FEDERAL COURT OF AUSTRALIA Ines v Commonwealth Bank of Australia [2008] FCA 1608 Australian Securities and Investment Commission Act 2001 (Cth), ss 12CB, 12DA and 12GF Federal Court Rules, O 23 Trade Practices Act 1974 (Cth), ss 52 and 51AB ARLENE TECSON INES and ANOR v COMMONWEALTH BANK OF AUSTRALIA NSD 711 OF 2008 EMMETT J 23 october 2008 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 711 OF 2008 BETWEEN: ARLENE TECSON INES First Applicant FRANCISCA RIEGO INES Second Applicant AND: COMMONWEALTH BANK OF AUSTRALIA Respondent JUDGE: EMMETT J DATE OF ORDER: 23 october 2008 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The proceeding be dismissed. 2. The applicants pay the respondent's costs up to and including 6 August 2008 on the ordinary basis. 3. The applicants pay the respondent's costs from and including 7 August 2008 on the indemnity basis. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 711 OF 2008 BETWEEN: ARLENE TECSON INES First Applicant FRANCISCA RIEGO INES Second Applicant AND: COMMONWEALTH BANK OF AUSTRALIA Respondent JUDGE: EMMETT J DATE: 23 october 2008 PLACE: SYDNEY REASONS FOR JUDGMENT INTRODUCTION 1 In this proceeding the applicants, Mr Arlene Ines and Mrs Francesca Ines, claim that they suffered loss by conduct of the respondent, the Commonwealth Bank of Australia (the Bank). They say that the Bank engaged in conduct that was misleading or deceptive or likely to mislead or deceive or was unconscionable in contravention of either ss 52 or 51AB of the Trade Practices Act 1974 (Cth) or ss 12CB, 12DA or 12GF of the Australian Securities and Investment Commission Act 2001 (Cth). In the event, it does not matter under which statute the claim is brought because the damages that are now claimed would be the same under each statute, if Mr and Mrs Ines are entitled to recover damages. THE WITNESSES 2 Much of the evidence before me was documentary. However, evidence was given by Mr and Mrs Ines as well as by Mr Sugam Gaunder, an officer of the Bank. 3 I am unable to be satisfied that I could rely on the evidence of Mr and Mrs Ines, particularly Mr Ines. His evidence was inconsistent in a number of respects and he prevaricated often in giving his evidence. On many occasions there were quite significant delays before he answered what appeared to be quite straightforward questions. I accept that Mr and Mrs Ines may not have the comprehension of English that many may have, in that English is their second language. That may be some explanation for the observations that I made of Mr Ines when he was giving evidence. On the other hand, they appeared to have no difficulty in comprehending English and in reading English. I am not satisfied that the evidence of Mr Ines was reliable where it was inconsistent with documentary evidence or the evidence of Mr Gaunder. 4 Mr Gaunder gave evidence carefully and was frank in acknowledging those parts of his evidence that were based on a reconstruction according to what he believed his practise would be and those parts of his evidence that he said related to actual recollection. Accordingly, the findings of fact that I will make will depend very much upon the documentation that is in evidence and the evidence of Mr Gaunder. That is not to say that I reject entirely the evidence of Mr and Mrs Ines. However, as I have said, where there is conflict between their evidence and that of Mr Gaunder, I prefer that of Mr Gaunder. THE FACTS 5 In 2002, Mr and Mrs Ines were the registered proprietors of land situated in Liverpool Street, Ashfield (the Ashfield Property). At that time, they were interested in buying a block of land and building a house for investment purposes. In late October 2002, they found vacant land situated in Cassar Place, Oakhurst (the Oakhurst Property). At that time, they made inquiries of Wincrest Homes Pty Limited (Wincrest) about building a house on the Oakhurst Property. On 4 November 2002, they paid a deposit of $1000 to Wincrest in consideration for which Wincrest was to provide a tender to build a house on the Oakhurst property. 6 Mr and Mrs Ines did not have the funds to buy the Oakhurst property or to build the proposed house. Accordingly, in late October 2002, Mr Ines attended the Summer Hill branch of the Bank and spoke to Mr Gaunder, who was described as the Bank's "Mobile Banking Service Manager". Mr Ines told Mr Gaunder that he and his wife would like to obtain a home loan to buy a vacant block of land and build a new house for investment purposes. Mr Gaunder told Mr Ines to bring his and his wife's payslips and group certificates, together with credit card statements, personal loan agreements, hire purchase agreements and leases that they had with any other financial institutions. Mr Gaunder said that the process of indicating whether a loan would be available would take about two days after all of that information was provided. 