meat gt at = Jeo wet ae iy aA abet ae' 4 xm, a gets "yee ets ge Bet eg ts ees SEE Se 'sR 2 = oa "4 orc no ee # os a) Trade Practices - application under s.52 and accrued Jurisdiction - loan agreement - alleged representations by branch manager of furst respondent as to soundness of business venture for which loan sought - whether misleading or deceptive - whether fraudulent er negligent misrepresentation - applicants not advised by respondents to seek independent legal advice on loan agreement - breach of fiducirary duty alleged - whether fiduciary relationship between applicants and respondents Trade Practices Act 1974 5.52 BARRY EDWARD STANTON and BRONWYN MARGARET STANTON v. AUSTRALIAN AND NEW ZEALAND BANKING GROUP LTD. and ESANDA LIMITED No. WA G77 of 1985 TOOHEY J. PERTH 16 DECEMBER 1986 ' IN THE FEDERAL COURT ! UF AUSTRALIA ! WESTERN AUSTRALIA ) No. WA G77 of 1285 DISTRICT REGISTRY ' GENERAL DIVISION ! BETWEEN: BARRY EDWARD STANTON and BRONWYN MARGARET STANTON Applicants and AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD. First Respondent and ESANDA LIMITED Second Respondent MINUTE OF ORDER JUDGE MAKING ORDER: TOOHEY J. DATE OF ORDER: 16 December 1986 WHERE MADE: Perth THE COURT ORDERS THAT: 1. The application is dismissed. 2. The applicants pay the respondents' costs of the application. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION No. WA G77 of 1985 eee ene BETWEEN: BARRY EDWARD STANTON and BRONWYN MARGARET STANTON Applicants and AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD. First Respondent and ESANDA LIMITED Second Respondent CORAM: TOOHEY J. 16 December 1986 REASONS FOR JUDGMENT This is a claim against a bank and a finance company arising out of a loan obtained by the applicants. Mr. Stanton, in the course of his work as a boilermaker, got to know Alan Harris who was conducting a liquid waste business. Mr. Harris suggested to Mr. Stanton that he buy one of Mr. Harris' trucks and that the two men carry out a co-operative enterprise in removing liquid waste in the area around Gosnells. The price of the truck was $10,000. Harris would provide Stanton with fifty contracts for liquid waste removal and Stanton would pay Harris $5,000 a year for the benefit of those contracts. The arrangement was a very loose one and, running ahead somewhat, Mr. Stanton did not ever receive any or the contracts. Mr. and Mrs. Stanton decided to operate in partnership but thev did not have the $10,000 required to buy the truck. Mr. Harris suggested that the Stantons contact the manager of the Gosnelis branch of the Australia and New Zealand Banking Group Limited, Francis John Henry Kirwan. Harris banked at the branch. The Stantons did not know Mr. Kirwan. Mr. Harris arranged an appointment on a date which I accept, from the evidence of Mr. Kirwan, to have been 22 June 1984. Mr. and Mrs. Stanton and Mr. Kirwan gave evidence. Mr. Harris was not called as a witness. The Stantons took no action against him, either in this Court or elsewhere. As a consequence there was much about the circumstances surrounding the breakdown of the arrangement between the Stantons and Harris that was not fully explained. I accept that all three witnesses gave their evidence to the best of their recollection. Mr. Stanton was vague on matters of detail and as to the sequence of events. Mrs. Stanton was clearer in her recollection though I am satisfied that in some respects she was mistaken as to the order in which events took place. Mr. Kirwan had a qood recollection of events though it would seem that, until 29 August 1985 when the application in this Court was filed, he had no reason to think that any proceeding would be taken against the bank or for that matter the finance company. In November 1984 Paula Natalie Wilkinson, who was then emploved by the applicants' solicitors, interviewed Mr. Kirwan at some length and took notes of the interview. Ar that staqge Ms. Wilkinson saw Mr. Kirwan to qet information that might assist in action against Harris. It is necessary to look in some detail at what Mr. Kirwan said to Mr. and Mrs. Stanton but 1t is helpful first to identifv the sequence of events. As already mentioned, the first interview took place on 22 June 1984. The Stantons gave Mr. Kirwan details of their financial position and he included these details in a document entitled "Statement of Financial Position". Mr. Kirwan told the Stantons that the bank would require security for the loan