Timms v Commonwealth Bank of Australia [2001] NSWSC 560 (6 July 2001)

Last Updated: 9 July 2001

NEW SOUTH WALES SUPREME COURT

CITATION:  Timms  v Commonwealth Bank of Australia [2001] NSWSC 560

CURRENT JURISDICTION: Equity Division

FILE NUMBER(S): 2644/94

3054/97

HEARING DATE{S): 21, 22, 23, 28, 29, 30 March 2001; 5, 12 April 2001

JUDGMENT DATE: 06/07/2001

PARTIES:

2644/94 Anastasia  Timms  (P1)

Brian  Timms  (P2)

TW Holdings Pty Ltd (P3)

BDA International Pty Ltd (P4)

Commonwealth Bank of Australia (D1)

Richard Robert Wheeler and Virginia

Lee Wheeler (D2)

Leslie Ludovic Rosenfeld and Alfred

Kant t/as Rosenfeld, Kant & Co (D3)

William Watson, Joseph Patrick

McNamara, Roderick James Watt

and Bruce Davies Atkinson t/as

Watson McNamara & Watt (D4)

3054/97 Commonwealth Bank of Australia (P)

Anastasia  Timms  (D1)

Brian  Timms  (D2)

TW Holdings Pty Ltd (D3)

BDA International Pty Ltd (D4)

JUDGMENT OF: Young CJ in Eq

LOWER COURT JURISDICTION: Not Applicable

LOWER COURT FILE NUMBER(S): Not Applicable

LOWER COURT JUDICIAL OFFICER: Not Applicable

COUNSEL:

M L D Einfeld QC and T G R Parker (Ps)

R G Forster SC and N L Manousaridis (Bank)

R E Dubler (Accountant)

SOLICITORS:

Boskovitz & Associates (Ps)

L E Taylor (Bank)

Phillips Fox (Accountant)

CATCHWORDS:

TORTS [35] & [42]- Negligence- Banks- Accountant- Whether Bank assumed a duty to pass on information- Whether Accountant failed to carry out his retainer- On facts claim fails.

ACTS CITED:

DECISION:

See paras 110, 120, 121, 122, 123 and 124

JUDGMENT:

THE SUPREME COURT

OF NEW SOUTH WALES

EQUITY DIVISION

YOUNG CJ in Eq

FRIDAY 6 JULY 2001

2644/94 -  TIMMS  v COMMONWEALTH BANK OF AUSTRALIA

3054/97 - COMMONWEALTH BANK OF AUSTRALIA v  TIMMS 

JUDGMENT

1 HIS HONOUR: These proceedings, which were heard together, involve three sets of parties, viz (a) Anastasia  Timms  and her husband Brian  Timms  together with their companies T W Holdings Pty Ltd and B D A International Pty Ltd, whom I will collectively call "the plaintiffs"; (b) Commonwealth Bank of Australia ("the Bank"); and (c) L L Rosenfeld and another, trading as Rosenfeld Kant & Co, to whom I will refer as "the Accountant". There were two other sets of parties involved in the litigation at some stage, but these did not appear at the final hearing.

2 The plaintiffs' essential claim was that on or about 7 March 1992, they purchased a business from people called Wheeler, or their company. The aftermath of the purchase of that business was financially disastrous to the plaintiffs. The plaintiffs say that they purchased the business because of misleading representations on behalf of the Bank and/or negligence on behalf of the Accountant. At the moment, I am merely giving an outline of the claim; I will go into more detail shortly. Both the Bank and the Accountant deny these claims and the Bank has cross-claimed for moneys due to it under various securities from the plaintiffs.

3 The case was heard by me on 21, 22, 23, 28, 29, 30 March, 5 and 12 April 2001, Mr M L D Einfeld QC and Mr T G R Parker appearing for the plaintiffs, Mr R G Forster SC and Mr N L Manousaridis for the Bank, and Mr Dubler for the Accountant. At the end of the hearing I reserved my judgment.

4 I will leave until the end of these reasons, consideration of the claim by the Bank for money totalling some $5 million plus its claim for the issue of a writ of possession of the home owned by the plaintiffs at Woollahra because the fate of this action depends on the main action and it is simpler to deal with the main action by itself.

5 The plaintiffs say that in 1988 the first plaintiff gave a mortgage over her home at Woollahra to secure obligations of the plaintiffs to the Bank in respect of advances concerning the plaintiffs' business ventures. She gave a further mortgage in 1991 for the same purpose with respect to one of the corporate plaintiffs.

6 In a deal completed about 7 March 1992, the fourth plaintiff borrowed $950,000 from the Bank which, with the Bank's knowledge, it on-lent, so far as $760,000 was concerned, to the third plaintiff, which used that sum to purchase a business which I will call "Artrona".

7 The Artrona business in 1991 was operated through two companies, Artrona Pty Ltd which manufactured leather lounges and sold them to another company 2001 Interiors Pty Ltd, though it did sell some furniture direct to the public at its showroom at Bundall west of Surfers' Paradise on the Queensland Gold Coast. 2001 Interiors Pty Ltd sold the lounges retail from its showroom at Crows Nest, NSW.

8 In fact, in September 1991, the first two plaintiffs had been hunting for a business to purchase and had been attracted by Artrona. On 19 September 1991, the male plaintiff read a fax from Golosky Business Brokers which attached 12 pages of information about Artrona. These pages were called "the Golosky documents" and I will continue to refer to them as such in these reasons.

9 Mr and Mrs  Timms  had had previous dealings with both the Accountant and one of the officers of the Bank who features strongly in this case, Mr Hart.

10 Mr Hart was formerly based at the Bank's Maroubra branch. Whilst there, he assisted Mr and Mrs  Timms  with finance for the rebuilding of their home at Woollahra. The  Timms  had had other dealings with Mr Hart prior to October 1991 and it is probable that they followed him to Five Dock. The plaintiffs do not appear to have any other connection with Five Dock.

11 Mr Rosenfeld had been recommended to the plaintiffs as an excellent accountant to advise them on the purchase of a business. By 1990 Mrs  Timms  came to the view that it was tine for her to acquire a business.

12 There was a considerable amount of evidence given before me about proposals to acquire a business of importing cashmere knitwear from Brazil, the possible acquisition of a business which imported and installed non-slip floor covering and a business, "Danusha", which was a jewellery wholesaler. I do not consider it necessary to deal with these proposals in any detail.

13 However, in each case, Mr Rosenfeld was consulted. He gave careful and conservative advice, which was accepted, that the businesses were not worth pursuing.

14 In June 1991, the  Timms  got a further idea about importing a range of sportswear called "Baleno" from Hong Kong. They discussed this with Mr Hart. Finance was not able to be obtained. Mr and Mrs  Timms  say that this was because, as Mr Hart told them, "the Bank does not like lending money for start up ventures. The Bank likes to lend money for businesses with a track record." Mr Hart denies saying this and denies that such was the Bank's policy. However, this evidence is relevant for a later part of the narrative.

