ANZ Banking Group Ltd v Griffin
[2010] VCC 70
•2 March 2010
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL LIST
Case No. CI-08-03716
| AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED | Plaintiff |
| (ABN 051 192 272) | |
| v | |
| BARRY THOMAS GRIFFIN | First Defendant |
| JUDY JOY GRIFFIN | Second Defendant |
| B & J GRIFFIN PTY LTD (ACN 127 033 792) | Third Defendant |
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| JUDGE: | HER HONOUR JUDGE KENNEDY |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 15, 16, 17, 18 and 22 February 2010 |
| DATE OF JUDGMENT: | 2 March 2010 |
| CASE MAY BE CITED AS: | ANZ Banking Group Ltd v Griffin & Ors |
| MEDIUM NEUTRAL CITATION: | [2010] VCC 0070 |
REASONS FOR JUDGMENT
Catchwords: Commercial – Advance by bank of funds to purchase childrens’ indoor play centre business - Claim by bank pursuant to guarantees and mortgage – whether guarantees and mortgage should be set aside under s158 of the Fair Trading Act (1999) Vic and/or s87 Trade Practices Act 1974 (Cth) and/or s12GM Australian Securities and Investments Commissions Act 2001 (Cth) by reason that bank engaged in misleading or deceptive conduct – whether representation made that the vendors of the business had purchased the play equipment in the business for $150,000 - whether in the alternative guarantees and mortgage should be rescinded and set aside by reason that bank made a negligent misstatement- whether mortgage security extends to only half a share of the property
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms K.J. Knights | Norton Rose |
| For the Defendants | Mr R. A. Harris | Settle Legal Pty Ltd |
| HER HONOUR: |
1 The bank seeks recovery of monies from Mr and Mrs Griffin pursuant to guarantees they executed on 4 September 2007 in relation to funds advanced to B. & J. Griffin Pty Ltd (“the company”). Mrs Griffin is the sole director of the company. The monies were advanced for the purposes of the purchase of a business known as “Buzy Kids & Cafe” from Mr and Mrs Bell, which business was conducted at Corowa. The business consisted of an indoor childrens’ playcentre and cafe. The business has ultimately failed.
2 The bank seeks recovery of the sum of $186,097.53 together with interest and costs pursuant to certificates of indebtedness dated 15 February, 2010 given under clause 19.1 of the guarantees.
3 The bank also seeks possession of the property at 4 Hill Close, Wahgunyah, pursuant to a mortgage given by Mr Griffin dated 4 September 2007.
4 The Griffins claim that Mr Robinson, a manager at the bank, made a representation to them “that the Bells had in fact purchased the play equipment then situated at the Buzy Kids & Cafe and that was to be sold with the business for $150,000” (“the bank representation”)[1].
[1] The defendants’ further amended defence and counterclaim dated 15 February 2010 para 35A
5 The Griffins claim that they relied on such a representation, which representation was false, and claim relief, setting aside the mortgage and the guarantees as void ab initio pursuant to s158 of the Fair Trading Act 1999 (Victoria) and/or s.87 of the Trade Practices Act 1974 (Cth) and/ or s.12GM of the Australian Securities and Investments Commission Act 2001 (Cth).
6 In the alternative, the Griffins also claim an order rescinding the mortgage and the guarantees and setting them aside as void ab initio on the basis that the bank made a negligent misstatement.
7 Finally, the Griffins also say that the bank security extends to only a half share, by reason that at the time Mr Griffin entered into the mortgage he was a joint proprietor of the property with Mrs Griffin.
8 Accordingly, the issues are:
(a) whether the Griffins are entitled to statutory relief based on misleading or deceptive conduct founded on the alleged bank representation; (b) whether in the alternative the Griffins are entitled to relief based on negligent misstatement; and (c) whether the bank’s security extends to only a half share pursuant to the mortgage. 9 Mr Harris, who appeared as Counsel for the Griffins, fairly conceded that if the Griffins failed in relation to the above defences, then the bank was entitled to judgment. He also conceded that the bank could rely on the certificates of indebtedness pursuant to clause 19.1 of the guarantees as proof of its loss.
10 Neither party sought relief against the company third defendant. The company had been joined at an earlier point in time when a set-off claim had been made by the Griffins. This claim was abandoned at trial.
Background
People
11 Mr Robinson has been with the bank for 22 years. He was formerly the small business manager in the Corowa branch from 1998 and at some point prior to 2006 he became the small business and agri-business manager. Although he assembled documents for credit applications and formally signed the ultimate letter of offer in this case he was not responsible for the ultimate approval of finance which was the responsibility of the credit department of the bank. Mr Robinson was called as a witness but had little independent memory of the transactions the subject of this dispute.