of $10,000 and that, having regard to the Stantons' assets, the security would be a second mortgage over the family home. It would seem that the registered proprietor of the home was Mrs. Stanton; there was already a mortgage in favour of Mrs. Stanton's mother. Mrs. Stanton wished to discuss the question of a second mortgage with her mother before making the home available as security. On 25 June Mr. Kirwan visited the home to make a valuation. Shortly thereafter he had a telephone call from Mrs. Stanton saying that her mother was not happy with the idea of a second mortgage. Mr. Kirwan said that in that event the bank would not be able to advance any money. He added that "If they wished to go on I would refer it to my Esanda Division because they had a different quideline as far as securities were concerned". Mrs. Stanton asked Mr. Kirwan to refer the matter to Esanda, which i he did. Mr. and Mrs. Stanton called at the bank where Mr. Kirwan introduced them to Kerth Laird, an officer of Esanda which had its office in the bank's premises. This was on 27 June. On 29 June Mr. and Mrs. Stanton siqned a memorandum of contract for a loan from Esanda and a bill of sale over the truck. Esanda paid the money to Harris; whether directly or by payment into his account with the bank did not emerge. I now return to 22 June 1984, the occasion of the first interview between Mr. and Mrs. Stanton and Mr. Kirwan. Mr. and Mrs. Stanton allege that what was said on that occasion by Mr. Kirwan constituted misleading and deceptive conduct on the part of Australia and New Zealand Banking Group Ltd. and Esanda Limited. There are further allegations of fraudulent misrepresentation, negligent misstatement and breach of fiduciary duty. I set out verbatim paras.3 and 4 of the statement of clain, notwithstanding some obvious errors in wording. "3. In order to induce the Applicants to make and complete the loan agreement the First and Second Respondent represented to the Applicant in effect: (a) that the First and Second Respondents would not lend money to the Applicants unless they considered a proposed business venture in the nature of Liquid Waste Operatives which the Applicants were considering entering into with one Alan Harris ('the proposed business venture') and for which the loan was required was sound; (b) that the First and Second Respondents had investigated the proposed business venture and 1t was considered by them to be sound; 'cy, that Harris was known to the First and Second Respondents as being a_ reputable person who would not disadvantaqe the Appiicants. 4, The representations were made by and are to be inferred from oral statements made by one Frank Kirwin, the First Respondent Gosnells Branch Manager, as servant or agent of and for and on behalf of the First and Second Respondents on varying dates but prior to the execution of the loan agreement." So far as Mr. Stanton's evidence is concerned, it is enough to say that he did not support any of the representations pleaded in para.3 of the statement of claim. Indeed the picture presented by Mr. Stanton was one in which Mr. Harris told Mr. Kirwan about the business he and the Stantons proposed to conduct and nothing was said by Mr. Kirwan about the prospects of the business or about Harris' reliability other than a remark made when the question of the mortgage came up that "I think it will be a good thing" or something along those lines. According to Mrs. Stanton, Mr. Harris gave Mr. Kirwan details of the business and how he hoped to build it up. She did not mention anything said by Mr. Harris on that occasion that would support para.3 of the statement of claim. However she spoke of going back to see Mr. Kirwan the day following the first interview. Having regard to the sequence of events, it could not have been the next day and it is more likely to have been by way of a telephone conversation. I accept Mr. Kirwan''s evidence that, at least from the bank's point of view, there was only one fon substantial interview and that it took place on 22 June. Because of the Stantons' treluctance to commit the house to ai second mortaqaqe, sometning which Mr. Kirwan was told bv Mrs. Stanton ina telephone conversation, the Stantons' dealings thereafter were with Mr. Laird on behalf of Esanda. While undoubtedly there was some contact between the Stantons and Mr. Kirwan during their dealings with Esanda, 1t was largely related to introducing them to Mr. Laird