Adour Holdings P/L (In Liq) v Commonwealth Bank of Australia

[1991] FCA 656

Re: ADOUR HOLDINGS PTY LIMITED (IN LIQUIDATION)
And: COMMONWEALTH BANK OF AUSTRALIA; ANTONIO GIUSTI; ELISABETTA GIUSTI; PETER
MICHAEL; SOLOMON MICHAEL; KATRINA MICHAEL; GRAHAM JOHN TAYLOR; P. and S.
MANAGEMENT PTY LIMITED; TERENCE NOEL McGRATH; JULIE ANN McGRATH; CLIFFORD
FREDERICK HOUGHTON and NOLA IDA HOUGHTON
No. N G1357 of 1988
FED No. 656
Trade Practices Act Section 52
(1991) 13 ATPR 41-147

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Burchett J.(1)

CATCHWORDS

Trade Practices Act, section 52 - claim against bank upon representations by branch manager and loans officer as to its attitude towards a proposed further lending - representations not in fact authorised - apparent authority - effect of s. 84 - effect of unauthorised representations as conduct.

Trade Practices Act 1974, ss. 52 and 84

HEARING

SYDNEY

#DATE 29:10:1991

Counsel for the Applicant: Mr J.M. Rolfe QC (and later Mr R.W.R.

Parker QC) with Mr J.E. Armfield

Solicitors for the Applicant: Messrs Mulally Mylott

Counsel for the Respondent: Mr D.A. Cowdroy QC with Mr M.R. Gracie

Solicitor for the Respondent: Mr L.E. Taylor

ORDER

The applicant and the second cross-claimants bring in short minutes of orders to reflect the reasons of the court.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

In this matter, the applicant seeks relief against the Commonwealth Bank of Australia in respect of a contract of loan, and also claims damages including interest under s. 51A of the Federal Court of Australia Act 1976. The Bank cross-claims against a company and a number of individuals, associated with the applicant, upon guarantees and security documents entered into by them in relation to the transaction of loan. All cross-respondents, other than the seventh cross-respondents (the cross-claim against whom has been discontinued by the Bank), have brought a second cross-claim against the Bank, seeking a declaration that the guarantees and security documents are void or not binding upon the second cross-claimants, and consequential relief. The central issue, common to the claim and cross-claims, concerns the allegation of the applicant, and those connected with it, that they were misled by misrepresentations about the attitude of the Bank towards the application for the loan, and about its intentions as regards the making of further advances pursuant to that application.

1. The loan had been sought for a development project, to cost $5.4 million, the first stage of which was to be the acquisition of land at Campbelltown for $1.45 million. It is the applicant's case that it applied for a loan to cover the total project; that it was offered an initial loan of $1.45 million dollars, the letter of approval admittedly containing the statement: "It is also mentioned that this approval, in no way, implies a commitment on the Bank's part to finance the proposed development/construction"; but that it was expressly encouraged to believe, and its directors did accordingly believe, eventual approval of the balance of the loan it had sought depended only on satisfactory building plans and contractual arrangements for building. Most importantly, it was not told that the Bank's real concern was the accuracy of a feasibility statement, prepared for the applicant and submitted with its application, and the viability of the project as a whole. On the case advanced by the applicant and the second cross-claimants, if the true nature of the Bank's attitude had been known, as it would have been had correct and careful answers been given to questions which were asked of the Bank's officers by the applicant's directors, the loan of $1.45 million would never have been accepted, because it was essential to any prospect of success of the applicant's venture that the building work should proceed promptly, there being no return to meet holding charges available from the land itself. Furthermore, even after its entry into the transaction, had the true position been belatedly revealed, the applicant says it would have sought to salvage the situation by immediate approaches to other lenders; but the Bank continued to mislead it to expect the loan to be forthcoming imminently, until nearly seven months later, by which time accumulated interest charges had destroyed any prospect of a successful application elsewhere.