12 Mr Robinson was acquainted with the Bells who had previously owned a business in Corowa known as the Corowa Holiday Units which had been financed by the ANZ. In 2006, Tracey and Graham Bell were looking to start up a new business being an indoor children’s play centre and cafe. They approached Mr Robinson who forwarded their application to the Melbourne office for processing in May 2006. However, their application for finance with the ANZ was rejected and they ultimately financed the purchase of the Buzy Kids business through Esanda (in part) and Cascade Home loans. Mrs Bell was called under subpoena by the bank to give evidence in the proceeding. Her evidence will be referred to below.
13 Mr and Mrs Griffin were also residents of Corowa and were friends of the Bells. Mrs Griffin left school at aged 17 after completion of year 11 but presented as a reasonably articulate person who had engaged in a variety of work including secretarial work as a public servant in Canberra and work as a senior clerk. However, apart from being engaged as a consultant for a cleaning company, “Enjo”, she had not previously run a business prior to purchasing the Buzy Kids business from the Bells in September 2007. Mrs Griffin was called as a witness and, as will be seen below, gave generally cogent evidence.
14 Mr Griffin, who suffers from ill health, did not give evidence, but the bank agreed that no adverse inference should be drawn from the fact that he was not called.
Invoices regarding the play equipment of the business
15 It was undisputed that the Bells purchased play equipment to a value of $110,000 from Superbounce Pty Ltd trading as “Goplay.” There was evidence of an invoice number 00000500 of 28 November 2006 in the name of Goplay which contained a statement that the goods as described were to be shipped to the Bells but billed to Esanda. The invoice also contained reference to a $60,000 deposit to be paid prior to the end of November (“the $110,000 invoice”). Mr West, director of Superbounce, confirmed that this invoice reflected the basis on which the play equipment was supplied by his company.
16 It appears that this $110,000 invoice was forwarded to Mr Robinson at the bank on 9 July 2007 given the date of 9 July 2007 appears at the top of the document with the facsimile number of Superbounce. There also appear the words “Att: Ron regards Tracey [Bell].”
17 The equipment was funded in part by a chattel mortgage between the Bells and Esanda with a principal amount of $50,350 dated 30 November 2006. Mr Robinson accepted that his signature as a witness appeared on this chattel mortgage.
18 Mrs Bell’s evidence was that there was other equipment purchased that was not sourced from Goplay. This conflicted with evidence of Mrs Griffin that the only extra equipment beyond that specified in the $110,000 invoice was a cubby house, seesaw and picnic table.
19 A complicating feature was that there was also a further invoice numbered 00000452 in evidence with the same date also in the name of Goplay but for a value of $160,000 (being $145,454.55 plus GST) (the “$160,000 invoice”).
20 However, it also appeared that this second $160,000 invoice was also forwarded to Mr Robinson at the bank on 10 July (the second invoice again contains the Superbounce facsimile number in the header with a date of 10 July).
Operation of the Buzy Kids business
21 The Buzy Kids business ran from January 2007 and had only been operating for some five months when the Bells decided to sell. Mrs Bell gave evidence that the reason for selling was that her husband’s father had become ill and they were determined to return to Melbourne to be closer to her husband’s family.
22 Mrs Bell also gave evidence that the Bells provided their Bas statements and other documents to their accountant, Gilchrist Norton Pty Ltd, who then prepared some accounts under cover of a letter of 11 May 2007 addressed “to whom it may concern.” These accounts gave the gross profit from trading from 29 January to 11 May 2007 at $19,181. They also showed the value of the plant and equipment to be $221,603, less depreciation of $10,674. A depreciation schedule attached also showed play equipment in the amounts of $54,545 and $145,454, giving a total of approximately $200,000 in respect of play equipment. The evidence of Mrs Bell was that this included the $110,000 paid to Superbounce.
23 The business was put on the market with an asking price of $200,000.
Purchase by the Griffins
24 The evidence of Mrs Griffin was that she and her husband had been looking to purchase a business at some point in 2007. They had originally looked at a paint business, but, as she herself claimed, “somebody got to it basically before we did”. They were aware that the Bells were selling the Buzy Kids business at an asking price of $200,000. Mrs Griffin was somewhat surprised at the price, and raised the issue with Tracey Bell. She claimed that she was told by Mrs Bell that she had paid $150,000 for the play equipment.
