in that regard. Because no contract eventuated from that discussion, the matter is not vital. But it does throw some light upon the attitude of the parties and their relationship to each other. In buying the forms the James showed a willingness to act on the advice of Mr. Parker. In suggesting that they buy the forms and use them, Mr. Parker showed a lack of appreciation of the James' interests. He showed a further lack of appreciation in suggesting to them, as he acknowledged, that "they did not need to see a solicitor to complete an offer and acceptance. Given the magnitude of the purchase price and the uncertainty surrounding finance, it was very much in the interests of the James that they see a solicitor.
37. Mr. Parker thought that the meeting recorded in his diary note of 14 July
mentioned earlier (a Monday) in fact took place on
the preceding Friday, 11
July. Messrs. Kingsley and David James said that they did not meet with Mr.
Parker on 11 July but that they
did have a meeting on 14 July. It is more
likely that the James' account of the date of the meeting is the correct one.
It is apparent
that on 11 July the Kingsley James family and the Phillip James
family met during the afternoon at the office of Taylor, Knott &
Murray,
Katanning solicitors. They met for the purpose of settling the terms of the
contract to be prepared by Mr. Taylor. In the
contract as originally prepared,
Bibiking Pty. Ltd. was the vendor and David Maxwell James and Peter Norman
James were the purchasers.
That contract was executed by the parties in Mr.
Taylor's office on 15 July. Some time later another contract was prepared, in
identical
terms save that Kingsley Frederick David James and Jill Maxine James
were added as purchasers. Mr. James said that in December 1980
he suggested to
Mr. Taylor that he and his wife be added as purchasers since they were
committing their assets in the financing of
the purchase. He thought he signed
the contract on 2 February 1981. Mr. Taylor was of opinion that the new
contract was executed
"many, many months" before that date and that it had
been prepared in August or September 1980. Mr. Taylor's evidence is the more
probable.
The Bibiking contract
38. The contract fixed the purchase price at $1,065,750, to be paid by a
deposit of $10,000 on the sealing by the vendor of the contract,
a further sum
of $25,000 on or before 8 August 1980, a further sum of $71,575 on or before
31 August 1980 and the balance of $959,175
on or before 1 February 1981.
Clause 4 of the contract is of considerable importance in the events that
followed and so I set it
out in full.
"4. IT IS AGREED HOWEVER that if the purchasers for any39. In some ways the terms of the contract were unusual. Although the purchase price was $1,065,750, the initial deposit was only $10,000 and an amount equal to the conventional deposit of 10% did not become payable until 31 August. Furthermore, the contract gave the purchasers until 31 August 1980 to withdraw from the contract by forfeiting the amount of $35,000 due by 8 August. This provision gave the purchasers a breathing space of a month or so at the end of which they could withdraw from the contract. It is true that they would lose the $35,000 they had paid but this was less than half of a 10% deposit they might have been expected to provide at the outset and to lose if they did not complete the contract, quite apart from any damages for which they might have been liable. Curiously, cl. 4 was not inserted at the request of the purchasers but at the suggestion of Mr. Phillip James. He did not give evidence and none of the witnesses who were called, including Mr. Taylor, threw much light upon the circumstances in which the clause was included. I infer that, because it was in a sense a family transaction, Mr. Phillip James was offering his relatives an opportunity to withdraw from the contract at an early stage. But he was not prepared to return the $35,000 and the reason for this, at least as to $25,000, may be found in Mr. Parker's diary note of 14 July 1980 which includes the following in relation to Bibiking:
reason do not wish to or are unable for any reason to
proceed with the purchase and subject in each case to
the payment as aforesaid of the said two amounts of TEN
THOUSAND DOLLARS ($10,000.00) and TWENTY FIVE THOUSAND
DOLLARS ($25,000.00) by the 8th August, 1980 the
Purchasers may by the 31st August, 1980 communicate to
the Vendor or to the said Solicitors by notice in
writing that they are unable or unwilling to proceed
with the purchase of the said land and in such event
the Purchasers shall not be obliged to pay the said sum
of SEVENTY ONE THOUSAND FIVE HUNDRED AND SEVENTY FIVE
DOLLARS ($71,575.00) on the 31st August, 1980 nor the
balance of the purchase price namely NINE HUNDRED AND
FIFTY NINE THOUSAND ONE HUNDRED AND SEVENTY FIVE
DOLLARS ($959,175.00) and this Offer and Acceptance
shall be cancelled so far as concerns those two
payments but the sum of THIRTY FIVE THOUSAND DOLLARS
($35,000.00) due and payable by the Purchasers by the
8th August, 1980 shall be paid and if not so paid then
payment may be enforced by the Vendor after that date."
"Purchase terms $10,000 now, $25,000 on 8.8.80 (non40. Clearly Mr. Phillip James was committed to a purchase of his own and was not prepared to return the $25,000 and then find himself liable for that amount under the contract in which he was purchaser. There was no evidence that in any of the discussions between the Kingsley James and the Phillip James families, including the meeting with Mr. Taylor, there was any suggestion that the contract should be expressed to be subject to finance or in any way made conditional upon the purchasers obtaining a loan. Counsel for the applicants relied upon this fact as evidence that on 11 July 1980 the applicants were confident that they would receive a loan of whatever moneys were necessary to meet the contract for the purchase of Bibiking. In the circumstances, this conclusion has much force. However the conclusion does not dispose of other questions, in particular - were the applicants justified in so believing and, if so, were they justified because of what had been said to them by Mr. Parker or by Mr. Wells?
refundable, vendors committed to making this payment on
the farm he has bought at Dandarigan), $71,000 by
31.8.1980 (total $106,000 deposit). Balance on
settlement 1.2.1981, take over 1.3.1981".
41. Whether the meeting with Mr. Parker took place on 11 July or 14 July is
not vital. The relevance of the date lies in the area
of credibility and also
perhaps for some light it may throw upon Mr. Parker's system of recording
entries in his diary. However I
am satisfied that the meeting took place on 14
July. The evidence of the James in this regard is confirmed by the diary entry
itself
which refers in specific terms to details of the contract which were
only arrived at on the afternoon of Friday, 11 July and so could
not have been
made known to Mr. Parker until later. The diary note also contains this
statement:
"David is to arrange with Tim Duncan, (Accountant C.P.Mr. Parker made an appointment on behalf of the James with Mr. Wells on Friday, 18 July. This suggests that the entry was made earlier that week. I do not accept Mr. Parker's explanation that he recorded "this week" in relation to something that took place on Friday, 11 July because of uncertainty as to when the meeting might in fact take place.
Birds) for production of SP's, balance sheets and very
basic cash flow before calling to see John Wells
hopefully later this week".
42. Mr. & Mrs. James, David James and Peter James executed the contract of sale in Mr. Taylor's office on 15 July. Once again I must say how odd I find their actions in doing so. As will appear, they had a meeting arranged, three days later, with a man (Mr. Wells) whom they had not met and upon whom they were relying to provide them with a loan of $1,000,000 or thereabouts on terms which had been mentioned but which were by no means settled. It would have been easy enough to ask Mr. Phillip James to wait a few days until they had seen Mr. Wells and were able to satisfy themselves that a loan would be forthcoming. While Mr. Phillip James was involved in the purchase of at least one other property, there was no evidence that he was pressing for immediate execution of the contract. Indeed, while not a reluctant vendor, it was the purchasers who had approached him and not he who had approached the purchasers. Mr. Taylor regarded himself as acting for both vendors and purchasers, an unsatisfactory position though one that is not uncommon in the case of a country solicitor who has represented all concerned over the years. He gave no advice to Mr. Kingsley James or any members of his family as to the merits of the purchase or of the financial arrangements relating to the purchase.
43. What had the applicants been told regarding the provision of finance by
15 July 1980? Whatever they had been told, it was by
Mr. Parker for they had
not had any dealings with Mr. Wells at that stage. I am satisfied that Mr.
Parker had told Mr. Kingsley James
and Mr. David James that the prospects of
their obtaining a loan were good but I am not satisfied that he told them that
there was
no doubt about those prospects. And I think that he told them the
prospects were good after he rang Mr. Wells on 11 or 14 July, more
likely the
latter. The fact that Mr. Parker arranged for the James, together with their
accountant Mr. Duncan, to attend on Mr. Wells
and to take with them balance
sheets and a cash flow indicates and must have indicated to the applicants
that there was much information
required by Mr. Wells. It is also apparent
from Mr. Parker's diary note of 14 July 1980 that Mr. Wells had spoken of
direct and indirect
lending. Direct lending simply meant a loan made by a
lender to the James on whatever security was thought to be satisfactory.
Indirect
lending, which was later explained to the James as being lending from
an overseas source, usually required a guarantee from a financial
institution
such as a bank. Hence there is a reference in the diary note as follows:
"It may well be that the Brokers are unable to locate a44. In my view the James were entitled on 15 July, as a result of what they had been told by Mr. Parker, to feel some confidence about their prospects of getting a loan. But they were not entitled to assume that a loan acceptable to them was certain. They had not spoken to Market Securities as agent for any prospective lender. Mr Parker had mentioned, in reporting what he had been told by Mr. Wells, a loan of $1.5 million over 5 years at 2 1/4% over the current bond rate, fixed for 5 years with a review in similar circumstances in 1985. But they did not know for sure that this was the sort of loan they would get or whether it might be necessary to borrow money in circumstances where the Bank would be called upon to provide a guarantee. Given the size of the transaction in which they were involved, I am of the opinion that ordinary prudence dictated that they should make no assumptions about the certainty of a loan until they had seen Mr. Wells.
direct lending source and it may be necessary for the
Bank to provide a Guarantee. If so lending would be at
say 12% plus Bank guarantee fee of say 2/2.5%. Wells
believes that if direct lending is found weight could
be up to 14% maximum."
45. On Friday, 18 July 1980 Messrs. Kingsley, David and Peter James, together with Mr. Duncan, met Mr. Wells in the latter's Perth office. All those present, except Mr. Wells, gave evidence. According to Mr. Kingsley James, Mr. Wells mentioned various types of loans he would be trying to get for them. He mentioned overseas loans, saying that "if we had an overseas loan we would have to have a bank guarantee". Mr. Wells said he had been speaking to Mr. Parker in that regard. He mentioned two or three weeks as the timetable for obtaining a loan. Mr. James said that "an amount of $1.6 million was the proposed loan" though he did not make it clear whether this figure was mentioned at the meeting as opposed to some earlier occasion. Mr. Wells looked at various documents brought to him that morning, in particular a two year project budget prepared by Mr. David James and some figures Mr. Duncan had with him.
46. In cross-examination by counsel for the second and third respondents, Mr. Kingsley James said that Mr. Wells told him that he may or may not need a guarantee, depending on where the money came from. He admitted that Mr. Wells may have said that, in order to have any prospect of success of obtaining an overseas loan, a bank guarantee was necessary. Mr. James said that he was very confident at the time of the Bank granting him a guarantee and that he mentioned this to Mr. Wells. He admitted that Mr. Wells discussed other options in the event that a bank guarantee was not forthcoming, mentioning domestic loans as a possibility. Mr. James recalled Mr. Wells telling him that overseas loans were "cheaper" than domestic loans, a reference to interest rates. The meeting ended on the basis that Mr. Wells was to seek an overseas loan.
47. Mr. David James said that at the meeting Mr. Wells talked about the type of loan that he was seeking. He recalled some mention of Barclays Bank though the name may have been mentioned before 18 July. Mr. Wells spoke of a guarantee, saying that the Bank would guarantee a loan. During the meeting Mr. Wells rang Mr. Parker to say that he may or may not need a guarantee and then told the meeting that there would not be any problem. In cross-examination Mr. David James said that he remembered Mr. Wells talking about hedged and unhedged loans. He agreed that the purpose of the meeting was to discuss the possibility of Mr. Wells obtaining an overseas loan. He agreed that Mr. Wells had said that, so far as an overseas loan was concerned, a bank guarantee was essential. Mr. James said that he thought the loan that they were getting was an overseas loan.
48. The evidence of Mr. Peter James added nothing to what has already been said. He had little recollection of the details of the meeting.
49. Mr. Duncan had not met Mr. Wells before 18 July. He took with him the
previous three years financial statements for what he described
as "each of
the James' accounting entities". He had a folder containing details of the
properties owned by the family, with title
descriptions. Mr. Duncan said that
Mr. Wells would not say who the loan was going to be from. "He suggested that
it may be either
a loan of off shore funds or a loan made by a local
investor". In regard to an off shore loan, Mr. Duncan raised the matter of
insuring
against currency fluctuations. He had the impression that Mr. Wells
had someone in mind with money. What struck Mr. Duncan was that
Mr. Wells
wanted to get on to the application for a loan that day.
"He suggested that we would probably have approval - or50. Mr. Duncan recalled that there was mention of the Bank and that a bank guarantee would be necessary for an overseas loan. He mentioned that the James were looking for a long term loan on an interest only basis. The meeting concluded, according to Mr. Duncan, with Mr. Wells saying that he thought he could complete the application that day and would get on to it straight away. Almost his last words were "We'll have a party when the loan has been approved". In cross-examination by counsel for the second and third respondents. Mr. Duncan said that Mr. Wells stated that "he would be able probably to get an approval by Wednesday which was five days away, three working days, or by the following Friday".
could - by Wednesday, and certainly by next Friday.
That very much surprised me because even lenders like
the Commonwealth Development Bank ask applicants to
have a six weeks option on the property they are going
to buy before they will look at it. They need six
weeks to look at an application but Mr. Wells was
fairly confident of getting this within a week".
51. I am satisfied that at the meeting on 18 July 1980 Mr. Wells expressed to
those present his confidence in his ability to obtain
a loan of the sort that
the applicants were seeking. He mentioned both domestic and overseas loans,
without identifying one or the
other as the likely source. But, to the
applicants, that was not so important as an assurance that they would get a
loan of sufficient
size to enable them to complete the purchase of Bibiking
and on reasonably long terms on an interest only basis. The James and Mr.