2. The statement of claim, filed by the applicant on 17 November 1988, bases its claims upon s. 52 of the Trade Practices Act 1974; upon ss. 52A and 55A of that Act; upon negligence; and upon breach of contract. None of these heads of liability has been abandoned, but principal reliance was placed upon s. 52, and the breadth of the relief available, if a claim under that section is made out, seems to me to reduce the other claims to secondary importance.

3. The story, as it emerged in the evidence, of the circumstances out of which this case arises took, as its starting point, the entry of Messrs Taylor, McGrath, Giusti and Michael into arrangements to form a joint venture to undertake the construction of a substantial complex, to include a tavern, shops and office accommodation, as well as possibly a motel, in Queen Street Campbelltown, just across the road from a very much larger development which had cost of the order of $40 million. A joint venture agreement was reduced to writing and executed as a deed on 20 August 1986. Mr Taylor had had prior experience, over many years, as a real estate agent in the Campbelltown area, and had been the project supervisor of a substantial and successful project that had been financed by a finance company associated with the Bank. He and Mr McGrath were, it appears, together with one of the principals of the firm of accountants which acted for the joint venturers, interested beneficially in a company Mogor Holdings Pty Limited (Mogor). That company was a party to the joint venture deed. The evidence indicates that, at some considerable expense, Mogor had been successful, through Mr Taylor, in obtaining development approval for the proposed project, although that approval had been obtained in the name of the then owner of the land, Zanmore Pty Limited (Zanmore). Zanmore had, prior to the execution of the joint venture deed, entered into a contract to sell the land to Mogor for $800,000, but the contract was subject to a clause permitting Mogor to rescind it by notice at any time until 2 p.m. on 4 October 1986. It would seem that Mr Taylor and Mr McGrath felt the need, for the prosecution of a project of this magnitude, to associate themselves with others of greater financial substance. Mr Giusti and Mr Michael fell in this category. Statements of assets controlled by them or their families suggest that each of them had access to property of the order of $1.5 million in value. Mr Michael's family operated a chain of clothing stores in the western suburbs of Sydney, and he was interested in acquiring a store in the proposed building. Both Mr Michael and Mr Giusti appreciated that there would probably be a profit in the transaction for Mogor, but neither of them was told the extent of the gain which would be available to Messrs Taylor and McGrath, and to the principal of the accounting firm, on the sale of the land to the joint venture. The arrangement, which was set out in the deed and was also implemented by a formal contract of sale, involved Mogor selling the land to the corporate vehicle of the joint venture, the applicant Adour Holdings Pty Limited (Adour), for $1.45 million. Even allowing for substantial expenses in obtaining the development approval, and in carrying out certain other obligations which Mogor undertook under the joint venture deed, there was a very considerable profit to be received by Mogor.

4. The joint venture deed provided a framework for the development of the Queen Street property in accordance with the development approval, and for the sharing of the proceeds between entities represented by Messrs Taylor, Giusti, Michael and McGrath, those entities being the shareholders of Adour. Graham Taylor Pty Limited (presumably a company beneficially owned by Mr Taylor) was appointed project manager. The four gentlemen were the directors of Adour. On behalf of the directors, Mr Taylor was the individual who approached the Bank to arrange finance for the project. It should be noted that Mr Taylor's interest (as well as Mr McGrath's), as a director and shareholder in Mogor, was expressly disclosed in the joint venture deed, although (as I have indicated) the amount of the profit to be earned by Mogor was not disclosed. The deed concluded with the following clause:
   

"16. FINANCE AS A CONDITION OF THIS AGREEMENT 16.1 Completion of Adour's purchase of the property from Mogor AND the ability of Adour to proceed with the development is conditional on Adour obtaining approval of necessary finance to carry out these objectives. If, after making all due and proper enquiries and applications for finance Adour cannot, on reasonable and acceptable terms, obtain such finance then:

(i) Either Adour or Mogor may terminate the Agreement for Sale of Land and neither Adour nor Mogor shall be liable to the other in any way whatsoever;

(ii) Notwithstanding anything hereinbefore contained the provisions of this Joint Venture Agreement shall be deemed at an end and all parties, as amongst themselves, shall be released from their respective obligations hereunder."