7 In early November 2002, Mr and Mrs Ines attended the Bank's Summer Hill branch where they spoke to Mr Gaunder. Mr Gaunder gave them a loan application which they completed and returned to him. The application was for a loan of $500,000. The purpose of the loan was stated to be the purchase of the Oakhurst Property. 8 On 5 December 2002, the Bank wrote to Mr and Mrs Ines relevantly saying: I am delighted to inform you that, based on the information you gave me your application for an Investment Home Loan meets with the Bank's requirements for approval of an amount of $500,000.00. … The Bank will write to you again shortly with our loan offer. The offer documents will set out the full terms and conditions of the credit contract, including any special conditions you must satisfy before we will advance you the credit. Included with the offer documents will be a schedule setting out the loan details. To accept the Bank's offer, you will need to sign this schedule and return it to the Bank. If you do not receive these documents within 3 days or if you have any questions about the documents when they arrive, please call me on my direct number… In a panel set out in the letter the following information appeared: Account Name: Arleen Tecson Ines Francisca Riego Ines Property: Tba Sydney 2000 Loan Amount: $500,000.00 Interest Rate*: 5.39% pa Guaranteed Rate Period*: 1 year Monthly Repayment*: $3,047.00 Loan Term: 25 years * These particulars may change. Details to be given when the Bank writes to you with the loan offer. 9 Mr and Mrs Ines now attach significance to the fact that three of the items in the panel are marked with an asterisk as being particulars that may change. They draw attention to the fact that there is no asterisk against the loan amount of $500,000. However, neither Mr Ines nor Mrs Ines gave evidence that they noticed that distinction. That is significant in relation to the ultimate claim that is made by Mr and Mrs Ines against the Bank. They ultimately claim that the Bank misled them into believing that it had agreed to advance $500,000 to them. In the event the Bank only advanced $394,000. 10 In mid-December 2002, Mr Ines spoke to Mr Gaunder again and told him that he and Mrs Ines needed to pay the 10 per cent deposit for the purchase of the Oakhurst Property but that they did not have enough money for the deposit. Mr Gaunder suggested that they come to the branch and he would organise the 10 per cent deposit. Mr Gaunder told Mr Ines that, pending approval of their loan application, he could arrange an overdraft. Mr Gaunder told Mr Ines that he was going to do that through his loan manager. He told Mr Ines that it would be an overdraft against his Streamline account with the Bank and mentioned that interest fees and charges would normally be applicable. Mr Gaunder also said that, once the loan was approved, there could be draw down against the loan to pay off the overdraft. Mr Ines did not necessarily accept that he was told those things. However for the reasons I have indicated, I prefer Mr Gaunder's evidence on that matter. 11 Mr Gaunder subsequently obtained approval from his loan manager; as was the Bank's standard practice, and arrangements were made for Mr and Mrs Ines to attend at the Summer Hill branch of the Bank on 3 January 2003. They attended the Bank on that day. It was standard practice for the Bank to ask a customer to sign a withdrawal slip before an amount could be debited to an account in the customer's name. Mr Gaunder filled out a blank withdrawal slip in which he inserted the account number of a Streamline account in the name of Mrs Ines. As at 1 January 2003, that account had a small credit balance, although most of the balance was withdrawn on the following day. The withdrawal slip was for a sum of $20,900 and is dated 3 January 2003. Mrs Ines signed the withdrawal slip on 3 January 2003. She claimed that she did not notice that it was a withdrawal slip. However, the withdrawal slip states quite clearly on its face that that is what it is. Mr Gaunder did not recall the discussion that occurred on 3 January 2003, but said that it was his practice in such a situation to say that what was involved was a temporary overdraft to be repaid from the loan account if the loan was made. I accept that something along those lines was said to Mr and Mrs Ines. 12 On 3 January 2003, Mr Gaunder handed to Mr and Mrs Ines a bank cheque in the sum of $20,900 bearing the date 3 January 2003 and made payable to Wincrest Homes. Mr Gaunder did not sign the cheque, which was signed by other authorised Bank signatories in the Summer Hill branch. Mr Ines says that during the meeting of 3 January 2003, he asked Mr Gaunder when they were going to receive unconditional approval for the proposed loan. It is unclear when, in the course of the meeting, that question was asked and there was no evidence of any response to the question. 