15 The affidavits of both Mr and Mrs  Timms  are in virtually identical words. I will, however, quote from the female plaintiff's affidavit, paragraph 54 which states:

"On or about 8 October 1991 Brian and I met with Mr Rosenfeld in his office. The following conversation took place:

Rosenfeld: `As I said to Brian on the telephone, I have a good feeling about this business.'

Deponent: `Are you quite sure about this, Les?'

Rosenfeld: `Yes, I am. It looks good.'

Deponent: `What gives you that good feeling? What makes you think that it is a good business?'

Rosenfeld: `I've looked at numerous businesses in the past and I generally get a feeling about each business early on. I feel that this business is a good one.'

Male plaintiff: `If that's the case, we want you to do a thorough investigation of the business and give us your opinion whether it is worth our while buying it. We want you to make sure that what the vendor is telling us about the business is true.'

Rosenfeld: `Okay'.

Male plaintiff: `What do you think is the value of the business?'

Rosenfeld: `There are two methods of valuing the goodwill of a business'."

He then described the two methods; though Mrs  Timms  could not remember what they were. He made certain calculations and indicated what his view of the value of the goodwill of the business was.

16 The deponent then said:

"This is a huge amount of money to pay for a business. It's our life's work. It's absolutely critical that you get it right. Going on just a good feeling is not enough. We need proof that it is a good and profitable business. We are relying on you to check out the business. We want you to absolutely thoroughly investigate the business - leave no stone unturned."

Rosenfeld: "Leave it to me, I will do everything possible to make sure that the business is what they say it is. I'll look at the financial records of the business."

Deponent: "Les, please go in there and check absolutely everything."

Male plaintiff: "Do whatever you have to do to thoroughly investigate and analyse the business."

17 The plaintiffs then say that shortly after that meeting the male plaintiff telephoned Mr Michael Hart who was the loans officer and assistant manager of the Bank's Five Dock branch and told him that they had found a business which they thought was a good business. He also said that their accountant had had a preliminary look at the business and liked what he saw and then said: "By the way, they bank with the Commonwealth Bank at the Barrack Street branch ...".

18 The plaintiffs say that a few days after this telephone conversation they attended the Five Dock branch of the Bank and met Mr Hart. The male plaintiff said: "We think we have found a business which we may wish to purchase. I know that the bank prefers to lend for established businesses. This business has been in existence for 21 years. It has an established track record. They bank with the Barrack Street branch and you should be able to check how viable the business is." Mr Hart replied that he would check the business. Mrs  Timms  then said: "This business has a long track record with your bank. You have the perfect opportunity to look into it." Mr Hart replied: "Yes, I'll get in touch with Barrack Street and get them to give me all the information they have about the business." Mrs  Timms  said: "Because they bank with you, you should be able to give us the bank's opinion whether the business is profitable and worth pursuing." Mr Hart told her that whatever he found out, he would let the  Timms  know. Mrs  Timms  said: "We are relying on you to find out about the viability of the business and to advise us. If you come back to us and tell us that there is some doubt about it, we won't proceed." Mr Hart replied: "Leave it with me, Anastasia, I'll get all the records from Barrack Street and do a thorough check and then I'll tell you all about it."

19 The plaintiffs then say that there was a further meeting with Mr Hart in early November 1991 when the plaintiffs asked Mr Hart what he had found out from the Barrack Street branch about the business. They say Mr Hart said: "The reports from Barrack Street say that it's a very good and profitable business. It is well established. You are getting a very good buy. The bank is satisfied that it's a good business and you won't have any trouble getting the money for it." The male plaintiff said: "What's your opinion as to the viability of the business?" Mr Hart replied: "The business is viable and profitable." The male plaintiff asked: "What does Barrack Street branch say about the profitability of the business? Do you know if they are experiencing any financial or other difficulties?" Mr Hart replied: "The business appears to be profitable. They are not having any current difficulties." The female plaintiff said: "Are you quite sure, because this is very important to us because our house is on the line. I don't want to jeopardise our home." Mr Hart repeated: "Don't worry, it is a very good and profitable business. In any case, you won't lose your home because the bank takes a very dim view of selling family homes." Mrs  Timms  said: "If there's any doubt please tell us because I don't want to lose our home. It's what we have worked for all our lives. If there is the slightest doubt we won't proceed." Mr Hart ended the conversation by saying: "The bank would not advise you to buy the business if we didn't know it to be a good business."

20 On 1 November 1991, Mr  Timms  instructed a solicitor to act for the plaintiffs on at least one aspect of the purchase of the business. After intermediate faxes and correspondence, Golosky on 7 November 1991 faxed Mr  Timms  a draft business sale agreement naming a price of $900,000 plus stock at valuation.

21 On 11 November 1991 the  Timms  say that they again saw the Accountant. They had previously sent him the Golosky documents. Again, the evidence of both natural plaintiffs is identical. According to the plaintiffs, Mr Rosenfeld said: "I've now looked at the records for the business and I have met with Richard Wheeler. The profit shown in the tax accounts is less than the profit shown in the management accounts." The male plaintiff said: "How do you explain the difference?" Mr Rosenfeld replied: "Businesses like this have a lot of cash coming through. You know how it works; a bit of money under the counter. These things can happen for other reasons such as the deposits taken may be higher than the expenditure for the furniture completed or vice versa."

Male plaintiff: "What's your feeling about the business now?"

Rosenfeld: "I still feel very positive about it."

Male plaintiff: "What do you think the working capital requirements would be?"

Rosenfeld: "About $30,000 because Wheeler has a clever system of using the customers' deposits as working capital."

Female plaintiff: "Why did Richard Wheeler come to see you?"

Rosenfeld: "Richard Wheeler wanted to explain some figures. No big deal."

Female plaintiff: "How are things shaping up?"

Rosenfeld: "I'm still working on it; but so far things are looking good. I still have a good feeling about the business."

22 There was a further meeting with the Accountant on 25 November 1991. The male plaintiff asked Mr Rosenfeld whether he had analysed the business sufficiently to make a recommendation. Mr Rosenfeld said: "Yes I have analysed it. Everything checks out. It is a good and profitable business. I am happy about everything. This business I recommend you buy."

23 The female plaintiff said:

"Are you quite sure that you checked everything because anybody can produce a set of reports and put figures on it?"

Rosenfeld: "Yes, of course I have checked it all out and it is correct. The business is making the money they say it is making."

Mrs  Timms  "Have you checked the bank statements?"

Rosenfeld: "We are way past that."

...

Mrs  Timms : "You know we are investing a huge amount of money, so we want to be absolutely sure that the business is profitable."

Rosenfeld: "Trust me, everything will be fine. What you are buying is a good business. I have checked it thoroughly. It's a good buy. You will make money."

24 The next day the  Timms  met Mr Hart again together with the manager of the Five Dock branch, Mr Greg Walker. They were handed a letter, PX53. Essentially, this letter said:

"... the Bank would prefer to allow the business to pass. However, without commitment, the Bank would be prepared to consider the request further provided ...".

