Commonwealth Bank of Australia v Longo
[2001] VSC 191
•15 June 2001
| IN THE SUPREME COURT OF VICTORIA AT MELBOURNE |
COMMERCIAL AND EQUITY DIVISION
No. 5955 of 1993
| COMMONWEALTH BANK OF AUSTRALIA | Plaintiff |
| v | |
| SALVATORE LONGO AND CARMEL LONGO | Defendants |
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JUDGE: | Hansen J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 21–24 & 28 May 2001 |
DATE OF JUDGMENT: | 15 June 2001 |
CASE MAY BE CITED AS: | Commonwealth Bank of Australia v Longo |
MEDIUM NEUTRAL CITATION: | [2001] VSC 191 |
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Equity – Husband and wife customers of bank – Mortgages – Wife claims unconscionable conduct by bank – Husband claims undue influence by wife.
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr J Tsalanidis | G S Ray |
For the First Defendant | Mr S V Palmer | J Kotsifas & Associates |
For the Second Defendant | Mr J L Evans | Indovino's Lawyers |
HIS HONOUR:
Salvatore and Carmel Longo were born in Sicily. He is 68 years of age; she is 58 . He migrated to Australia in 1948 aged 15 (or perhaps he was 18) years having attended primary school in Italy to third year; she migrated to Australia in 1963 aged 20 years having attended school in Italy for five years to about 12 years of age. When he arrived his father took him to grow tomatoes on a farm. When she arrived she did packing work. They married in Italy in September 1963 and have three children: Steven; Grace, who is aged 34; and Rosanna, who is aged 30.
For some years Salvatore and Carmel banked with the Commonwealth Bank of Australia ("the bank"). In June 1977 they purchased an orchard of a little over 26 acres at Lemnos for $50,000. The purchase was funded by the sale of their house in Shepparton for $57,000. The transactions were settled in January 1978. A Shepparton firm of Solicitors, Cameron & Cameron, acted for them on each transaction. In anticipation of settlement of the purchase, in November 1977 they applied to the bank for an overdraft facility of $3,000 for working capital purposes for the business of an orchard which they proposed to conduct on the block being purchased. The bank approved the facility on the security of a house property in Riverview Drive, Kialla, owned by Salvatore and which he had acquired from his father. A mortgage in favour of the bank was duly executed over the Kialla land by Salvatore as mortgagor and debtor and Carmel as debtor. The mortgage was in the all monies form.
Salvatore and Carmel were customers of the bank from 1977 to 1990. As those years progressed so did the number of their accounts and the level of their debt. Additional security was required and further mortgages were provided. Two of the mortgages, provided in May 1983 and May 1987 respectively, were secured over the orchard block. Ultimately, the liability to the bank became too much. Properties were sold to reduce the debt until all that remained was the orchard block. No compromise having been reached, on 28 April 1993 the bank filed the present writ for possession of the orchard block and judgment for $520,197.79 as the amount then owed to the bank. By the time the case came on for trial, the amount claimed had, with interest, increased to $1,319,696.88 as at 17 May 2001.
Each defendant sought, by different routes, to avoid all liability to the bank. They were separately represented, as they had to be in light of their defences.
The defendants do not raise any issue as to the correctness of the various statements of account issued by the bank from time to time, or as to any formal step, such as the giving of a notice, that the bank might have been required to take prior to commencing the proceeding.
The pleadings comprise an amended statement of claim, an amended defence and counterclaim of Salvatore dated 20 December 1999, a further amended defence and counterclaim of Carmel filed by leave during the trial, and an amended reply and defence to counterclaim dated 4 February 2000. To keep costs down I did not require the bank to file a further amended reply and defence to counterclaim to Carmel's further amended defence and counterclaim; it was unnecessary as the position of the parties was clear and the existing reply and defence could sensibly be read as responsive to the amended pleading.
Statement of Claim
The bank sues on two mortgages, dated 10 May 1983 and 14 May 1987 respectively. In each instance, the defendants were the mortgagors, the mortgage secured repayments on the orchard block and the mortgage was registered on the Certificate of Title. Under the 10 May 1983 mortgage (which was in the all monies form) the bank sought judgment for the amounts owing on a fully drawn loan account and a housing loan. Under the 14 May 1987 mortgage (which questionably was not an all monies mortgage) the bank sought judgment for the amount owing on the housing loan. The bank also sought an order for the possession of the orchard block, relying, in that respect, on either mortgage to found the claim. I will refer to these mortgages as the first and second mortgages and sometimes as the 10 May 1983 and 14 May 1987 mortgages.