25 Mrs Griffin requested the financial figures from Mrs Bell, and was given the financial statements prepared by Mrs Bell’s accountants, Gilchrist Norton Pty Ltd. There was no suggestion on the evidence that Mrs Griffin sought any clarification about the basis on which the equipment was valued at some $200,000 in the accounts given the oral statements of Mrs Bell that an amount of $150,000 had been paid for that equipment.
26 After being rejected for finance by the Commonwealth Bank, Mr and Mrs Griffin decided to go to the ANZ Bank, where they contacted Mr Ron Robinson. By this stage the asking price was $175,000 and Mrs Griffin told Mr Robinson they would need to borrow the entire purchase price to fund the purchase. Mr Robinson told them that they would need to complete a credit application form and that he would need to be provided with payslips and other supporting documentation including a business plan.
27 A first “business plan” was then provided by the Griffins which expressed the view, inter alia, that “the sky is the limit” in terms of the Buzy Kids business.
28 On 8 July 2007 Mrs Griffin wrote an email to Mr Robinson wherein she attached an updated business plan and profit-and-loss statement. In that plan, the Griffins noted: “We have offered them [the Bells] $175,000 for their business (pending finance). They have accepted this offer.”
29 On Monday 9 July, at 10:08 am, Mr Robinson emailed Mrs Griffin in relation to the Buzy Kids business plan and profit-and-loss statement, and stated as follows:
“Morning Judy, received with thanks. Did you have a chance to fill in the application form? This form I need as it gives me the personal information of you and Barry I need to complete the submission.
Also, I have spoken to Tracey this morning, she will fax to me the equipment
invoice I spoke about last week.” (emphasis added)
30 The evidence of Mrs Griffin was the reference to a conversation the week before was to the fact that Mr Robinson had asked whether the Griffins had a tax invoice showing what price the Bells had paid for the play equipment to prove its value. Mrs Griffin advised him that she did not have such an invoice. Her evidence was that Mr Robinson said that he would “chase Tracey up to find out if she had one”.
31 By email later the same day at 4:05 pm, Mrs Griffin responded to Mr Robinson, stating:
“RON
SORRY, WORKED THIS MORNING. HAVE ONLY JUST READ YOUR EMAIL. BARRY & I WILL FINISH COMPLETING APPLICATION FORM TONITE AND I WILL DROP TO YOU IN THE MORNING.”
32 Mrs Griffin’s evidence was that she dropped the credit application form in on the following day, Tuesday, 10 July which credit application is dated 9 July in the name of the Griffins personally. The security to be offered was that of 4 Hill Close, Wahgunya which property was at that time held in the joint names of the Griffins. That credit application provides the names of both an accountant, Justin Timms of Kerr, Andison and Kenny, and a solicitor, Rodney Ambrose of Hargreaves & Andrews, as “key contacts” in relation to the application.
33 At 4:07 pm on 9 July , Mr Robinson wrote:
“Thanks Jude, what’s your home number I wish to run something past you?”
34 Mrs Griffin then emailed her phone number at 4:10 pm and a series of conversations ensued which will be referred to in some detail below.
Grant of finance
35 The Griffins subsequently lodged a second credit application dated 18 July which was in the name of the company. Mrs Griffin conceded that she had received advice that a better structure could be achieved for asset protection so that they should restructure the purchase and set up a company of which she would be the sole director. She was somewhat vague as to how this would work but made reference to “public liability issues.” The second application then provided for the home to be security but with the owner designated as Mr Griffin only. This was consistent with a proposed change in the ownership of the home solely into Mr Griffin’s name which change occurred by way of a transfer of 11 October, as will be seen below. Other security given by the company was proposed to be the guarantees (ultimately the subject of this proceeding) and a mortgage debenture.
36 The second credit application also reiterated details of the accountant, Mr Timms, and the solicitor, Mr Ambrose, as “key contacts.”
37 By letter of offer of 30 August 2007 the bank offered three business facilities to the company to a value of $185,000. This offer was accepted on 4 September, 2007.
38 Also on 4 September:
(a) Mrs Griffin executed a guarantee;
(b) Mr Griffin executed a guarantee;
(c) Mr Griffin executed a mortgage;
(c) the company executed a mortgage debenture (not the subject of this
proceeding); and(d) Mrs Griffin also completed a statutory declaration wherein she gave the
value of the assets of the business at $175,000.39 The Griffins subsequently drew down on the facility and purchased the business for $175,000 on 5 September 2007.
Subsequent matters
40 The business was not a success and within a very short time the Griffins placed the business on the market in about January 2008. The business was ultimately closed on 31 May 2008 with some of the cafe equipment sold at a clearing sale in an amount of $2,500.