Apart from cl. 16 of the deed, Adour had also the benefit of an express provision in its contract with Mogor making the contract conditional on the obtaining of "finance on acceptable terms".

1. Adour, through Mr Taylor, made approaches to several financial institutions including the Bank. The approach to the Bank was made at the Glenquarie Centre branch at Macquarie Fields, of which the manager was Mr Spooner and the loans officer was Mr Noyce. Mr Taylor banked there, and Messrs Spooner and Noyce were aware of the previous project, financed by the Bank's finance company, with which he and the accountants and builder involved in the proposed project had all been concerned. The earlier transaction had proved successful. Messrs Taylor and McGrath and a principal of their accounting firm attended upon Messrs Spooner and Noyce sometime in August 1986. At about that time, Mr Croker, the accountant in the accounting firm who handled Adour's affairs, spoke to Mr Noyce on the telephone in order to find out what details would be required. Mr Noyce said to him: "Give me your normal feasibility that we have received from you over the last couple of years." On all the evidence, I conclude that Mr Croker did in fact prepare a feasibility study of the kind that had been used in previous applications, and in particular in the application for the earlier project to which I have referred. The feasibility study related to the entire project, and I am quite satisfied that the application for finance sought, as Mr Taylor said, "total project funding of $5.4 million", and was so understood by the officers of the Bank.

2. Mr Spooner proceeded to prepare an internal memorandum for the New South Wales Branches Administration of the Bank dated 10 September 1986. This document referred to Messrs Solomon Michael, Antonio Giusti, Terence McGrath and Graham Taylor as having respectively 35%, 25%, 20% and 20% interests in Adour. Attachments showed the very substantial worth, to which I have already referred, of the Michael family trust and the Giusti family trust. The feasibility statement prepared by Mr Croker was also attached, with some supporting documents. Mr Noyce described the feasibility statement as "a fully detailed feasibility study of the proposed development ... together with a projected cash flow statement". This may be a generous description, but it should be borne in mind that, as I have said, I am satisfied the feasibility study was in a form which had previously been accepted. The memorandum referred to the Michael family as "highly valued clients of our Regents Park, NSW branch", and listed several of their company accounts. It stated the family was "mainly involved in exclusive clothing shops and currently have stores at Campbelltown, Auburn, Granville and Liverpool." It added: "They have also recently been approved Term Loan facilities to complete a development of 20 town houses in Leumeah ... . Solomon Michael is the son in charge of the Company's operations." Mr McGrath was said to be the proprietor of the "Cut-Price Supermarket" at Bargo, and to have managed with success previously a family liquor store at Leumeah. Mr Taylor's success as a real estate agent and good conduct of dealings were referred to. Mr Antonio Giusti was said to have a contract for Viscount Caravans in respect of a canteen, "and has many investments properties". It was suggested this was a good opportunity to acquire some or all of his banking which had been conducted at ANZ Banking Group. The site of the proposed development was described as "a valued" one, close to the new Campbelltown mall shopping complex which had "recently been sold to the "Lend Lease" Company for $40.0M". It was stated Queen's Counsel had seen no significant problems with regard to the tavern licence, and the building cost had been provided by the building company involved in the previous project. An approximate development profit of over $2 million was forecast. The memorandum, which was signed by the manager, Mr Spooner, concluded with the following general comments:
   

"With the current population growth being experienced in the area, we see this development as satisfying local demand for a `total entertainment centre'.

The very successful backgrounds of Michael and Giusti, the proven expertise of the Project Manager, Taylor and the professionalism of the Group's Accountants - Marks, Croker and Cheetham - indicates a sound platform for a highly successful venture.