Salvatore's Defence and Counterclaim
Salvatore admits signing the first and second mortgages but alleges that he did so under the actual undue influence of his wife. His defence also pleads a case of unconscionability in the Amadio sense[1] in relation to each mortgage but in his final address counsel for Salvatore expressly abandoned those pleas. He also disclaimed any case of unconscionability based on Garcia v National Australia Bank Ltd.[2] He expressly confined the defence to the plea of undue influence. As to that plea, see paras 30 and 33 of the defence concerning the first mortgage and paras 44 and 47 concerning the second mortgage. In summary, the matters relied on are the relationship of husband and wife; that Carmel spoke better English than Salvatore (he claiming no literacy in English); that Carmel dealt exclusively with the bank; that he relied on her to protect his interest and explain matters; that she put emotional pressure on him to sign documents; that she did not explain relevant matters including the documents; and he signed the documents at her request, without independent advice, trusting in and relying upon her judgement that it was in his interest to do so. It is alleged that the bank knew or ought to have known of these matters.
[1]Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447.
[2](1998) 194 CLR 395.
Counsel put the case as one of actual undue influence, referring in that respect to CIBC Mortgages PLC v Pitt,[3] and Bank of Credit and Commerce International SA v Aboody.[4] Counsel put the case this way to take advantage of the conclusion in Pitt that in a case of actual undue influence the subject transaction will be set aside without the person who acted under the influence having to confront an issue whether the transaction was to his disadvantage. The relief sought is a declaration that Salvatore is not indebted to the bank for any amount at all and that the first and second mortgages "and all other loan and facilities provided … are void and unenforceable" against him.
[3][1994] 1 AC 200 at 209.
[4][1990] 1 QB 923 at 967–969.
Carmel's Defence and Counterclaim
Carmel admits (by amendments made at the trial) that she signed the mortgages but alleges that at all relevant times she was under a special disability of which the bank took unconscientious advantage. She seeks an order that the mortgages be set aside and a declaration that she is discharged from all liability to the bank. The special disability is that she lacked literacy in English and lacked fluency in spoken English. It is alleged that when she signed the mortgages and entered into the loan agreements she did not understand their nature and effect, in particular the interest payable on loans to the defendants and the terms and conditions of the facilities. The bank knew or ought to have known of her special disability and ensured she had independent advice prior to such documents being signed. If she had understood the true nature and effect of the various mortgage and loan documents she would not have continued to operate the defendants' accounts with the bank after 1987. It is alleged further that the bank knew or ought to have known that she did not comprehend what interest was payable on the loans or the terms and conditions of the facilities, that by the end of 1987 the defendants had no real likelihood of being able to service their debt to the bank, and that she lacked commercial experience and was conducting a shop and post office business in a way likely to increase the level of their debt. Finally, it is alleged that if the defendants had ceased to operate their accounts with the bank in or around 1987 they would have been able to discharge their debt to the bank, and to all other creditors, without having to sell or encumber the orchard block.
Bank's Reply and Defence to Counterclaim
Four points were raised in answer to the defences. First, that any right in the defendants to relief in equity is precluded by their laches, acquiescence and delay. Secondly, the bank's title under the registered mortgages is indefeasible under the Transfer of Land Act 1958. That is correct, but counsel for the bank acknowledged that the bank's title was subject to an in personam right, if such could be established. Thirdly, by reason of various letters and acknowledgments concerning the bank facilities and the mortgages, the defendants had affirmed the validity of the mortgages or were estopped from denying they were enforceable. Fourthly, as a condition of obtaining relief in equity the defendants must themselves do equity and that required they pay the bank the amount owed.
The Evidence
The bank called six witnesses and tendered a court book of documents. Salvatore gave evidence and called their daughters Grace and Rosanna, and their accountant Dominic Mellino. Carmel gave evidence but called no witnesses.
Essentially the court book consisted of documents from the bank's files from 1977 to 1996. It also included documents from the file of a previous solicitor for the defendants which had mistakenly been discovered.