Duncan left that meeting, optimistic about the prospects of a loan. They were
entitled to be optimistic in the light of what Mr.
Wells had told them.
The instalment due on 8 August 1980
52. Under the contract of sale a further payment of $25,000 was due on 8 August 1980. There was evidence from Mr. Kingsley James that before that date he spoke to Mr. Parker who told him not to worry as he thought that Mr. Wells was capable of getting a loan. In cross-examination he agreed that Mr. Parker was saying only that Mr. Wells thought he could get a loan. However in re-examination he said that he took that statement to be an assurance that Wells was capable of getting a loan because it came from "my trusted bank manager". The expression was a rather artificial one and it sounded so. But as further evidence of the fact that Mr. Kingsley James assumed that a loan was forthcoming, he instructed Mr. Taylor to prepare an agreement whereby, in the event of the purchase price being paid before the due date, Mr. Phillip James would be entitled to a lease of the property until 1 February 1981. In the event, no such agreement was prepared.
53. Mr. Parker's diary note of 24 July 1980 records having been told that an application had been submitted through Market Securities for a loan of $2,000,000 and "brokers are confident of success. Reply should be to hand within 2 weeks and proposal encompasses refinancing of all debts - Bank, Esanda, Private mortgages, etc.". The note goes on to refer to an understanding of the interest rate, duration of the loan and other matters relevant to the loan. This, I think, was a record of what Mr. Parker had been told by Mr. Wells rather than what he had been told by the applicants.
54. On 8 August Messrs. Kingsley and David James went to the Bank, needing
help to pay the amount of $25,000 due that day. Mr. Parker
said (and I accept
his evidence) that he was upset that the James had left approaching him until
the very day the payment was due.
Mr. Parker telephoned the administrative
section of the Bank and received approval for a commercial bill in the sum of
$30,000 payable
on 30 September 1980. That date was selected, according to Mr.
Parker, because Mr. Kingsley James "believed the finance would be
approved and
available before that date". The applicants had received no word from Market
Securities that a loan had been granted.
Mr. Parker said that on that occasion
he discussed with the James whether they should continue with the acquisition
of Bibiking because
the deposit due that day was non refundable. In
cross-examination, Mr. Kingsley James agreed that some such statement could
have
been made by Mr. Parker though this was denied by Mr. David James. There
is no reason to doubt Mr. Parker's evidence in this regard.
He added that the
James said they wished to proceed because they felt confident they would get
the money.
The instalment due on 31 August 1980
55. Paragraph 13 of the statement of claim pleads that on or about 27 and 28 August 1980 Messrs. Kingsley and David James attended the Bank, sought advice as to what steps they should take in relation to the payment of $71,775 due on 31 August and were advised to borrow this sum against the security of Avondale. Evidence was given by the James in relation to such an attendance involving Mr. Parker. But it is clear that Mr. Parker went on holidays on the evening of 8 August 1980 and did not return to work until 8 September. In fact during Mr. Parker's absence the James arranged a loan of $70,000 from Bridging Finance Pty. Ltd. to enable them to pay the amount of $71,775 due by 31 August 1980.
56. Settlement of Bibiking was due on 1 February 1981. Market Securities
still had not arranged a loan. According to Mr. Kingsley
James, Mr. Parker
told him in or about October 1980 that he was still hopeful of Mr. Wells
getting a loan and thought him capable
of getting a loan. Mr. James did not
suggest that Mr. Parker was reporting a recent conversation with Mr. Wells.
Mr. Parker's diary
note of 22 October 1980 records:
"Kingsley, David and Peter called for interim review.The events of November 1980
Mortgage broker in Perth was still negotiating with
Citicorp on the funding of a $2.2m loan encompassing
the purchase of adjoining farmland ($1.2m) and
refinance of existing debts and provision of carry on
needs".
57. On 7 November 1980 Messrs. Kingsley, David and Peter James again called on Mr. Parker to discuss financial arrangements for completion of the purchase of Bibiking. According to Mr. Parker's diary note for that date, they expressed their concern that a loan had not been arranged and mentioned that Mr. Wells was seeking two loans of some $500,000 each. They told Mr. Parker that Mr. Wells "has suggested that the Bank may be prepared to meet any shortfall". That diary note also records the James acknowledging that "given the new circumstances, it will be more than likely necessary for them to sell land to co-incide with the purchase of the new farm". Mr. Parker suggested that they consider three propositions, one involving two loans of $500,000 each, one involving one loan of $500,000 and the third with no outside lending involved. Each proposition would involve the sale of some of the James' land. Mr. Parker suggested that the James call back the following week to begin discussions with Mr. O'Toole, a farm adviser, "so that cash flow projections can be commenced in each of the circumstances to enable a course of action to be undertaken during say the 1st or 2nd week in December".
58. Messrs. Kingsley, David and Peter James called on Mr. Crane, the assistant state manager of the Bank, on 12 November 1980. They did so at the suggestion of Mr. Gellard of Bridging Finance Co. Pty. Ltd., the company which had provided the $71,000 required at the end of August. They told Mr. Crane of the difficulties they were experiencing in securing a loan and how Mr. Parker had introduced them to Mr. Wells. Mr. Crane said he would write to Mr. Parker. The conversation ended with Mr. Crane saying "Don't worry. We'll look after you.". Mr. Crane telephoned Mr. Parker the same day and was told that Mr. Wells was now seeking a bridging loan of $900,000 or thereabouts from Barclays Bank or another two financial institutions. Presumably this is what Mr. Parker had been told by the James. Mr. Crane suggested to Mr. Parker that perhaps the Bank could provide the bridging finance required on short term commercial bills.
59. On 17 November 1980 the James again called on Mr. Parker, this time with Mr. O'Toole. He was a farm management consultant practising in Katanning and it was he whom Mr. Parker suggested the James consult.
60. According to Mr. O'Toole, he was asked by Mr. Kingsley James to assist with "the preparation of budget estimates concerning the purchase and operation of the property Bibiking". Before the meeting at the Bank on 17 November, Mr. O'Toole saw Mr. Parker to get some details of the James' finances. He was trying to assess the family's financial position as at 1 February 1981, the date on which they were required to find the balance of purchase price. Mr. O'Toole put together some figures which lead him to the conclusion that, on the basis of the family's existing farming operations and production programme, "there would be insufficient income to service anything like the level of debt that would be entailed in effecting the property purchase and operating the overall holding". Mr. Parker's diary note of 17 November 1980 records that at the meeting that day the James estimated their capital needs to complete the purchase of Bibiking as $965,000, together with other monies to enable them to carry on for the ensuing 12 months. The diary note contains this comment "O'Toole will immediately commence cash flow projections and a firm assessment of their needs to formulate a proposition".
61. This concerted approach to the Bank in November, both to Mr. Crane and to
Mr. Parker, is hardly consistent with the James' expressed
optimism concerning
a loan through Market Securities. It is even less consistent when regard is
had to the fact that on 27 November
1980 Market Securities wrote to Mr.
Kingsley James listing the various organizations it had approached and the
reasons why those
approaches had been unsuccessful. The letter concluded "Rest
Assured we are still doing our utmost to set this deal". On 19 January
1981
Market Securities again wrote to Mr. Kingsley James to report on its lack of
success in its approach to various organizations.
The letter concluded:
"However we are continuing in our search and assure youAdvance Application of 14 January 1981
of our best intentions to set your deal. We believe
that the ANZ Bank may be assisting you in the short
term. Could you please advise us or have Terry Parker
advise us what is happening in this regard".
62. On 14 January 1981 Mr. Parker submitted to the head office of the Bank an
advance application in relation to the account of Kingsley
James & Co. The
"Accommodation Recommended" was in the following terms:
------------------------------------------------------------------------------
-- Nature of Existing Present Recommended
Term
Liabilities LiabilitiesLimits Limits
------------------------------------------------------------------------------
-- Working Account 29546 - -
FDL 52000 52000 52000 clear 1985
FDA 100000 100000 100000 5 years
FDL NO 2 to open - 150000 10 years
CBAD 50000 50000 1250000 12 months
-----------------------------------------------------------
Total direct limits $202000 202000 1552000
------------------------------------------------------------
Total limits $202000 202000 1552000
------------------------------------------------------------------------------
--
63. Some of the terms in the application require explanation. "FDL" refers to farmers debt loan. "FDA" is fully drawn advance. "CBAD" is commercial bill accepted and discounted. As can be seen, Mr. Parker was recommending an increase in commercial bills from $50,000 to $1,250,000 for a period of 12 months. Commercial bills were a facility offered by the Bank. They were either of 30 days' or 6 months' duration. In effect they consisted of a promissory note drawn in favour of the Bank which the Bank then sold on a discounted basis in the money market. When the term of the bill expired, it was "rolled over" for a further period. When this procedure had been followed on several occasions, the result was a commercial bill line. I shall say more about the advance application of 14 January 1981 but first it is necessary to say something of the circumstances that brought it about. In this regard there was a considerable conflict of evidence between Mr. Kingsley James and Mr. Parker.
64. Mention has already been made of the interview on 17 November 1980 at which it was arranged that Mr. O'Toole would prepare cash flow projections. Mr. O'Toole thought that the meeting with Mr. Parker was on 18 November 1980 but the difference in evidence is of no real importance. Mr. O'Toole prepared what was described as a "rough budget" which did not work. By that it was meant that, having regard to income and outgoings, there would be insufficient money to service the loans proposed. It is at this point that the conflict of testimony begins. Mr. Kingsley James stated that there was a further meeting with Mr. Parker, at which the latter said that the James would have to sell all their sheep and go on to an all cropping basis. The term "all cropping" is self evident; it simply means that the farmer runs no stock and confines his activities to cropping. Mr. James said that he approached Mr. O'Toole again, asking him to prepare a budget on an all cropping basis. Mr Parker denied that he had given any such instructions or advice to the James. He agreed that there was a need "to change the profile of the farm to a basically cropping exercise"; but that was not the same as an all cropping basis.
65. I do not accept Mr. Kingsley James' evidence in this regard, for a number of reasons. To begin with, he had been a farmer for many years and was a man of firm views. I do not think he would have accepted advice from Mr. Parker as to the best way of conducting his farming operations though I accept that, where financial considerations were involved, he was bound to pay some heed to what the Bank told him. But I do not think that Mr. Parker would have given such advice. It is apparent that there are considerable risks involved in conducting a farm on an all cropping basis, except perhaps for a short term. This was made clear by David Eric William Nuttall, the managing director of Agribusiness Counsellors Pty. Ltd., a company carrying on the business of farm management consultants and valuers. The risks are those associated with putting all one's eggs in one basket. If there is a crop failure, there is simply no income. The logistics of farming on an all cropping basis are considerable and there are real problems of controlling weeds, plant diseases and soil deterioration. All this was known to Mr. James and, in a more superficial way, to Mr. Parker. Furthermore, the term "all cropping" was used by the applicants in a rather loose way so as to refer sometimes to all cropping literally and at other times to a system in which a high proportion of land is used for cropping.
66. Mr. Parker was concerned and had been concerned since his arrival in Katanning about the stock trading activities of Kingsley James & Co. As mentioned earlier, these activities involved a great deal of money and were responsible in part for the liquidity problems of the applicants. I accept that Mr. Parker continued to urge Mr. Kingsley James to cease stock trading. But that is an entirely different matter from running sheep for wool and to maintain a flock. In this regard I accept the evidence of Mr. Parker that, to increase the income of the James over the following year or so, he advised an increase in cropping and a reduction in stock in 1980.
67. These conclusions are born out by the second budget that Mr. O'Toole
prepared (exhibit 46). According to Mr. O'Toole it was prepared
following
discussions between him and the James -
". . . the essential features of which were to increaseThe second budget prepared by Mr. O'Toole comprised two projected cash flow statements, one covering the year ending 31 January 1982 and the other covering the year ending 31 January 1983. They reflect the discussions mentioned by Mr. O'Toole. They do not contemplate all cropping and no stock.
the cereal cropping to 11,000 acres per annum and
reduce the Merino sheep flock to approximately 2,000
head and include a resale sheep enterprise; that is
stocking the stubbles and selling the stock off again
before planting of the subsequent crop".
68. The advance application of 14 January 1981 identified various properties
to be held as security for the financial assistance
proposed. It contained a
lengthy statement by Mr. Parker as to the background of the application, in
particular the need to finance
the purchase of Bibiking. It included the
following statement:
"The Broker being used has seemingly kept customers on aThe application also contained the following statement:
string for some time now with promises of funds and
'approved' applications - each of which has 'fallen
through' or 'still being considered'.
Customers are now in the position of settlement being
due 1st February 1981 without finance backing and the
probable loss of more than $107,000 deposit paid.
Vendors have committed themselves to purchases
elsewhere against funds being available from the sale.
While vendors are 'family' there is not the affinity
normally expected and even if there were - action
against the vendors (Phil and Kim James) by the vendors
of the properties they are in turn purchasing, must be
passed back to our customers.
Accordingly, and with considerable losses looming, the
Bank has been asked to provide a rescue operation with
bridging finance pending the raising of outside funds
or sale of other farm land to clear the $1M plus".
"At this late date, there are only two alternatives openThere is one further statement which I set out as it is of some importance, having regard to what has been said concerning the livestock trading operation.
to customers - suffer the loss or locate bridging
finance.
Assuming the latter is successful, customers will
continue in their quest for outside term lending or, if
such a source(s) cannot be located within 12 months,
they will undertake to immediately sell farmland and
industrial land (latter already in hand) to clear the
bridging content then remaining. This may take up to
12 months (maximum)."