Application is submitted for your consideration. Approval of $1.45M to complete land acquisition initially, and `in principle' approval for construction expenses (subject to satisfactory costing) is strongly recommended."

1. The response from the NSW Branches Administration of the Bank is dated 24 September 1986. It refers to a telephone conversation with Mr Noyce on 22 September, and continues:
   

"As discussed, a Bills Discount Facility (with Bills Endorsement option) of $1.45m net has been approved to assist acquire the vacant land at Queens Street, Campbelltown. Approval is on the basis submitted, subject to:

. Up front `non-refundable' establishment fee of $4,000. ...

. Security support on 65% margins. ... . . .

(A number of details were set out relating to the securities to be obtained, and other matters not presently material.) . Loan term of 12 months with capitalisation of interest permitted over this period. Facility then to be either re-negotiated, refinanced or cleared from sale of the subject property or other assets. ... . This approval not being construed as a commitment by CBA to finance the proposed shopping/office complex. . Control documents being provided in due course. Please impress on client that this approval in no way implies a commitment on CBA's part to finance the proposed development/construction.

In respect to the shopping/office complex a detailed investigation will be required by Property Valuation Department (eg valuations, market analysis etc). However, the matter will only be referred to them on confirmation that the abovementioned establishment fee has been received. Provision of a copy of the accepted construction tender and proposed plans would be of considerable assistance to PVD. Pending complication (sic.) of PVD's report would you please let us have financial statements for all entities in the group (Y/E 30/6/85 and 86)."

(Emphases have been added.)

1. The evidence indicates that Mr Spooner and Mr Noyce were delighted to receive this response. Mr Spooner described himself as "excited", and declared that this was the approval he "expected". It was, if not the largest, certainly close to the largest, proposed loan negotiated at the branch. There was much dispute at the hearing about what Messrs Spooner and Noyce told Messrs Giusti, Michael, Taylor and McGrath. But Mr Spooner readily conceded his enthusiasm, and that fact strongly suggests he had failed to appreciate the strength of the warning conveyed in the concluding portion of the document of 24 September 1986. There was no occasion for enthusiasm. In fact, the whole project remained quite uncertain until the "detailed investigation" and "valuations" and "market analysis" stated to be requirements were carried out, and unless they proved favourable. Although construction tender and proposed plans were referred to, the terms in which they were mentioned make it quite clear their importance was secondary; what mattered were the things that were "required" - the valuations and market analysis. And the Deputy Chief Manager who wrote the document expressly drew attention to the uncertainty of the position in his request to impress on the client that the Bank was not committed to the proposal.

2. Yet what Mr Spooner reported to Adour in a letter dated 29 September 1986 is quite unemphatic about the outstanding problems. It expresses pleasure that the Bank has approved a facility of $1.45 million to assist with the acquisition of the land; says the approval is "on the Bank's usual terms and conditions," which it sets out; and adds:
   

"It is also mentioned that this approval, in no way, implies a commitment on the Bank's part to finance the proposed development/construction."

For the twice-repeated warning which Mr Spooner was requested to "impress" on the client, the letter substitutes a mention; but, more importantly, the circumstance which would make the mention a very serious warning - the Bank's requirement of "a detailed investigation ... by Property Valuation Department", including valuations and market analysis - is entirely omitted. This is consistent with Mr Spooner, in his excitement, failing to appreciate how far the approval he had received fell short of the "in principle" approval for the whole project which he had sought. It is also consistent with his statement that this was the approval he had expected.