13 The fact that Mr Ines asked the question indicates that, at that stage, Mr Ines accepted and understood that unconditional approval for the proposed loan had not been given, notwithstanding that, in the letter of 5 December 2002, the Bank had informed him and Mrs Ines that, on the information they had given, their application met with the Bank's requirements for approval of an amount of $500,000. It is significant that Mr Ines had informed Mr Gaunder that the value of the Ashfield property was approximately $650,000. That, as it subsequently appeared, was a significant overestimate of its value at the time. 14 Mr and Mrs Ines took the bank cheque to their solicitors, B. David and Associates and gave the bank cheque to Mr Bernie David. On 6 January 2003, Mr David wrote to the solicitors for the seller of the Oakhurst Property enclosing an executed counterpart contract for sale in respect of the Oakhurst Property. He did so, according to his letter, "to initiate exchange." Mr David enclosed with the letter the bank cheque in the sum of $20,900 representing 10 per cent of the deposit payable under the contract. On the same day, Mr David wrote to the vendor's solicitors asking for amendments to the contract. The amendments were as follows: 1. Completion date to be 42 days. 2. Interest rate in special condition 7 to be reduced to 8 per cent. 3. Council rates to be adjusted at $680 per year and water rates at $125 per quarter. 15 On 13 January 2003, the vendor's solicitors responded saying that the first matter was agreed but that the second matter wasn't. The vendor's solicitors also said that the vendor was not prepared to reduce the rates in the reference schedule because in the vendor's experience those figures were realistic. The letter requested a prompt exchange of contracts. 16 On 24 January 2003, the vendor's solicitors, who also apparently acted for Wincrest, wrote to Mr David confirming that Wincrest required exchange of a building agreement by 3 pm on 31 January 2003. The letter said that, if exchange did not occur, the Oakhurst Property would be placed back on the market without further reference to Mr and Mrs Ines. On 28 January 2003, the vendor's solicitors wrote to Mr David enclosing the counterpart contract duly sealed and executed to complete exchange. It is significant that there was a considerable delay between the time when the Bank gave Mr and Mrs Ines the bank cheque for $20,900 and the time when they were actually committed to buy the Oakhurst Property. 17 In the meantime, on 8 January 2003, the Bank wrote to Mr and Mrs Ines concerning the proposed loan. The letter relevantly said: We refer to previous discussions and are pleased to provide copies of your mortgage documentation. The security required for the loan is listed at Item K of the loan contract Schedule. A copy of the loan contract has been provided to you separately in your capacity as either a borrower or guarantor. … We enclose copies of the following documents. A list of documents was set out and the letter then continued: Before signing the original documents, each signatory should take time to read them carefully. Under terms of the enclosed mortgage, you are obliged to obtain our consent if you propose to lease the mortgaged property. We advise that consent will not be required unless… and there followed certain circumstances in which consent would not be required. 18 Also sent to Mr and Mrs Ines was a document entitled "Consumer Credit Contract Schedule" (the Schedule), which contained particulars of the "Investment Home Loan" that the Bank offered to Mr and Mrs Ines. The Schedule relevantly said: The Contract is made up of this Schedule and the Usual Terms and Conditions for Consumer Lending (in the Contract we call them the UTC). By signing the Schedule you agree to be bound by the Contract. You must read both the Schedule and the UTC before you sign the Schedule. The Schedule contained a financial table which relevantly specified that the amount of credit was $500,000. It specified an annual percentage rate of 5.25% for 12 months and after 12 months the rate was to be the "investment home loan standard variable rate" which, at that stage, was 6.57%. In each case, a default rate of 2% higher than the other rate was specified. The Schedule also set out various expenses, including the total amount of interest charges payable under the contract assuming the contract ran for the full period of 25 years. The total interest was shown as $521,279. The Schedule also specified credit fees and charges payable under the contract, to the extent that they were ascertainable, of $5008. 