41 The current proceeding was issued on 5 September, 2008.
Misleading or Deceptive Conduct
42 The bank submitted that the defendants had not established a number of matters needed to entitle them to the statutory relief sought, namely:
(a)
the making of the bank representation was not made out on the evidence;
(b)
if it was, the alleged representation was not relied on and did not cause the defendants to enter the guarantees and mortgage;
(c) that the bank representation was not in any event proven to be false; and (d)
that it would not be appropriate to grant relief setting aside the mortgage and guarantees in any event.
Whether the bank representation was made
Evidence of Mrs Griffin
43 Mrs Griffin claims that she had a number of meetings with Mr Robinson. At an early meeting with Mr Robinson wherein he requested documents for the credit application she told him that Mrs Bell had said the play equipment had cost $150,000.
44 As indicated already, during the course of her subsequent meetings with Mr Robinson, he also asked whether the Griffins had a tax invoice of what the Bells had paid for the play equipment. Mrs Griffin advised him that she did not have such an invoice. Her evidence was that Mr Robinson said that he would “chase Tracey up to find out if she had one”. Given the context of the emails already extracted, it appears that this conversation occurred during the week of 2 July 2007.
45 Mrs Griffin then gave evidence of the conversation that followed the chain of emails, above, which culminated in Mr Robinson requesting and receiving her home phone number on 9 July. Her evidence was that Mr Robinson:
“...told me that he had received a tax invoice from Tracey Bell and that the amount on the invoice showed $110,000, including GST, that they weren’t prepared – the bank was not prepared to go any further with our credit application – when I had told him that I’d been told by Tracey Bell that the equipment was valued at $150,000.
What else did he say? Did he say anything else as to why the bank wouldn’t go ahead?---They weren’t prepared to loan that amount of money when the equipment, the main asset of the business that we were buying, wasn’t worth that.
What did you say, if anything, to him?---I agreed with him. I just said to him that
we weren’t prepared to go ahead either.
What else, if anything, was said in that discussion at that point in time?---I was gobsmacked, if that’s an appropriate term. He just said to me what he’d said, what I’ve just told you, and that I’d agreed. He said, ‘Look, I’ll follow it up with Tracey. I’ll try and clarify it.’ ”
46 Mrs Griffin went on to give evidence as to the next contact she had with Mr Robinson the next day, Tuesday 10 July. As indicated already, it appears that by this stage Mr Robinson was in receipt of the $160,000 invoice. In evidence-in-chief Mrs Griffin claimed that Mr Robinson:
“... rang me back, and he said he now had what he needed from Tracey to
continue with the loan application.”
47 Mrs Griffin did not say anything in response to this advice, but agreed that she then “effectively proceeded with the formalities”.
48 Under cross-examination Mrs Griffin agreed that the discussion in relation to “not going ahead” was in relation to proceeding with the application for credit.
49 In terms of the conversation of 10 July, she conceded that she did not ask Mr Robinson what he had actually received, and certainly did not ask him if he had proof that the play equipment was worth $150,000. Instead, her evidence was that she “presumed” he had proof that the equipment was, as she [Mrs Bell] had said: $150,000. She sought no explanation as to what he had got that he “needed”, and did not ask him, because she “trusted him”.
50 Under re-examination, Mrs Griffin was asked about any documentary evidence she had about the value of the equipment. She said that she had the financials which she had already given to the bank but otherwise:
“Mrs Bell had told me that they had paid $150,000 for the play equipment. At the time of the -once the finance was approved Mr Robinson had told me that he had what he needed to continue with the application. I assumed he had satisfied himself that the equipment was as Mrs Bell had said - valued at a cost of $150,000.”(emphasis added)
51 The bank generally accepted Mrs Griffin’s evidence as to the conversations on 9 and 10 July but submitted that the court should not accept that Mr Robinson had said the Bank wasn’t prepared to go any further with the credit application “when she had told him that she had been told by Tracey Bell that the equipment was valued at $150,000”and that Mr Robinson said the bank was not prepared to loan the money “when the equipment, the main asset of the business that we were buying was not worth that.”
52 I accept the bank’s submission, which was consistent with the evidence Mrs Griffin gave under cross-examination. Although it was apparent that the conversation with Mrs Bell clearly now looms as a significant matter in Mrs Griffin’s mind, I do not accept that it is likely that Mr Robinson would have referred to this conversation with Mrs Bell on 9 July as Mrs Griffin attempted to suggest. Mr Robinson’s actions in seeking invoices suggest he was interested and focused on documentary evidence and there is no reason to suggest he would refer to some earlier conversation relaying only hearsay evidence at best about the alleged figure of $150,000.