1. The evidence of all of the directors of Adour is that even the muted version of the Bank's reaction which they received thoroughly alarmed them. They appreciated that an approval for $1.45 million to buy a parcel of land with dilapidated structures on it, incapable of yielding any return, would be worse than an outright rejection, unless they could obtain finance to carry out their project. But the fairly bland terms of the letter they had received left open the possibility that, while reserving its position, the Bank was in fact quite satisfied with the material it had received, and needed only confirmation that the final plans and building contract would be in accordance with what the feasibility study contemplated. Mr Taylor's evidence is that he spoke to Mr Spooner or Mr Noyce about the letter. (Mr Taylor was somewhat confused in his evidence as to which of these gentlemen it was with whom he had this conversation, but he insisted on the substance of what he was told.) In his affidavit he says he spoke to Mr Noyce, and pointed out that the application was for $5.4 million, which was the amount required. Mr Noyce said:
   

"The Bank is aware of that and would not have approved the land finance unless it was happy with the total project. All we need now are your detailed building plans so that our valuers can verify construction costs. We have to check that you can complete the building for the price quoted."

The directors of Adour also instructed their accountant, Mr Croker, "to contact the Bank to discuss the question of the remaining construction finance." Mr Croker swore that he asked Mr Spooner: "Is there any problem in the Bank giving Adour $5.4 million?" Mr Spooner replied: "No, its normal banking procedure is to approve the land acquisition loan as one loan and the construction loan as a separate loan." Mr McGrath also gave evidence of a conversation with Mr Noyce, which he had before he signed a guarantee to enable the transaction to go through, in which Mr Noyce said to him:

"If the Bank had not intended to go through with it we wouldn't have gone this far. ... All we need from you are the building plans so that our valuer can check out the construction costs."

1. Although Mr Giusti had left the initial negotiation to Mr Taylor, his signature was required for supporting mortgages, and he saw Mr Noyce at a stage when it would still have been possible for Adour to withdraw, that is, in early October. Mr Giusti was a fairly impressive witness. According to his account, he expressed concern that the loan application had been split into two parts, but said he had been told by Mr Taylor and the accountant that the Bank usually handled this type of project in that way. Mr Noyce responded: "Tony, if the Bank didn't view the whole project favourably they would not have approved the finance for [the] land." Mr Giusti said: "Stephen, I hope the Bank realizes that we are not just buying a block of land?" It was expressly admitted by Mr Noyce in evidence that this was put to him by Mr Giusti. That seems to me to be a very important confirmation of the fact that the directors were indeed concerned. If they had this concern, it is difficult to believe it was allayed by anything less than what they say they were told by the Bank officers. Unless it was allayed, to proceed with the purchase, without taking any other steps to secure finance, was madness. Mr Giusti says that the response to the particular question was "Tony, the Bank realizes that as they have the feasibility study on the whole project with our report and recommendation." Mr Noyce added a comment to the effect that the earlier project had been "handled in the same manner and they didn't have any problems. It's a successful project and we are very enthusiastic about this one." The fact was, of course, that the Bank did not "view the whole project favourably", but had emphatically reserved judgment on it, and instructed Messrs Spooner and Noyce to say so.

2. Mr Michael, who was also a fairly impressive witness, if a little inclined towards drama, was in a similar position to Mr Giusti. He left the initial arrangements in the hands of Mr Taylor. However, he was required to sign security documents before the settlement could go through, and he also had a conversation with Mr Noyce before he did so. Mr Noyce told him:
   

"Bob (i.e. Mr Spooner) and I submitted the total feasibility study with the loan application together with a report on the company directors and a recommendation by us. If the Bank didn't like the deal they would not have approved the loan for the purchase of the land. Bob and I are very enthusiastic about the whole proposal."

