PAGE v COMMONWEALTH BANK OF AUSTRALIA SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL SHELLER JA 4 December 1995 [1995] NSWCA 352 Sheller JA. Leslie Edward Page and Marjorie Patricia Page have, apparently, filed an application in the High Court for special leave to appeal from a decision of this Court given on 6 October 1995 dismissing their appeal from a decision of Giles J in the Commercial Division of the Court given on 15 November 1994. This is an application by Mr and Mrs Page for a stay of Giles J's judgment pending the determination of the application for special leave. The opponent, Commonwealth Bank of Australia, which was the plaintiff in the proceedings in the Commercial Division and which opposes the application for a stay, lent money to Rosehall Pty Limited (Rosehall) for the purchase of the Murray River Hotel in Wodonga. Mr and Mrs Page gave the bank a mortgage of their home at Ryde to secure the indebtedness of Rosehall and by that mortgage also covenanted to pay on demand money due to the bank fromRosehall. In the proceedings the bank claimed possession of the Ryde property and judgments for nearly $400,000. The defence was that the mortgage should be set aside or was unenforceable. Giles J's formal orders were judgment for the bank against Mr and Mrs Page for $394,748.63 and for possession of the Ryde property. Leave to issue a writ of possession to enforce the judgment was given with the writ to lie in the office for four months from the date of judgment. Mr and Mrs Page were ordered to pay the bank's costs of the claims against them. Mr and Mrs Page's application for a stay was supported by an affidavit made by their solicitor, Peter Alan Jackson, to which were annexed copies of affidavits sworn by Mr and Mrs Page on 15 February 1995 in support of an application for a stay of Giles J's judgment pending the appeal to this Court. Mahoney JA granted a stay on condition that Mr and Mrs Page pay to the bank an amount of $150 per week. This amount was paid regularly and Mr and Mrs Page offer to continue paying that amount should a further stay now be granted. Mr Jackson is also instructed to give an undertaking that the application for special leave to appeal will be prosecuted with all reasonable expedition. In his affidavit of 15 February 1995 Mr Page stated that he would be sixty-nine on 18 February 1995. Since 1954 he has lived in the Ryde property with his wife as their home. He is in receipt of $454 net of tax per week from a superannuation entitlement and a part pension of $31 per fortnight. He retired in 1983. The home is next to a bowling club where he and his wife play bowls two or three days a week. The social contact of bowls is important to him because he has built up a network of friends and acquaintances and because playing bowls provides him with an activity he finds relaxing. In February 1995 Mrs Page was seventy-one and frequently has to attend her local doctor at the West Ryde Clinic for problems associated with stress and arthritis. She isconcerned that if her husband and she leave the home she will not be able to rent a house in the vicinity and will not be able to continue under the care of her doctor who has been treating her for 2 UNREPORTED JUDGMENTS about two years. She also uses the bowling club as a means to mix with friends and acquaintances. She retired in 1983 and receives a part pension of $31 per fortnight. The principles to be applied in an application such as the present one are not in doubt. In Jennings Constructions Limited v Burgundy Royale Investments Pty Limited (No 1) (1986) 161 CLR 681 on such an application before a single justice of the High Court, Brennan J said at 685: In each case when the Court is satisfied a stay is required to preserve the subject matter of the litigation, it is relevant to consider: first, whether there is a substantial prospect that special leave to appeal will be granted; secondly, whether the applicant has failed to take whatever steps are necessary to seek a stay from the Court in which the matter is pending; thirdly, whether the grant of a stay will cause loss to the respondent; and fourthly, where the balance of convenience lies. This Court's judgment was given ex tempore by the Chief Justice, with whom Priestley and Meagher JJA agreed. His Honour summarised the appellants" argument in the Court of Appeal as being that it was unconscionable for the bank to seek to enforce its rights under its contractual arrangements with Mr and Mrs Page. His Honour observed that there was no finding at first instance, nor was there any evidence to support a finding, of any dishonest or discreditable conduct on the part of the bank, or on the part of any person for whose conduct the bank should be held responsible. His Honour said: After making a clear analysis of the facts of the case, and considering those facts in the light of the relevant legal principles, Giles J concluded there was no reason in equity or good conscience why the bank should not enforce its contractual rights against the appellants. With that conclusion I agree.'""It appears that at the time of the loan of the six issued shares in the capital of Rosehill one was held by David John McGlynn, a nephew of the appellants, and one by his wife; one was held by Mr and Mrs Page's son, Peter Leslie Page and one by his wife; and one by Mr Page and one by Mrs Page. They were entitled to participate