BOCHMAN v STATE BANK OF NEW SOUTH WALES SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MAHONEY, HANDLEY and SHELLER JJA 9 December 1994, 15 March 1995 [1995] NSWCA 51 GUARANTEE — CONTRACTS REVIEW ACT — NO QUESTION OF PRINCIPLE The respondent bank held a mortgage over the appellant's home by way of guarantee to secure the overdraft of a customer - the bank sued for possession - the defendant cross claimed raising various causes of action including the Contracts Review Act - the trial judge preferred the evidence of the then bank manager Mr Beh to that of the defendant and rejected the cross claims - the appellant challenged the judge's findings of fact in particular his decision to accept the evidence of Mr Beh in preference to that of the defendant - contemporary documentary evidence supported Mr Beh's evidence and was inconsistent with the appellant's claims - Held: No question of principle - appeal dismissed with costs. Mahoney JA The appellant Mr Bochman owns land at Riverstone. He gave a mortgage to the respondent Bank to secure the guarantee given by him of the debt of a Mr Lam. Mr Lam did not pay the debt. The Bank accordingly has sought possession. Mr Bochman has sought to avoid liability under the guarantee and the mortgage on several grounds. At the trial Brownie J found for the Bank. Mr Bochman has appealed to this Court against his Honour's judgment. It appears from the written submissions prepared for Mr Bochman and from what has been said by Mr Montgomery for him, that there are in the appeal three main issues: whether the mortgage was executed by Mr Bochman in proper form; whether he is entitled to relief under the Contracts Review Act or otherwise against the obligations undertaken by him; and whether the guarantee which the mortgage supported was discharged by what was done by Mr Lam and/or the Bank. The third ground was, it is accepted, not taken below, in the pleadings or the argument. Mr Montgomery, who was not counsel at the trial, sought to raise it before this Court. Having heard what was put in relation to it, the Court was of opinion that the point was not open to be argued on appeal. Had it been taken below, the evidence called at the trial might well have been different. In those circumstances, having heard what was said as to the substance of the ground of appeal, the Court concluded that advantage could not be taken of it before this Court. It was submitted by Mr Montgomery that the guarantee and/or the mortgage were not enforceable because of the circumstances surrounding the transaction in which they were given. The appellant's case was, inter alia, that documents were signed by him in blank or were otherwise not in proper form when entered into by him. I agree with Handley JA that, having regard to the findings of fact made by the trial judge, this Court should not uphold the submissions now made for the appellant in relation to them. The trial judge, having seen the witnesses, was in a position of advantage in determining which of them should be accepted. He accepted the evidence of the Bank manager Mr Beh in relation to crucial aspects of the matter. In the circumstances, I agree with Handley JA that the appellant should not succeed on this ground. 2 UNREPORTED JUDGMENTS In relation to the second ground, counsel relied essentially on the Contracts Review Act. I agree with Handley JA that, having regard to the facts established by the evidence, there is no sufficient basis for intervention by the Court under this Act. I agree that the appeal should be dismissed with costs. Handley JA This is an appeal by a guarantor from a judgment of Brownie J. The respondent bank held a registered mortgage dated 18 October 1989 over the appellant's home at 68 Regent Street, Riverstone by way of guarantee to secure the overdraft of H and P Fashions of Cabramatta, a business owned by a Mr Lam. The bank sued for possession and the defendant cross-claimed alleging that it had engaged in misleading and deceptive conduct contrary to s52 of the Trade Practices Act and the corresponding provision in the Fair Trading Act and claiming relief under those Acts, the Contracts Review Act, the Credit Act and under the general law for undue influence, unconscionable conduct, and breach of fiduciary duty. The only witnesses who gave oral evidence were the defendant and Mr Beh, who at the relevant time was manager of the bank's Canley Heights branch. There was also a substantial amount of documentary evidence. The trial Judge preferred the evidence of Mr Beh to that of the defendant and rejected the cross-claims. On 30 September 1994 he gave judgment for possession in favour of the bank. The defendant appealed and sought a stay of execution which was granted but the appeal was expedited, coming on for hearing on 9 December. Counsel for the appellant challenged the Judge's findings of fact and in particular his decision to accept the evidence of Mr Beh in preference to that of the defendant. Counsel relied on the inconsistencies between Mr Beh's oral evidence and his affidavit sworn earlier in the proceedings. Counsel also relied upon the failure of Mr Beh to record in his manager's diary details of his meetings with the defendant and Mr Lam as required by the bank's internal regulations and other alleged breaches of the bank's internal procedures. Mr Beh said that "the errors" in his affidavit occurred because he had left the bank, did not have access to his file, and was not able to refresh his recollection. The Judge accepted this explanation. The Court is not entitled to disturb this finding. The Judge also found that the