It must be no surprise for me to observe that the memory of witnesses of relevant events was often not good. It is unacceptable that in 2001 witnesses should be expected to give evidence of matters including conversations that occurred in the late 1970s and 1980s. At least there were the contemporaneous documents of the bank, including file notes and correspondence, but the defendants themselves and the witnesses called by Salvatore had no contemporary notes of their own and, apart from correspondence from Mellino and tax returns he had prepared, no documents of their own which recorded conversations and events.
All of the bank witnesses had been employed at the Shepparton branch of the bank where the defendants conducted their banking. They gave evidence of their dealings with the defendants and of the conduct of their accounts. The first called was Anthony John Kelly, a senior loans officer at the branch between July 1981 and June 1984. He retired from the bank's employ last December after 30 years' service. He gave evidence concerning the defendants' accounts leading up to and including execution of the 10 May 1983 mortgage, and on to when he left the branch. Daryl Charles Christie was assistant manager, loans, when he met Mrs Longo in July 1985 to discuss the conduct of the defendants' accounts which were in excess of their limit. He left the employ of the bank in May 1997. Norman Mien Meka commenced employment with the bank in December 1983 as a clerk at the Shepparton branch, and progressed to a lead teller, securities clerk and lending officer until he took up employment with the National Australia Bank in September 1998 (and by whom he remains employed). In March 1987, when he was a lending and securities officer, he was involved in the preparation of a home loan application for the defendants, which the defendants signed, and in their signing of a mortgage dated 29 April 1987 and related matters. Trevor John Lowrie, who had commenced employment with the bank in 1967, was employed at the Shepparton branch between 1978 and mid-1992; he was a loans officer from 1979. He left the bank's employ in 1994 and now conducts his own business. He gave evidence of a meeting with the defendants on 16 March 1987 concerning a re-arrangement of their accounts, of a meeting on 26 March 1987 concerning the home loan application, and other matters. Neville Anthony McAllen was employed at the branch; his only involvement was that as acting senior manager he accompanied Lowrie to the meeting with the defendants on 16 March 1987, and some other matters. He is no longer employed by the bank, and now conducts a small business. The final witness called by the bank was John Patrick Doherty who is employed as a manager in the group credit and market risk, credit management unit of the bank. He identified certain documents as coming from the bank's files and gave evidence of the amounts due to the bank at 17 May 2001 and several earlier times. He produced a statement of the amount due at 17 May 2001 and claimed under each mortgage. Each statement was tendered as evidence pursuant to the prima facie evidence clause in the mortgages. They showed that as at 17 May 2001 the amounts owed were: on the fully drawn loan account $1,064,378.57 plus daily interest at $404.17, and on the housing loan $255,318.31 plus daily interest at $47.55. Save for one possible qualification Doherty's evidence was not challenged. The qualification was that in final address counsel for the defendants submitted that, if the mortgages or "transactions" are set aside, Doherty's evidence will fall because it was given pursuant to the prima facie evidence provisions in the mortgages. This submission raised the possibility of an assessment such as before a Master, to ascertain the amount that might be owed on some account or other. Apart from this possibility there was no challenge to Doherty's evidence.
In summary, then, apart from Doherty, the bank witnesses had been, but no longer were, in the employ of the bank.
The defendants gave evidence in support of their cases, each trying to avoid all liability although by different legal routes, and in Salvatore's case by the route of blaming his wife. He called their daughters and Mellino to support him in that case. Mellino had prepared the personal income tax returns of the defendants and their tax returns as partners in the orchard business and in another business concerning a shop and post office. He described how he dealt only with Carmel and said that he did not meet Salvatore until after the bank had served summonses on them. Over the years he had contact with the bank from time to time concerning the Longos.
The witnesses from the bank impressed me as reliable and responsible people who did their best, after the passage of so many years since the occurrence of the relevant events, to give the best evidence they could of what had happened in the conduct of the defendants' accounts. Sometimes all they could do was rely on a file note as to a conversation or event. To me their evidence, and the responsible manner in which it was given, was redolent of honesty. I am well satisfied, in the view I formed of each of them, that they would have been sensitive to the need to ensure that the defendants were aware of relevant matters including the nature and effect of documents proffered by the bank for their signature.