There were then five conditions including "Presentation of audited financial accounts or investigation of the proposal by CDB Investigating Accountant at applicants' cost". "CDB" was shorthand for Commonwealth Development Bank.

25 Mr  Timms  asked Mr Walker what the letter was all about. Mrs  Timms  said: "Are you refusing the loan because it is a bad business?" Mr Hart said: "No, the bank just wants a few extra things. Once that's done, I'm sure we can get the loan approved." Mrs  Timms  said: "If you are sitting here and telling us that it is a bad business and that's why the loan has been refused, then we stop right here and we won't buy the business. We don't want the money."

Mr Hart: "We know it's a good business. The bank just needs a few extra things. Once those are ticked off, we will write to the Zone and I'm confident that we can get the loan approved."

Mr Walker: "This is crazy, we know that it's a good business. Michael put in an excellent application. We just need a bit of extra information to get this loan approved. We don't think it will be a problem. We'll just write to them and the loan should be okay."

Male plaintiff: "What do you want me to do?"

Mr Hart: "All we need is a letter from you just to cover the points in our letter and we will resubmit the application."

Male plaintiff: "Okay, I'll get it to you in the next few days."

26 The evidence shows that at the relevant time the Bank's officers must have been anxious to get as many loans approved as they could. Both Mr Hart and Mr Walker were in fact disappointed at the attitude that Zone had taken. Zone appears to be the higher level of the Bank which was empowered to make the decision in this particular case.

27 On 28 November Mr  Timms  faxed Mr Hart a letter which is PX55-56. When one reads the letter one can see that Mr  Timms  did not deal with the Bank's real concerns. However, it is an important letter and I will set most of it out in full.

28 The first paragraph after the introduction deals with how the plaintiffs had planned for their financial future. The following paragraphs read as follows:

"The second point in your letter covers the issue of the provision of even more financial data that has already been provided by us or is readily available to the Bank. We are advised by the vendor that in 1990 the Bank commissioned a firm of chartered accountants to undertake a report on the viability of the business and that in 1989 an internal audit was performed by an Investigating Accountant from the Development Bank. We fail to see what more useful information we can add to the Bank's already not inconsiderable amount of financial data on the affairs of the companies in question.

In the light of our good standing as a long-term customer of the Bank we do not feel that the Bank can reasonably justify the imposition of a non-refundable up-front fee in order to consider the request further.

We expect a minimum consulting revenue of around $100,000 (117 days @ $8.50 per day) for the calendar year 1992.

For your information we have enclosed copies of the draft service and share purchase agreements.

We feel that the Bank has once again procrastenated [sic] unduly on this matter. It is timely to remind you of the value of us as customers of the Bank and to also point out the considerable value which a business the size of Artrona represents today and will represent in future as it expands both nationally and internationally. In view of our long relationship with the Bank and, hopefully, our good standing, we have not sought, at this stage, to obtain the funds elsewhere. However our patience is at an end, and we must have a resolution on this matter within one week.

We believe that we have offered more than ample security and that the business is extremely sound. We also believe that the Bank agrees with both these assertions. We therefore request a meeting with the area management responsible for the decision so that we may speedily resolve this matter for once and for all.

I look forward to your prompt reply."

29 On 10 December 1991, Mr Hart telephoned Mrs  Timms  to tell her that the Bank had approved the loan.

30 On 12 December 1991, there was a further meeting with Mr and Mrs  Timms  and Mr Hart. Mr Walker had signed an official letter bearing date 10 December 1991 informing the  Timms  that the Bank had approved a finance package of $970,000. The security was to include a mortgage by Mrs  Timms  over 59 Wallaroy Road, Double Bay and the approval was subject to certain conditions, the most important of which is: "Certification by accountants Rosenfeld Kant & Co that financial statements provided for the Artrona Group for the years ended 30 June 1989, 30 June 1990 and 30 June 1991 provide a true and accurate account of the Group's performance. Copies of the financial statements will be provided direct to the accountants."

31 The  Timms  say that during this interview Mr Hart said to them:

"The bank requires certification by your accountant that the financial statements for the Artrona Group for the years ended 30 June 1989, 30 June 1990 and 30 June 1991 provide a true and accurate account of the Group's performance. I'll write to your accountant."

Mr Hart then proceeded to write what the  Timms  thought was a facsimile to send to Mr Rosenfeld.

32 On 16 December 1991, the plaintiffs exchanged formal documents for the purchase of Artrona and paid a deposit of $29,700 and paid stamp duty shortly after of $9,000. The purchase price was $297,000 plus stock at valuation with a minimum of $360,000.

33 The purchase was completed on 6 March 1992 and the third plaintiff paid the balance of $705,581.50, but received a cheque for adjustments of $83,891.71.

34 The business was always unsuccessful in the plaintiffs' hands and ceased to trade on 28 January 1994. The plaintiffs say they lost the entire value of the business. Further, they still owe the Bank approximately $5,130,000.00. This involves the personal plaintiffs owing on their home loan and fully drawn loan account plus interest, $481,000, the third plaintiff owing the Bank $1.850 million, and the fourth plaintiff $2.799 million.

35 The plaintiffs say on the material which I have digested, that they relied on both the Bank and the Accountant for advice in buying the business: both indicated that the business was a good and viable business. They would not have invested in the business had they not had that advice and they lost everything.

36 I will now consider the evidence of the Accountant and the Bank, plus the objective facts.

37 Mr Rosenfeld says that after a telephone call from Mr  Timms , he was called upon by Mr Wheeler, who was controlling the vendors, and Mr Wheeler produced unaudited accounts which were said to be "prepared in-house by me and my staff". Mr Rosenfeld then examined those accounts.

38 Mr Rosenfeld says he saw Mr  Timms  and possibly Mrs  Timms  as well, on 8 October 1991. He told the  Timms  that he had had a look at the accounts that Wheeler had brought in, and prepared a list of things that needed to be investigated. He said he needed to see the statutory accounts prepared by the accountants, and copies of the income tax returns for the last three financial years. He then said: "The business has consolidated trading losses. I spoke briefly to Richard Wheeler about the consolidated trading losses and he said they were the result of an export venture which had gone sour. This will need to be investigated and checked." Mr  Timms  said that he would do that and also check on the Wheelers' experience in business. Mr Rosenfeld said: "It is not clear what are the `deposits' in the balance sheet and this should also be checked." Mr Rosenfeld pointed out other matters that should be checked including the item "accommodation expenses". He then said: "The accounts I have been provided with are prepared `in-house', they've not been audited. The accuracy of the accounts needs to be verified. You can verify the turnover and direct costs by going through bank statements and cash books to see if they reconcile. It's impossible to advise on the veracity of the accounts as they now are. I can go in or send my staff to check this out."