"However, while the Budget (prepared by customers and69. It is one of the applicants' chief complaints against the Bank that they were persuaded to change their method of farming operations and that in doing so they acted to their considerable detriment because their crops did not produce the amounts expected. Furthermore, the applicants say, they were persuaded by the Bank to assume liabilities under commercial bills which they were unable to service so that ultimately they were forced to sell most of their farming properties. These matters require closer consideration but I am satisfied that Mr. Parker did not advise the James to switch over to an all cropping basis and I am also satisfied that they did not do so. Mr. Parker suggested a higher proportion of cropping. The James discussed this aspect with Mr. O'Toole and, relying on his advice and their own experience, decided on the amount of land to be cropped and the amount of stock to be held.
Farm Adviser) is based on the bridging exercise in
mind, it will be seen that cash flow generation is
excellent. This is solely from the large cropping
programme (on-going) capable of achievement following
the excision of the livestock trading operation".
70. On 2 February 1981 Mr. Parker learned from area office that the application of 14 January had been approved. He informed the James accordingly.
71. Counsel for the applicants made much of the fact that in a memorandum
accompanying the advance application of 14 January 1981
(exhibit 83), Mr.
Parker wrote:
"A decision was made just prior to Christmas to submitThe year 1981 was a time of rising farm values, a rise which continued until mid 1982 and then fell away. Counsel pointed to the reference to "a hopeless businessman" and "he relies heavily on others" as evidence of the trust placed by Mr. James in the Bank and his necessary reliance upon any advice given by it. However it is important to keep in mind the distinction between advice of a financial nature and advice in regard to farming operations. As to the first, there is no doubt that the Bank did advise the applicants from time to time and in the circumstances it had an obligation to do so. As to the second, I do not think Mr. Parker gave or the applicants accepted any such advice. There can be a real distinction between the giving of advice on the one hand and the imparting of information or the exchange of ideas on the other.
this bridging application and it has taken to now to
compile same. James senior is an affable fellow and a
reasonable farmer but a hopeless businessman. Trying
to get to grips with him on financial matters is
hopeless - he relies heavily on others. However, has a
son now on farm who has completed an agricultural
college course (NSW) and has taken over financial reins
to a large degree. He has accrued an excellent level
of landed assets, mainly through good luck in the
farmland purchases made around the town boundary,
inflation and rapid town development over recent
years".
72. Settlement of Bibiking was now due and security documents were prepared by the Bank as a matter of urgency. Some security documents were signed on 6 February in the office of the Bank. The mortgage documents themselves were, for the most part, signed on 12 February 1981. On this occasion Mr. Parker and Mr. Sharpe, the assistant branch manager, were present as well as members of the James family and Mr. Taylor. Mr. Taylor's role on this occasion was left somewhat in the air. I accept Mr. Parker's evidence that he was not there at the request of the Bank. I am satisfied that the James told him that they were attending at the Bank to sign security documents. I am not satisfied that they asked Mr. Taylor to accompany them and I was told by counsel that there was nothing in Mr. Taylor's files to suggest that an account had been rendered to anyone for his attendance on that day. Mr. Taylor did not seem to know why he was present.
73. It was Mr. Parker who explained each document to the James before they signed it. Mr. Taylor may have made some comment in answer to a question by Mrs. James but apparently he did not see his role as one of advising the James. The security documents had been prepared and it is unlikely that the Bank would have agreed to any changes. In any event, it is not suggested that there was anything about the security documents themselves that was out of the ordinary or particularly onerous.
74. On 7 August 1981 Messrs. Kingsley, David and Peter James called on Mr.
Parker again. This is not to say that there had not been
discussions between
February and August. But a diary note of that date records advice by Mr.
Parker that the Bank would consider
rolling over the bill facility for a
further 12 months
"on the basis that working account was kept strictly in75. The same diary note records that, through their accountant, the applicants were advertising for long term finance and that there was prospect of a loan of $1.9 million over a period of 10 to 20 years on an interest only basis. However by October 1981 the applicants' position had worsened and Mr. Parker's diary note of 1 October 1981 records advice by him to Messrs. Kingsley and David James that
credit and a tangible reduction was made in CB facility
presently standing at $1.25M. Suggested reduction
$250,000. However, budget projections indicate that
$250,000 reduction is not possible if they are to
overcome need to borrow for carry on requirements next
year. It would seem that a reduction of $100,000 and
possibly up to $150,000 only may be achieved".
". . . the bank is not interested in supporting them any76. There is a lengthy diary note of 19 October 1981. No outside loan was forthcoming. An inspection of Bibiking and Avondale by Mr. Parker with Messrs. Kingsley and David James showed the crops looking excellent and the possibility of a first advance on crops of $700,000. However Mr. Parker pointed out to the James that bank approval of a commercial bill line earlier in 1980 "was on the firm understanding that it could be cleared within 12 months". Mr. Parker emphasised the need to give consideration to selling land with a view to reducing the commercial bill line.
further. They are to arrange and lodge funds to
account prior to issuing any cheques to be drawn and
which must not exceed those deposits. This arrangement
to continue until grain proceeds are to hand - they
expect first barley receipts during late November.
However, this is considered premature and branch
estimation on date of receipts is late December".
77. In 1982 the applicants' position worsened even further. They were unable
to meet their obligations to the Bank under the commercial
bill line and in
the end the Bank insisted that steps be taken to sell the properties the
subject of its security. I shall say something
more of the sale of the
mortgaged land later in these reasons but before doing so it is necessary to
retrace steps to 1981 to consider
the implications of a purchase in which Mr.
Angus James was involved.
Angus James - the Lake King farm
78. The transaction is relevant to the applicants' claim against the Bank in this way. In or about September 1981 the Bank lent Mr. Angus James the sum of $185,000 to buy a farm at Lake King. The applicants say that, at the request and on the advice of Mr. Parker, Mr. and Mrs. James executed a guarantee mortgage in favour of the Bank over part of Brickworks to secure the loan to Mr. Angus James. In that respect, the applicants say, the Bank was guilty of misleading and deceptive conduct by representing that Mr. and Mrs. James were in a position to provide a guarantee mortgage when in fact they were unable to meet the terms of the borrowings to which they were already committed.
79. On 9 March 1981 Mr. Angus James called on Mr. Parker to discuss in a general way the prospects of a loan to secure the purchase of a farm. Mr. Parker did not commit the Bank but recommended to Mr. James that he look beyond the Katanning region to areas where properties were cheaper. He suggested looking at Esperance or even up north to a station property.
80. Mr. Angus James looked around areas east of Katanning until he came upon a property at Lake King. Through the agency of Elders he signed an offer to buy Roe Location No. 2853 for $160,000, payable by a deposit of $16,000 and the balance on 27 April 1981. Both vendor and purchaser signed the contract on 12 March 1981. Although settlement was expressed to be on 4 May 1981, the vendor, Mr. Eichler, agreed to a term in the contract "to give the purchaser immediate access to the property to start his cropping programme".
81. Although there was some suggestion in the evidence of Messrs. Kingsley and Angus James that Mr. Parker was aware of the Lake King property before the contract was signed, I am satisfied that he was not. His diary note of 13 March 1981 records a call by Messrs. Kingsley and Angus James to inform him of the purchase of "3012 acres at Lake King for $144,576 - actual purchase price $160,000 (this includes a combine/culti trash, new root rake and new plough and water tanks and sufficient grain to sow 1200 acres").
82. Angus James was seeking finance by 27 April 1981. Mr. Parker noted that
this time was too short as an application to the Commonwealth
Development Bank
would have to be completed and this would require the preparation of cash
flows over a period of 3 years. Mr. Parker
suggested to Mr. James that he seek
an extension of terms from the vendor. Mr. James travelled to Adelaide where
Mr. Eichler was
then living and on 3 June 1981 the parties agreed to extend
the date for approval of finance until 12 August 1981, with a settlement
date
on 31 August. Mr. James agreed to pay interest on the sum of $160,000 at the
rate of 16%, calculated from 4 May 1981 and payable
at settlement. There was a
further provision that in the event finance was not approved by the stipulated
date
". . . the Purchaser agrees that he shall waive any83. There were a number of meetings between Mr. Angus James and Mr. Parker in April, May and June 1981, with various attempts by Mr. Parker to obtain money from different sources to assist Angus with the purchase of the Lake King property.
interest or property in the crop sown by him on the
land and shall not seek any reimbursement therefor
holding any interest or property therein unto the
Vendor absolutely as from either the date of refusal of
finance or the 12 the day of August 1981 whichever is
the earlier".
84. On 16 July 1981 Mr. Parker wrote to Mr. Angus James
". . . to confirm our verbal advices that a Farm85. Unfortunately for Mr. Angus James, although the 1981 season started well in the Lake King area, it did not carry through and the first crop was not nearly as successful as expected. Mr. Angus James also put in a barley crop in Katanning but, in view of the lateness of the year when the crop was sown, it too was not particularly successful.
Development Loan of $140,000 has been approved to
assist in the purchase of the Lake King farm property
and repay existing loans at this branch.
. . .
As discussed, the Farm Development Loan approval is
subject to the Bridging Finance Company loan of $70,000
and the Commonwealth Development Bank loan of $45,000".
86. There is no doubt that Mr. Angus James bought the Lake King property on a very slim equity. He borrowed virtually the whole of the purchase price and, in my view, it is extraordinary that Mr. Kingsley James did not seek to dissuade him from such a purchase, given the limits to which the family's finances were stretched in March 1981. Indeed it seems that Mr. James told his son that the block was for sale, although he may have been just passing on a message from Elders. In my view it was equally unwise of Mr. and Mrs. James to commit themselves as guarantors of the purchase in the circumstances in which they were then placed.
87. Mr. Angus James found himself unable to continue with the farm and eventually it was sold in 1983 for a purchase price of $210,000. There is no reason why it could not have been sold earlier and probably at a better price.
Sale of the James' properties
88. Although the applicants undertook in May 1982 to sell the land secured by the mortgages to the Bank in connection with the purchase of Bibiking, clearly they were reluctant to do so. The sale of farm land was anathema to Mr. Kingsley James and was destructive of all that he had built up over the years. But the applicants had no choice and in August 1982, through Elders, they took steps to sell some of the land. They did so by tender rather than by auction or private treaty. This was on Elders' advice. The James were well known in the area and their financial difficulties would also have been well known by the end of 1982. Elders thought that to call tenders would be more likely to attract reasonable offers than a sale by auction which would have all the earmarks of a forced sale or than a sale by private treaty.
89. No sales were effected until 1983. It is enough for present purposes to
set out in summary form when various farms were sold
and the prices obtained.
All properties to be mentioned were sold privately other than Rowlands which
was sold by auction.
______________________________________________________________________________
__
Property Date of Sale Price Total
______________________________________________________________________________
__
Yallambee Part One 20 April 1983 $280,000
Yallambee Part Two 9 March 1983 $148,950 $428,950
Cronins 20 April 1983 $170,000 $170,000
Bibiking Part One 8 April 1983 $431,330
Bibiking Part Two 9 March 1983 $192,000
Bibiking Part Three 26 April 1983 $185,280 $808,610
S.M.P. 17 March 1983 $140,000 $140,000
Rowlands Part One 5 May 1983 $24,000
Rowlands Part Two 5 May 1983 $66,500
Rowlands Part Three 5 May 1983 $32,000 $122,500
$1,670,060__________________________________________________________
The proceedings in this court
90. The application to this court was lodged on 13 November 1984. The applicants sought an interlocutory injunction to restrain the Bank from exercising its power of sale as mortgagee of Avondale. The Bank undertook to take no further steps in relation to the sale of that property until the litigation was determined.
91. It is unnecessary to trace the history of the litigation thereafter save
to say that there have been motions by the respondents
seeking orders striking
out various paragraphs of the statement of claim. In part those motions were
successful, in part they were
not. The applications have been reported - see
James v. Australia and New Zealand Banking Group Ltd. (1985) ATPR 40-504;
(1985) ATPR
40-523; (1985) ATPR 40-567. The last of these decisions, which
involved a contention by the second and third respondents that any
cause of
action against them was in any event statute barred, was the subject of an
unsuccessful appeal by them to the Full Court
of the Federal Court - see Tamar
Management Pty. Ltd. v. James (unreported decision delivered 20 September
1985). A motion by the
second and third respondents seeking an order for
security for costs was also dismissed - see James v. Australia and New Zealand
Banking Group Limited (unreported decision delivered 23 October 1985).
Misleading or Deceptive Conduct - The Relevant Law
92. The applicants' case against the respondents under s. 52 of the Trade
Practices Act turns upon statements said to have been made in relation to the
availability and obtaining of a loan to finance the purchase of Bibiking.
Assuming that the respondents made the statements attributed to them, some of
what was said related to what would happen in the future.
In Bell v.
Australasian Recyclers (W.A.) Pty. Ltd. (1986) ATPR 40-644 I discussed the law
in relation to statements relating to what
would happen in the future. I shall
not repeat what is set out there but shall summarise the views expressed. I
shall also state
in summary form the law relating to intention or state of
mind where s. 52 is invoked.
1. A corporation may be in contravention of s. 52,whatever its intention or the state of mind of those controlling it. Hornsby Building Information Centre Pty. Ltd. v. Sydney Building Information Centre Ltd. [1978] HCA 11; (1977-78) 140 CLR 216; Parkdale Custom Built Furniture Pty. Ltd. v. Puxu Pty. Ltd. [1982] HCA 44; (1981-82) 149 CLR 191.
2. The mere fact that representations as to futureconduct or events do not come to pass does not make them misleading or deceptive. Bill Acceptance Corporation Ltd. v. GWA Ltd. (1983) 50 ALR 242.
3. Nevertheless, a statement relating to the future maycontain an implied statement as to present or past fact. It may represent impliedly that the promisor has a present intention to make good the promise and it may represent impliedly that he has the means to do so. Thompson v. Mastertouch TV Services Pty. Limited (1977) 15 ALR 487.
4. A statement involving the state of mind of the makerof the statement e.g. promises, predictions and opinions ordinarily conveys the meaning that the maker of the statement had a particular state of mind when the statement was made and that there was basis for that state of mind. If the meaning contained in or conveyed by the statement is false in that or in any other respect, there will have been a contravention of s. 52. Global Sportsman Pty. Ltd. v. Mirror Newspapers Ltd. (1984) 55 ALR 25; Australian Ocean Line Pty. Ltd. v. West Australian Newspapers Ltd. (1984-85) 58 ALR 549.