19 On the last page of the Schedule, which contained provision for signature, a panel also appeared as follows: IMPORTANT BEFORE YOU SIGN THINGS YOU MUST KNOW * READ THE CONTRACT DOCUMENTS so that you know exactly what contract you are entering into and what you will have to do under the Contract. * Once you sign this Contract document, you will be bound by the Contact. However, you may end the Contact before you obtain credit or a card or other means is used to obtain goods or services for which credit is to be provided under the Contract, by telling the Bank (the Bank is your credit provider) in writing, but you will still be liable for any fees or charges already incurred. * Fill in or cross out any blank spaces. * You do not have to take out consumer credit insurance unless you want to. If the Contract or mortgage documents says so, you must take out insurance over any mortgaged property. * Get a copy of the Contract documents. * If you are taking out insurance, the Bank cannot insist on any particular insurance company. * Do not sign this Contract document if there is anything you do not understand. * If this Contract document says so, the Bank can vary the annual percentage rate (the interest rate), the repayments and the fees and charges and can add new fees and charges without your consent. * If the Contract says so, the Bank can charge a fee if you pay out your contract early. 20 The terms and conditions attached are important. The terms and conditions include a table of contents. Item 2 refers to conditions to be met before the Bank will provide the loan. Condition 2.1 relevantly provided that the Bank would provide the loan only if the Bank was "satisfied with the valuation and title to the Security Property". 21 Mr and Mrs Ines signed the Schedule underneath the panel to which I have referred and returned the document to the Bank. It is common ground that, by doing so, they brought into existence a contract between themselves and the Bank. However, it is now common ground that that contract was subject to the condition to which I have referred, namely, that the loan would be provided only if the Bank was satisfied with the valuation and title to the Oakhurst Property. That is where things went wrong. 22 On 4 January 2003, Mr Gaunder completed a valuation instruction addressed to Macquarie Bell Pty Limited (Macquarie Bell). The instruction was for Macquarie Bell to conduct a valuation of the Ashfield Property. The instruction included as the owners value estimate the sum of $650,000. The valuation instruction was received by Mr John Kovacic, a registered valuer employed by Macquarie Bell. On 6 January, Mr Kovacic telephoned Mr Ines to arrange a time to attend the Ashfield Property to carry out the valuation. Mr Ines told Mr Kovacic that he was going to Queensland with his children and would not return until 13 January. 23 On 13, 15, 16 and 20 January, Mr Kovacic left messages on Mr Ines's phone indicating that he wished to come to value the Ashfield Property. Finally, on 28 January 2003, Mr Kovacic attended the Ashfield Property to carry out his valuation. Mr Ines was present and showed Mr Kovacic around. On 29 January, Mr Kovacic prepared a valuation report, which he forwarded to Mr Gaunder. The valuation showed market value of $520,000. Mr Gaunder telephoned Mr Ines and informed him of the valuation that had been received. Some days later, Mr Ines telephoned Mr Gaunder in an endeavour to persuade him that the valuation was wrong and that the true value of the Ashfield Property was significantly greater than the $520,000 that had been put on it by Mr Kovacic. 24 In the course of the discussions, Mr Gaunder indicated to Mr Ines that, in the light of the valuation, there would have to be a revision of the amount of the proposed loan. Following the discussions, Mr Gaunder asked Macquarie Bell to carry out a check valuation. As a consequence, on 7 March 2003, Macquarie Bell sent to the Bank a revised valuation indicating that the market value of the Ashfield Property was $535,000. Following receipt of that report, Mr Gaunder wrote to Mr and Mrs Ines, on 9 March 2003, relevantly saying: Further to our approval for an investment home loan for the sum of Five Hundred Thousand Dollars, we wish to advise that the offer has been withdrawn due to short fall in the security value offered by you. Valuation of your Ashfield property … has been valued by the bank at $540,000.00, your estimate of $650,000.00 has not materialised thus this withdrawal. The bank has reviewed the offer and the new offer is as follows: · Loan of $394,000.00 in addition to current loan of $402,000.00 · Land to be purchased for no less than $209,000.00. · Build a house to the value of $240,000.00, costing the same. To proceed I need from you a builder's contract for the sum of $240,000.00 and council approved plans for the same, I will need to obtain a valuation of the plans / cost to complete from the bank valuers before any funds will be released to build. Based on this approval you will need to contribute some $55,000.00 to complete this project. The bank will need to see(bank statement) or would require an undertaking from you that you would have the $55,000.00 to complete the building. 25 A copy of that letter was sent to Mr David. The Bank also sent to Mr and Mrs Ines a further Consumer Credit Contract Schedule, bearing the date 19 March 2003, for a loan of $394,000. The relevant particulars of the loan were otherwise the same as the earlier offer that had been made. In due course that contract schedule was accepted by Mr and Mrs Ines and returned to the Bank, thereby creating a second agreement. Pursuant to that agreement, the Bank in fact advanced to Mr and Mrs Ines moneys to enable them to complete the purchase of the Oakhurst Property and to commence the building contract with Wincrest. 