JUDGMENT No. oc tS alt CATCHWORDS DISCOVERY - claim relating to loan - unconscionable conduct by reason of manager's representation and promises - further discovery agamst the respondent - memoranda and advices from Head Office - lending manuals and employment history of manager. Trade Practices Act ss. 52,53 aro argaret Napier as an execut the estate t QG8 of 1992 Kiefe] J; Brisbane; 4 November 1994 FEDERAL COURT OF AUSTRALIA PRINCIPAL REGISTAY IN THE FEDERAL COURT OF AUSTRALIA EENS D DISTRICT REGISTRY GENERAL DIVISION ~~ BETWEEN: SHARON MARGARET NAPIER as an executor of the estate of the late Colin Ross Napier Applicant AND: NATION. U' IA B. Respondent MINUTES OF ORDERS JUDGE MAKING ORDER: Kiefel J DATE OF ORDER: 4 November 1994 WHERE MADE: Brisbane OURT O T: 1. The respondent file and serve upon the applicant within twenty-one (21) days of the date hereof an affidavit stating: (a) whether circulars, bulletins, memoranda and advices from Head Office, Queensland State admunistration, regional managers or regional operations for the south-west region relating to projections of lending and interest rates or containing the bank's comments upon future rates for the period 1986 to the date of the filing of the application herein and addressed to the Tara branch or to branches generally; (b) whether lending manuals, the Tara manager's delegated lending authority and the bank's regulations for the years 1985-1987; (c) whether customer liabilities regular returns and reports and manager's watch lists from 1985 to 1987 and with respect to accounts held by Mr Napier at the Tara branch; are presently in its possession, custody or power or whether they have been in its possession, custody or power and if they have been but are not now in its possession, custody or power when they were not and what has become of them and if this 1s not known stating what searches have been conducted to ascertain what has become of them. THE COURT FURTHER DIRECTS THAT the respondent file and serve upon the applicant within twenty-one (21) days a cchedule of the employment history of its employee, Sid Pyne to be verified by an affidavit of an officer of the Tespondent. NOTE: Settlement and entry of orders is dealt with m Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA ) No. 8 2 QUEENSLAND DISTRICT REGISTRY ) GENERAL DIVISION ) BETWEEN: SHARON MARGARET NAPIER as an executor of the estate of the late Colin Ross Napier Applicant AND: AN K LI D Respondent CORAM: Keefel J DATE: 4 November 1994 PLACE: Brisbane REASONS FOR JUDGMENT The applicant seeks orders for further discovery against the respondent. e Applicant's Claim The applicant's claim relates to loans made by the respondent to her late husband in 1986. It 1s alleged the circumstances surrounding them commenced with the manager of the Tara branch threatening Mr Napier with legal action in the event that his overdraft was not cleared, coupled with a representation or advice that Mr Napier ought to apply for a fixed rate bill at 15.5% and that that would provide sufficient for his present and future funding needs. That took place in early 1986. The manager of the Tara branch, I take it, 1s also said to have represented that the interest rate would remain at that rate and in any event it 1s alleged that it was agreed that it would be so fixed for three years. Mrs Napier pleads that pressure was exerted on her husband in that instance and that he had no choice but to take the loan. Mrs Napier explained in the course of this application that her husband was then committed to that course of action and expended money on the basis that he not only had to take the loan but that the loan had been confirmed orally by the manager. By July 1986, before any documentation was produced, the rate of interest had increased, although the manager said tt would fall in the middle of the following year (although it is unclear what it is intended by the following words "but that the bank believed that the fall in the interest rate would only be for a short time".) The manager then advised Mr Napier to take a bridging loan at 19.5% but told him that, as soon as the bill rates returned to 15.5%, the bank would grant that facility. It is also said (although it is alleged it was never intended) that the bank undertook to be understanding and flexible in relation to Mr Napier's financial needs. It is said that the making of the loan was in the circumstances unconscionable, that the bank was guilty of false, misleading, and deceptive conduct by reason of the manager's representations and promises and that it breached its agreements and negligently failed to advise Mr Napier not only of the later reduction in interest rates but of his inability to afford repayment of the advances. Subsequent to the death of her husband, Mrs Napier, an executor of his estate, says that the bank has continued to tail to advise her and her co-executor of reductions in the