5. Although the applicants' case against the firstrespondent depends almost entirely upon what was said by Mr. Parker, it is the Bank and not Mr. Parker which has been sued. Both Tamar and its managing director, Mr. Wells, are respondents. If Mr. Wells is liable in damages under s. 82 of the Trade Practices Act, it must be because he answers one of the descriptions in s. 75B of that Act.
93. The circumstances in which a person may be held liable under that section
were dealt with by the High Court in Yorke v. Lucas
(1985) 61 ALR 307; that is
a matter to which I shall return in the event that Tamar is held liable to the
applicants or any of them.
Misleading or Deceptive Conduct - The Bank
94. The statement of claim contains a number of allegations of misleading or deceptive conduct against the Bank. Each has as its core the loan which the applicants hoped to get through Market Securities. I shall not set out verbatim the various paragraphs of the statement of claim in which allegations of misleading or deceptive conduct appear, but I shall deal with the substance of those allegations.
95. Part of the case against the Bank was that, by its conduct in referring the applicants to Mr. Wells, the Bank represented that Tamar was competent to procure a loan for the applicants when in fact it was not registered as a licensed finance broker and was not competent to carry on that business. In other causes of action, to which I shall refer later, the applicants alleged a failure by the Bank to tell them that Tamar was not a licensed finance broker.
96. Nothing was said by Mr. Parker regarding the status of Tamar or of Market Securities. Indeed the evidence of all concerned indicated that it was Mr. Wells, by name, to whom Mr. Parker referred the applicants. Furthermore, nothing said by Mr. Parker, expressly or impliedly, carried a representation that Tamar or Market Securities was a licensed finance broker. Nor was there evidence that at any stage Mr. Parker became aware that Tamar was not licensed. Tamar admitted during the hearing that it was not a licensed finance broker.
97. The applicants did not make out any case against the Bank in regard to the licensed status of Tamar; indeed most of the allegations in that regard were abandoned by counsel for the applicants during his final address.
98. The applicants further alleged that, by recommending them to Mr. Wells, the Bank represented that Tamar was competent to procure the loan for them. I am unable to read into the statement attributed to Mr. Parker (that he knew someone who might be able to assist the applicants to obtain a loan) any representation as to the competence of the finance broker. Earlier in these reasons I have found that Mr. Parker's approach to the second and third respondents was not earlier than the middle of June 1980. It was not until 7 July 1980 that Mr. Kingsley James and Mr. Phillip James agreed on a price for Bibiking. Mr. Parker arranged the meeting of 18 July between the James and Mr. Wells and the contract for the purchase of Bibiking was executed three days before that meeting. After the meeting of 18 July Mr. Parker had some contact by telephone with Mr. Wells, but for the most part communication was directly between the applicants and Mr. Wells. Furthermore, notwithstanding the failure by Mr. Wells to give evidence, I am not persuaded that he was incompetent as a finance broker. Certainly he failed to obtain the loan required by the applicants but that failure, of itself, does not constitute incompetence.
99. If the applicants have a case against the Bank in regard to Mr. Wells' failure to obtain a loan, it cannot be by reason of Tamar's unregistered status or by reason of any incompetence on the part of Mr. Wells. Any such case must depend upon what Mr. Parker said to the applicants concerning the likelihood of Mr. Wells obtaining a loan for them.
100. Part of the extensive range of conduct said to constitute a breach of s. 52 is an alleged representation by Mr. Parker that an overseas loan would be obtained by Tamar, when such a loan was not available. An adjunct to this allegation is a further representation that the Bank would guarantee an overseas loan when it had no intention of doing so.
101. I am far from persuaded that any representation was made by Mr. Parker concerning the availability of an overseas loan as opposed to the availability of a loan in general. Certainly an overseas loan was mentioned in telephonic discussions between Mr. Parker and Mr. Wells before the meeting of 18 July and certainly Mr. Parker conveyed these discussions to the applicants. But an overseas loan was mentioned only as a possible source of finance for the applicants. It was a source that had some appeal for them because of the possibility that it might be a long term loan on an interest only basis and at a relatively low rate of interest. But I can find nothing in the evidence to justify a conclusion that Mr. Parker told the James that Mr. Wells would get an overseas loan for them or that he told them that the Bank would guarantee such a loan.
102. While there was no evidence from Mr. Wells as to what was said at the meeting on 18 July, it is apparent from the evidence of Messrs. Kingsley and David James and Mr. Duncan that the loan discussed might be from an overseas source or from within Australia.
103. Not only did the applicants fail to prove that Mr. Parker told them the Bank would guarantee an overseas loan when it had no intention of doing so, but the applicants did not attempt to establish any lack of intention on the part of the Bank. Once again, it is apparent that there were discussions about the need for a bank guarantee. Mr. Wells told Mr. Kingsley James that a bank guarantee was required for an overseas loan and, according to Mr. Kingsley James, Mr. Parker said that the Bank "might have to guarantee the loan". But this evidence fell far short of what was pleaded or of what might reasonably be held to be misleading or deceptive conduct on the part of the Bank. In any event it is clear that, before 8 August 1980 when the further payment of $25,000 was due on Bibiking, Mr. Wells had made it plain to Mr. Kingsley James that there would be no bank guarantee.
104. There was evidence from Mr. David James that at the meeting, said by the applicants to have taken place on 14 July 1980, Mr. Parker expressed the view that the James could rely on the Bank guaranteeing a loan. I do not accept that evidence. Mr. James could not recall the context in which the remark was made. It was denied by Mr. Parker, whose evidence on this matter I prefer. It is most unlikely that Mr. Parker would have made such a statement when he had no authority to do so and when the amount of the loan, its term, the rate of interest and indeed the currency in which it might be paid were all unknown. I accept the evidence of Mr. Parker "We would need to look at the proposition prior to the submission of an application to the bank's administration for a bank guarantee to issue".
105. The applicants further plead misleading or deceptive conduct on the part of the Bank by reason of Mr. Parker's representation to them that they could arrange suitable borrowings to effect a purchase of Bibiking and should execute an offer to buy Bibiking when, it is alleged, no suitable borrowings had been procured or arranged or could be procured or arranged on their behalf.
106. According to Mr. Kingsley James, Mr. Parker said in May 1980 that "he thought Wells would be able to get us a loan". Such a statement, if made, was no more than an expression of opinion based upon what Mr. Parker had been told and was expressed as such. On its own it could not, in my view, constitute misleading or deceptive conduct.
107. I am satisfied that, when Mr. Parker rang the James in Perth at the end of June 1980, it was in connection with the purchase of Bibiking. I am also satisfied that during this conversation Mr. Parker used the expression "it's a goer" or something very much like it. From the fact that Mr. Parker advised the James to buy some offer and acceptance forms, it is apparent that the discussion involved Bibiking even if there were other topics. But I do not think that the applicants have established that anything said by Mr. Parker on that occasion constituted misleading or deceptive conduct. I am not satisfied that Mr. Parker mentioned Mr. Wells by name or that anything said by Mr. Parker went beyond a general statement that it was likely that money would be forthcoming for the purchase of Bibiking. At that stage the purchase price had not even been agreed and certainly any mention of a loan could have been only in the most general terms as to amount, duration and rate of interest. It is apparent that no loan was in fact available on 27 June. It was not the applicants' case that Mr. Parker was dishonest. And he would have been dishonest to say that a loan was in fact available on 27 June. He had some reason for optimism and no doubt he conveyed that optimism to the James. But they must have realised that much more remained to be done before it could be said with certainty that a loan was available. It can hardly be supposed that the applicants were willing to commit themselves, sight unseen as it were, to a loan in excess of $1,000,000.
108. The meeting on 18 July 1980 was arranged so that the James could take to Mr. Wells the sort of information that a lender would require before agreeing to advance such a substantial sum. Mr. Duncan was present at the meeting as the James' accountant, for the express purpose of providing information and answering questions. As Mr. Kingsley James said in answer to a question why he had earlier agreed that it was obvious that Mr. Wells would require a budget, cash flow and statement of position - "Because if a man is going to apply for a loan he has got to have some figures, does he not". Equally, Mr. David James, when asked why it was necessary to take so much information to Mr. Wells, replied "Nobody lends any money, whether big or small, without some facts".
109. I do not accept that, during the telephone conversation at the end of June, the Bank through Mr. Parker represented that the applicants could arrange suitable borrowings to buy Bibiking. Equally I am not persuaded that Mr. Parker did not have an honest belief in what he told the James on that occasion.
110. Of course the allegation of misleading or deceptive conduct against the Bank is not confined to events leading up to the end of June 1980. But the meeting on 18 July represented a direct contact between the applicants and Mr. Wells and a situation in which the applicants knew thereafter the person with whom they were dealing. Mr. Parker was not present at the meeting on 18 July and, so far as is known, had no contact with Mr. Wells thereafter other than an occasional telephone call. Once the meeting took place on 18 July, Mr. Parker largely dropped out of the picture so far as communication between the applicants and Mr. Wells was concerned. Thereafter the James were in the better position, as between themselves and the Bank, to assess the likelihood of a loan becoming available. It is true that they had already signed the contract to buy Bibiking, but I have already expressed my views as to the wisdom of that course when they were to see Mr. Wells only three days later. And in any event, the contract into which they entered permitted them to withdraw at any time until 31 August 1980 on forfeiture of $35,000.
111. I am not persuaded that Mr. Parker told the James they could rely upon Mr. Wells to obtain a loan for them though, as I have said, I accept that he (Mr. Parker) communicated the optimism expressed by Mr. Wells. It is not without significance that, according to Mr. David James, in the middle of June 1980 Mr. Parker was looking at more than one source of finance for the James. In particular he told Mr. David James that he had been in touch with a Mr. Quartermaine with a view to financing the purchase of Bibiking. It is true that, in all likelihood, this conversation preceded the telephone call at the end of June. But the point is that Mr. Parker was not looking only to Market Securities and, apart from the optimism expressed by Mr. Wells, Mr. Parker had no reason to conclude that finance was available through that firm. Nor, in my view, did Mr. Parker tell the James anything more than it was likely that finance would be available. The negotiation of the terms of that finance had to be a matter for the James as they recognized by attending the meeting on 18 July 1980.
112. It is pleaded that there was misleading or deceptive conduct on the part of the Bank in "failing to advise the Applicants not to execute an unconditional offer to purchase the Bibiking property". Conduct is not misleading or deceptive unless it contains or conveys a misrepresentation. Although I am critical of Mr. Parker's advice to the James to acquire offer and acceptance forms and his further advice that they did not need a solicitor to complete the forms, I am not persuaded that there was any misrepresentation on his part. The James did not use the forms and the Bank played no part in the preparation or execution of the contract for the sale of Bibiking.
113. There are other allegations relating to the Bank's failure to advise the applicants that it was in their interest to withdraw from the contract. These allegations run into the difficulty of spelling out misleading or deceptive conduct from silence on the part of the Bank. And they founder on the evidence of Mr. Parker that he was on holidays between 8 August and 8 September 1980 (when the instalments fell due) and that, before he went on holidays, he asked Mr. Kingsley James to consider whether it was wise to continue with the purchase of Bibiking since it was then possible to withdraw from the contract. It is not clear whether at that time Mr. and Mrs. James had become co-purchasers of Bibiking but it is of no moment; Mr. James had from the outset spoken on behalf of his family.
114. A further head of conduct is that the Bank represented to the applicants that it was in their interest "to undertake onerous short term borrowing commitments" to complete the purchase of Bibiking "when the business conducted by the Applicants on the all-cropping basis required by the Bank could not service such commitments" (statement of claim para. 19(n)). This allegation is linked with a complaint of misleading or deceptive conduct in failing to advise the applicants that, on an all-cropping basis, they could not service the Bank's loan (para. 19(o)).
115. These allegations are answered by the findings I have already made. The Bank did not require the applicants to change to an all-cropping basis. Mr. Parker suggested to Mr. Kingsley James that the applicants should cease their livestock trading in order to improve their liquidity. The decision as to how much land they should put to crop and how much to stock was one for them, in which regard they had the benefit of Mr. O'Toole's advice as well as of their own experience. Exhibits 52 and 64 evidence the assessment of Mr. David James in the one case and Mr. O'Toole in the other as to how much land might be cropped. Mr. O'Toole's evidence made it clear that it was Mr. Kingsley James who instructed him to prepare a revised budget, "the essential features of which were to increase the cereal cropping to 11,000 acres per annum and reduce the Merino sheep flock to approximately 2,000 head and include a resale sheep enterprise; that is stocking the stubbles and selling the stock off again before planting of the subsequent crop".
116. The Bank did not represent to the applicants that it was in their interest to borrow on commercial bills; that was the only form of loan the Bank was prepared to undertake in February 1981 and then as part of what Mr. Parker described as a rescue operation. Mr. O'Toole prepared a budget extending over a period of two years because Mr. Parker had told him that was the period "during which the overall indebtedness would need to be substantially reduced, either through profits from the farming operation and/or the sale of farming assets, farmland, to bring the debt down to a level that the bank might be able to finance on a conventional basis". It was the applicants' decision that they would not sell any of their land and this in turn meant that their ability to service the Bank loan depended upon the productivity of their farms. In that regard Mr. Nuttall was of the view that in the short term, that is over a period of two years, the applicants could meet their interest obligations under the loan from the Bank.
117. The remaining particulars concern the loan made to Mr. Angus James and the guarantee entered into by Mr. and Mrs. James. The misleading or deceptive conduct complained of is an alleged representation by the Bank that Mr. and Mrs. James were in a position to provide a guarantee mortgage at a time when the applicants were unable to meet their short term borrowing commitments and at a time when the Bank should have known that Angus would be unable to meet the terms of the loan made to him by the Bank.