39 Mr  Timms  said, "Golosky has offered to assist in carrying out the investigations that need to be done to buy the business." Mr Rosenfeld said: "That's not a good idea. He's just trying to sell the business. Do you want me to check out the accounts?" Mr  Timms  said: "No, I'm conscious of the cost. I'll do it." There were then various other discussions about how the transfer would need to be organised and Mr Rosenfeld, when asked about the value of the business said: "Well I'm not in a position to advise on the value of the business because all I've got is Wheeler's accounts. But I've made some rough calculations based on them to give you an idea about how a business can be valued." He then set out two examples of the method of approach.

40 He says that he had a further meeting with Mr  Timms  on 11 October 1991 in which he again made it clear to Mr  Timms  he was using figures in Mr Wheeler's in-house accounts.

41 On 4 November 1991, Mr Wheeler delivered to Mr Rosenfeld purported statutory accounts for 1991.

42 Mr Rosenfeld examined these purported 1991 accounts and phoned Mr  Timms  in which he said: "Wheeler has given me a copy of the statutory accounts for 1991. There are significant differences between these and the in-house accounts. You should do a reconciliation between the two sets of accounts and find out what are the differences." Mr  Timms  said he would do this and there was a further conversation a day or so later in which Mr  Timms  said: "I've spoken to Wheeler and he has explained to me the differences between the accounts. The main differences are because of the $200,000 odd inter-company transfer of funds and customer deposits of $211,740.

43 Mr Rosenfeld also recalls a telephone conversation with Mr  Timms  which took place sometime fairly soon after he received the 1991 purported statutory accounts, in which words to the following effect were spoken by himself (LR) and Mr  Timms  (BT):

LR: "Do you want us to do a full due diligence of the Business?"

BT: "No, I'll do it myself - just tell me what to look for and I'll do it."

LR: "You need to go through the bank statements and cash books to check that they reconcile to each other and to the statutory accounts.

"You have to check the administrative records and look at the costings. Check the sales orders and bank statements to verify sales and check payments to verify expenses. With the costings, you need to work out the cost of the sales to prove the gross profit margin.

"Check orders on hand and, in particular, what deposits are held for them. See what percentage of an order is taken as a deposit.

"Check historical sales. Wheeler says he has monthly accounts, check those accounts to see if they match up to the bank accounts and to the statutory accounts.

"Have a chat with the landlords to see whether they will sign new leases and if not, if they will assign the existing leases. Talk to the creditors of Wheeler's companies - check out Wheeler's track record and make sure they're happy to trade with you and on what terms.

"You need to check the staffing - find out what the liabilities are for holiday pay and long service leave. Talk to the staff and also ascertain the morale and how they feel about the Wheelers.

"Check that there are no outstanding sales, group or payroll taxes.

"Check expense centres - particularly wages.

"Check the quality of the leather used."

44 Mr Rosenfeld says that the items referred to were the main steps which he advised Mr  Timms  to carry out. He believes that he advised Mr  Timms  in relation to other more minor items but no longer recalls the specifics in that respect.

45 Mr Rosenfeld agrees that there was a meeting on 11 November with the  Timms . He kept notes of the matters he wished to discuss at that meeting and those notes were tendered in evidence.

46 The material part of these notes (TX3134) are:

"Statutory accounts significantly different from previous ones.

"BT should meet with Wheeler and get a comprehensive explanation for differences. What we saw to date not reliable.

"If deal goes ahead should get expert to examine stock not only finished goods but also raw material re see if leather is ok.

"Wheeler's accountant said that accounts were late in being prepared because Wheeler has not paid fees. He believes that Wheeler has financial difficulties - Tends to spend money faster than he makes it.

...

"See if interim accounts are available for the current financial year - even though from what we got from Wheeler in the past I doubt that we could rely on these."

47 Some of these items, including the last, have a tick after them and from the photocopy originals TX3132-3, the more likely scenario is that these ticks were made during the interview with the  Timms .

48 Mr Rosenfeld says that up until early November 1991 he had understood that the  Timms  were looking to purchase the whole business. He was then informed that the Wheelers were to retain 25% and were to continue to work in the business.

49 On 11 November 1991, Mr Rosenfeld had a further meeting with Mr and Mrs  Timms . He says that he told Mr and Mrs  Timms  that having examined the statutory accounts, he had to tell them that they showed a significantly different picture from the in-house accounts. He advised Mr  Timms  to meet with Mr Wheeler and get a comprehensive explanation for the differences and he should also reconcile the sales between the two sets of accounts, especially the customer deposits. Mr  Timms  said that he would meet with Wheeler to get a comprehensive explanation. Mr Rosenfeld then said: "You should get an expert to examine the stock, not only the finished goods but also the raw materials and in particular the leather, and to comment on its quality and suitability for the furniture." Mr Rosenfeld also said: "I'm concerned about reports of the Wheelers' poor financial circumstances." He said that he was particularly concerned because the Wheelers were to continue to have an equity in the company. Later in the conversation Mr Rosenfeld says that he said to the  Timms : "The accounts I have seen cannot be relied upon as the accounts have not been audited. If the two sets of accounts agreed it would be less of a concern but because they are so different it is hard to form an opinion about the viability of the business. Because the accounts cannot be relied upon the only way to satisfy yourself is to go back to the source documents such as the deposit books and the bank statements."

50 Mr  Timms  then said: "The Wheelers seem like nice people - we've been seeing a lot of them lately. Wheeler is staying in the business - he wants an option to buy back in. He must have confidence in the business." Mr Rosenfeld replied: "Look, I think the guy's desperate - if you are going to go ahead with this purchase, you should drive a hard bargain with him."

51 Mr Rosenfeld said he had a meeting in his office with both Mr and Mrs  Timms  and Mr Wheeler. Mr Wheeler did provide certain explanations, but during the meeting Mr Rosenfeld said: "I believe you are in financial difficulties. If so could you explain what these difficulties are?" to which Mr Wheeler replied: "They are not related to the business but to personal property investments. The business itself is sound." After Wheeler left the meeting, Mr Rosenfeld said to the  Timms : "Richard Wheeler seems desperate to sell. I believe they need to reduce personal liabilities. Considering the Wheelers' apparent financial circumstances, if you are going to buy the business you should drive a hard bargain in negotiating a price. I'm not in a position to advise you in relation to the value of the Business because the accounts I have seen aren't audited and can't be relied upon." He kept saying that to Mr  Timms  from time to time.

52 Shortly after 9 December 1991, Mr Rosenfeld received from Mr Murrell of Priestley & Morris, copies of the business' trading accounts for the year dated 30 June 1990. These were not the actual tax returns and Mr Rosenfeld gave them very little weight.

53 On 12 December 1991, Mr Rosenfeld spoke on the phone with Mr Hart. Mr Hart said: "I want a letter from you about the Artrona group's accounts. I need you to verify that they represent a true and accurate account of the group's performance based on your investigations." Mr Rosenfeld said that he hadn't carried out an audit, and he couldn't certify the accuracy of the accounts. All he could say was that the accounts the Bank had sent were the accounts that he, Rosenfeld, had looked at. Mr Hart said: "Okay - send me a letter confirming that." Mr Rosenfeld telephoned Mr  Timms  and told him that Mr Hart had asked him to verify the business accounts, but he couldn't do that because he hadn't carried out a due diligence and that "I've told him all I can do is confirm that the accounts I have looked at are the same as the ones he has." Mr  Timms  said "Fine".