I was not similarly impressed by the defendants. Each sought to avoid all liability, to the extent of not paying even one cent of their debt to the bank. Their self interest was obvious. It led Salvatore to exaggerate his admittedly limited ability to comprehend spoken English (in this respect I note that several times in giving his evidence—which he did through an interpreter—he answered a question directly), feign loss of memory and misrepresent his understanding of the banking transactions. In short there was a lack of frankness, which led Carmel to give false evidence, both in answers to interrogatories (sworn through an interpreter) and at the trial, as to the signing of the first and second mortgages. In her evidence she extended this false evidence to the signing of a string of other bank documents. The evidence was contrived, wilfully but stupidly, in an effort to create a case. Observing her while she was giving evidence and sitting in court during the trial, it was apparent that she was emotionally affected and distressed by the turn of events and felt responsible for the loss confronting herself and her husband. But sympathy for people in distress can not negative a finding that the evidence of a witness is unreliable. Nor can the denial of signing documents be passed off as immaterial on the basis that they obviously had been signed by the witness, for the fact is that after I had given leave to file an amended defence in which her execution of the mortgages was admitted, she went into the witness box and persisted in the false evidence. If she did that because she was caught by her prior false answers to interrogatories then the dilemma was of her own making, contrived for the purpose of avoiding liability, and one false oath was simply followed by another. I conclude that her evidence as to her lack of understanding of the banking transactions and as to what she had been told or made aware of by bank officers was false. She dealt with the bank, and various officers, over a sustained period in the course of which there were many oral and written communications and the defendants signed numerous documents. I find that she had a good and sufficient understanding of the transactions and the state of the accounts. I prefer the evidence of the bank witnesses as to their dealings with the defendants. I reject the evidence of Salvatore and Carmel where it conflicts with evidence of witnesses called by the bank.
All I say about Grace and Rosanna is that they gave evidence in an attempt to support their father. The findings I make establish that I do not accept the case that he was as ignorant of relevant matters or subject to the undue influence of Carmel as was sought to be established by their evidence. Mellino, I thought, had a tendency to downplay the matter of communications he had with bank officers (which were referred to in bank file notes) and his role. He did not have contemporaneous file notes to refresh his memory in giving evidence and he understandably had difficulty in recollection. But at one point in his evidence he positively disagreed with a statement in a bank file note dated 1 February 1998 that he had attended the bank with Mrs Longo; he said he attended with another client. The definiteness of the answer was somewhat striking in comparison with his evidence generally and on balance I do not accept it. Where his evidence conflicts with evidence of the bank's witnesses and the contemporaneous records of the bank (save to the extent they were qualified by bank witnesses), I prefer the bank's evidence.
Chronology
In this section I give an account of relevant events in the course of the conduct of the defendants' accounts. In doing so I state the facts as I find them to be, unless I indicate the contrary.
I have already referred to the transaction in November 1977 when the bank granted the defendants a $3,000 overdraft facility on the security of a mortgage over a property at Kialla owned by Salvatore. The defendants duly completed the purchase, took possession of the orchard block and commenced to conduct a commercial orchard in partnership. They continue to conduct that business in partnership.
The documents in the court book pick the matter up in August 1979 when the defendants applied to the bank for a loan of $20,000 to enable them to purchase a house property at 49 Williams Road, Shepparton for $18,000. The extra $2,000 was required for renovations to the property. Their intention was to let the property to earn income. At the time the existing overdraft account was operating within the $3,000 limit. The branch structured the application as one for a $12,000 fully drawn loan and $8,000 as a secured personal loan. The security was to be the existing mortgage over the Kialla property and a mortgage over the property being purchased. The application was forwarded to the bank's Melbourne office for approval but declined. Then, within a short time, the defendants placed $7,000 on interest bearing deposit with the bank, with further payments from the cannery to be added to the deposit, and the loan was approved. On 21 September 1979 the bank wrote to the defendants confirming the approval of the funding, which would take their total commitment to $23,000. The letter stated that the approval was on the bank's usual terms and conditions and subject, specifically, to requirements as to security, repayments, establishment fee, interest rate, other charges, overdraft service fee and documentation set out in the letter. The defendants took up the offer and proceeded with the purchase, in which Cameron & Cameron again acted for them as solicitors. The defendants signed a mortgage to the bank of the property being purchased, the loans were drawn down to enable settlement, the defendants took a transfer and on 15 November 1979 were duly registered as proprietors of the Williams Road property. The bank's mortgage was registered on the title on 26 November 1985. It remains to mention that the defendants let the property to tenants until they sold it in 1989.