26 The advance was debited with the amount of $20,900 for the deposit, which amount was applied in satisfaction of the overdraft on the Streamline account. Various advances were made pursuant to the loan agreement until it was fully drawn on 18 November 2003. At that stage, it was still necessary for a further sum to be paid as the final instalment to Wincrest for the construction of the house. Mr and Mrs Ines in fact borrowed the sum of $58,200 from Mr Bernabe Ferrer on 15 December 2003. That was dispersed, for the most part, in paying the final instalment on the construction of the house. THE CLAIMS 27 In their amended statement of claim, Mr and Mrs Ines assert that, by providing the bank cheque to them on 3 January 2003, the Bank represented that their application for an investment home loan of $500,000 had been or would be approved. They also say that the letter of 8 January 2003 constituted a representation by the Bank to Mr and Mrs Ines that, by completing and returning the documents attached with that letter, the sum of $500,000 would be provided as an investment home loan. Finally Mr and Mrs Ines assert that between the date when they accepted the offer of 8 January 2003 and 9 March 2003, the Bank omitted to inform them that the valuation received by the Bank was too low to support a loan of $500,000, that the Bank would not be bound by the agreement created by acceptance of the offer of 8 January 2003 and that the offer was conditional and had been withdrawn. 28 Mr and Mrs Ines say that the two alleged representations and the omission to inform them of those three matters constituted conduct that was misleading or deceptive or likely to mislead or deceive. They say that by that conduct they suffered loss or damage. The damages that they claim are in excess of $90,000. I shall return to that question shortly. 29 In addition, Mr and Mrs Ines say that the conduct of the Bank in relation to the offer made by the letter of 9 March 2003 was unconscionable within the meaning of the Trade Practices Act and the Australian Securities and Investments Commission Act by reason that the Bank knew, or ought to have known, that Mr and Mrs Ines: (a) would rely on the representations and the agreement made by the acceptance of the offer of 8 January 2003; (b) would proceed to exchange contracts in the absence of any advice from the Bank that the investment home loan had not been approved; (c) exchanged contracts on 28 January 2003 and were required to settle within 42 days; (d) received notice to complete, requiring them to complete the contract on or before 3 pm on 26 March 2003; (e) required monies from the Bank in order to comply with the notice to complete; (f) had insufficient time to arrange finance from another lender; and (g) had no practical choice other than to accept the lesser sum offered by the Bank. LIABILITY OF THE BANK 30 Counsel for Mr and Mrs Ines rather conceded, as I understood him, that if Mr and Mrs Ines are unable to establish that the alleged representations constituted misleading or deceptive conduct, they would be unable to establish unconscionable conduct. In any event it is quite clear that Mr and Mrs Ines did not need $500,000 in order to complete the purchase of the Oakhurst Property. They only needed something below $200,000 to complete and the balance was to be used over something like six months in order to complete the construction of the house. There is no basis, at all, for any conclusion that the Bank's conduct, even if it were misleading, was unconscionable. 31 Mr Ines gave evidence concerning the alleged causal connection between the conduct complained of and the damage alleged to have been suffered. The evidence given by Mr Ines in that respect was almost incomprehensible, having regard to the inconsistencies in the evidence. At one stage in cross‑examination, Mr Ines said that he did not tell the Court that on 3 January 2003 he believed he had an unconditional loan approval for $500,000. Perhaps asking a question that he did not need to, counsel for the Bank then said to Mr Ines: You are telling [the Court] that you did not believe on 3 January 2003 that you had an unconditional loan approval from the Bank for $500,000? You did not believe that. That is true, isn't it? Mr Ines's answer was: I don't know, I couldn't be sure. Counsel for the Bank pursued the matter, asking Mr Ines: Did you, or did you not, believe on 3 January 2003 that he had an unconditional loan approval from the Bank for $500,000? The answer was that he believed that he had a $500,000 unconditional approval. 