and there was no reason for Mr. Kirwan to have expressed a view to the Stantons about Harris' business on any such occasion. Speaking of the day after the first meeting, Mrs. Stanton said that she and her husband spoke to Mr. Kirwan about the question of mortgaging their house. In her words: "... and I said I was a bit dicey on it because I did not want to mortgage the house and then lose it if it was not - if things did not work out. And Mr. Kirwan said that he thought that he would not loan money out if it was not a good deal and we sort of went ahead from there." Later she added that Mr. Kirwan said "He felt that Mr. Harris was a qood bloke and he had known him for some time". Later again she said "... and I think he said he did not think he would do a dirty on anybody, or something like that - a dirty deal, or something". Although I think Mrs. Stanton was mistaken in speaking of a second interview with Mr. Kirwan at which Harris was discussed, I accept her evidence, repeated several times in examination-in-chief and cross-examination, that Mr. Kirwan said something to the effect ed pa a , eee Syst BS +n heen SL q Likiee? zee f a Ess! eel ~ a) wut od tas 2 ear * art ids 'pgs that Harris was a aood ploke and that he (Kirwan; did not think that Harris would do a dirty deai, Indeed Mr. Kirwan agreed that he may have taid tne Sstantons that Harris was known to the bank as a reputable person who would not disadvantage them. He said "Well, I could have said it and I would have said that if I had been asked". However he denied having said anything in terms corresponding to sub-paras.(a) or (b) of para.3 of the statement of claim. I accept that denial. The conversations between Mr. and Mrs. Stanton and Mr. Kirwan must be seen in context. The Stantons did not go to the bank to get advice about the arrangement suggested by Harris. They did not go to get advice as to whether or not they should borrow money. They (in particular Mr Stanton) had decided to buy the truck and to enter into a co-operative arrangement with Harris. They went to the bank to negotiate a loan to enable them to buy the truck. They did not go to the bank to get information about Harris, whether about his reliability or otherwise. Furthermore there is nothing to suggest that Mr. Kirwan knew any more about the proposed arrangement than did the Stantons; indeed the evidence established that he knew no more than he was told by Harris, in the presence of the Stantons, on 22 June 1984. Another aspect of the matter is that whatever was said by Mr. Kirwan was by way of opinion. That is not to say that an expression of opinion may not constitute misleading or deceptive conduct; clearly 1t may - see Global Sportsman Pty. Ltd. v. Mirror 3. Newspapers Ltd. (1984) 55 A.L.R. 25; Australian Ocean Line Pty. Ltd. v. West Australian Newspapers Ltd. '1985) 58 A.L.R. 549. To cite a passage rrom the former decision at Sl: "A statement which involves the state of mind of the maker ordinarily conveys the meaning (expressly or by implication) that the maker of the statement had a particular state of mind when the statement was made and, commonly at least, 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, the making of the statement wiil have contravened sub-sec.52(1) of the Act." One thing is clear. Whatever Mr. Kirwan said about Mr. Harris, there is no reason to doubt that he believed what he said. The contrary was never put to hin. Kirwan had had limited dealings with Harris but there was nothing in those dealings to suggest that the latter was other than reputable and someone who would not disadvantage the applicants. An unsatisfactory feature of the case was the absence of a clear picture as to why the arrangement between Mr. and Mrs. Stanton and Mr. Harris fell through. It may be accepted that Harris did not perform his part of the bargain by producing fifty contracts for liquid waste removal but that of itself does not establish him to have been a person who was not reputable for the Court does not know with any certainty whether there were contracts and, if so, why they were not able to be fulfilled. There was evidence from Mr. and Mrs. Stanton that, when they tried to conduct a waste removal business on their own account, they ran into problems with local authorities because they did not have the required licences wo under the Health Requlations. Again, lust what aif anything transpired between Mr. and Mrs. Stanton and