1. Counsel for the Bank attacked the credit of Messrs Taylor and McGrath on the footing that they had quite a lot to gain from the completion of the contract between Mogor and Adour. It was suggested they may have talked the other directors into accepting the Bank's offer of a loan for the land purchase only, and that this may have been the real reason for the transaction, rather than anything said by the Bank officers. But it has to be borne in mind that both Mr Taylor and Mr McGrath gave guarantees in respect of the loan of 1.45 million dollars, under which they stood to lose much more than any gain they may have hoped to obtain through Mogor. They were experienced businessmen, and would well have appreciated that if the construction finance should not be available Adour would be very likely to go into liquidation, and their guarantees might be called up. In the case of Mr McGrath, his wife too gave a guarantee. While the circumstances require their evidence to be treated with caution, I should also note that Mr McGrath gave his evidence with a certain spontaneity, and he appeared to me to be providing the court with a genuine recall of his conversation with the Bank officer. In any case, the applicant's version of events does not depend entirely upon Messrs Taylor and McGrath. Its foundation is laid by the terms of the documents to which I have referred. And it is confirmed in vital respects by the evidence of Messrs Giusti and Michael. It was not, in my opinion, at all convincingly rebutted by the evidence of Messrs Spooner and Noyce. Neither of the Bank officers was an acceptable witness. Both gave numerous answers to which I could give no credence. Generally, where their evidence conflicted with that of the witnesses for the applicant, I preferred the evidence of the latter. While I hold the view that visual and aural demeanour can be of over-rated value for the ascertainment of truth, I should record that the demeanour of each of Messrs Spooner and Noyce was strikingly unpersuasive.

2. There were many details which added confirmation to the thrust of the applicant's case. I do not find it necessary to discuss at length all of the peripheral evidence. Much was disputed about what was said at a luncheon at La Strega restaurant at Liverpool on 16 October 1986, and what was said at a meeting at the Flower Drum restaurant shortly after the settlement of the purchase. Generally, I accept the version of the applicant's witnesses, but these occasions are of only tangential assistance since they occurred after the applicant had become committed. However, they do tend to suggest the likelihood that the Bank officers may have been prepared to say, before the settlement of the land purchase, what they were prepared to say so soon afterwards. And reiterated encouragement to believe the required construction loan would be forthcoming must have inclined the directors to await the Bank's pleasure, without taking any steps to test alternative sources of finance, until the accumulated holding charges had enmeshed them beyond hope of recovery. That was a reasonably foreseeable consequence which would be of particular importance if the case in negligence required full examination.

3. The reiterated encouragement to which I have referred continued over a number of months. The Bank's decision concerning the construction aspect of the loan application was extraordinarily delayed. At the hearing, some of the blame was attributed to Mr Taylor, who did not lodge the plans and specifications with the Bank until just before Christmas. But consideration of the Bank's internal memorandum of 24 September 1986, the relevant parts of which have been set out above, makes it plain that the criticism should not be given great weight. What was essential was that the Property Valuation Department of the Bank should carry out its detailed investigation, involving valuations and market analysis. It was not suggested that this had to await the plans and specifications. The memorandum expressly stated that payment of an establishment fee was required, and merely added: "Provision of a copy of the accepted construction tender and proposed plans would be of considerable assistance to PVD." But in any case, there was a very long delay after the plans and specifications had been delivered to the Bank. It was not until the directors approached the Bank's administration directly that an answer, rejecting the application, was finally given to Mr Spooner on 24 April 1987. But it was not Mr Spooner who advised Adour's directors. I infer that he was too embarrassed to discuss the matter with them. A senior officer of the Bank informed Mr Taylor on 24 April 1987. Although Mr Taylor had been thus informed, one would have expected the manager of the branch, with which the company had been dealing for so long and which had given it so much encouragement, to have spoken to him or one of the other directors to proffer an explanation. Actually, Mr Spooner and Mr Noyce both did take some energetic action; but the action they took was to protest to the bank's Branches Administration. The fact that they did so is eloquent of their attitude. It is consistent with the terms of Mr Spooner's memorandum of 31 December 1986, with which he had forwarded the plans and specifications; that memorandum referred to the attachment of "the following documents to enable costing to be carried out". Mr Spooner appeared oblivious of the fact that costing was not at all the issue which concerned his superiors. Indeed, it was not the issue which in the event scuttled the proposal; the rejection was squarely based on the detailed investigation, valuations and market analysis referred to in the memorandum of 24 September 1986. In evidence, Mr Spooner underlined his misunderstanding of the initial approval letter when he said:
   

"The way I interpreted it, the Bank was quite happy to help with the land purchase at this stage, but they were not prepared to give a commitment at this time to help with the construction stages until all the relative plans, et cetera were presented."