The bank records then disclose that in October 1980 Carmel attended at the bank and requested a temporary excess of $1,000 on the overdraft account until mid-December. The bank's file note recorded that excesses had been caused by clients overspending on a recent trip to Italy. I find that this note was based on information provided by Carmel and stated the reason why additional credit was required. But within weeks drawings on the account exceeded the increased limit of $4,000. The bank contacted Carmel concerning the excesses and she explained the current business position. It was apparent to the bank officer that the defendants required extra working capital and Carmel was advised that the bank would permit excesses to $6,000 until the end of February 1981. Carmel was "very grateful", but was told the $6,000 must not be exceeded. On 7 November 1980 the bank wrote to the defendants confirming approval of the temporary increase of $3,000 on the overdraft account, which took the total commitment to the bank to $25,133.00. The letter further stated that the increase was on the bank's usual terms and conditions and also subject to the security of the Kialla and Williams Road properties, and terms as to repayment, interest rate, establishment and loan services set out.
The story is similar in 1981. At this stage Kelly commenced to be involved. His file note dated 18 August 1981 records that Carmel called following the bank's dishonour of a cheque for $1,600 which would have taken the overdraft account over the limit of $3,000 to $4,057. She complained that in the past the bank had telephoned to ascertain the reason for irregularities. She explained the present business position including that $1,000 was owed to pressing creditors. Kelly advised that the bank would allow a temporary excess of a further $3,000 until mid-November 1981. On 20 August 1981 the bank sent the defendants the usual form of letter confirming approval of the temporary increase on the overdraft account, which took the total commitment to the bank to $24,453, and further referred to the security, repayments, interest rate and fees for the arrangement. This was on the same lines as previous letters.
Then, on 26 October 1981 Carmel attended at the bank and advised Kelly of developments concerning the orchard business, including financial matters. Kelly's file note, which I accept as accurate, records that he advised her that liquidity seemed to have been a problem in the past few years and that efforts should be made to ease that situation. Carmel "said she was aware of the position" and advised that a property in Kialla had been placed on the market for $60,000. This was not the property over which the bank held a mortgage. Kelly agreed to extend the temporary excess arrangement of $3,000 to 31 March 1982 "on the basis that earnest attempts are made in the interim to sell the Kialla land". I find that he so advised Carmel and that she understood the position. A letter in the usual form confirming the temporary increase was sent to the defendants on 27 October 1981.
On 16 March 1982 Carmel spoke to a bank officer; the temporary excess had been cleared although an instalment on the fully drawn account was overdue. The defendants were noted as "longstanding and honest" clients and it was considered prudent to increase the overdraft limit to $6,000 on a permanent basis to alleviate seasonal temporary excess requirements. The next file note is that of Kelly on 23 August 1982 in which he records advice from Carmel that the vacant land in Kialla had been sold and the defendants would clear $49,000. She thanked the bank for their assistance and advised that the surplus funds from the sale would be lodged with the bank. That occurred on 12 November 1982 when Carmel placed $40,000 on term deposit in the name of the defendants for 17 months at 14.5% interest.
The story then moves to March 1983 and the events which led to the 10 May 1983 mortgage. In March the defendants, through Carmel, sought from the bank a loan of $70,000 to enable the purchase of two adjoining blocks of land on separate titles in Lemnos North Road, Lemnos. A mixed business and post office agency was conducted in premises on one lot; a rental dwelling was located on the other lot. The purchase price was $85,000 plus stock of approximately $5,000. Carmel saw Kelly about the matter. She informed him the orchard was not large enough to support the entire family, two children aged 18 and 16 had left school and had not been able to find full-time employment, and the defendants wished to set them up in their own business. On 24 March 1983 a formal application, which Kelly had written, was sent to the bank's office in Melbourne for approval. It was a long letter which set out a deal of financial and other information and attached a copy of the financial statements concerning the business provided by the vendor's agent. The letter stated that the defendants would not rely on income from the orchard business to repay the loan sought; profit generated from the new business and rental from other properties would be adequate to meet the proposed commitments. There would also be rental from a house on the property to be purchased. It was also stated that there would be surplus funds of $20,000 which would be retained with the bank on term deposit until required. Security would be the existing mortgages over the Kialla and Williams Road properties and a new mortgage over the orchard block. I find that Kelly discussed all these matters with Carmel and that she understood. The loan was approved and on 11 April 1983 the bank wrote to the defendants advising of the approval, stating that their total commitment would then be $90,472, that the approval was on the bank's usual terms and conditions and subject to requirements as to security (as stated above), repayments, interest rate, establishment fee, other charges and documentation set out in the letter. Again, this letter was in the usual form, and clear in its terms. The bank then prepared, and in May 1983 the defendants signed, the following documents: application for term loan (which set out the amount and purpose of the loan, repayments, interest and security), mortgage of the orchard block, and an assignment of the insurance policy on the building and fixtures on that land. The documents were signed before Kelly who signed the latter two as witness.