rate of interest from time to time. The Application The respondent has listed documents 1n its possession and verified these by affidavit. Further affidavits filed on this application seek to confirm, in some respects, the sufficiency or conclusiveness of the discovery. Mrs Napier however contends that there must be other documents held by the applicant (or which were at least at some time held by it) and seeks orders that they be listed. She is assisted by the evidence of Mr Salmon, a former employee of the bank and a person familiar with its procedures. The first class of documents in the list contained in Mrs Napier's letter of January 1993 (Schedule 1, items (a), 2(c)) are circulars, bulletins, memoranda and advices from Head Office, Queensland State Administration, or regional managers or regional operations for the south-west region relating to lending and interest rates. It is not difficult to comprehend that there may be such documents and indeed the bank manager's advices set out in the statement of claim suggest that he has received some advice as to the bank's view as to interest rates. Mr Brandis, who appeared for the bank, did not contend that they or some such documents might not exist. Their relevance was however questioned. But it seems to me that, insofar as such documents may deal with future trends or convey the bank's approach, they might be used by the applicant to support the likehhood that the manager said what 1s alleged. At present those advices are denied. The order to be made will however limit those documents as ones as were circulated to the Tara branch or documents of a class which were circulated to branches generally and for the years 1986 to the date of the filing of the application. The order ought to extend for this period given the allegation of a failure to advise as to prevailing rates of interest in circumstances which are alleged to amount to breaches of ss. 52 or 53 of the Trade Practices Act. The bank monthly and/or quarterly summaries for the years 1985, 1986 and 1987 are sought in s. 1(d). Mr Salmon in his affidavit does not however refer specifically to the information contained in such documents, and it would seem to me from the description in the letter that they would be a summary of activities in the branch for those periods. As such, they would not likely contain any forward projection of interest rates, and in the absence of other information explaining their telationship to Mrs Napier's claim, I cannot see the need to list them. A claim for the production of a schedule of rates of interest applicable throughout the whole of this penod (to the present date) is made. There is, I accept, no such document presently in existence which the bank would be liable to produce. It has however undertaken to produce such a list for the purpose of these proceedings. Mrs Napter then points to the likely existence of lending manuals, the Tara manager's delegated lending authority, and the bank's regulations generally. Mr Salmon again points to the existence of the manager's lending authority. The respondent's contention 1s that no issue arises as to his authority to make the loans in question. But the terms of, and the circumstances in which, the advances were made are matters which may affect the propriety of the loan and it may be considered by the Court hearing the matter proper to view the conduct of the manager in the background of any limits or guidelines which ought to affect his approvals, and for the purpose of the claim for relief based upon unconscionability of the bargain. Whilst I am left with a doubt as to whether a lending manual for the relevant years 1985-87 now exists, 1t is not clear to me just what searches have been undertaken to ascertain those parts current for those years. The same comments apply with the respect to the bank's regulations. Whilst there 1s some material which suggests that it is not kept in a state relevant to those years (as it 1s updated from time to time) and these Proceedings were not brought until 1992 (which might excuse the bank for not keeping those pages), if it 1s unable to locate them the bank ought to refer to the searches made. The balance of the items (a) to (u) in Schedule 2 fall within these catzgories of documents, that is to say, the regulations or manuals which I have dealt with. Items (v), (w), (y) and (aa) are not pursued. In relation to the documents described "Customer File Documents" the applicant presses for discovery of the manager's watch list from 1984 onwards, the customer habilities regular returns (irregular account lists) for the same period, and correspondence between the branch and admmistration of the bank regarding those matters. The two remaining categories of documents I shall deal with separately. The Customer Interview Records discovered, by reference to the dates appearing on them, seem to cover the period in question and it 1s said by the