53 I otherwise generally accept the evidence of Mrs Griffin as to the critical conversations of 9 and 10 July.
Evidence of Mr Robinson
54 As indicated already, Mr Robinson was largely unable to recall the precise conversations with Mrs Griffin.
55 Under examination-in-chief he did, however, recall seeking an explanation about the $110,000 invoice and that he was advised by Mrs Bell that the $60,000 deposit referred to in that invoice was going to be paid by the Bells with a $100,000 balance to be financed by Esanda. This appeared to be consistent with the invoice being addressed to Esanda given the invoice for $100,000 “married off” with the details of the amount provided by the finance company. That when he then received the $160,000 invoice later (on 10 July) he believed that the $160,000 was the original purchase amount particularly given the tax invoice number was lower (suggesting it was earlier in time) and that it was made out directly to the Bells.
56 However, under cross-examination he could not recall this conversation with Mrs Bell at all.
57 In terms of the pivotal conversation on 10 July 2007, he could not remember if the words Mrs Griffin claims were precisely used, but fairly conceded it was “something along those lines”.
58 Although some criticism was made of Mr Robinson by the Griffins I generally found him to be an honest witness who was understandably limited in any precise recollection concerning a credit application. I also accept his explanation as to the mismatching. It was inherently probable that he sought and obtained some explanation in his “follow up” conversation with Mrs Bell.
Evidence of Mrs Bell
59 Mrs Bell was not an impressive witness. Her evidence was improbable and unsatisfactory on a number of issues and she, at times, appeared selective in her ability to recall events.
60 Firstly, she appeared to recall only one conversation with Mr Robinson although the surrounding evidence suggests she had at least two conversations (one wherein he requested an invoice and another wherein he requested some clarification). This despite the fact that she purported to portray a good memory on other matters.
61 In terms of the mismatched invoices, Mrs Bell also gave improbable evidence. Thus, she claimed that she requested a valuation of the equipment from Mr West in June/July 2007 when she was selling the business and that the $160,000 invoice was received in response to this request for a valuation. This, despite the fact that the $160,000 invoice is expressed to be an invoice and is dated 28 November 2006, well prior to the business even commencing.
62 Her evidence also contrasted with the evidence of Mr West that in around November 2006 Mrs Bell requested an invoice for a larger amount of money to see if she could get more finance from the bank but that she would “fall back” to the lower amount if she was turned down. Further that the $160,000 invoice was provided pursuant to this request. Under cross-examination Mr West also clarified that the second invoice for $160,000 was based on there being a greater volume of equipment. This explanation was consistent with the date of the invoice of 28 November 2006 being on or about the date Mrs Bell was applying for finance. Although not entirely satisfactory, he provided a more probable explanation than that proffered by Mrs Bell.
63 Finally, Mrs Bell at one point claimed to have told Mrs Griffin she paid $110,000 for the equipment but under cross-examination claimed that she could not recall any discussion about the price paid for the equipment. Nevertheless, Mrs Griffin’s evidence on this matter was consistent with the evidence of Mr West that Mrs Bell had told him that “she used the larger value invoice on the paperwork when she sold the playground.” In the absence of a satisfactory explanation for the $160,000 invoice and in the light of Mr West’s evidence, I therefore prefer and accept Mrs Griffin’s evidence on this matter that something was said to the effect that the equipment cost or was valued at approximately $150,000 (Mrs Griffin used the terms interchangeably). However, it remains to be determined whether the alleged representation was made by the bank as opposed to Mrs Bell.
Submissions of the Griffins
64 The Griffins submitted that the use of the words to the effect that Mr Robinson “had what he needed to continue with the loan application” constituted the alleged bank representation, namely a representation that the Bells had in fact purchased the play equipment then situated at the café for $150,000.
65 In making this submission, the Griffins relied on a number of matters which included[2]:
[2] Defendants’ written submissions dated 22 February 2010 para 11
(a) that Mr Robinson was a Bank manager who had been with the Bank for 22
years and was well experienced;(b) that Mr Robinson had previously lodged a credit application for the Bells in 2006 at which time Mr Robinson had seen various documents, including a Goplay invoice for $110,000, and the chattel mortgage with Esanda;
(c) that Mr Robinson knew the Griffin’s offer to buy was pending finance and
that the Griffins had to borrow the entire $175,000; and(d) that Mrs Griffin’s evidence was that if B & J Griffin did not buy the business
the Griffins would not have entered into the guarantees or the mortgage.66 Each of these matters were equivocal and did not suggest that the words of Mr Robinson should be construed as alleged.