118. The obligation assumed by Mr. and Mrs. James was the mortgage of Brickworks. But Mr. James was already liable as a guarantor of his son's obligations to the Bank under an earlier guarantee. It is true that, by giving a mortgage of her interest in Brickworks, Mrs. James assumed an obligation to the Bank. But any liability Mr. and Mrs. James incurred could only be by reason of default on the part of Mr. Angus James. Mr. Parker did not represent to Mr. and Mrs. James that they were in a position to provide a guarantee mortgage "at a time when the Applicants were unable to meet the terms of the aforesaid onerous short term borrowing commitments undertaken by the Applicants and at a time when the Bank should have known that Angus Kingsley James would be unable to meet the terms of the loan facility provided to him by the Bank" (statement of claim para. 19(r)).
119. It was Angus James' decision to buy the Lake King farm, a decision which in my view was endorsed by his father notwithstanding some disclaimer by Mr. Kingsley James. Mr. Angus James had to borrow money to buy the farm and his equity in the farm was such that a guarantee from his parents was not an unreasonable requirement by the Bank. At the time he bought the farm, the prospects were good. Mr. Angus James himself was an able, hard-working farmer. The 1981 season began well and there was no reason to anticipate a default. Mr. Angus James ran into problems because of bad weather; his clearing costs proved to be larger than anticipated; and the barley crop he planted at Katanning was not a success. But none of these matters can be brought home to the Bank. When Mr. James did run into trouble, he could have sold the farm at a price that would have freed him and his parents of any obligations in respect of that property. In fact it was not sold until 1983, at a price of $210,000. This was more than he had paid for it though he had spent money and time on the farm. It was not shown that Mr. and Mrs. James' obligations to the Bank in respect of the Lake King property played any part in the applicants' inability to meet their obligations to the Bank in respect of Bibiking or that it played any part in the later sales of the applicants' properties.
120. Extensive though the range of alleged misleading or deceptive conduct on
the part of the Bank is, the applicants have failed
to make good any of these
allegations. Their claim against the Bank under the Trade Practices Act must
fail.
Misleading or Deceptive Conduct - Tamar
121. The case of misleading or deceptive conduct pleaded against Tamar and
Mr. Wells is in these terms.
1. In or about June 1980 Mr. Wells, acting for and onbehalf of Tamar, represented to the applicants (other than Mr. Angus James) that Tamar "was able to obtain for them a long term low interest rate loan which would enable them to finance the purchase of Bibiking." (statement of claim para. 24).
2. On or about 18 July 1980 Mr. Wells, acting for andon behalf of Tamar, represented to the applicants that Tamar was a finance broker and that it was able to procure a loan of $1.6 million with an interest rate of between 12-14% per annum for a term of seven years during which period interest only would be payable and that the loan would be approved within 14 days (para. 24A).
3. Between 18 July 1980 and January 1982 Mr. Wells,acting for and on behalf of Tamar, represented to the applicants that Tamar was able to procure a loan of the type just mentioned (para. 24B).
122. The statement of claim pleads each of these representations as instances of misleading or deceptive conduct on the part of Tamar. The representation said to have been made in or about June 1980 derives from what Mr. Wells told Mr. Parker in a telephone conversation. As it was not contended that Mr. Parker was the agent of either Tamar or Mr. Wells, any evidence given by the applicants of what Mr. Parker told them regarding that telephone conversation was necessarily hearsay so far as the second and third respondents were concerned. However Mr. Parker gave evidence and counsel for the Bank sought to adduce from him what Mr. Wells had told him. I permitted that evidence to be given so that Mr. Parker might explain what he in turn told the applicants and also because the conversation might throw light upon Mr. Parker's own conduct. Counsel for the applicants and the Bank agreed that evidence by Mr. Parker of what Mr. Wells told him was not evidence of the truth of those statements. However, in my view, such statements might constitute admissions by Mr. Wells.
123. In any event there was nothing in the evidence of Mr. Parker regarding his contact with Mr. Wells before 18 July 1980 to support the pleading that Mr. Wells represented that Tamar was able to obtain for the applicants a long term low interest rate loan. Mr. Parker's evidence in that regard went no further than that Mr. Wells expressed interest in seeking a loan for the applicants, to which end he would be pleased to meet them and that he (Mr. Wells) had in mind a loan of about $1.5 million at an interest rate of 2 1/4% or 2 1/2% above the government bond rate. There was nothing misleading or deceptive in that statement.
124. The allegation of misleading or deceptive conduct on 18 July 1980 is the primary complaint against Tamar and Mr. Wells. It derives of course from the meeting that took place that day. In that regard there was evidence from Messrs. Kingsley, David and Peter James together with Mr. Duncan. There was no evidence from Mr. Wells, the only other person present at the meeting.
125. Although the case pleaded is that Mr. Wells represented to the applicants that Tamar was a finance broker, the real complaint in that regard relates to the licensed status of Tamar. I do not accept that at the meeting on 18 July Mr. Wells expressly represented to the applicants that Tamar was a finance broker. No doubt he did so by implication. But such a representation had no causal part to play in the events that followed. It is, I think, something of a red herring.
126. Mr. Duncan's evidence offers the strongest support for the applicants' case against Tamar in regard to what Mr. Wells said. The meeting was held on a Friday. Mr. Duncan was struck by Mr. Wells' comment that he would probably have approval of a loan by Wednesday of the following week and "certainly by next Friday". In cross-examination Mr. Duncan stated "He (Mr. Wells) said that he would be able probably to get approval by Wednesday which was five days away, three working days, or by the following Friday".
127. The case pleaded against the second and third respondents is of misleading or deceptive conduct in representing that Tamar "was able to procure a loan of 1.6 million dollars at an interest rate of between 12-14% per annum for a term of seven years during which period interest only would be payable". The conduct pleaded is not in terms of an overseas loan or a domestic loan; it is in terms simply of a loan, whatever the source might be. The distinction was not crucial to the applicants.
128. Much was made by counsel for the applicants of the second and third respondents' failure to call Mr. Wells as a witness. That criticism was fairly made and, in accordance with the authorities, strengthens the evidence of those whom the applicants called in regard to the meeting. In this regard, the relevant authorities are noted by Woodward J. in Australian Transport Insurance Pty. Ltd. v. Graeme Phillips Road Transport Insurances Pty. Ltd. (unreported decision delivered 20 December 1985). It may be inferred that, had Mr. Wells been called, he would not have denied the evidence of Messrs. Kingsley, David and Peter James or that of Mr. Duncan. But the failure of a party to call a witness who might be expected to throw light upon a particular matter does not entitle the Court to make findings more adverse to that party than the evidence led justifies. In the present case, the absence of Mr. Wells as a witness is an added reason for accepting the applicants' evidence as to what took place at the meeting on 18 July. But the question still remains - does that evidence support the case pleaded against the second and third respondents and, in particular, is it sufficient to justify a finding that Mr. Wells told the applicants that Tamar was able to procure a loan of 1.6 million dollars at an interest rate of between 12 and 14% for a term of seven years on an interest only basis?
129. The applicants' case must be distilled from the testimony of several witnesses. Mention of a loan of $1.6 million appears in the evidence of Mr. Kingsley James, Mr. David James and Mr. Duncan though there is some doubt whether Mr. Kingsley James was at the time speaking of the meeting itself or of an earlier conversation involving Mr. Parker. According to Mr. Duncan, Mr. Wells said that he thought he could do "considerably better" than an interest rate of 12%. Mr. Duncan also said that it was made clear to Mr. Wells that what the applicants wanted was a long term loan on an interest only basis. There was some variation in the evidence of these three witnesses as to the period mentioned by Mr. Wells to obtain a loan. But I am satisfied that a period not exceeding 14 days was mentioned.
130. While in one sense what Mr. Wells told those at the meeting was a representation as to the future viz. the procurement of a loan, it was also a clear representation by Mr. Wells of Tamar's capacity to obtain a loan such as the applicants required. The question still remains - did that representation constitute misleading or deceptive conduct on the part of Tamar?
131. The applicants called Gerald James Brown, a member of the firm G.J.
Brown & Associates who are property consultants, valuers,
auctioneers and real
estate agents. Mr. Brown had a range of qualifications in the area of
agriculture, valuation and finance broking.
He gave evidence as to the
information that, in his opinion, a finance broker would require in order to
obtain a loan of $1.5 million
for farming purposes. That information was as
follows:
"(a) Full set of Accounts over last 3 years.132. By measuring this evidence against answers to interrogatories sworn by Mr. Wells the applicants sought to demonstrate that a person who undertook to obtain a loan without the requisite information would be incompetent, acting negligently and could not have an honest belief in his capacity to obtain the loan. I shall not canvass Mr. Brown's evidence in any detail. Read in its entirety, particularly in the light of cross-examination by counsel for the second and third respondents, I am satisfied that at the meeting on 18 July 1980 Mr. Wells had for all practical purposes the information thought by Mr. Brown to be necessary to obtain a loan. The aspect on which Mr. Brown expressed some reservations was the lending ratio which he understood, in the light of a document prepared by Market Securities (exhibit 24), to be 61% or with added security 58%. However he thought that such a lending ratio would be acceptable if accompanied by a bank guarantee.
(b) Farm Records, over last 3 years to establish yield
per hectare or per acre, in comparison to district
average yield.
(c) (i) Budgets based on past performance as to yields
above.
(ii) Adequate allowances being made for increased
plant if programme was to change.
(d) References as to farming ability and management
skills.
(e) Up to date Valuations of the property by a
qualified and competent Rural Valuer.
(f) Independent farm advice as to acceptability of
budgets.
(g) Loan to value ratio not to exceed 35%.
(h) A track record which conformed with accepted
farming practice in the locality or district".
(exhibit 63)
133. Thus the evidence of Mr. Brown did not assist the applicants greatly in their case of misleading or deceptive conduct against Tamar. Nevertheless I am satisfied that the clear implication in what Mr. Wells said at the meeting on 18 July 1980 was that Tamar had the capacity to obtain for the applicants within 14 days a loan that was suitable for their requirements. Tamar did not have that capacity. In ordinary commercial experience, as deposed to by Mr. Duncan, such a loan was not procurable within that time. The fact that a loan was not procured within that time or at all provides additional evidence of lack of capacity.
134. It is in this area of the claim that the failure of Mr. Wells to give evidence assumes particular significance. If there was evidence of Tamar's capacity to do what it represented it could do, that evidence should have been forthcoming. It was not and the Court may more readily draw inferences adverse to Tamar, inferences that in any event are open on the applicants' case. In my opinion, what Tamar represented to the applicants at the meeting on 18 July 1980 regarding a loan constituted misleading or deceptive conduct on its part.
135. As to the third area of alleged misleading or deceptive conduct, I do not think the applicants established that between 18 July 1980 and January 1982 Mr. Wells continued to represent that Tamar was able to procure a loan in the terms pleaded (statement of claim para. 24B). Messrs. Kingsley and David James saw Mr. Wells again on or about 29 August 1980. The purpose of that meeting, Mr. Kingsley James thought, was that Mr. Wells "had an application form for us to sign for that loan". This apparently was a reference to the payment due on 31 August 1980, which Mr. Wells arranged through Bridging Finance Pty. Ltd. This emerged more clearly from the evidence of Mr. David James. Mr. Kingsley James said that at the meeting he asked "Why haven't we had the loan by now" and Mr. Wells replied "It's still coming. Don't worry". It was put to Mr. James in cross-examination that the purpose of the August meeting was to review the situation in the light of the knowledge that a guarantee was not likely to be forthcoming. Mr. James said he could not recall that as the purpose of the meeting and of course there was no evidence from Mr. Wells on the point.
136. Mr. David James gave evidence of the August meeting, saying that Mr. Wells was asked how he was going with the loan. "He said we would not have any problem with getting the long-term loan and he was just having a few technical problems about getting final approval or something of that nature."
137. I am satisfied that at the meeting at the end of August 1980 Tamar continued to represent its capacity to obtain a loan as it had done at the meeting on 18 July and that this was continued misleading or deceptive conduct on its part. Thereafter, although there was evidence by Mr. Kingsley James and Mr. David James of telephone calls to Mr. Wells, I am not satisfied that Tamar continued to make a representation in the terms pleaded or that there was misleading or deceptive conduct in the terms pleaded. The evidence of the applicants as to what happened thereafter was in very general terms. On 27 November 1980 Market Securities wrote to Mr. Kingsley James listing the organizations it had approached unsuccessfully. On 19 January 1981 it wrote again, reporting lack of success. And by the end of 1980 the applicants had themselves applied to the Bank for finance in regard to the settlement of Bibiking. This is not inconsistent with the case pleaded against Tamar but it does evidence the desultory state dealings between the applicants and Tamar had then reached.
138. The applicants have made good the case pleaded against Tamar in para.
24A of the statement of claim and the case pleaded in
para. 24B to the end of
August 1980. Questions then arise as to the implications of this misleading or
deceptive conduct for the
applicants, in particular any causal connection
between it and the purchase of Bibiking and whether the applicants sustained
any
damage by reason of that conduct. There is also the question of the
limitation plea raised by Tamar. I shall deal with these matters
later in
these reasons for judgment.
Misleading or Deceptive Conduct - Wells
139. The applicants' case against Mr. Wells under the Trade Practices Act depends upon a finding of liability against Tamar. There is such a finding.
140. Paragraph 28B of the statement of claim pleads that, by his conduct, Mr.
Wells
"aided abetted counselled or procured the said141. By this plea the applicants invoke paras. (a) and (c) of s. 75B of the Trade Practices Act. In the light of Yorke v. Lucas, to which reference has already been made, a person may only be held liable under para. (a) if he intentionally aided, abetted, counselled or procured a contravention by a corporation of a relevant provision of the Trade Practices Act and did so with knowledge of the essential matters constituting the contravention, in particular knowledge of the falsity of representations amounting to misleading or deceptive conduct. Paragraph (c) requires knowledge of the essential facts constituting the contravention; to be "party to" requires intentional participation, the necessary intent being based upon knowledge of the essential elements of the contravention.
contravention of Section 52 and further, or in the
alternative, the Third Respondent was directly or
indirectly knowingly concerned in or party to the said
contravention".