Mr. Harris in this regard is not at all clear. i am not to be taken as suqgesting that Mr. and Mrs. Stanton were responsible for the problems they encountered. But in so far as they rely upon misleading or deceptive conduct on the part of the respondents, the evidence did not establish that Mr. Kirwan said anything that was objectively not true or, in so far as 1t was by way of opinion, was something for which there was no basis. The claim under s.52 of the Trade Practices Act 1974 must fail. The claim of fraudulent misrepresentation must also fail. There was simply no evidence that Mr. Kirwan said anything knowing it to be false or recklessly, not caring whether it was true or false, It is all too common to include with a claim under s.52 an allegation of fraudulent misrepresentation. An allegation of fraud is a serious matter and ought not to be made without some foundation. There was no foundation in this case. Likewise the applicants failed to establish that Mr. Kirwan was negligent in anything relevant he said. To begin with, I am not persuaded that anything he said was false. Even if it was, there is no reason to conclude that he knew or ought to have known that what he said was false. That leaves for consideration the claim for breach of fiduciary duty. ey 10. The th tatement of claim pleads that "in the premises" the respondents scwed the apolicants & fiauciary auty and that they breached that dutv. The breach 1S particularised in terms that the respondents failed to ensure that the applicants received independent advice on the loan agreement before its execution. In my view neither of the respondents stood in a fiduciary relationship to the applicants. Such a duty may arise as between banker and customer in the particular circumstances of the case - see for instance Lloyds Bank Ltd. v. Bundey £1974] 3 All E.R. 757. But there was nothing in the circumstances of this case to give rise to a fiduciary duty, either on the part of the bank or the finance company. The difficulties the applicants face in this part of their case are pointed up by the particulars themselves. Why should the respondents have advised the applicants to receive independent advice on the loan agreement? The applicants are not complaining about the loan itself or the terms upon which it was granted. Their complaint is that they entered into an arrangement with Mr. Harris and borrowed $10,000 (actually $11,000 to cover certain expenses) to buy Harris' truck to enable them to operate in business with hin. Mr. and Mrs. Stanton did not go to Mr. Kirwan for advice as to whether they should enter into the agreement. They had already reached a decision to do so and went to the bank as a possible source of finance. If the particulars of breach of fiduciary duty are to be taken to mean that the applicants should have been told to get li. independent aadavirze about entering into any artangement with Harris, an oplicat u ia] fa] 1s sought ro be imposed on the respondents tor which 4 car WA feaonc warrant either jn principle or in the Particular circumstances of the case. The applicants did not plead unconscionable conduct or undue anfluence on the part of either respondent; and in any event there was no evidence to support such a case. The closest I think the applicants came to relying upon Mr. Kirwan was when Mrs. Stanton expressed her concern about giving a second mortgage to the bank. But in the end they gave no such mortgage. The Court was told that Esanda lodged a caveat to support its loan though the basis for such a caveat and the type of caveat itself were not disclosed. The Court was not told why proceedings were not taken by Mr. and Mrs. Stanton against Mr. Harris. Several possibilities come to mind. Whatever the reason, no proceedings were taken and it would seem that the applicants were advised to turn their attention to the bank and the finance company. However they have failed to make good any of the causes of action pleaded against the respondents and their claim must be dismissed. I certify that this and the preceding 10 pages are a true copy of the reasons for judgment herein of his Honour Mr. Justice Toohey /? t Associate Dated: 16 December 1986 Ty oy & Qounsel for the applicants: Counsel for the resvondents: Date of hearing: le. Mr. J.F. Munagar instructed by Messrs. Vincent Jordan & Co. Mr. RK. Machnay instructed by Messrs. Stables & Co. 17 and 18 November 1986 RE TE TE I fears vow Spe Ire res oe nese