67 More particularly, in terms of the previous application by the Bells, the representation alleged was made by Mr Robinson to Mrs Griffin. There is nothing to suggest it should be construed in the light of any previous credit application by the Bells. Moreover there is nothing to suggest that a “well experienced” bank manager would recall the details of documents forwarded (and witnessed) pursuant to a previous credit application which, in any event, did not clearly particularise the value of the equipment.
68 The Griffins however highlighted other factors as follows:
(a) that Mr Robinson had been told by Mrs Griffin that she had been told by
Mrs Bell that the play equipment had cost them $150,000;(b) that Mr Robinson assisted the Griffins in completion of their business plan; (c) that Mr Robinson played a “hands-on” role by volunteering to obtain the invoice from Mrs Bell and again later offering to “clarify” the situation after receipt of the $110,000 invoice;
(d) that Mr Robinson’s evidence surrounding the receipt of the two invoices is
unsatisfactory;(e) that Mr Robinson’s actual words that “he had what he needed to go ahead” could only mean he had obtained proof that the play equipment was purchased by the Bells for $150,000; and
(f) that Mr Robinson did not “disclaim responsibility” for the passing of the
information and acted beyond a “mere conduit”.69 As indicated already the statement of Mrs Bell to Mrs Griffin has clearly achieved prominence in Mrs Griffin’s mind. However, although I accept that at some (relatively early) stage, she advised Mr Robinson of Mrs Bell’s oral statement concerning the $150,000, there is nothing to suggest that this was being referred to by Mr Robinson in July. There is even a lack of clarity in the evidence as to whether she was referring to a purchase price or valuation. However, be that as it may, there is no basis for suggesting that the reference to “having what he needed” referred to proof that an amount of $150,000 had been paid, or indeed any other specified amount. Rather, as was apparent under both cross-examination and re-examination, Mrs Griffin “assumed’ or “presumed” herself that he was referring to the $150,000 figure.
70 In terms of (b) above, any assistance given by Mr Robinson in terms of completing the business plan was of no consequence but tended to underline his relatively minor role in arranging for lodgement of the finance application.
71 In terms of (c) above, it is true that Mr Robinson actively sought the invoice and clarification of the invoice. However, this was clearly done to expedite the assembly of documents for the application for finance. There is no question of Mr Robinson “disclaiming responsibility” for the truth of the invoices (cf (f), above) which invoices were not even given to (or asked for) by Mrs Griffin. Rather, the concern of both at the time was the processing of the credit application. The fact that Mr Robinson assisted in obtaining information he needed for that application does not transform his role into that of an advisor.
72 In terms of (d) above Mr Robinson’s evidence as to his internal reaction to the two invoices is irrelevant to the question of what representation should be taken to have been externally made to Mrs Griffin. In any event, for reasons already given I accept his explanation.
73 Finally, in terms of (e) I do not accept that Mr Robinson’s words to the effect that “he had what he needed” could only mean that the Bells had in fact purchased the play equipment for an amount of $150,000. As indicated already, there is nothing to suggest that Mr Robinson was speaking of a figure of $150,000 or any other amount. Rather, the statement was a relatively simply one, namely, that a banker had all that was required to now process a credit application - nothing more and nothing less.
74 The Griffins referred to a decision of the Federal Court in Re Lindsay Gordon Bown & Christine Ann Bown v Commonwealth Bank & Anor[3] wherein Von Doussa J found that a bank officer had engaged in misleading and deceptive conduct when speaking to prospective purchasers of a business who were seeking finance from the bank. However, in that case His Honour referred to the bank officer “painstakingly explaining calculations” as to the return of the business and that “the effect of his [the bank officer’s] evidence is that he expected the applicants to make a judgment whether they would proceed or not according to whether they were satisfied with the level of return after bank repayments, indicated by his calculations…”(at [42]). His Honour also found that the bank officer made the statement that the business was a “good little business.” That case is clearly distinguishable from the present case wherein Mr Robinson did not purport to “enter the field” of advising as to the wisdom of proceeding with the purchase of the business.
[3] [1992] FCA 29075 In my view then the natural meaning of the words used by Mr Robinson suggest, simply, that Mr Robinson had all the information he needed to process the application for finance.
76 Moreover, when all of the surrounding circumstances are taken into account the words should not be taken to mean any more than this. I accept that the question whether words spoken are misleading may depend on “relatively subtle nuances.”[4] However, there is nothing in the words spoken, or the surrounding circumstances (even allowing for “subtle nuances”) to suggest that Mr Robinson was saying that the Bells had bought the equipment for $150,000 as alleged.