142. I am satisfied that Mr. Wells did aid and abet the contravention of s. 52 by Tamar found to have taken place. I am also satisfied that he was directly and knowingly concerned in and a party to the contravention. All dealings with the applicants by Tamar were through Mr. Wells. It was he who made the representations to the applicants and there is nothing to suggest that he was merely passing on information provided to him by Tamar. He expressed his own view of Tamar's capacity to obtain the loan sought by the applicants and he continued to do so, at any rate until the end of August 1980. He did so with knowledge of the essential facts constituting the contravention of s. 52 by Tamar.
143. In Yorke v. Lucas at 313 Mason ACJ., Wilson, Deane and Dawson JJ. said:
"We would only add, lest it be thought that it has144. It was unnecessary for their Honours to resolve the difficulty to which they referred. Section 75B does not contain any limitation as to the class of person who may be involved in a contravention of Part IV or V of the Act. The Federal Court has from time to time held persons in the position of managing director or the like liable within s. 75B by reason of what they themselves have said. See for instance P.J. Berry Estates Pty. Ltd. v. Mangalore Homestead Pty. Ltd. (1984) ATPR 40-489. In the circumstances I find Mr. Wells to be a person involved in the contravention by Tamar of s. 52 of the Act.
escaped our attention, that the appellants may, even if
knowledge were not necessary to involvement under
para. (a) or under para. (c) as 'party to', have
encountered difficulty in establishing that Lucas was
involved within the meaning of s. 75B in the
contravention constituted by the making of the false
representations, having regard to the fact that the
representations, albeit made on behalf of the Lucas
company, were made by Lucas himself. As Dixon J.
observed in Mallan v. Lee [1949] HCA 48; (1949) 80 CLR 198 at 216:
'It would be an inversion of the conceptions on which
the degrees of offending are founded to make the person
actually committing the forbidden acts an accessory to
the offence consisting in the vicarious responsibility
for his acts'".
145. As in the case of Tamar, questions then arise as to the consequences of
Mr. Wells' conduct, in particular whether the applicants
suffered any damage
thereby and whether any claim for damages they may have against Mr. Wells is
statute barred by reason of s. 82(2) of the Act. Before turning to those
matters I shall deal with the other causes of action pleaded against the
respondents.
Claims in Negligence
146. The jurisdiction of this Court is attracted by the claim against all respondents of misleading or deceptive conduct in contravention of s. 52 of the Trade Practices Act. However the applicants have pleaded other causes of action, in particular negligence against the Bank and Tamar.
147. The respondents did not challenge the jurisdiction of this Court to
entertain the other causes of action, save in one respect.
The second and
third respondents argued that the trade practices claim against them was in
any event statute barred, having regard
to the limitation period of three
years in s. 81(2) of the Act. They argued further that, the claim being
statute barred, this Court had no jurisdiction to entertain any of the claims
against them founded on the common law. These are matters to which
consideration must be given but I propose to look first at the
claim in
negligence against the Bank.
Negligence - the Bank
148. Paragraph 7 of the statement of claim pleads that the Bank owed a duty to the applicants to exercise "all such skill care and diligence as was appropriate for a person carrying on business in the manner of the Bank and in providing advice and guidance to the Applicants in the manner aforesaid". The "manner aforesaid" I take to be the pleading in earlier paragraphs of the statement of claim that the applicants relied upon the advice and guidance of the Bank in matters of finance, particularly in regard to the purchase of farming properties.
149. In para. 7 of its defence the Bank admits that "it owed to its customers (including the applicants) a duty to exercise due skill, care and diligence in relation to advice and guidance provided to it in the course of its business as a bank", but otherwise denies para. 7 of the statement of claim.
150. Paragraph 21 of the statement of claim pleads against the Bank a breach of "its said duty of care . . . to exercise all due skill and diligence" and alleges negligent advice. Negligence is particularised under ten heads. I shall deal with each head of negligence in turn.
151. The Bank accepted that a duty of care may arise in a banker customer relationship, giving rise to a responsibility to the customer who intends to act on that advice. Hedley Byrne v. Heller & Partners [1963] UKHL 4; (1964) AC 465. However counsel for the Bank submitted that a duty of care does not arise in regard to all advice sought by a customer. There are, counsel submitted, two qualifications. The first is that the advice must be in regard to a matter relating to an area in which the banker carries on the business of giving advice or information or holds itself out as possessing skill and competence in the field in question. Mutual Life & Citizens' Assurance Co. Ltd. v. Evatt [1970] HCA 46; (1970) 122 CLR 628. Secondly, the advice must be regarded by the banker and the customer as considered advice. It must not be given in passing or an "off the cuff" or "kerb stone" opinion. Mohr v. Cleaver and Brown (unreported decision of Full Court of Supreme Court of Western Australia delivered 6 June 1985).
152. Despite the many criticisms made of the limitations imposed by the Privy Council in Mutual Life & Citizens' Assurance Co. Ltd. v. Evatt and the reservations expressed by the High Court in L. Shaddock and Associates Pty. Ltd. v. Parramatta City Council (1981) 55 ALJR 713, I regard myself as bound to follow the views of the Privy Council. On the other hand, I do not read the decision of the Full Court in Mohr v. Cleaver and Brown as endorsing a principle that there can be no duty of care in respect of advice given in passing or off the cuff. Even in that case there may be an obligation to take such care as is reasonable in the circumstances. In the present case these qualifications and distinctions only assume importance in regard to advice said to have been given by Mr. Parker to the applicants concerning a change in their farming operations. In so far as the purchase of Bibiking and the purchase of the Lake King property by Mr. Angus James were concerned, I did not understand counsel for the Bank to quarrel with the submission made on behalf of the applicants that the Bank owed a duty of care in regard to any advice it gave concerning the financing of these purchases and in particular the terms of any borrowings that might be involved.
153. One particular of negligence is that the Bank referred the applicants to Tamar, representing to them that Tamar was a person competent to procure the proposed loan "whereas the Bank knew or should have known the Second Respondent was not registered as a licensed Finance Broker as required by s. 26 of the Finance Brokers' Control Act 1975 and was not competent to carry on the business of a Finance Broker" (para. 21(a)). I do not accept the Bank's submission that advice of this nature was outside the area of the Bank's expertise and was not capable of giving rise to a duty of care. However, for reasons already given in relation to the question of misleading or deceptive conduct, I do not think that the Bank did represent to the applicants that Tamar was competent to procure a loan for them. Furthermore the Bank neither knew nor, in the circumstances, ought to have known that Tamar was not registered as a licensed finance broker. The Bank had no reason to think that Tamar was other than competent to carry on the business of a finance broker and there was no evidence that it was not so competent.
154. It is then said that, in representing to the applicants that it would "guarantee an overseas loan", the Bank guided the applicants to enter into a contract to buy Bibiking when the Bank knew or should have known that a long term low interest loan was unlikely to be found (para. 21(b)). Again, for reasons given in relation to the claim of misleading or deceptive conduct, I reject the argument that the Bank said that it would guarantee an overseas loan. At its highest from the applicants' point of view, Mr. Parker said that the Bank would need to look at any proposition involving a bank guarantee. And it was apparent to the applicants before 8 August 1980, when the further payment of $25,000 was due on Bibiking, that there would be no bank guarantee.
155. The third particular of negligence is that the Bank failed to advise the applicants that the business conducted by them "could not service the lending facilities and financial arrangements by the Bank for the Applicants". This is an allegation of failure to advise and meets the difficulty that "as a general rule, a failure to act is not negligent unless there is a duty to act" (Gibbs C.J. in Sutherland Shire Council v. Heyman (1985) 59 ALJR 564 at 571; see also Brennan J. at 586-587). In my view there was no duty on the Bank to give the applicants advice as to whether or not their business could service the loan, which I understand in this case to be a reference to the actual loan provided by the Bank.
156. I am not to be taken as expressing some general principle that there is no duty on the part of a bank which is providing a loan to a customer to advise that customer of the prospects of meeting the obligations imposed by the loan. I speak only of the circumstances of this particular case. When the Bank did provide a loan for the applicants, it was some seven months after the contract for the purchase of Bibiking had been executed and the loan was made to assist the applicants by reason of their inability to secure finance elsewhere. At the time the contract was executed the Bank did not have the information necessary to make an assessment of the extent of the applicants' capacity to borrow and repay a substantial loan. When the Bank made the advance to the applicants in February 1981, it was against a background that Mr. O'Toole had been advising the applicants on their situation and their potential to repay a loan. In those circumstances I do not accept that the Bank had a duty to advise the applicants regarding their ability to service the loan offered to them by the Bank.
157. It is alleged that the Bank was negligent in failing to advise the applicants not to execute a binding contract for the purchase of Bibiking until "appropriate loan facilities had been procured for the Applicants being a loan that could be serviced by the Applicants business" (para. 21(d)). Again I do not accept that there was a duty on the Bank to give the advice suggested. It is true that the Bank had been involved with the applicants in the purchase of a number of farming properties over 20 years or so. But the applicants did not rely upon advice from the Bank in deciding to make those purchases. The applicants made those decisions for themselves and then looked to the Bank for financial assistance to complete the purchases. When the initial contract for the purchase of Bibiking was executed, the applicants had access to the advice of Mr. Taylor who was acting for all concerned. Without doubt it was in the interests of the applicants to have a "subject to finance" provision in the contract. The fact that there was none was not the fault of the Bank. As it happened, the applicants were at liberty to withdraw from the contract at any time before 31 August 1980. Admittedly this involved a forfeiture of $35,000 but this was a small price to pay if there was any doubt as to their capacity to complete the purchase.
158. These reasons lead me likewise to reject the allegation that the Bank was aware or should have been aware that "the proposed loan facilities" could not be obtained by 31 August 1980 or thereafter and that the Bank should have advised the applicants to withdraw from the contract (para. 21(e)). In any event, before 8 August 1980 Mr. Parker had asked Mr. Kingsley James to consider whether it was wise to continue with the purchase of Bibiking, given the option that still existed of withdrawing from the contract. Notwithstanding that a loan was not then available, Mr. James was anxious that the purchase proceed. It is very likely that his anxiety to have Bibiking included in the family's holdings blinded him to the pitfalls of continuing with the purchase.
159. A further head of negligence pleaded is that the Bank advised the applicants to change their farming operations to all cropping and to undertake a short term borrowing commitment on the basis that their land would be sold if no replacement finance could be obtained, when the Bank knew or should have known "that the applicants could not service such onerous commitments and that no replacement finance in the terms of the proposed loan was likely to be obtained" (para. 21(f)). For reasons already given, I reject the contention that the Bank advised the applicants to change their farming operations to an all cropping basis. The applicants did make changes to their farming operations in favour of additional cropping but this was a decision made in consultation with Mr. O'Toole and in the light of the applicants' assessment of their capacity to service a loan from the Bank.
160. Furthermore I am satisfied that, from the time when the applicants made their first approach to the Bank in regard to the purchase of Bibiking, Mr. Parker had pointed to the likelihood that they would have to sell land to fund the purchase. Apart from his oral evidence to this effect, his diary notes of 9 May and 7 November 1980 make this clear.
161. It is then said that the Bank failed to advise the applicants to obtain independent advice on the terms of the loan and financial arrangements proposed by the Bank and "upon the feasibility of the purchase of the Bibiking property on the part of the applicants by use of such loan facilities on the terms set by the bank" (para. 21(g)). I do not think there was a duty on the Bank to advise the applicants to obtain independent advice as to the Bank's loan proposal. It was not suggested by the applicants that there was anything unusual about the terms of the loan itself or about the security documents which they were required to execute. In that regard Mr. Taylor, if not expressly instructed by the James to be present when the mortgage documents were signed, was in fact present and available to give advice. The applicants' real complaint, I think, is that they were not financially able to service the loan. But again they had access to Mr. O'Toole and to Mr. Duncan and, particularly in the case of Mr. Kingsley James, they were farmers of long experience. I am unable to accept that the Bank was negligent in failing to advise the applicants to obtain independent advice.
162. It is said that the Bank was negligent in failing to warn the applicants of the possibility that Tamar might be unable to obtain a loan (para. 21(h)). In my view the Bank was under no duty to advise the applicants in that regard. Once Mr. Parker arranged the meeting on 18 July 1980, he had very little to do with Mr. Wells. Following that meeting the applicants were in a position to make their own assessment of the likelihood of a loan and to continue to make that assessment in the light of their contact with Mr. Wells.
163. There is a further head of negligence pleaded, that at a time when the applicants could not service the loan provided by the Bank and at a time when the Bank should have known Mr. Angus James would be unable to meet the terms of his loan, the Bank advised Mr. and Mrs. James "to provide a personal guarantee to support the Bank's loan to Angus Kingsley James and advised these Applicants to encumber a further property by way of mortgage to support the said loan facility" (para. 21(i)). I have dealt with these matters in connection with the claim of misleading or deceptive conduct. It was Mr. Angus James' decision to buy the Lake King farm; his equity made a guarantee inevitable; the Bank did not advise Mr. and Mrs. James to provide a guarantee; and there was no reason why the Bank should have thought it likely that Mr. Angus James would default.
164. The last head of negligence alleged is that the Bank failed to advise Mr. and Mrs. James to obtain independent advice in regard to the guarantee mortgage provided in connection with the purchase of the Lake King property (para. 21(j)). It is not at all clear what Mr. and Mrs. James might have gained by "independent advice". Mr. Angus James was anxious to purchase the Lake King property and Mr. Kingsley James was agreeable that he should do so. Whatever commitments Mr. and Mrs. James incurred in this regard, they did so on their own initiative and with a full appreciation of their own financial position.
165. In my view none of the allegations of negligence against the Bank has
been made out.