1. For the Bank, it was submitted that Messrs Spooner and Noyce did not have authority to commit it to the making of the further advance. But the branch manager and loans officer were authorised to transmit the Bank's answer. The Bank chose to deal with the matter by internal memorandum sent to the branch, leaving it to the branch officers to advise the directors of Adour. In any case, the claim for contravention of s. 52 does not depend upon their authority to enter into a contract containing particular terms. This is made clear by s. 84(2), as it has been interpreted by the full court: Walplan Pty Ltd v Wallace (1985) 8 FCR 27 at 37-38. I am satisfied that conduct was engaged in, on behalf of the Bank, by its servants and agents Messrs Spooner and Noyce, which was within their apparent authority, insofar as they made the representations to which I have earlier referred. Those representations were misleading, and they did mislead the directors of Adour, and those associated with them who executed guarantees and other security documents. Unfortunately, Mr Spooner, who described himself as "a very aggressive lender, marketer", misrepresented the Bank's true position when he put a very optimistic gloss on it in what he said to the directors, while at the same time failing to communicate the real essence of the warning contained in the internal memorandum he had received.

2. In Bonds Brewing (NSW) Pty Ltd v Reffell Party Ice Supplies Pty Ltd (Waddell C.J. in Eq., unreported, 17 August 1987), the defendant entered into the purchase of a leasehold interest upon the mistaken assumption that the plaintiff would not exercise its legal rights to obtain possession of the premises (being a licensed hotel) without paying reasonable compensation for goodwill. At the time, the defendant's directors were required to sign a letter acknowledging that the plaintiff would not be obliged to compensate them for loss of goodwill upon termination of the lease. The defendant was successful, however, in establishing a defence of promissory estoppel to a later claim for possession without compensation on the basis that an officer of the plaintiff, who had no authority to do so, had described the letter as a "formality". It was said to be unconscionable thereafter for the plaintiff to rely on it. Waddell C.J. in Eq. said:
   

"Nor do I think that (the officer of the plaintiff) could reasonably have appeared to (the defendant's directors) to have any authority to vary the terms of the letter ... . But the absence of any apparent or ostensible authority on the part of (the officer) to vary the terms of the letter is not an end of the matter. The question is, whether the plaintiff is bound by what he said for the purpose of assessing the part which it played in the making of the assumption by the defendant which led it to purchase the lease of the premises. I think that it is."

His Honour went on to say that the officer making the representation "would, in my opinion, have appeared to be in a position to state with authority what the plaintiff's policy was in relation to the letter." It seems to me that precisely the same reasoning is applicable here to the bank manager and the loans officer in relation to the part played by the Bank, which is said to have contravened s. 52 of the Trade Practices Act.

1. Counsel for the Bank also relied on the restricted nature of the authority of Messrs Spooner and Noyce in another way. It was suggested that the directors would not have relied on what they said. I am quite satisfied, as a matter of fact, that this submission is incorrect. The conduct of business would be impossible if businessmen could not rely on representations, except those made at the very highest level of management. Customers of the Bank were entitled to proceed on the assumption that its branch manager and loans officer could communicate the Bank's attitude towards an application for a loan. The directors could and did rely on Messrs Spooner and Noyce to advise whether the Bank was satisfied in principle, and required only confirmation that the final plans and building contract would be in accordance with what the feasibility study contemplated.

2. Even on the view which I have accepted, the directors were taking some risk. They were aware that they did not have the benefit of a binding agreement to lend. They were aware that the Bank was not committed. But they were not aware of the real nature of the Bank's reservations, and that made a great difference. They were given to understand that the prospects for approval of the further loan they required were very rosy indeed - very much rosier than they actually were. I am quite satisfied that Adour would never had entered into the transaction, but would instead have revived their applications for finance elsewhere or exercised their right to terminate the purchase of the land, had the Bank's true position been communicated to them, or had they not been misled as to what its position was. I am satisfied that none of the directors would have acted as all the directors did, but for the misrepresentations communicated by Messrs Spooner and Noyce; and, especially, I am satisfied that neither Mr Giusti nor Mr Michael, who required reassurance before they would execute the documents proffered to them, would have permitted the matter to proceed but for the misleading replies they received.