equally in the profits and assets of the company in a distribution on a winding-up. The house over which they gave their mortgage was their only substantial asset. In addition to money raised by loan from the bank, the three groups of shareholders in Rosehall each agreed to put up $40,000 by way of loan to Rosehall. On an earlier occasion Mr and Mrs Page had given a mortgage over their house to secure a borrowing by Peter and David (as these two persons were, for convenience, referred to in the judgment) in connection with another hotel at Blayney which had been successful but which had been sold. It was after the sale of the Blayney hotel that the decision was made to purchase the hotel at Wodonga. Again Peter and David asked Mr and Mrs Page to give a mortgage over their home to secure the finance necessary. Mr and Mrs Page, after discussion and consideration of the venture, agreed in principle but stipulated that on this occasion they would require a one-third equity interest in the venture, a stipulation which Peter and David accepted. Rosehall was acquired as a shelf company. Mr and Mrs Page did not have any separate legal advice. In arranging the execution of the mortgage documents, the bank wrote to Mr and Mrs Page to the effect that they should satisfy themselves before signing the document that they understood the full nature and effect of their liabilities to the bank and obtained appropriate advice, legal or otherwise, if they were at all uncertain of their position. Mr Page received that letter. Mrs Page said that she did not meaning, presumably, that her husband did not show it to her. Giles J said: It follows that there was no evidence of what occurred when Mr and Mrs Page signed the mortgage, but it should be said at once that there was no evidence from them that they did not appreciate that what theysigned was a mortgage of the Ryde property or did not understand what a mortgage was, nor was it submitted that I should so find. URJ PAGE v COMMONWEALTH BANK OF AUSTRALIA (Sheller JA) 3 Discussion took place between Mr and Mrs Page and Peter and David about the prospects of the hotel business. David gave Mr Page a lengthy document, covering seven pages, heading 'Explanations'. Both Giles J and the Chief Justice said the document appeared to have been intended as a careful description of the venture for the benefit of Mr and Mrs Page. There was no suggestion that in this outline of the prospects of the venture David acted dishonestly or in any way misrepresented his own personal beliefs as to the future of the venture, and as to what was involved in terms of business risk for Mr and Mrs Page. The Chief Justice said: It is perfectly obvious that all of the four parties principally involved, that is to say, Mr and Mrs Page and Peter and David, genuinely believed that the purchase was financially advantageous, and that the prospects of success of the hotel were good. The most serious allegation that is made against any of the parties involved in this transaction is that David McGlynn innocently, but recklessly, misrepresented to Mr and Mrs Page that there was no significant or substantial risk to them arising out of their participation in the venture. Unfortunately the four parties made an erroneous assessment of the prospects of success of the venture. At the hearing no substantial attempt was made to investigate the reasons for the failure of the hotel business or to relate those reasons, whatever they might have been, to any particular aspect of the information or advice given to Mr and Mrs Page by David prior to the purchase of the business. The most that was done was to point to certain internal bank documents which contained comments made by officers on the bank's view of the prospects of success of the business. David was not called as a witness. Peter gave only relatively brief evidence. Giles J was not prepared to conclude that there was any material misrepresentation made by David, even of an innocent character, of such a kind as would, for example, as between David andMr and Mrs Page, have entitled Mr and Mrs Page to get out of their contractual arrangements in so far as they involved David. The Chief Justice said that no successful challenge had been made to that finding on the appeal. The appellants" argument was for the most part based upon the principles discussed in Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447 with some additional reliance upon Akins v National Australia Bank (1994) 34 NSWLR 155 and Barclays Bank PLC v O'Brien [1993] QB 109. The Chief Justice was of opinion that there was no factual foundation for the application of the principles upon which the appellants sought to rely. The appellants" case was that the purchase of the hotel business and the giving of a mortgage to secure the loan raised for that purpose were essentially risky. Mr and Mrs Page did not appreciate or, at least, did not adequately appreciate the risk. The bank never explained it to them and David painted a picture much rosier than the prospects of the hotel warranted. Mr and Mrs Page, it was said, were suffering from a special disadvantage or special disability. Counsel for the appellants said that the three aspects of this disadvantage or disability were that Mr and Mrs Page lacked assistance and explanation in circumstances where assistance and explanation were necessary, Mr and Mrs Page were in their late sixties and Mr and Mrs Page lacked business expertise. It was acknowledged that the bank had neither knowledge nor notice, actual or constructive, of the third of those aspects of disability. The bank knew of Mr and Mrs Page's age. But the aspect primarily relied upon was the lack of assistance and explanation in circumstances where assistance and explanation were necessary. The Chief Justice said it was convenient to reflect upon what the bank knew about that matter. 