[4] See Watson v Foxman (1995) 49 NSWLR 315 at 318 cited by the Griffins77 In these circumstances I find that the bank representation as alleged is not substantiated and the Griffins are not entitled to the statutory relief sought.
78 It is unnecessary, in those circumstances, to consider the other submissions of the bank on the question of misleading or deceptive conduct.
Negligent Misstatement
Principles
79 Counsel for the Griffins suggested that the principles enunciated by Barwick CJ in The Mutual Life and Citizens’ Assurance Co Ltd v Evatt[5] operated. The bank made no submissions on this issue and did not challenge the application of these principles.
[5] (1968) 122 CLR 556 at 571-380 The first condition stated by Barwick CJ was:
“….the circumstances must be such as to have caused the speaker or be calculated to cause a reasonable person in the position of the speaker to realize that he is being trusted by the recipient of the information or advice to give information which the recipient believes the speaker to possess or to which the recipient believes the speaker to have access or to give advice, about a matter upon or in respect of which the recipient believes the speaker to possess a capacity or opportunity for judgment, in either case the subject matter of the information or advice being of a serious or business nature. It seems to me that it is this element of trust which the one has of the other which is at the heart of the relevant relationship. I should think that in general this element will arise out of an unequal position of the parties which the recipient reasonably believes to exist. The recipient will believe that the speaker has superior information, either in hand or at hand with respect to the subject matter or that the speaker has greater capacity or opportunity for judgment than the recipient. But I do not think that it can be said that this must always be so, that inequality in these respects must necessarily in fact be present or be thought to be present if the special relationship is to exist.…”
85 bank owed a duty to take reasonable care:
81 The second is that:
“… the speaker must realize or the circumstances be such that he ought to have realized that the recipient intends to act upon the information or advice in respect of his property or of himself in connexion with some matter of business or serious consequence.”
82 And the third is that:
“…the circumstances must be such that it is reasonable in all circumstances for the recipient to seek, or to accept, and to rely upon the utterance of the speaker.”
83 In the case of San Sebastian Pty Ltd v The Minister Administering the Environment Planning & Assessment Act 1979 & Anor[6] Brennan J restated these three “conditions.” Moreover in Tepko Pty Ltd & Ors v Water Board[7] Gleeson CJ, Gummow and Hayne JJ generally approved of the principles above and stated that two were of immediate significance in that case. Those principles were also generally accepted by the other members of the court notwithstanding their Honours Kirby and Callinan JJ (with whom McHugh J agreed) reached a different view on the facts.
[6] (1986) 162 CLR 340 at 371-2
[7] (2001) 206 CLR 1
84 Other cases have emphasized however, that, notwithstanding the guidance offered by the Evatt principles the Court should nevertheless undertake a “case by case” approach.[8]
The Griffins submit that these three principles were met here such that the as to determine whether the play equipment was in fact purchased by the Bells for $150,0000;
(b) to ensure that the play equipment was in fact purchased for $150,000 by
the Bells;(c) to “fully inform” the Griffins and the company of the information it had obtained so as they could then use this information to decide whether to purchase the business; and
(d) to provide to the company and the defendants with all documents it had obtained from Mrs Bell or others that related to the sum the play equipment was purchased for.
[8] See e.g. Kestrel Holdings Pty Ltd v APF Properties Pty Ltd [2009] FCAFC 144 at [99]
86 In my view no duty of care arises as alleged.
87 Although Mrs Griffin gave evidence that she “trusted” Mr Robinson there is nothing to suggest that the parties were in any unequal position in terms of gathering information for the finance application. There is nothing to suggest that Mrs Griffin would be unable to obtain the invoices obtained by Mr Robinson and nothing to suggest Mr Robinson had assumed the role of financial advisor simply because he obtained the invoices directly from Mrs Bell. Indeed the credit application indicated that the Griffins had their own advisors - both an accountant and a lawyer. In these circumstances I do not accept that any special relationship was formed beyond the more usual of a buyer and seller of financial services within a commercial setting[9].
[9] See and cf comments in Westpac v Potts, unreported SC of Qld, full court,16.4.1992 referred to in Bown’s case [1992] FCA 290 at [55]
88 Secondly, there was nothing to suggest that Mr Robinson should have realised that Mrs Griffin “intended to act” on his statement that he had “what he needed” to process the application for finance. The evidence before him was that the company had already agreed to purchase the business subject to finance. In these circumstances the purchase of the business was a “done deal” and the concern of both Mrs Griffin and the bank was the obtaining of finance rather than the collection of material to enable consideration of whether to buy the business.