54 There was a meeting at 8 am between Mr  Timms  and Mr Rosenfeld in the latter's office at which various matters were discussed as to what Mr  Timms  should look to in the purchase of the business. In a telephone conversation later in the day, Mr Murrell advised Mr Rosenfeld that the 1991 tax returns had not yet been filed, but he could fax the 1991 trading statements that the returns would be based on, and he did so. Later that day Mr  Timms  phoned and Mr Rosenfeld said that he'd received 1991 trading statements unaudited.

55 On the same day Mr Rosenfeld sent to the Bank the following letter:

"We refer to your facsimile of 12 December, 1991 regarding funds being borrowed from the abovenamed in order to complete the purchase of the Artrona Group. We would like to confirm that the initial financial information for Artrona Group covering period 30 June 1989 to 30 June 1991 upon which we advised our clients, is the same as the information attached to your facsimile. Please note that we have not carried out an audit of these accounts."

56 The  Timms  also involved a solicitor in the purchase, Mr B D Atkinson of Armidale. Mr Atkinson recalls that there was a conversation with Mr  Timms  on 1 November 1991 in which Mr  Timms  said, inter alia, "There are two problems with the business. First, although Mr Wheeler is a brilliant designer he is not a manager so the business has development financial problems. Second, Mr Wheeler has attempted to expand the business by developing an export market but his attempts have been a failure because he has lacked sufficient capital. I am sure the business will grow and be successful if we retain Wheeler's services to work on design and to assist in developing the export market." This conversation was had in the context of Mr Atkinson drawing a covenant which would tie Mr Wheeler to the business.

57 Mr Hart said that his first approach from Mr and Mrs  Timms  was in October 1991. He was made aware, he can't remember by whom, that the Artrona business conducted accounts at the Barrack Street branch of the Commonwealth Bank. He telephoned that branch and later received a memorandum from an officer of that branch. I will come back to these.

58 He received further material from the Barrack Street branch and the Wheelers. He prepared a submission for Zone dated 11 November 1991 which Mr Walker signed. That letter, which, of course, Mr and Mrs  Timms  did not see at the time, noted -

"We have confirmed with Barrack Street branch that the partial sale of the Group has been sought by the existing Directors to substantially reduce personal outside borrowings in relation to various residential investment properties, both in Sydney and the Gold Coast.

"The sale proceeds are also to be utilised to finalise existing CBA indebtedness, Group and payroll tax, sales tax, creditors and all redundancy/superannuation benefits to existing personnel who will be re-employed...

"We are privy to an investigating Accountants report dated 21/11/90 conducted at the CBA's request... which confirms that substantial Group cash flow was directed by the Directors to assist servicing of individual outside borrowings. ..."

59 It was this proposal which in due course was rejected with an intimation that without commitment it might be reconsidered. Mr Hart then prepared a revised submission which was approved.

60 Mr Hart gave evidence that he was disappointed when the initial application was rejected and rather surprised, as he thought that Zone would lend the money.

61 With respect to the affidavits filed by the  Timms , Mr Hart generally denies making any of the vital statements relied on by the plaintiffs. He denied that the Bank had a policy of not lending for new businesses and he said he had no recollection of Brian  Timms  saying "I know that the Bank prefers to lend for established businesses." He denies that he ever said "It's a very good business. You are getting a very good buy" or "The business is viable and profitable." He denies saying "The business appears to be profitable. They are not having any current difficulties". He says in fact he knew that Artrona was experiencing cash flow problems which he believed were aggravated by excessive drawings by the Wheelers to service their own personal borrowings. He did not say the Bank takes a very dim view of selling family homes. He denies that he ever said "We know it is a good business." He denies that Mr Walker ever said that in his presence.

62 Mr Walker also denied he had ever given any advice to the plaintiffs which might suggest that he held the opinion that Artrona was a good or viable business.

63 The material which Mr Hart received from the Bank's Barrack Street branch is in evidence. It showed that the Bank had put in one of the large accountancy firms to prepare a report on the companies in the then not too distant past. Essentially that report showed that the Bank was likely to lose money that it had lent to the Wheelers and to Artrona unless it continued to support the companies operated by Mr Wheeler. The business, however, was then currently trading profitably so that the Bank was hopeful that in due course it would recover its loan. However, Mr Wheeler was in default with paying group tax and sales tax and owed suppliers. The Bank had instituted strict controls as a condition of meeting salary cheques each week. The purpose of those conditions appears to have been to prevent Mr Wheeler withdrawing cash out of the business for his own purposes.

64 Although the submissions of all counsel contained some complex submissions including submissions as to law, the basal problem in the instant case is to resolve the conflicts of fact. All the key witnesses were cross-examined at length before me.

65 Mr  Timms  was not an impressive witness. His life history was that he was born in 1945 and so was 46 years of age at the time of the transactions now being considered. He matriculated into the Sydney University Law School, but dropped out after one or two years. He was employed as a computer operator from 1964 becoming a self-employed computer consultant in 1978.

66 Mrs  Timms  had left school at 15. She was 49 at the relevant time and had run her own cleaning business from 1974 to 1978 and had also operated a small importing business in the jewellery line in 1975.

67 Mr and Mrs  Timms  had invested in land at Cambridge Park in 1972 and made a profit of $9,000 over an initial $10,000 investment. They had twice upgraded homes in the 1970s with the aid of the Commonwealth Bank and at each time made a capital profit. In 1984, again with the aid of the Bank, they acquired a warehouse as an investment property which shortly later they sold at an 80% profit.

68 Accordingly, when the present transaction came about, Mr and Mrs  Timms  were not new to the business of borrowing money for investment purposes. They were in the dangerous position that their small investments to that date had all been successful, with a very high percentage profit. That is a scenario which can often lull people into a false sense of security as to their own ability to earn investment income.

69 A great problem for the plaintiffs' case was the way in which the evidence for Mr and Mrs  Timms  was presented to the Court. As I have indicated, the conversations which were vital for their case to succeed were set out virtually identically in both Mr and Mrs  Timms ' affidavit. Where one has an affidavit recalling a conversation that took place some eight or nine years earlier, one expects there to be divergence and gets suspicious if there is not.

70 This situation led counsel for the plaintiffs to seek to read an affidavit of their instructing solicitor, and this, in due course, was done. The solicitor swore that he prepared both the affidavits of the natural plaintiffs, that he had a number of conferences with the male plaintiff for the purpose of preparing a draft affidavit for him, and that he did so without Mrs  Timms  being present.