bank that no other such document exists. Whilst little seems to have been noted in a period which Mrs Napier describes as one of fairly intense activity relating to the loans, there is I consider nothing to suggest additional documents of this description are in existence and not discovered. Mrs Napier points to the account of her husband having been irregular for a long period and Mr Salmon's affidavit bears this out. In these circumstances, there would necessarily, Mr Salmon says, be computer generated lists (the watch lists referred to) in which reference to the account is made, together with reports made as to the period over which or the days in respect of which the account was irregular and the peak debt m that period. To an extent the bank took a narrower view of relevance of these documents than 1s required by the rules. Additionally, the affidavits of its officer and of its solicitor explained the discovery so far made. The respondent's solicitor states that all customer liabilities irregular reports or watch list reports in the files maintained by the bank m_relation to the accounts im question have been discovered. I have no reason to doubt that this is so but this leaves with the question as to whether such documents are contained in other files since they either emanate from or are returned to some central poimt. The customer liabilities irregular returns, a different document from the reports, are also produced by the bank. Mrs Napier says that the account can be shown to have been irregular throughout the whole period when the loans were further negotiated and security taken. In the event that the respondent 1s unable to presently locate such documents, it ought to state what searches have been made. The last remaining document or class of documents are those contained in the personnel file of Mr Pyne, including details as to his banking career appointments. Mrs Napier points to a similar file having been discovered in another action, but that is not of assistance here. The question of the manager's abilities might be thought to relate to some claim in negligence. Whilst it is of course undesirable to be too restrictive in an approach to a pleading drawn by a litigant personally, the only reference to negligent conduct appears to be that relating to the applicant at some time after the loans were in fact made by the manager. Mr Salmon does not otherwise explain what relevant information may be obtained from the personnel files. The applicant's reference to a superior's opinion of the manager's lending ability and which might affect his motivation to have done something with respect to the loan does not appear to me to relate to issues in these proceedings. In any event, whilst I can accept that a personnel file exsts, it would be mere speculation to assume that a document setting out such an opinion at the relevant time exists. In these circumstances, I decline to order discovery of that file. It does seem to me however that the history of employment of the bank manager may have some relevance and indeed I would expect it to be set out in his statement of evidence. AND THE COURT ORDERS THAT: The respondent file and serve upon the applicant within twenty-one (21) days of the date hereof an affidavit stating: (a) (b) (c) whether circulars, bulletins, memoranda and advices from Head Office, Queensland State administration, regional managers or regional operations for the south-west region relating to projections of lending and interest rates or containing the bank's comments upon future rates for the period 1986 to the date of the filing of the applcation here and addressed to the Tara branch or to branches generally; whether lending manuals, the Tara manager's delegated lending authority and the bank's regulations for the years 1985-1987; whether customer liabilities wregular returns and reports and manager's watch lists from 1985 to 1987 and with respect to accounts heid by Mr Napier at the Tara branch; are presently in its possession, custody or power or whether they have been 1m its possession, custody or power and if they have been but are not now in its possession, custody or power when they were not and what has become of them and if this is not known stating what searches have been conducted to ascertain what has become of them. THE COURT FURTHER DIRECTS THAT the respondent file and serve upon the applicant within twenty-one (21) days a schedule of the employment history of its employee, Sid Pyne to be vertied by an affidavit of an officer of the respondent. I certify that this and the preceding eight (8) pages are a true copy of the reasons for judgment herein of the Honourable Justice Kiefel. Date: 4 November 1994 maa pebblored Associate Counsel for the applicant: In person Solicitors for the applicant: In person Counsel for the respondents: Mr G Brandis Solicitors for the respondents: Flower and Hart Date of Hearing: 31 October 1994