89 The Griffins sought support in the case of Smith & Anor v State Bank of New South Wales Ltd. [10] However, in that case the bank actually provided a certificate of accreditation for display in respect of an undischarged bankrupt with a criminal history. The trial judge found that the bank realised or ought to have realised that if it made statements about the persons it accredited the recipients of those statements would act on those statements; the very point of accrediting person being to persuade potential customers they should rely on the advices of those accredited because the bank had accredited them.
[10] (2001) 188 ALR 729
90 The Smith case is therefore distinguishable from the present case wherein there was nothing to suggest Mrs Griffin would act on the information that Mr Robinson had what he needed to process a finance application.
91 Finally, there is no evidence that Mrs Griffin and/or those advising her had sought any clarification as to the value of the equipment prior to agreeing to purchase the business. This, notwithstanding the apparent disparity between the basis for the Gilchrist figures (which suggested a value of the equipment of some $200,000) as compared with the oral advice of Mrs Bell giving a figure of $150,000. This tended to confirm that the precise value of the equipment was not a matter of significance and makes it unreasonable for Mrs Griffin to rely on Mr Robinson’s statements without further inquiry.
92 In any event, and for reasons already given, Mr Robinson’s statement did not constitute any representation as to the price paid for the play equipment or its value. Both the context and specific words were solely referable to the processing of the application for finance.
93 In these circumstances I do not accept that the bank owed a duty to take reasonable care in the ways alleged.
94 It follows that the claim based on negligent misstatement fails.
Mortgage
95 By mortgage dated 4 September, 2007 Mr Griffin executed a mortgage of his “estate and interest in fee simple” to the bank. At the time he and Mrs Griffin were both registered as “joint proprietors” and were joint tenants of the property.
96 On 11 October, 2007 Mr and Mrs Griffin executed a transfer of land wherein they, as transferors, transferred all their estate in fee simple to Mr Griffin alone for “natural love and affection.” This was apparently provided to give effect to the restructuring contemplated in the second credit application given to the bank.
97 Then on 5 January, 2008 the mortgage and transfer were both registered on title with the transfer registered first in time.[11]
[11] Agreed statement of facts as to registration dated 24 February 2010
98 The question is then whether, as claimed by the Griffins, the bank security extends only to a half share, by reason that at the time the first defendant executed the mortgage he was a joint proprietor of the property with the second defendant and thereby only held a 50 per cent interest in the property.
99 Pursuant to s40(1) of the Transfer of Land Act 1958 no instruments until registered shall be effectual to create vary extinguish or pass any estate or interest or encumbrance in on or over any land under the operation of the Act, but upon registration the estate or interest or encumbrance shall be created varied extinguished or passed in the manner and subject to the covenants and conditions specified in the instrument.
100 Pursuant to s45(2) upon registration of the transfer the estate or interest of the proprietor shall pass to the transferee.
101 Further, pursuant to s74(2) any mortgage shall “when registered” have effect as a security and be an interest in land, but shall not operate as a transfer of the land thereby mortgaged.
102 As indicated already the transfer was registered prior to the registration of the mortgage. Pursuant to s45(2), upon that registration the estate or interest of Mr and Mrs Griffin passed to Mr Griffin so that he was registered as the sole registered proprietor of the property.
103 The instrument of mortgage dated 4 September, 2007 mortgaged Mr Griffin’s estate and interest specified which was defined as “the mortgagor’s estate and interest in fee simple.” Pursuant to s40 this was not effectual to create or pass any encumbrance over the property prior to registration and was only effective as a security “when registered” pursuant to s74(2).
104 Further although there was clearly a personal contract entered into on 4 September which may have given rise to an action for damages, this is of historical significance only given the subsequent registration of the mortgage.
105 With the registration of the mortgage on 5 January, 2008 the mortgage instrument became effective as an encumbrance. As the oft-repeated statement of the High Court in Breskvar v Wall says: “it is not a system of registration of title but a system of title by registration.”[12]
[12] (1971) 126 CLR 376
106 The subsequent registration of the mortgage in these circumstances made the security effectual over the entire property in circumstances where Mr Griffin had previously been registered as the sole proprietor of the property.
107 In these circumstances the bank is entitled to possession and its security extends over the entire property by reason of registration.
Conclusion
108 There will be judgment for the bank in the amount of $186,097.53 plus interest and costs pursuant to the certificates of indebtedness dated 15 February, 2010.
109 There will further be an order for possession over the property at 4 Hill Close, Wahgunya.
110 I will hear from the parties as to the precise form of final order.
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