71 Paragraph 5 of the affidavit was as follows:

"Shortly before 5 July 1999 (the date when the affidavits were sworn) I had a conference with Mrs  Timms  for the purpose of preparing her affidavit. Prior to that, I had had a number of conferences with Mrs  Timms  for the purposes of taking instructions generally, but I had not taken instructions for her affidavit as to the terms of any conversations she had had with officers of the Bank or Mr Rosenfeld. In preparing Mrs  Timms ' draft affidavit, I adopted the following procedure. I brought up on my computer a separate copy of the draft of Mr  Timms ' affidavit. I said to Mrs  Timms  who was sitting opposite me on the other side of my desk words to the effect `I want you to give me your recollection of the conversations which you heard'. If Mrs  Timms  gave an account which I considered to be substantially the same as Mr  Timms ' account, I simply left the wording from Mr  Timms ' draft unchanged in Mrs  Timms ' draft. Otherwise I modified the draft as I proceeded. Mr  Timms  was not present and I did not provide a copy of his draft affidavit to Mrs  Timms  either before or during the conference."

The affidavit of the solicitor then concluded by saying that Mr and Mrs  Timms  separately checked their drafts before swearing their affidavits.

72 Needless to say, counsel for the defendants had a field day in cross- examining the solicitor. It is not necessary to go through the cross-examination in detail; suffice it to say that the process that that solicitor used was one not designed to enable the Court to see the best recollection of both Mr and Mrs  Timms  as to what was said.

73 However, the solicitor's continued insistence during cross-examination that the departures from the actual words used by Mrs  Timms  had been minimal meant that if accepted, the close similarity to the two accounts of the conversations had not been adequately explained.

74 The account given by the solicitor as to how the affidavits were taken also conflicts with the accounts given by Mr and Mrs  Timms .

75 The solicitor's evidence also threw some doubt on the credibility of his clients' evidence because the notes taken by the solicitor with his clients before inspection of documents, when compared with what was said in the affidavits, shows a drift towards certainty as time went on and that some significant statements which appear in the affidavits do not appear in the early notes. In particular, there is nowhere in Mrs  Timms ' initial instructions to the solicitor as to what was said at the early November meeting with Mr Hart when Mr Hart said that the business was viable and profitable.

76 Returning to the evidence of Mr  Timms , he was thoroughly cross- examined for almost three days by counsel for the Bank and the Accountant. He did not fare particularly well under cross- examination. Under the cross-examination of Mr Forster SC, Mr  Timms  did not concede that he must have had figures dealing with the accounts of the companies in his possession in the last quarter of 1991.

77 Mr  Timms  was asked in particular about the evidence he had given that the Bank or Mr Rosenfeld had said that the business was "a good buy". He was asked how anyone could say that when the person did not know how much Mr  Timms  and his group were in fact paying for the business. It is clear that the initial asking price was $900,000 plus stock at valuation and this came down to $279,000 plus stock at valuation. Significantly counsel put to Mr  Timms  that no-one could say it was a "good buy" unless they knew the purchase price. Also, unless Mr  Timms  had some idea that Wheeler was desperate to sell or that there was something wrong with the accounts or otherwise, it would not have been possible to reduce the initial asking price of $900,000 to under one-third of that figure. Mr  Timms  did not cope well with either of these lines of questions. He was also cross-examined as to the vagueness of the term "the business is profitable" from which it was put to him that one could understand that it was making $10 a year or $10 million a year unless one had something more. However, in answers to questions Mr  Timms  said over and over again a statement similar to that recorded at T62 where Mr Forster SC asked:

"You were certainly very keen by that time (26 November 1991) to buy the business, were you not?"

A. "Yes, because we had our adviser recommend the business and we had the bank also tell us it was a good, viable business."

Q. "You keep coming back to this, don't you?"

A. "They were the two things that were important to us."

Q. "Were they?"

A. "Yes".

78 Mr  Timms  was also challenged as to whether the red light showed when he heard that the Bank had had a firm of chartered accountants do a report on the business. He said that he did not consider that there would have been any problem about the business because if that had been the case, Mr Hart would not have been so positive about it.

79 As to the letter of 28 November, Mr  Timms  agreed that the letter was to put some pressure on the Bank and that he hadn't really considered seeking funds elsewhere. Mr Forster SC put to him:

"I want to suggest to you, Mr  Timms , that so far as your intentions were concerned nothing was going to stand between you and this business and certainly not the Commonwealth Bank ...?"

A. "No, that is not the case". (T70)

80 Questions were asked of Mr  Timms  as to why, when he found that the business was not at all profitable, he did not protest to the Bank. His answer was that he thought that he should keep on the right side of the Bank because he needed extra capital to see if the business could be made to succeed. In this, his evidence was credible.

81 On a matter going more to damages than anything else, Mr  Timms  was asked how it was that he was going to devote himself to the Artrona business and yet still be able to earn $100,000 a year by being a consultant in the computer industry. Again, no satisfactory answer was ever given.

82 Mr Dubler for the Accountant, commenced his cross-examination by seriously damaging the credibility of statements that Mr  Timms  was a person who wanted an investment with no financial risk whatsoever. It was put to him that a business that he wanted to become involved in, importing cashmere knitwear from Argentina and Brazil was something with real commercial risk and that he would have gone forward with it had it not been for the fact he could not get finance.

83 Mr Dubler also put to Mr  Timms  that he was far more capable of reading balance sheets and accounts than he would give himself credit for so doing. Although Mr  Timms  denied this, the cross-examination showed that this was probably true.

84 Mr  Timms  also acknowledged that there had been some "mistakes" in his affidavit with respect to the documents that he had seen and forwarded to Mr Rosenfeld.

85 A strong thread in Mr Dubler's cross-examination of Mr  Timms  is that Mr  Timms  knew that he could employ Mr Rosenfeld to do a due diligence project with respect to the business, but chose not to. This, Mr  Timms  persistently denied. However, the sheets from Mr Rosenfeld's diary and other working papers setting agendas for meetings strongly suggest that Mr Rosenfeld created lists of what was to be discussed at the meetings, ticked items after they had been discussed, and on numerous occasions wrote in a different coloured ink on the righthand margin as if on an action sheet "BT to do this" or similar words. Mr  Timms  himself kept few notes. It is difficult to reconcile the two pieces of evidence.

86 Mrs  Timms  gave similar evidence to her husband and that fact I have already remarked upon. She left most of the business to her husband, though she was always present when her husband had a face-to-face meeting with the Bank officer. She denied that she and her husband wanted to get a bank loan at any cost and that she was not really led into any false sense of security by what either the Bank or the Accountant did. There is little value in examining her evidence in detail.

87 Mr Rosenfeld was strongly cross-examined by Mr Einfeld QC. He was asked about previous transactions where he had been advising the  Timms  about the purchasing of businesses and it was put to him that some of the certificates he gave to the Bank in respect of some of these ventures were not completely accurate, a matter which Mr Rosenfeld denied. It was put to Mr Rosenfeld that his impression that Mr  Timms  was cost-conscious and did not wish him, Rosenfeld, to continue very far, was mistaken and that Mr Rosenfeld's hourly rate was not even discussed. In fact Mr Rosenfeld rendered a bill for $3,550 which did not detail everything he did but included analysing the companies' management accounts and statutory accounts, reporting thereon, and "discussions with your bankers supplying them with various information required."

