Karam v ANZ Banking Group Limited & 1 Ors [2001] NSWSC 709

New South Wales Supreme Court

CITATION : Karam v ANZ Banking Group Limited & 1 Ors [2001] NSWSC 709 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 2142/97 HEARING DATE(S) : 20/06/00-22/06/00, 27/06/00-30/06/00, 18/07/00-20/07/00, 02/11/00, 03/11/00, 07/11/00-10/11/00, 14/11/00, 17/11/00, 21/11/00, 01/03/01, 26/04/01, 27/04/01 JUDGMENT DATE : 21 August 2001

Charles Raymond Karam (First Plaintiff; First Cross Defendant) John Raymond Karam (Second Plaintiff; Second Cross Defendant) PARTIES : Nada Marie Karam (Third Plaintiff; Third Cross Defendant) Diane Karam (Fourth Plaintiff; Fourth Cross Defendant) Australia & New Zealand Banking Group Limited (First Defendant; Cross Claimant) William Croker (Second Defendant) JUDGMENT OF : Santow J

COUNSEL : M L D Einfeld, QC/ D B Studdy (Plaintiffs; Cross Defendants) M Walton, SC/ P J Dowdy (First Defendant; Cross Claimant) SOLICITORS : Webster O'Halloran (Plaintiffs; Cross Defendants) Coudert Brothers (First Defendant; Cross Claimant) CATCHWORDS : EQUITY — Banking loans to an incorporated family business earlier carried on in partnership — Borrowers with limited English and technical understanding of financial and legal security matters — Special disability — Unconscionability — Application of Contracts Review Act — Distinction between recommends independent legal advice and inviting borrowers either to take away and read documents or get legal advice — Difficulty of understanding documents — Availability of house mortgages and personal guarantees to secure corporate debt — Construction of house mortgages with form S148 including all monies clause as a guarantee — Inadequate or misleading explanation given by Bank — Relevance to unconscionability — Estoppel — Illegitimate pressure amounting to economic duress in relation to subsequent acknowledgments and cross-deed of covenant — Independent legal advice does not avert that result where adviser not furnished with relevant information including security documents — Continued effect of duress negates effect of subsequent legal advice — Release, effect of and principles of construction — Relevance of fact that security sold by borrowers in these circumstances rather than the bank — Scope of equitable compensation where security sold taking into account gravity of conduct — Limitation issues — Scope for liability of bank in relation to advice or there endorsement of property purchase financed by bank — Negligent misrepresentation, breach of duty of care or breach of fiduciary duty alleged — No such liability in present circumstances — Relevance of reliance and its reasonableness — Issues of causation — Is there any fiduciary duty in particular circumstances — Limitation aspects. - WORDS AND PHRASES — meaning of "advice" Contracts Review Act 1980 (NSW) s7 LEGISLATION CITED : Limitation Act 1969 (NSW) s14 s23 Trade Practices Act 1974 (Cth) s82(2) Advent Investors Pty Ltd v Goldhirsch (2001) 37 ACSR 529 Amaca Pty Limited formerly known as James Hardie & Coy Pty Limited v CSR Limited [2001] NSWSC 324 Ankar Pty Limited v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549 Aquaculture Corporation v New Zealand Green Mussel Co Ltd (1990) 3 NZLR 299 Barclays Bank plc v O'Brien [1994] 1 AC 180 Barton v Armstrong [1976] AC 104 BCCL v Ali [2001] 1 All ER961 Beneficial Finance Corporation Limited v Karavas (1991) 23 NSWLR 256 Bennett v Minister for Community Welfare (1992) 176 CLR 408 Blomley v Ryan (1956), 99 CLR 362 Breen v Williams (1996) 186 CLR 71 Bridgewater v Leahy (1998) 194 CLR 457 Caffrey v Darby (1801) 6 Ves Jun 488; 31 ER 1150 Catt v Merrick Australia Limited (1986) 9 NSWLR 639 Chapman v E-Sports Club Worldwide Ltd (2000) 35 ACSR 462 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 Commonwealth Bank of Australia v Mehta (1991) 23 NSWLR 84 Commonwealth Bank of Australia v Smith (1991) 42 FCR 390 Commonwealth v Verwayen (1990) 170 CLR 394 Commonwealth Bank of Australia v Zell (Sperling J, 19 February 1997, unreported) Contracts Review Act, S H Lock (Australia) Limited v Kennedy (1988) 12 NSWLR 482 Cornish v Midland Bank Plc [1985] 3 All ER 513 Crescendo Management Pty Limited v Westpac Banking Corporation (1988) 19 NSWLR 40 Environment Agency v Empress Car Co (Abertillery) Ltd (1998) 2 WLR 350 Fountain v Bank of America National Trust & Savings Association (1992) 5 BPR 11,817 Fry v Lane, Re Fry; Whittet v Bush (1888) 40 Ch D 312 Gipps v Gipps [1978] 1 NSWLR 454 Gould v Vaggelas (1985) 157 CLR 215 Grant v John Grant and Sons (1954) 91 CLR 112 Henjo Investments Pty Limited v Collins Marrickville Pty Limited (1988) ATPR 40-850 Holmes v Jones [1907] 4 CLR 1692 CASES CITED : Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 Houghton v Immer (No. 155) Pty Limited (1997) 44 NSWLR 46 Houlahan v Australian and New Zealand Banking Group Limited (1992) 110 FLR 259 ICS v West Bromwich BS [1998] 1 All ER 98 Iletrait Pty Limited v McInnes (NSWCA, 17 April 1997, unreported) Karam v Australia and New Zealand Banking Group limited (2000) 34 ACSR 545 Kenny & Good Pty Limited v MGICA (1992) Limited (1999) 199 CLR 413 Louth v Diprose (1992) 175 CLR 621 Lowe v Lombank Ltd [1960] 1 WLR 196 McMahon v Pommeroy Pty Ltd (1991) ATPR 41-125 Mahlo v Westpac Banking Corporation (NSWSC Santow J, 6 February 1998, unreported) Micarone and others v Perpetual Trustees Australia Limited (1999) SASR 1 Mutual Life & Citizens Assurance Co Ltd v Evatt (1968) 122 CLR 556 National Australian Bank v Nobile (1991) 100 ALR 227 National Bank of Australia Ltd v Mason (1976) 50 ALJR 362 Nockton v Lord Ashburton [1914] AC 932 O'Halloran v R T Thomas & Family Ltd (1998) 45 NSWLR 262 O'Rorke v Bolingbroke (1877), 2 App Cas 814 Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187(FC) Pilmer v Duke Group Ltd (2001) 75 ALJR 1067 Poseidon Limited v Adelaide Petroleum NL (1991) 105 ALR 25 Royal Bank of Scotland v Etridge (No. 2) [1998] 4 All ER 705 Salkeld v Vernon (1758) 1 Eden 64, 28 ER 608 Sherson & Associates Pty Limited v Bailey [2000] NSWCA 275 Smith v Chadwick [1884] 9 App Cas 187 Stanton v Australia and New Zealand Banking Group Limited (1987) 9 ATPR 40-755 State Bank of New South Wales v Muir and Anor (1996) BPR 15,483 Target Holdings Ltd v Redfern [1996] 1 AC 421 Teachers Health Investments Pty Limited v Wynne (1996) NSWConvR 55-785 Tepko Pty Ltd v Water Board (2001) 75 ALJR 775 Vadasz v Pioneer Concrete (SA) Pty Limited (1995) 184 CLR 102 Wardley Australia Limited v State of Western Australia (1992) 175 CLR 514 West v AGC (Advances) Ltd (1986) 5 NSWLR 610 (CA) DECISION : See paragraphs 505 to 513.