4 UNREPORTED JUDGMENTS The bank had no direct dealings with Mr or Mrs Page. We know as an objective fact that Mr Page had some views of his own upon the prospects of success of this hotel business and we know that Mr and MrsPage received a lengthy explanation which contained the views of David McGlynn as to the prospects of success of the business. 5 There was nothing in the evidence to indicate what the bank knew or should have known about the nature and extent of the advice and assistance that Mr and Mrs Page were receiving in relation to this transaction. For all the bank knew Mr and Mrs Page had received extensive advice and given careful and detailed consideration to the prospects of success of the hotel 10 to be acquired. In the Chief Justice's view there was no basis for concluding that the bank was affected by constructive notice that Mr and Mrs Page lacked assistance and explanation in circumstances where assistance and explanation were necessary. Reference was made to evidence by one of the bank officers involved and to internal bank documents to show that the bank appreciated that 15 this was a risky transaction. The Chief Justice said: Of course it was a risky transaction. Commercial transactions usually are risky. Profit is the corollary of risk, and the reason why people who engage in business ventures are rewarded by way of profit is for the taking of a risk. However, counsel for the appellant has pointed out correctly that so far as Mr and Mrs Page were concerned, this was a 20 transaction to which they were committing virtually the entirety of their assets and from their point of view the risk of the transaction was greater than it would have been, for example, for other parties to it. Even so, Giles J was not prepared to conclude, and I for my part would not be either, that there was any special disadvantage or disability in the present case, or that the bank was on constructive notice of any such disadvantage or 25 disability. No successful challenge was made of the trial judge's findings that there was no evidence that Mr and Mrs Page did not appreciate the nature of the instrument of mortgage that they were signing and that Mr Page received the document headed 'Explanation' intended to be a careful description of the venture for the 30 benefit of Mr and Mrs Page. Giles J said: In 1990 Peter was aged about thirty-six and David was aged about thirty-three. The bank knew no more than that Mr and Mrs Page were the parents of Peter. In fact, they were then aged sixty-four and sixty-seven. Their counsel described Peter as middle-aged, something withwhich he may not have agreed, but whether the bank knew 35 _ his age or simply acted on his appearance, I see no reason to conclude that it should have thought Mr and Mrs Page were so ill-educated, aged or otherwise susceptible that there was in the nature of the relationship a substantial risk that in procuring their mortgage Peter would commit a legal or equitable wrong entitling them to set aside the transaction. 40 On the contrary, the bank knew that Mr and Mrs Page had provided a mortgage of the Ryde property for the purchase of the lease of the Blayney hotel and that that transaction had been successful. It sent the S 33 letter plainly directing Mr and Mrs Page's attention to an understanding of what they were doing and the taking of advice, and received the mortgage witnessed by someone known to Mr 45 Aldis. Subject to the question of misrepresentation, in fact there had not been any relevantly wrongful conduct towards Mr and Mrs Page on the part of Peter or David in the past or on this transaction. Mr Page had taken part in the search for a new hotel and although they were 50 not highly educated, Mr and Mrs Page were astute enough to seek, for perfectly understandable reasons, an interest in the hotel. URJ PAGE v COMMONWEALTH BANK OF AUSTRALIA (Sheller JA) 5 As [have said, there was no suggestion that they lack an understanding of the mortgage they gave. Mr Page had a good enough understanding of the financial statements to extract material figures in October 1990." It was said that a number of misrepresentations were made primarily by David to Mr and Mrs Page. Giles J said: It may be accepted, however, that it was conveyed to Mr and Mrs Page by the particular statements indicated, and more generally by matters such as the aspiration to have the Ryde property released after twelve months, that the transaction was such that a mortgage of the Ryde property would not expose them to significant risk. His Honour concluded that that did not involve a relevant misrepresentation. He pointed to the scanty evidence that existed as to the reason for the failure of the hotel and the connection between such failure and any of the matters that had been discussed between Peter, David and Mr and Mrs Page. Giles J concluded: I do not think that the argument put on behalf of Mr and Mrs Page establishes that any of the representations