Negligence - Tamar
166. The applicants allege negligence on the part of Tamar; there is no similar claim against Mr. Wells.
167. Paragraph 26 of the statement of claim pleads a duty owed by Tamar to the applicants to "exercise all due skill, care and diligence as is appropriate for a person conducting a business of finance broking". Tamar admits that duty of care but says that at all times "it exercised its duty skilfully, carefully and diligently in relation to the advice and information provided by it through the Third Respondent to the Applicants . . . " (defence para. 9).
168. The particulars of negligence alleged against Tamar are that it was not a registered licensed finance broker, that it was not competent to carry on the business of finance broker, that it represented to the applicants and to the Bank that loan funds were readily available when it knew or should have known "that he was unable to competently provide such advice", that it failed to procure the proposed loan and that it failed to advise the applicants that its representations that it could procure the proposed loan and that such loans were readily available were false.
169. There is some difficulty of language with the way in which these particulars are pleaded. The reference "he was unable to competently provide such advice" appears to be a reference to Tamar. For reasons already given, the fact that Tamar was not a registered or licensed finance broker does not constitute negligence and I am not persuaded that Tamar was not competent to carry on the business of finance broker. The fact that Tamar failed to procure a loan may be evidence of negligence but does not constitute negligence of itself. The plea that Tamar was negligent in failing to advise the applicants that its representations were false adds nothing to the particulars that precede it. If the applicants have a case in negligence against Tamar, it must arise from what Mr. Wells said at the meetings on 18 July and 29 August 1980.
170. In my view Mr. Wells painted an unduly optimistic picture at the July meeting. He left those present in no doubt his capacity to secure the sort of loan required by the applicants, even though the precise terms of the loan had not been decided. Furthermore he left those present in no doubt that he would be able to arrange a loan within a week or so. In the light of the evidence generally and in particular that of Mr. Duncan, Mr. Brown and Mr. Parker regarding the obtaining of loans from various sources, I am of the opinion that Tamar through Mr. Wells was negligent in what it told the James.
171. What Mr. Wells said was more than a mere expression of hope or a prediction as to what might happen; it was taken by those present and reasonably taken by them to be a statement of capacity to secure a loan. As I have said, the fact that he did not procure a loan is not of itself evidence of negligence. But it is at this point that the failure by Mr. Wells to give evidence assumes further significance. He made statements concerning the loan which I am satisfied, from other evidence to which I have referred, were made carelessly. And they were statements made to persons who were seeking advice on matters that Tamar held itself out as qualified to give. If there was some justification for what was said, it should have been forthcoming from Mr. Wells. It was not. My comments regarding the July meeting apply equally to what was said at the August meeting.
172. Difficult questions arise as to the consequences for the parties of a
finding that Tamar was negligent in what was said at the
meetings on 18 July
and 29 August 1980; I shall deal with those questions later in these reasons.
Undue Influence - the Bank
173. The applicants plead that the arrangement they made with the Bank in February 1981 to borrow money to complete the purchase of Bibiking, the loan provided to Mr. Angus James and the guarantee mortgage executed by Mr. and Mrs. James in support of that loan were all procured by the undue influence of the Bank.
174. Undue influence is particularised in this way. Having advised the applicants that they would obtain a long term low interest loan and that they should therefore buy Bibiking, and being aware that the applicants had not obtained a loan, the Bank advised them to seek from the Bank a short term high interest borrowing which it knew or should have known could not be serviced by the applicants. Further the Bank failed to offer any less onerous financial arrangements and failed to ensure that the applicants received independent advice when the Bank knew or should have known that there was a real prospect that the applicants would default under the arrangements into which they entered. In requiring the applicants to enter into these arrangements, the Bank took advantage of the inequality of bargaining power between it and the applicants "to obtain an advantage for itself in the form of a high earning loan facility supported by substantial securities" and did so in the knowledge that the applicants had no alternative source of finance and were in jeopardy of defaulting under the contract of sale (statement of claim para. 22(a), (b) and (c)). These allegations are denied by the Bank.
175. In Johnson v. Buttress [1936] HCA 41; (1936) 56 CLR 113 at 134 Dixon J. spoke of undue influence as falling into two categories. In one, "facts must be proved showing that the transaction was the outcome of such an actual influence over the mind of the alienor that it cannot be considered his free act". In the other, "the parties may antecedently stand in a relation that gives to one an authority or influence over the other from the abuse of which it is proper that he should be protected". I agree with the submission by counsel for the Bank that it is the second type of undue influence upon which the applicants rely. In other words the applicants do not contend that the Bank brought influence to bear on the applicants; rather they assert that by reason of the relationship between the parties the will of the applicants was not independent and voluntary.
176. In Commercial Bank of Australia v. Amadio (1983) 57 ALJR 358 at 363
Mason J. referred to the distinction between unconscionable
conduct and undue
influence and said:
"In the latter the will of the innocent party is not177. The relationship between banker and customer is not one which ordinarily gives rise to a presumption of undue influence. National Westminster Bank v. Morgan (1985) 1 All ER 821 at 829. However Lord Scarman, who delivered the principal judgment of the House of Lords, said at 829:
independent and voluntary because it is overborne. In
the former the will of the innocent party, even if
independent and voluntary, is the result of the
disadvantageous position in which he is placed and of
the other party unconscientiously taking advantage of
that position.
There is no reason for thinking that the two
remedies are mutually exclusive in the sense that only
one of them is available in a particular situation to
the exclusion of the other. Relief on the ground of
unconscionable conduct will be granted when
unconscientious advantage is taken of an innocent party
whose will is overborne so that it is not independent
and voluntary, just as it will be granted when such
advantage is taken of an innocent party who, though not
deprived of an independent and voluntary will, is
unable to make a worthwhile judgment as to what is in
his best interest".
". . . a relationship of banker and customer may becomeAt 831 Lord Scarman added:
one in which the banker acquires a dominating
influence. If he does and a manifestly disadvantageous
transaction is proved, there would then be room for the
court to presume that it resulted from the exercise of
undue influence".
". . . I would prefer to avoid the term 'confidentiality'178. There is no presumption of undue influence in the case of banker and customer. Whether there has been undue influence is a question of fact. There has been no undue influence unless the will of the customer has been overborne, not necessarily because there has been some wrongful act or threat on the part of the bank. It is enough that the will of the customer is overborne by reason of the position of influence in which the bank stands, though it is apparent from National Bank of Westminster v. Morgan that the transaction in question must be one that is disadvantageous to the customer.
as a description of the relationship which has to be
proved. In truth . . . the relationships which may
develop a dominating influence of one over another are
infinitely various. There is no substitute in this
branch of the law for a 'meticulous examination of the
facts'".
179. In considering the circumstances in which the applicants executed various securities in favour of the Bank in February 1981, it is relevant to bear in mind that what the Bank was being asked to do was, in Mr. Parker's words, to carry out "a rescue operation". Settlement on Bibiking was imminent and all other attempts by the applicants to raise the balance of purchase price had failed. The time in which they might withdraw from the contract on forfeiture of $35,000 had passed some months earlier. They were anxious to complete the purchase and, substantial though the purchase price was, it is apparent from the evidence of Mr. Jelley and Mr. Ferguson, the valuers who testified, that the applicants were getting value for money. Indeed, had Bibiking been sold at any time before June 1982, the applicants would almost certainly have made a profit.
180. The Bank was not anxious to lend money to the applicants. It is apparent that by 1981 Mr. Parker felt that all too often the Bank had been called upon to assist them in regard to the purchase of land. The Bank was urging the applicants and had been urging them for some time to sell land to reduce the extent of their borrowings but the applicants were unwilling to do so. There is little doubt that, except in the case of Saleyards (land capable of sub-division within the township of Katanning), Mr. Kingsley James was reluctant to cede any of the land held by the family. It was suggested by him in evidence that to do so might affect the capacity of the family to borrow but I am satisfied that this was largely rationalization. It was possible, at least until prices began to fall after mid 1982, for the applicants to sell some land and so bring their borrowings within manageable proportions. This they did not do and their failure to do so was entirely their own decision.
181. The applicants had access to the advice of Mr. O'Toole and Mr. Duncan in regard to their ability to service the loan from the Bank and they had access to Mr. Taylor in regard to any legal matters that required explanation or advice. From the point of view of the applicants, the commercial bill line was not a satisfactory form of finance, particularly having regard to its short term nature. But it was all that the Bank was prepared to offer in the circumstances and it would not have involved the applicants in unduly onerous obligations had they been prepared to quit some of their land. The contention on behalf of the applicants that the Bank obtained an advantage for itself "in the form of a high earning loan facility" was not supported by the evidence. It is apparent from exhibit 78, a schedule prepared by Mr. Parker comparing the return to the Bank from commercial bills and the return from term lending (had that been available), that the Bank would have earned more from term lending than from commercial bills.
182. There is no doubt that in February 1981 the applicants were in an
unhappy position. They had to find a great deal of money and
they had to find
it quickly since their earlier attempts to borrow had failed. It is important
to bear in mind that those failures
were not attributable to the Bank. The
Bank was a reluctant lender and the package it proposed to the applicants was
reasonable in
the circumstances. In June 1981 Bibiking was worth, according to
Mr. Ferguson, $1,130,000 and it is reasonable to conclude from the
evidence of
the two valuers as to the movement of price generally that the farm
appreciated even further until mid 1982. This is
true of the other land owned
by the applicants. The remedy for their situation lay very much in their own
hands.>
Fiduciary duty - the Bank
183. Paragraph 23 of the statement of claim pleads that the applicants were longstanding customers of the Bank and that the Bank was in a fiduciary relationship with them "in that it received and continued to receive advantages from the Applicants custom". The paragraph then pleads various breaches of that fiduciary duty which amount to little more than the pleading of undue influence.
184. I do not accept that the Bank stood in a fiduciary relationship to the
applicants. I was not offered any authority for that
proposition and on
principle I am not persuaded that it was the case. But in any event, the
alleged breaches of fiduciary relationship
went no further than the alleged
matters of undue influence and the answers to one are answers to the other.
This head of claim must
fail.
Interim summary
185. The applicants' various claims against the Bank fail. They have
established misleading or deceptive conduct on the part of Tamar
and
negligence against that company. They have shown Mr. Wells to be a person
involved in the contravention by Tamar of s. 52 of the Trade Practices Act. It
remains to consider the position of Tamar and Mr. Wells in the light of these
findings.
Defence of Limitation
186. Paragraph 13 of the defence of the second and third respondents pleads that, in so far as the applicants rely upon ss. 82 or 87(2)(d) of the Trade Practices Act, their cause of action "did not accrue within three years of the commencement of this action and is barred by the provisions of Section 82(2) of the said Act."
187. Section 82 reads:
"(1) A person who suffers loss or damage by conduct of188. The application in these proceedings was filed on 13 November 1984, hence any cause of action earlier than 13 November 1981 is statute barred, at least so far as s. 82 is concerned. Other questions arise in regard to the claim under s. 87(2)(d) which empowers the Court to make "an order directing the person who engaged in the conduct or a person who is involved in the contravention constituted by the conduct to pay to the person who suffered the loss or damage the amount of the loss or damage".
another person that was done in contravention of a
provision of Part IV or V may recover the amount of
the loss or damage by action against that other
person or against any person involved in the
contravention.
(2) An action under sub-section (1) may be commenced at
any time within 3 years after the date on which the
cause of action accrued."
189. While the second and third respondents do not contend that any common law cause of action against them is statute barred, they do argue that since the claim under the Trade Practices Act is precluded by reason of s. 82(2), there is no jurisdiction in the Federal Court to determine any common law claim against them. This argument bears on the applicants' claim in negligence against Tamar.
190. As yet there has been no definitive statement as to the meaning and operation of s. 82(2) of the Trade Practices Act. I made some comments about the matter in my ruling on the "no case" submission by the second and third respondents and that ruling is an appendix to these reasons. However the defence goes to the very heart of the applicants' claim against the second and third respondents and I propose to deal with it fully here even though some of what is said echoes what appears in the earlier ruling.
191. Section 52 of the Trade Practices Act prohibits conduct that is
misleading or deceptive or is likely to mislead or deceive. The section does
not confer any right of action
on a person injured by conduct prohibited by
the section. Such a right of action is conferred by s. 82(1) and it is
conferred on a person "who suffers loss or damage by conduct of another
person" done in contravention of s. 52. Loss or damage is the gist of the
action. In my view, a cause of action under s. 82 accrues, not when there is a
contravention of s. 52, but when loss or damage is suffered in consequence.
See Arcadi v. Colonial Mutual Life Assurance Society Ltd. (1984) ATPR 40-473.
In that case I said at 45,454:
"There may be several distinct losses, flowing fromThis statement was not meant to suggest that a cause of action is kept alive so long as any loss or damage is being suffered. Once an applicant has suffered loss or damage relevant to his claim, time begins to run.
conduct in contravention of the Act and the cause of
action is not complete until those losses have
occurred".
192. Counsel for the second and third respondents made a written submission
that any loss or damage suffered by the applicants in
consequence of
misleading or deceptive conduct on their part must have been suffered or at
any rate begun to have been suffered on
one or other of the following dates:
1. 15 July 1980, when the applicants executed the contract to buy Bibiking and
made the initial payment of $10,000.
2. Fourteen days after 18 July 1980, being the time within which Mr. Wells,
acting on behalf of Tamar, represented that Tamar could
procure a loan for the
applicants.
3. 11 August 1980, when the applicants made a further payment of $25,000 under
the contract to buy Bibiking. In fact the date was
8 August 1980.
4. 31 August 1980, when the applicants made a further payment of $71,775 and
lost the right to withdraw from the contract.
5. February 1981, when the applicants effected settlement of Bibiking and at the same time borrowed $1,250,000 from the Bank to make the final payment on Bibiking and executed various securities in order to obtain that loan.
193. In the submission of the second and third respondents, it does not matter which of those dates is selected as the appropriate one for all fall well outside the three year limitation in s. 82(2).