88 I consider that Mr Rosenfeld emerged from the cross-examination more or less unscathed.

89 Mr Einfeld QC's cross-examinations of Mr Walker and Mr Hart the Bank officers, did, however, bear more fruit. Mr Hart kept steadfastly to his evidence, but Mr Einfeld QC had some success with Mr Walker. Mr Einfeld QC's submissions are that I should focus on Mr Walker's evidence and disregard Mr Hart's where it conflicted, as unreliable, but I cannot see any logical reason for doing this.

90 Mr Hart, under cross-examination, maintained the line that his job was to make sure that the Bank was secure. If a customer wanted to borrow money for a particular purpose, that was really not his concern. The Bank liked to lend money and to receive interest for it provided that it was going to be repaid, thus it would lend on virtually any proposal provided it had adequate security. Mr Hart made it clear that he did not consider it part of the Bank's function to advise the purchaser as to the vendor's business, or to indicate to the purchaser any information that was confidential to the vendor that the Bank had merely because it was the banker to the vendor.

91 On the other hand, although Mr Walker tried to pursue the same line, he did not do so quite so successfully. When faced with the fact that the Bank did have details as to the problems that the vendors were having with the business, he became uncomfortable under cross-examination.

92 Mr Walker recognised that he may have reconstructed his evidence to a degree from reading the Bank files. However, he thought that he had little to do with the  Timms  before they were introduced by Mr Hart and got the impression that Mr  Timms  had told him (Walker) that he ( Timms ) had an MBA and was a competent business man. He also was made aware by Mr  Timms  that Mr  Timms  was well acquainted with the Bank's Chief Executive Officer. Mr  Timms  gave the impression of being very confident of being successful.

93 Mr Walker can remember that, on at least two occasions, he told Mr and Mrs  Timms  to make sure that they were getting independent financial and legal advice.

94 Mr Walker gave his evidence on the fifth day of the hearing. Up until the luncheon adjournment, his evidence was as solid as that of Mr Hart. However, after lunch, and particularly nearer to 4 o'clock Mr Einfeld QC made some very real inroads. At T316, when being cross-examined about the investigating accountants' report it was put to Mr Walker that this would spark cause for concern that the business being purchased by the  Timms  was that of companies which, had they been on a forced sale, would have had a very substantial deficiency of shareholders' funds. Mr Walker agreed with this. He said, however, that he would not have been immediately alarmed by the fact that the companies were in arrears with their group tax. However, this was one of the matters that caused him to strongly advise Mr  Timms  to get independent financial advice. Similar questions were put to Mr Walker about payroll tax and sales tax. At T320, Mr Enfield QC put:

"The fact that the bank receives a report from an investigating accountant that uses the expression: `The company should be allowed to continue to trade with the implementation of identified procedures and controls', would itself have created some consternation in your mind would it not?"

A. "No".

Q. "It doesn't indicate a glowing report of approval of the company's financial circumstances, does it?"

A. "I suppose that's debateable."

95 At 322:

Q. "Now you know that after the  Timms , Mr and Mrs  Timms  had attended upon Mr Hart in October Mr Hart at their suggestion made inquiries of Barrack Street about the Artrona businesses, correct?"

A. "Yes".

Q. "And you know that Barrack Street sent to your branch some information in response to Mr Hart's question?"

A. "Yes".

Q. (T323) "But you don't place tight controls over every customer's accounts?"

A. "No, but operations within very defined parameters."

Q. "And you place them on customer's accounts where there is a risk where the bank is otherwise likely to be at risk with that customer, correct?"

A. "Probably, yes."

Q. "Because there's some doubt as to the customer's viability or its soundness, correct?"

A. "Yes, that would be right."

96 At T325:

Q. "It was a business of companies that had failed to meet tax obligations, is that right?"

97 Mr Einfeld QC then put various other failings of the companies to Mr Walker and then asked:

Q. "That wouldn't have indicated to you Mr Walker firstly that that company was as at the date to which this report relates extremely sound, would it?"

A. "Viable".

Q. "It wasn't what I asked you. Tell me if you don't understand my question please. Would that have indicated to you that the Artrona companies were extremely sound?"

A. "Questionable, yes."

Q. "Or that the business was extremely sound, questionable again?"

A. "Yes, you could put it that way."

Q. "Let alone that it was necessarily a good business, that wouldn't have indicated that to you, would it?"

A. "On the information available I thought that this was a viable business and capable of repaying a debt."

98 There were many other questions to the same effect.

99 It would seem that there was some disquiet actually within the Five Dock branch of the Bank as to just how far Mr and Mrs  Timms  were aware of the financial problems that the Wheelers had. There is a note in one of the diary sheets "Does the customer know the problems Wheeler is having" or words to that effect. Ordinarily, the fact that the Bank knows something about customer A would not mean that it had a duty to make customer B aware of that, especially when customer B was purchasing customer A's business, but part of the problem in this case is that at least on one version of the facts, the Bank did volunteer to make the  Timms  aware of the state of the business from their Barrack Street branch records, the Bank had information that the Wheelers were not running an extremely good business, and the Bank was also aware that the  Timms  believed that it was a good business.

100 The only other witness to give evidence was Mr Atkinson, the solicitor whose cross-examination need not be discussed.

The Case Against the Bank

101 In submissions, Mr Einfeld QC put even though there were some unsatisfactory aspects of the oral evidence on the plaintiffs' side, the Bank's own manager had accepted part of the plaintiffs' case. He put that it is not in dispute that Mr  Timms  said to the Bank officers that the vendors banked with its Barrack Street branch and that Mr Hart said he would check it out. There is no evidence at all that Mr Hart ever said "I can't tell you because it's confidential". Indeed, the furthest Mr Hart's evidence goes is that he wouldn't have breached confidentiality in fact.

102 The Bank's case is that Mr  Timms  put himself forward as a person with an MBA experienced in business who knew what he was doing. Mr  Timms  wanted a bank loan, he put pressure on the local bank officers by telling them that he knew the Chief Executive Officer and he was sick of their procrastinations; he wanted his loan now or he'd go somewhere else. However, even if I accept that scenario, if things had got to the stage where the Bank had indicated that it would let Mr  Timms  know of any problems, and it failed to do so, the Bank might still be liable to the  Timms .

103 Mr Einfeld QC says that the Bank had a duty, knowing that the  Timms  were relying on it, to speak out. It may well be that the  Timms  did consider themselves good confident business people, but that is really an irrelevant consideration. If a bank sees that people believe that they are strong, good, confident business people and are making some false assumptions, and are relying on the bank for advice, then the bank has a duty to speak out, and in this case it didn't.