3. It was also submitted that Adour's case could not be made out unless "it was only upon the basis of the statements made by (Messrs Spooner and Noyce) that the applicant decided to borrow the finance." This way of putting the matter is quite inconsistent with what was said by Hill J. in Zoneff v Elcom Credit Union Limited (1990) 12 ATPR 51142 at 51151, by the full court in the same case on appeal ((1990) 12 ATPR 51742 at 51745) and by Wilson J. in Gould v Vaggelas (1985) 157 CLR 215 at 236. On the facts, I reject the submission that the directors were persuaded by Mr Taylor simply to take a risk, and I accept that they were induced by the misleading conduct of the Bank. I do not accept that the representations should be characterised as statements of opinion. I think they were statements of a fact, namely, the attitude of the Bank towards the application for finance in respect of the total project. If, however, Messrs Spooner and Noyce should be taken to have been expressing opinions, I do not think they had any reasonable basis for those opinions: Elders Trustee and Executor Co Ltd v E.G. Reeves Pty Ltd (1987) 78 ALR 193 at 242.

4. I think this case is plainly distinguishable from the decision in Brambles Holdings Limited v Caldalo Pty Limited (Davies J., unreported, 21 August 1991), to which I was referred by counsel for the Bank. In that case, no relevant representation "as to an existing fact or as to future conduct" (p 39) was found to have been made. As in Rhone-Poulenc Agrochimie S.A. v U.I.M. Chemical Services Pty Ltd (1986) 12 FCR 477, the question was whether, in the circumstances, silence could amount to a misrepresentation. However, it is worth noting where Davies J. drew the line. At page 40, he said:
   

"If Macdow had stood back whilst knowing that either Brambles or Custom Credit was to its detriment significantly changing its position or incurring significant unnecessary expenditure, then a duty of disclosure may well have arisen for its conduct or lack of disclosure may have been unconscionable."

Here, the Bank must have known that the long delay was gravely prejudicing any chance Adour might have had of obtaining an alternative loan, and Messrs Spooner and Noyce must have been aware that the directors were relying on their positive representations concerning the Bank's attitude which were given a special significance by their failure to advert to the Bank's major concern.

1. The case is also to be distinguished from Sydney Strata Securities Pty Ltd v Elders Finance Ltd (Davies J., unreported, 20 December 1990), where the applicant alleged that statements about contemplated future loans amounted to misleading and deceptive conduct. Davies J. (at 16) said: "But it was not misleading and deceptive unless it inferred a greater degree of commitment to the project than there actually was." This neatly encapsulates the basis on which I think that, in the present case, the conduct in question was misleading and deceptive; it inferred (indeed expressly stated) a greater degree of commitment to the project on the part of the Bank than there actually was.

2. These findings lead to the conclusion that the Bank's conduct was in contravention of s. 52, and that this conduct induced Adour to enter into the transaction of loan and to complete the purchase of the land, which it would not otherwise have done except on the basis of obtaining, first, some assurance of alternative finance for its total project. It follows that, not only would the principal security not have been entered into but for the bank's conduct, but the guarantees and other supporting securities would not have been entered into either. In any case, the misrepresentations also directly induced Messrs Giusti and Michael, and, through them, members of their families and, as well, Mr and Mrs McGrath.

3. During the course of the argument, an order was made by consent deferring questions relating to the relief which ought to be granted if I should be of the opinion I have now expressed. I left open the question whether any further evidence should be permitted to be led. Accordingly, the only order I shall make at this stage is that the applicant and second cross-claimants bring in short minutes of orders appropriate to reflect these reasons.