The loan having been approved, the defendants proceeded with the purchase. Cameron & Cameron acted for them and settlement occurred on 13 May 1983. The bank wrote to the defendants on 16 May advising of the settlement, as to the draw down of funds, and that a repayment book for the loan was available for collection. Possession was then taken of the new property. The defendants were duly registered as the proprietors of the Lemnos North Road land on 25 May 1983. Kelly explained that the bank did not take a mortgage of the land at that stage as the orchard block was preferable as security.
The existing shop and post office business was continued. Carmel ran the post office and her daughters ran the shop part of the business and the dwelling on the adjoining lot was let. Income was derived from these sources. Salvatore did not work in the shop and post office business. He continued to devote his efforts to the orchard business. Each of the businesses was conducted by Salvatore and Carmel in partnership and taxation returns were prepared and lodged on that basis.
The defendants had regular difficulties in keeping within the overdraft limit. By 21 June 1983 the overdraft account was in excess of the limit by almost $7,000. Carmel apologised to Kelly for the state of the account. She explained their position and requested tolerance. There was $43,000 on deposit but Carmel did not wish to apply those funds to reduce the excess. A similar discussion was had on 24 August 1983 (when the balance on the overdraft had gone out to $14,201) and a temporary excess of $10,000 (increasing the overdraft to $16,000) was granted to 31 October 1983. Another discussion occurred on 26 October (when the overdraft balance was $13,806) when Carmel called as a result of a letter which the bank sent because term loan reductions were in arrears, the temporary excess was about to mature and the annual fully drawn loan repayment was due. She provided financial information. Kelly recorded there was little option but to await developments over the month and, accordingly, carry the existing arrangement to end November 1983.
On 6 December 1983 Carmel called and transferred $6,000 to the fully drawn loan account. Kelly would have preferred $3,000 being applied to reduce the overdraft account but for taxation reasons that was not suitable to the defendants. Kelly recorded that their tight capital position was due to non-payment by cool stores for some of last year's crop. He continued the existing temporary arrangement until 28 February 1984.
The story then moves to 1984, and continues in similar vein. In January a separate account was opened at the bank for the shop and post office business; up to then there had been one account for both that business and the orchard business. On 22 March the bank wrote to the defendants advising that the term deposit for $40,000 was to mature on 28 April.
On 6 April 1984 Carmel advised Kelly that the property in Riverview Drive, Kialla that Salvatore had mortgaged to the bank in 1977 had been sold for $29,000 and that settlement was due in May. After allowing for certain payments there would be a balance of $21,000 which was to be applied as to $1,000 to their working account and $20,000 to a term deposit. Kelly's file note records that from the bank's point of view it would have been preferable for the net proceeds to be disbursed between the working accounts and term loan thus rectifying control problems, and I infer that he so advised Carmel. She did not take that advice, instead taking the view that income from one source should not be used to reduce debt on another account. Kelly recorded her optimism that the businesses would trade their way out of liquidity pressures.
On 11 May 1984 Kelly again spoke to Carmel. The bank had received $25,689 from Cameron & Cameron as the net proceeds of sale of the Kialla property and it was applied as to $20,000 to a term deposit for a term of 24 months at interest which commenced at 10.5% and increased by increments to 14%, and the balance to a separate account. Funds were then transferred from that account to reduce the overdraft account which was to reduce to the limit of $6,000. Excesses were to be cleared up in a few weeks. Kelly also discussed the shop account with Carmel; funds were to be injected so as to operate on an acceptable basis. He advised her that to ease liquidity problems she should take advantage of normal trading terms and not (as she was doing) pay for stock on delivery. As the earlier amount of $40,000 was retained the bank then held term deposit funds of $60,000. At the meeting Carmel mentioned that the defendants' home (on the orchard block) was run down and she inquired about the possibility of obtaining a housing loan to construct another house. In a general discussion Kelly informed her of the basic terms and conditions of a home loan, but no conclusion was reached and no commitment was made. This concluded Kelly's involvement with the Longos accounts.