194. The question must be approached in this way. Did the applicants suffer any loss or damage by reason of the misleading or deceptive conduct of Tamar? If they did, what was that damage and when did it occur? Unless the applicants suffered some loss by reason of what Mr. Wells said concerning the availability of a loan, they have no cause of action against Tamar under s. 82, in which case the question of limitation does not arise.
195. One thing is clear. Since I have found that there was no misleading or deceptive conduct until 18 July 1980, there can be no claim against Tamar by reason only of the fact that the applicants agreed to buy Bibiking on 15 July. On the other hand, Mr. Wells played an active part in the loan of $70,000 made by Bridging Finance Pty. Ltd. to the applicants to enable them to meet the payment due on 31 August 1980. Although the evidence concerning the loan was somewhat sketchy, there can be no doubt that Mr. Wells knew that a payment was due at the end of August 1980. The whole purpose of securing a loan from Bridging Finance Pty. Ltd. was to meet that obligation. While I do not think there was any express evidence that Mr. Wells was given the Bibiking contract, the reasonable inference is that the contract was among the documents given to him on 18 July 1980. He required the contract for the purpose of negotiating a loan; indeed he needed it to arrange the loan of $70,000 from Bridging Finance Pty. Ltd. An "Offer and Acceptance" is among the documents listed in Market Securities' memorandum, exhibit 24.
196. It is also reasonable to conclude that Mr. Wells knew or ought to have known that the applicants could withdraw from the contract at any time until payment of $71,775 on 31 August 1980, though by doing so they would forfeit $35,000. Had Tamar not continued its misleading or deceptive conduct on 29 August 1980, the applicants would have been compelled to consider their position more seriously before making the payment due on 31 August. They may have decided that, there being no continued assurance as to the availability of a loan, they should withdraw from the contract. In those circumstances they would have forfeited the $35,000 already paid. But they could hardly hold Tamar responsible for that loss since they had entered into the contract to buy Bibiking before there was any misleading or deceptive conduct by Tamar. It was argued on behalf of the applicants that Mr. Wells knew or should have known that there was a risk that the total deposits ($106,500) would be forfeited if a long term loan was not available at the time of settlement in February 1981. But the argument, even if persuasive, does not assist the applicants for that notional loss occurred outside the three year period. Counsel for the applicants submitted that there was no loss until March or April 1983 when a number of properties were sold. I do not accept that a relevant loss occurred, actually or notionally, at that time. Settlement had long passed and other considerations - the value of properties and the failure to sell them earlier - had long since intruded.
197. Counsel for the applicants further submitted that, while his clients contracted liabilities in executing the security documents in February 1981, they received a corresponding asset. Thus, said counsel, the case was distinguishable from those in which an applicant, induced to enter into a contract by reason of misleading or deceptive conduct, acquired an asset that was worthless or worth less than he paid for it. See for instance Fenech v. Sterling (1983) 51 ALR 205. The significance of that submission is as follows. While the applicants indebtedness to the Bank increased as commercial bills were rolled over, this was off-set by the value of Bibiking which continued to appreciate at least until mid 1982. It was only thereafter that Bibiking depreciated in value so that a point was reached where the applicants' indebtedness to the Bank outweighed the value of the land they had acquired. Whenever that event occurred, it must have been no earlier than three years before the commencement of proceedings. Although the Bank presented some material (in connection with a submission made by it on the question of limitation) that bore on the question of the value of Bibiking as against the applicants' indebtedness to the Bank, counsel for the applicants conceded, impliedly if not expressly, that the Court did not have all the information necessary to make an assessment on this basis. He therefore submitted that the Court might exercise its powers under O.38 r.1 of the Federal Court Rules and direct that Tamar's liability be ascertained by the Registrar, even though no inquiry had been sought in the application or statement of claim.
198. Order 38 r. 1 provides useful machinery where all that remains is the assessment of damages which itself is "substantially a matter of calculation". That is not the case here. Differing views have been expressed in this Court in relation to remoteness of damage in the case of a claim under s. 82. It may be that the test is one of foreseeability (Steiner v. Magic Carpet Tours Pty. Ltd. (1984) ATPR 40-490); or it may be that the statutory right to damages is intended to have a broader ambit than common law actions so that applicants are entitled to those losses which are the immediate result of the offending conduct and also to consequential losses if sufficiently direct. (Frith v. Gold Coast Mineral Springs Pty. Ltd. (1983) ATPR 40-339)
199. The resolution of these views is not something I need attempt in this case. On any view, it seems to me that damages said to have been suffered by the applicants when their equity in Bibiking was outweighed by their debt to the Bank was not reasonably foreseeable by Tamar, was not an immediate result of its offending conduct and was not a sufficiently direct consequential loss.
200. There is a further obstacle in the way of the applicants. It was open to them at any time either to sell Bibiking or to sell other land and discharge their obligations to the Bank or at any rate bring them within manageable proportions. This they did not do even though for the best part of two years from their agreement to buy Bibiking, the price of farmland was rising. Counsel for the Bank directed submissions to this aspect of the applicants' conduct, describing it as a novus causa interveniens. Whether it was so or constituted a failure to mitigate damages is of little consequence so far as the claim against Tamar is concerned. It may be that if the Bank had been found to have contravened s. 52, different considerations would arise in regard to the recoverability of damages from it. In Tamar Management Pty. Ltd. v. James, to which reference was made earlier, the Full Court suggested that attention might have to be given to the fact that the security provided by the Bank was based upon a bill line, thus raising the point whether in February 1981 the applicants and the Bank entered into one entire contract or whether they embarked upon a fresh transaction on each occasion the bill was rolled. The passage in question appears in my ruling on the no case submission, in the attached appendix.
201. While such a question may arise as between the applicants and the Bank, in my view it cannot arise as between the applicants and Tamar. Whatever approach be taken on the question of the remoteness of damage, the rolling over of bills and any loss flowing therefrom was too remote so far as Tamar is concerned.
202. It follows that any loss or damage suffered by the applicants by reason
of the misleading or deceptive conduct of Tamar on 18
July and 29 August 1980
fell outside the limit of three years prescribed by s. 82(2). These remarks
apply equally to the claim against Mr. Wells.
Operation of s. 87(2)(d)
203. There is a further question - whether the claim under s. 87(2)(d) is affected by the limitation period in s. 82(2).
204. In Fenech v. Sterling (1984) 57 ALR 98 a Full Court of this Court held
that s. 87(1A) (which contains the power to make ancillary orders in the case
of a contravention of Part V, which orders are defined in s. 87(2)) is free of
any prescribed period of limitation. The Court said at 104:
"However, the remedies it (s. 87(1A)) provides, when read205. So far as I am aware, there was no application for leave to appeal from that decision. But in Sent v. Jet Corporation of Australia Limited the High Court recently gave special leave to allow the question of limitation under s. 87 to be argued. See (1985) 21 Leg. Rep. S.L. 4.
with sub-s(2), are discretionary (unlike the
entitlement to damages given by s82) and the court must
give full weight to the general legislative intention
evinced by s82(2) of the Act. The influence of this
consideration will be particularly strong when reliance
is placed by the applicant on s87(2)(d) of the Act,
which is in substantially the same terms as s82. It
will be much less strong in a case where, for example,
the return of the property is sought under s87(2)(c),
or where the avoidance or variation of a contract is
sought under s87(2)(a) or (b)".
206. The history of Fenech v. Sterling may be traced one more step. Following the decision of the Full Court, the matter came before Beaumont J. in Fenech v. Sterling (1985) 61 ALR 445. His Honour held that the circumstances of the case did not call for the refusal of relief on discretionary grounds.
207. Accepting, on the basis of existing authority, that relief sought under s. 87(2)(d) is not subject to any prescribed period of limitation, I do not think this a case for the exercise of discretion to order Tamar to pay damages sustained outside a period of three years before the commencement of proceedings. As the Full Court pointed out in Fenech v. Sterling, the general legislative intention evinced by s. 82(2) is that a claim for damages must be brought within three years after the date on which the cause of action accrued. It would, in my view, be a curious and unexpected result that a person whose claim is barred by reason of s. 82(2) may nevertheless recover precisely the amount claimed merely by invoking para. (d) of s. 87(2). One can imagine circumstances in which, by reason of a respondent's conduct in concealing a contravention of s. 52, or the continuance of negotiations or some other circumstance that reasonably led an applicant to delay bringing proceedings, the discretion might be invoked. See generally 57 A.L.R. at 104.
208. While one must have a great deal of sympathy for the applicants in the
position in which they find themselves, I do not think
that they come within
any of the situations in which the exercise of such discretion as may exist is
appropriate. I do not overlook
the fact that on 10 December 1981 Market
Securities wrote to Mr. Kingsley James in regard to the prospects of a loan
from Citicorp,
noting that answers to certain questions "will obtain the loan
you most desire". But that letter must be taken in the general context
that
well over a year had elapsed since the misleading or deceptive conduct by
Tamar had taken place. In any event it would not assist
the applicants to
exercise the discretion, for the damage they claim to have suffered is too
remote.
Tamar's negligence - jurisdiction
209. Counsel for the second and third respondents contended that, in the event of the applicants' claim against those respondents being statute barred, there was no jurisdiction in this Court to deal with any common law claim against them.
210. This contention was the subject of a detailed written submission to which I have given close consideration. If I appear not to deal with the submission in great detail, it is because I am of the opinion that the question of the Court's jurisdiction is resolved by a more direct path than that taken by counsel in propounding and rebutting the thesis.
211. Counsel for the second and third respondents acknowledged that when a court exercising federal jurisdiction has its jurisdiction attracted in regard to a matter, its jurisdiction extends to the resolution of the whole of the matter. Counsel accepted that since Phillip Morris Inc. v. Adam P. Brown Male Fashions Pty. Ltd. [1981] HCA 7; (1981) 148 CLR 457 and Fencott v. Muller [1983] HCA 12; (1982-83) 152 CLR 570 the Federal Court has jurisdiction to determine, not only claims arising under the Trade Practices Act, but also other federal or non federal claims arising out of the same matter or controversy. Such matters fall within the accrued jurisdiction of the Court. The exercise of jurisdiction in matters thus attracted is discretionary, to be exercised in accordance with the principles enunciated in Stack v. Coast Securities (No. 9) Pty. Ltd. [1983] HCA 36; (1983-84) 154 CLR 261. There is no doubt that the claim in negligence against Tamar arises out of the same matter or controversy that gave rise to a claim for breach of s. 52 of the Trade Practices Act. Equally there is no doubt that the claim in negligence and the trade practices claim so depend on common transactions and facts that they arise out of a common substratum of facts.
212. All this may be taken as common ground between the applicants on the one hand and the second and third respondents on the other. But it was the latters' submission that once the trade practices claim was held to be statute barred, there was no basis upon which the Court could exercise its accrued jurisdiction. I do not accept that submission. This Court had jurisdiction to deal with the claim in negligence against Tamar because that claim lay within the accrued jurisdiction of the Court according to the principles just mentioned. To hold that the statutory claim is barred is not to say that the Court did not have or does not have jurisdiction to deal with that claim. Although s. 82(2) is expressed in terms that an action may be commenced within three years after the date on which the cause of action accrued, the general approach to such a provision in comparable legislation has been that it constitutes a defence. A respondent or defendant may, for whatever reason, choose not to plead a relevant limitation provision in which event it is not encumbent upon the court to consider the question for itself. Indeed, in the absence of such a defence, a court that did so would trespass beyond the issues raised by the pleadings. The position is in marked contrast to that where the jurisdiction of a court to deal with the claim before it is in question. Notwithstanding the failure of the respondent or defendant to raise the matter, the court must satisfy itself as to jurisdiction.
213. In the present case, not only was there a claim against the second and third respondents under the Trade Practices Act, but there was a contravention of s. 52 by Tamar and Mr. Wells was involved in that contravention. Those claims have failed, by reason of the provisions of s. 82(2) of the Trade Practices Act. In my view it is a misuse of language to say that the jurisdiction of the Court under the Trade Practices Act has never been attracted or that in some way it has been lost. For this reason I find it unnecessary to deal with the question of "pendent parties" and "pendent relief" to which counsel referred.
214. Tamar was negligent in what its managing director, Mr. Wells, told the applicants at the meetings on 18 July and 29 August 1980. The remaining question to be answered is - did the applicants suffer any and, if so, what damage as a result of that negligence? Another way of asking the question is - was Tamar's conduct a causally relevant factor in any damage suffered by the applicants?
215. The applicants did not enter into the contract to buy Bibiking by reason
of anything said by Mr. Wells on 18 July or 29 August
1980. It is true that
Mr. and Mrs. James were not parties to the original contract and only became
co-purchasers later. But their
addition as purchasers was not the result of
anything said by Mr. Wells; it had a quite unrelated cause. Certainly there
was a causal
connection between Mr. Wells' statements regarding the
availability of a loan and the applicants' decision to make the further
payment
on 31 August 1980. But, as has been said more than once in the course
of these reasons, the applicants did not suffer damage by reason
of that
payment or by reason of their decision to complete the purchase in February
1981. And they did not suffer damage merely by
reason of the nature and terms
of the loan obtained from the Bank to enable them to complete the purchase.
They suffered damage because
they overestimated their capacity to service the
loan from the Bank and, when that became apparent, they failed to take the
logical
step of selling some of their land. In my view, any damages suffered
by the applicants were too remote to hold Tamar responsible
in negligence for
that damage; nor was that damage a consequence of Tamar's negligence.
Conclusion
216. The applicants have failed to make good any of the causes of action pleaded against the Bank.
217. They have established a contravention of s. 52 of the Trade Practices Act on the part of Tamar and have shown that Mr. Wells was involved in that contravention. However their claims against Tamar and Mr. Wells under the Act are barred. They have made out a case of negligence against Tamar but have not shown that any damage suffered by them was as a result of that negligence.
218. In those circumstances the applicants' claim against all respondents must be dismissed.
AustLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.austlii.edu.au/au/cases/cth/FCA/1986/41.html