32 Mr Ines was then asked whether, after reading the letter of 5 December 2002, he believed that what the Bank was telling him was that he had an unconditional loan approval for $500,000. The response was that be believed that that was the loan approval that the Bank gave him. Mr Ines was then asked whether, after reading the letter for 5 December 2002, he believed that the Bank had given him an unconditional loan approval for $500,000. Mr Ines responded that he believed that that was the unconditional approval letter. It is hard to know which part of that evidence, if any, to accept as being genuine evidence as to Mr Ines's sate of mind. 33 The final position that Mr Ines took, namely that he believed the letter of 5 December 2002 was an unconditional approval letter, seems to be quite inconsistent with his question to Mr Gaunder on 3 January 2003, as to when they would get unconditional approval. In any event, there is no complaint in the pleading about the letter of 5 December 2002. The complaint is that, by giving Mr and Mrs Ines the cheque for $20,900, the Bank made a representation that it was going to give a loan of $500,000. Having regard to the conversations that I have found took place between Mr and Mrs Ines, on the one hand, and Mr Gaunder, on the other, and the unequivocal evidence of the signature of the withdrawal slip, I consider there is no basis for concluding that the Bank's conduct constituted a representation that it would advance $500,000, irrespective of the valuation to be placed on the Ashfield Property. 34 Mr Ines must have understood that anything said by Mr Gaunder to him, and any action by the Bank, was based on his statement to the Bank, that the Ashfield Property was valued at $650,000. In any event, as I have said, Mr and Mrs Ines did not commit themselves to any binding obligation until the end of January 2003. While it appears that they would have been prepared to exchange contracts on 6 January 2003, they did not, in fact, exchange contracts until 28 January 2003. 35 In the meantime, Mr and Mrs Ines received the letter of 8 January 2003, which made it clear that the position of the Bank was still conditional. While Mr and Mrs Ines first alleged that they were misled by that letter, each of them acknowledged that he or she did not read the letter of 8 January 2003 and accepted that, had he or she done so, it would have been apparent that the offer was being made conditional upon the Bank's being satisfied as to the valuation of the Ashfield Property. Nevertheless, without referring back to the Bank, they apparently allowed their solicitors to proceed with the exchange of contracts on 28 January 2003, notwithstanding that they had received no indication from the Bank that the condition had been satisfied. 36 I do not consider that any of the conduct, on the part of the Bank, complained about by Mr and Mrs Ines was misleading or deceptive. I have no doubt that they were confident, on 3 January 2003, that they would receive a loan of $500,000. That was because they were confident that the value of the Ashfield Property of $650,000 that they had indicated to Mr Gaunder would be established. That was the mistake that they made. It is unfortunate, from their point of view, but that seems to be the cause of the difficulties, if any, in which they found themselves. That is, they gave misleading information to the Bank. Any difficulties that they ended up suffering can be laid at no door other than their own. I would, therefore, dismiss the application. However, I will say something about the question of damages. DAMAGES 37 As I have said, Mr and Mrs Ines claim that by reason of the Bank's conduct, they were induced to exchange contracts for the purpose of the Oakhurst Property, in circumstances where they believed they had approval for a loan of $500,000. However, in order to complete the construction of the house on the Oakhurst Property, which was not finished until November 2003, they needed to borrow an additional $58,200, which they borrowed from Mr Ferrar on 15 December 2003. 38 However, on 17 September 2004, Mr and Mrs Ines borrowed $488,750 from GE Mortgage Solutions Limited (GE) at a rate more or less equivalent to that payable to the Bank. Of that sum, $392,477 was applied in repaying earlier loans made by the Bank to them on the security of the Ashfield Property. That left a balance of $96,273, which could have been applied in repayment of the Ferrar loan. However, Mr and Mrs Ines chose to apply the balance elsewhere. This is another aspect of Mr Ines' evidence that I have found quite unconvincing. It did not indicate a basis on which his evidence should be accepted. 39 In an affidavit that was read in part without objection, Mr Ines said that, on 25 November 2003, he and Mrs Ines received a tax invoice from Wincrest for payment of the final payment of $54,392.27. Mr Ines accepted in cross-examination that they borrowed the amount from Mr Ferrar in order to pay the final invoice from Wincrest. In cross examination, he agreed that, in this proceeding, he and Mrs Ines are claiming the interest that they were paying to Mr Ferrar. It was then suggested to him that he had in excess of $90,000 left over of his refinancing of the loans on the Ashfield Property through GE Mortgage that he could have used to repay Mr Ferrar. Mr Ines' response was that that money was used to make repayments on some other debts. Counsel for the Bank spent some time trying to get Mr Ines to agree to a perfectly straightforward proposition that he had a choice either to apply the $90,000 in repayment of Mr Ferrar's loan or not and that he chose not to. Mr Ines would not give a straight answer to what appeared to me to be a fairly straightforward question. 