contemporary documents supported Mr Beh's evidence and were inconsistent with the defendant's. Counsel for the appellant challenged this finding but it was clearly correct. The defendant did not dispute his signature on the mortgage. This did not refer to the sum secured nor to the duration of the appellant's guarantee. However as a result of the terms incorporated from a filed memorandum it was an "all moneys" mortgage. The bank originally stamped it as a security for $40,000. The relevant duty was paid on 30 October 1989 (117) and the mortgage was lodged for registration on 30 November 1989 (117). These and related expenses were debited to the customer's account on 23 October (150). During 1990 the defendant twice signed a form of acknowledgment and consent by a third party guarantor in relation to an increase in the liability covered by his mortgage. The first, completed in handwriting, contained alterations but appeared to authorise an increase in the customer's debt secured by the mortgage to $110,000. Mr Beh considered that the bank could not safely rely on that form and he had it retyped and signed by the defendant. This form authorised a further advance to H and P Fashions (Mr Lam) of $70,000 taking the URJ BOCHMAN v STATE BANK OF NEW SOUTH WALES (Handley JA) 3 total liability under the security to $110,000. The defendant did not dispute his signature on this form. He did not sign it in Mr Beh's presence although the latter purported to witness his signature. The form is dated in Mr Beh's handwriting 15 May 1990. The bank subsequently upstamped its security, the cost being debited to the customer's account on 18 July 1990. On 2 October the bank wrote a letter to the defendant in the following terms: "We refer to a cheque account 'H and P Fashions' at this Branch for which you have offered security over the above property, we regret to advise that this account has exceeded its authorised limit for quite some time. For your information the account is overdrawn $113.660.00. limit at $110,000.00. We have however written to Mr Lam but we have yet to receive a satisfactory result. Failure to adjust this account will see the bank look to its security to repay this debt which could have detrimental effects to yourself. Your cooperation to assist us to encourage Mr Lam to rectify this situation will in the long term be in your best interest. Should you have any further inquiries please do not hesitate to contact this office." The defendant returned this letter with a cheque for $3,650 and a note in his own handwriting stating: "Dear Sir, T enclose a cheque to settle the overdrawn account of $3,650. Yours faithfully, John Bochman. This and other documentary evidence is inconsistent with the defendant's evidence and his denials about the origin and date of the guarantee and mortgage, the amount initially secured, the agreed duration of his guarantee, and the circumstances and timing of the increase in his liability. Although Mr Beh did not fully comply with the bank's internal procedures, this provides no basis for rejecting his evidence and certainly does not entitle this Court to interfere with the Judge's findings of fact. In these circumstances, as the Judge noted, "the factual underpinning for the central part of the defence simply disappears". Counsel for the appellant did not rely on the Trade Practices Act or Fair Trading Act but he pressed the appellant's claim under the Contracts Review Act and associated claims under the general law. On the Judge's findings of fact there is simply no basis for the appellant's claims of breach of fiduciary duty, undue influence, and unconscionable conduct. Mr Beh did not volunteer information to the defendant about the state of the overdrawn account of H and P Fashions or its history. However the defendant did not ask Mr Beh for this information and it was not alleged that the latter was guilty of any misrepresentation. In Westpac Banking Corporation v Robinson (1993) 30 NSWLR 668, referred to by the trial Judge, this Court followed long standing authority in holding that non-disclosure of the details and history of the account to be guaranteed did not in general relieve a guarantor of his liability. There remains the appellant's claim under the Contracts Review Act. On the Judge's findings of fact, which cannot be disturbed, there is no factual basis for this claim either. The bank was guilty of no misrepresentation or pressure. There was no evidence that Mr Lam had been guilty of any misrepresentation, unconscionable conduct, undue influence or breach of fiduciary duty or, if he had, that the bank was on notice of any such matter. In the circumstances of this case non-disclosure of the details and history of the account to be guaranteed had no 4 UNREPORTED JUDGMENTS legal consequences under the general law and the Act has not indirectly created a wider duty of disclosure. The correspondence of October 1990 demonstrates that the defendant was then well aware of the extent of his obligations to the bank and was not surprised to learn that the overdraft limit of $110,000 had been fully used by Mr Lam. There is therefore no basis for a finding that either the guarantee or the mortgage were unjust. In my opinion the appeal should be dismissed with costs. Sheller JA I have had the benefit of reading the judgments prepared by Mahoneyand Handley JJA. I agree for the reasons given in those judgments with the orders proposed by Handley JA. Appeal dismissed with costs. Counsel for the Appellant: RE MONTGOMERY Instructed by: BRYAN McCARTHY Counsel for the Respondent: RG FORSTER SC Instructed by: PARISH PATIENCE