104 Mr Einfeld QC says that there are a lot of minutiae in this case, but when one ascends above them, ultimately three matters need to be considered:

(1) was information given by the Bank to the  Timms ?

(2) was it false or misleading?

(3) did the  Timms  rely upon it and did it induce their contract?

105 As to these, Mr Einfeld QC says the Bank's standard answer is:

(a)  Timms  knew about the Wheelers' problems;

(b)  Timms  had an accountant;

(c) therefore it was reasonable for the Bank not to say anything.

However, he says when one analyses the evidence, all that the  Timms  knew was that the Wheelers had problems out of bad real estate deals from which they would be getting relief by having the proceeds of sale and this would also pay outstanding suppliers. The  Timms  did not know of their deeper problems. However, even if the  Timms  had some inkling of the deeper problems that knowledge merely heightened their reliance on the Bank for guidance.

106 Mr Forster SC says that at the end of the day, for the plaintiffs to succeed they must show that they did in fact rely on the Bank officers' actions and words. If the plaintiffs do not satisfy the Court that they are witnesses of truth, it would be difficult to find any such reliance. Although the Court may in some cases infer reliance, the present is not such a case. The objective facts suggest the absence of reliance only. The Bank was there only to lend money. If Mr and Mrs  Timms  relied on anybody, it was their Accountant.

107 In the end it really comes down to a question of acceptance or rejection of evidence. I have set out extensively in these reasons references to various parts of the evidence. I cannot accept Mr or Mrs  Timms  as giving an accurate account of what was said to the Bank back in 1991. They took no notes, Mr  Timms  at least made errors in his affidavits which appear to have been corrected after he got discovery of the Bank's documents, the method of taking the affidavits of Mr and Mrs  Timms  has caused considerable problems, but these problems would have been caused in any event because Mr and Mrs  Timms  continue to assert that they just did not put their heads together at all, yet they have produced identical words of conversations which took place eight years earlier.

108 The view I have formed from the whole of the evidence is that Mr  Timms  particularly gave the impression that he knew what he was doing and that he wanted this business and he wanted this bank loan and he proceeded to get it. I do not accept that he was at all affected by anything that the Bank officers said or did.

109 The Bank officers were primarily there to provide a source of income for the Bank and also to provide services for the customer at the customer's cost. It may well have been that in accordance with the culture of the Bank at the time local branch managers and their staff were over-enthusiastic about recommending loans for customers and it may well be that Mr Hart went too far in indicating that he would get some details from Barrack Street, but that's as far as it goes. I agree with Mr Forster SC's submissions that it was hard to work out exactly what was Mr  Timms ' version and then Mrs  Timms ' version in the way in which the evidence was collected. There is also validity in Mr Forster SC's comment that the solicitor's evidence was that, although there was no discussion of their evidence between the male and female plaintiff, and Mr  Timms ' first interview did not contain matters disclosed by Mrs  Timms  in her first interview, the same passage ends up in both affidavits. The only conclusion is that despite their strenuous denials, they must have discussed the evidence. Further, there is no occurrence of the phrase "viable and profitable" before the  Timms  see the Bank's discovered documents. At T177.7 the phrase comes up in the Bank's document and thereafter it is picked up.

110 The material generally suggests to me that the most likely scenario is that the  Timms  relied on their own enquiries and after the venture failed, they reconstructed events to lay the blame at the Bank's feet. In my view there should be a verdict for the Bank on the  Timms ' claim.

The Claim Against the Accountant

111 It seems to me that the claim against the Accountant is even weaker than the claim against the Bank.

112 The essential first step is to work out what was the Accountant's retainer.

113 Was Mr Rosenfeld retained to investigate the accounts generally or to advise on what was given to him?

114 I accept Mr Rosenfeld's evidence that he was not asked to do a full due diligence and that his role was very much limited to examining the documents that he was shown by the  Timms . In my view the evidence shows that Mr  Timms  considered he had sufficient expertise and was very cost conscious and resorted to Mr Rosenfeld for guidance as to method and for advising the Bank.

115 Mr  Timms ' version and Mrs  Timms ' version of what was said to Mr Rosenfeld is clearly inaccurate. As I have mentioned earlier, it is incredible for Mr  Timms  to say that he never had either management or statutory accounts and cross-examination showed clearly that the figures that he was using must have come from one or other of those accounts.

116 Mr Rosenfeld's evidence is reinforced by the contemporaneously prepared agendas for meetings at which the things to be done were ticked or otherwise endorsed on the righthand margin.

117 I also accept Mr Dubler's submission that it is difficult to believe that Mr Rosenfeld, the careful accountant who recommended against previous speculative business ventures would, suddenly, "change his spots" and recommend the present business in the circumstances which I have set out.

118 In so far as the notes which Mr  Timms  says that he took in October and November 1991 are concerned, I cannot conclude that they are accurate where they differ from Mr Rosenfeld's notes. I do not consider, in the light of the general unreliability of the evidence of the  Timms , that Mr Rosenfeld ever said on 25 November 1991 that he had checked it all out, that everything was correct, the business was making the money that the vendors said it was making, because he was just not in a position to do so and the whole of the documentation shows that he was not endeavouring to do so, nor was it within his retainer. Nor do I consider that Mr Rosenfeld was retained to "check absolutely everything".

119 As Mr Dubler says, the high point of the plaintiffs' case appears to be three pencil marks on financial statements made in Mr Rosenfeld's hand in circumstances that he cannot now recall (see submission 20.3 in MI2408). I do not consider that this is sufficient in the light of all the circumstances to make me come to a difference conclusion.

120 Accordingly, there should be a verdict for Mr Rosenfeld.

The Cross Claims

121 It follows that the cross-claims for contribution must be dismissed as neither the Bank nor the Accountant is liable to the plaintiffs.

The Bank's Action

122 It follows, from what I have already said, that the matters which are relied on by Mr and Mrs  Timms  and the other plaintiffs to deny the Bank its prima facie entitlement to judgments against them have failed.

123 The material that is relied on to support the Bank's case in its proceedings 3054/97 is comprehensively set out in the document MI3301. There has been no answer to it in the light of my findings in the other suit. Accordingly, the Bank is entitled to judgment against each of Anastasia and Brian  Timms  for $5,129,894.19 plus interest from 26 February 2001. There should be judgment against the third defendant, T W Holdings Pty Ltd for $1,850,133.85 plus interest on the same basis as above, and against the fourth defendant, BDA International Pty Ltd for $2,799,115.66 with interest as above.

124 The Bank is also entitled as against Anastasia  Timms  for an order for possession of her property with the usual consequential orders. In view of the fact that the property is the first and second defendants' home it would be appropriate to allow two to four weeks from the making of the orders for vacation.

125 I will publish these reasons and stand the matter over to 19 July 2001 at 9.30 am for short minutes to be brought in. However, should that date be inconvenient to counsel, provided my Associate is contacted at least a week before, some alternative date can be arranged.

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LAST UPDATED: 06/07/2001