40 Further, on 24 January 2005, Mr and Mrs Ines borrowed $456,000 from Wizard Home Loans Limited. $399,757 of that advance was applied in repayment of the outstanding balance of the loan that is the subject of this proceeding. $42,436 was applied in reduction of the loan from Mr Ferrar. A further $35,000 was paid to Mr Ferrar on 25 July 2006. That appears to have discharged the indebtedness to him. 41 Thus, it appears that for the period from the date of the Ferrar loan until final repayment on 25 July 2006 interest totalling some $19,237 was paid to Mr Ferrar. In order to put Mr and Mrs Ines in the position they would have been in had the Bank advanced $452,000 rather than $394,000, the most they would be entitled to would be the difference between the interest they had paid to Mr Ferrar and the amount they would have paid under the Bank's loan up to the time of the GE advance. 42 The interest rate payable to Mr Ferrar was 36% per annum. The rate payable to the Bank was 5.25% for 12 months and thereafter the Bank's variable rate of 6.7%. Assuming, for the moment, that Mr and Mrs Ines did not go into default, that is the rate that they would have paid to the Bank. There is no reason to assume that the rate payable to GE was significantly different from that payable to the Bank. It is difficult to see, therefore, how the damages to which Mr and Mrs Ines would be entitled, assuming they established that they suffered loss by the Bank's conduct, would be more than a mere part of the interest paid to Mr Ferrar. 43 Mr and Mrs Ines adduced significant volumes of material designed to establish that their loss was very much greater. However, the evidence shows that they chose to apply funds that were available to them in discharge of other indebtedness that they had on credit cards and the like. The evidence could not support a conclusion that they suffered any loss by reason of the conduct complained about in excess of approximately $9000. That is to say, they could have repaid Mr Ferrar by September 2004, some nine months after they borrowed the money from him. The total interest payable for something in excess of two years was interest totalling about $19,000, assuming the rate that would have been payable to the Bank was only a sixth of the rate payable to Mr Ferrar. 44 The difference is considerably under $10,000. It is not necessary for me to make any precise calculation but the most that could possibly be recovered would be less than $10,000. However, as I have said, I am not persuaded that there was any conduct on the part of the Bank that was misleading or deceptive. It follows that the proceeding must be dismissed. COSTS 45 The Bank asks for its costs of the proceeding. It asks for a special order in respect of the costs incurred after an offer was made on 23 July 2008. On that day, the Bank's solicitors wrote to the solicitors for Mr and Mrs Ines offering to pay $35,000 in full and final settlement of the matter. The letter set out a calculation of the interest paid to Mr Ferrar, suggesting that if the applicants succeeded that would be the measure of the damage. A further figure described as an incentive was added. Thus, the letter said that the estimate of the damages was $29,948. An additional incentive amount of $5052 was added, making a total of $35,000. 46 In the circumstances, that offer seems to me, having regard to the conclusions I have reached, to be an eminently reasonable, if not an extraordinarily generous, one. On 12 August 2008, that offer was effectively repeated by a formal offer of compromise in accordance with Order 23 of the Federal Court Rules. Neither offer was accepted by Mr and Mrs Ines. In the circumstances, it seems to me to be appropriate therefore that Mr and Mrs Ines should bear the Bank's costs on an indemnity basis from a point shortly after the offer of 23 July 20098 was made. Two weeks seems an appropriate period of time within which Mr and Mrs Ines could have received advice from their solicitors and accepted the offer. 47 On that basis I would order Mr and Mrs Ines to pay the Bank's costs on the ordinary basis up to 6 August 2008, and order them to pay the Bank's costs on an indemnity basis from that time onwards. I certify that the preceding forty-seven (47) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 26 November 2008 Counsel for the Applicants: Mr J Levingston Solicitor for the Applicants: Alexander Lee & Associates Counsel for the Respondent: Mr DA McLure and Ms JA English Solicitor for the Respondent: Commonwealth Bank Legal Services Date of Hearing: 20, 21, 22 & 23 October 2008 Date of Judgment: 23 October 2008