concerning the risk involved in the venture was a misrepresentation; certainly not in the sense of a statement of fact or forecast known by Peter or David to be incorrect and not even as a statement of fact or forecast which on a proper appreciation of the position should have been seen to be incorrect. That the hotel may have been initially unprofitable does not establish misrepresentation, but as Ihave already indicated, it may be that by the end of 1990 a level of trading had been achieved of the same order as that understood prior to the purchase. Still less does the fact that the hotel failed establish misrepresentation. There was no legal or equitable wrong practised by Peter or David by way of misrepresentation entitling Mr and Mrs Page to be relieved from the giving of the mortgage, and accordingly, nothing of which the bank could relevantly have constructive notice for the purpose of (certain) principles ... In dismissing the appeal the Chief Justice said: His Honour rejected the submission that Mr and Mrs Page were in a position of special disadvantage, or that the bank took unfair or unconscientious advantage of any opportunity thereby created. In my view, on the facts as found by Giles J, which have not been successfully challenged on this appeal, there was no basis for the application in favour of the appellants of principles relating to the subject of unconscionability which might entitle the appellants to avoid the enforcement by the bank of the contracts into which the appellants entered. Ishould say immediately that I have quoted at length from the judgment of the Chief Justice because having read it and even with the benefit of the careful and written and oral submissions of Mr Lawler, who appeared for Mr and Mrs Page, I do not think there is a substantial prospect that the High Court will grant special leave to appeal from it. At the forefront of the claimants" argument was evidence that the bank officer responsible for implementing the loan conceded that at the relevant time he knew that giving of the mortgage by Mr and Mrs Page was a very high risktransaction for them. Mr Lawler attached to his written submissions a list of matters said to contribute to substantial risk to the Pages in the giving of their mortgage. Amongst these was the dependence of the profitability of the Murray River Hotel on undeclared cash receipts. However these alleged matters of "misrepresentation' fly in the face of the findings made by the trial judge, after having considered each alleged misrepresentation, rejecting the suggestion. To overcome this point when it was raised, Mr Lawler fell back on an argument that the allegation was an innocent misrepresentation. However this allegation was 6 UNREPORTED JUDGMENTS directly dealt with by the Chief Justice and the trial judge in the matter to which I have adverted. It seems to me that the claimants have an impossible task in attempting to overturn these findings. The claimants turned to attack the findings about special disadvantage and notice by the bank. Again having carefully considered these matters which are set out in the written submissions they do not seem to me to throw any doubt upon the correctness of the judgments that have been given. The claimants submitted that this case was an appropriate one for the grant of special leave to agitate the question whether a bank owes a duty of care to advise or warn a customer; see Beneficial Finance Corporation Limited v Karavas (1991) 23 NSWLR 256 at 276; James v ANZ Banking Group (1986) 64 ALR 347 at 385. The claimants relied upon what the President said in his judgment in Gough v Commonwealth Bank of Australia (unreported) Court of Appeal, 31 May 1994 at 22. His Honour said that the general law was moving towards a recognition of a duty on the part of those with responsibility in relation to others, to ensure that they obtain independent advice. I am not persuaded that this is any reason for the granting of special leave in the present case. The bank sent a letter to Mr and Mrs Page telling them that they should satisfy themselves that they understood the full nature and effect of theirliabilities to the bank and obtain appropriate advice, legal or otherwise if they were at all uncertain of their position. In my opinion on the facts and in the circumstances of this particular case there is no persuasive argument that the bank was required to do more. I do not think this is a case where there are any uncertainties or incongruities in the law to be applied. The only immediate threat, if a stay is not granted, is that the bank will enter into possession. There is no evidence to suggest that the bank will, or could, sell the property before the hearing of a special leave application which will not be until 1996; see generally Rahme v Commonwealth Bank of Australia (1993) 68 ALJR 53 at 55. I was informed from the bar table that the value of the property was approximately $250,000. Interest is accruing at the rate of $1,000 per week to which Mr and Mrs Page are making a contribution of $150. The claimants do not and cannot tender or offer the whole or any significant part of the amount outstanding. I am alive to the evidence that Mr and Mrs Page have given, but taking account of all the matters to which I have referred I do not think that the case is one appropriate for the grant of a stay. The application is refused with costs. Orders accordingly.