In June 1984 Lowrie commenced to be involved with the accounts. There is a file note of his on 8 June of a discussion with Carmel in which she advised funds were to come to the orchard business, the shop account was discussed at length and she expressed confidence the account would work into credit by July. She was reluctant to transfer funds on deposit to place the accounts in order. The latter point continued an old theme. It is obvious, and I so find, that the bank pointed out the advantage of using funds held on deposit to reduce debt which was incurring a higher level of interest, but the advice was rejected.
Thereafter in 1984 there are file notes and correspondence by other banking employees concerning the accounts. These were not the subject of oral evidence and I pass over them quickly. They follow the pattern of recording balances (and excesses) and of discussions with Carmel in which, among other things, she continued to resist using funds on deposit to reduce debt. Arising out of these discussions, in September 1984 the bank approved the following limits to assist the farming operations, namely, the limit on the farming account be increased to $15,000, a limit of $5,000 be allowed on the shop account, and $8,000 be transferred from the shop account to the fully drawn loan. (The orchard is often referred to as the farm and the word farming is often used to refer to the conduct of the orchard business.) The bank advised the defendants of approval of these limits by a letter dated 10 October 1984 which, in the usual way, stated that the approvals were on the bank's usual terms and conditions and subject to requirements as to security (being the mortgages over the Williams Road property and the orchard block), interest, repayments, and fees set out. The defendants acknowledged acceptance of the terms by signing a duplicate of the letter. The defendants also signed a letter which acknowledged, for the purpose of the Sale of Land Act 1962, that in connection with the mortgage of the orchard block no sale had been made on terms or would be made without prior reference to the bank.
The story then moves to 1985. On 13 May the bank wrote to the defendants advising them the rate of interest on their term loan for the next year. Such letters were sent each year.
There continued to be excesses on the overdraft accounts for the orchard and shop, and from time to time bank officers spoke to Carmel to seek to have the excesses brought into line. At a meeting on 8 July Carmel advised a capital expense of $17,000 at the orchard which would be covered by transferring the $20,000 term deposit to the overdraft account (which at that stage was more than $10,500 over the limit). The $20,000 was duly transferred on maturity of the deposit in August. Carmel also advised that in the next months the orchard account should be well within the limit. Excesses on the shop account were also discussed, with Carmel advising the account had borne certain capital expenses. She advised the account would come within the limit in the next eight weeks from normal trading. She was advised that penalty interest would be imposed on excesses after August. Carmel also advised that the defendants owed $20,000 to the vendor of the land in Lemnos North Road.
On 31 July Carmel saw Christie, at the request of the bank, to discuss the conduct of the overdraft accounts. The orchard overdraft was a little more than $11,000 over the limit; the shop and post office account was almost $14,000 over the limit. Christie prepared a file note of the meeting which I accept as accurate. Apart from that he retained a memory of the Longos and of the subject conversation, although not all the detail was recorded in that, and in a subsequent, file note. On this occasion Carmel produced $5,370 of shop income in notes which had been held at home. This was deposited to a savings account and a bank cheque was drawn against that account in favour of the vendor of the Lemnos North Road land. Christie said that Carmel had previously held cash from the shop and not banked it until they contacted her when she would "come in with some cash and pay some money into the account". On the matter of the farm account, Carmel signed a form to take out the $20,000 term deposit on maturity, and when that occurred in August the funds were applied to the orchard account. The shop account was discussed. Christie (in line with bank officers before and after) encouraged her to place the $40,000 term deposit in the account to make it easier to operate and have disposable cash and no issue of returning cheques. It would also save interest. Carmel refused (as she had previously) to use the $40,000 term deposit in this way. She said she could clear excesses within two to three months. That was doubtful on past experience and she had not allowed for the $3,000 payment due on the fully drawn loan the next month. Christie, who advised that the excesses could not be allowed to continue as they had in the past few months, and as she wanted to retain the $40,000 term deposit, suggested a compromise to help the situation. The bank would write a $34,000 small business loan from which the fully drawn loan would be repaid and the remaining amount of about $17,500 would be credited to the shop account to bed down the excesses. The loan would be over a seven year term with monthly repayments of $685 out of the shop account. This would take pressure off the account and give an extended time in which to pay the debt. There was an establishment fee and interest component which, I find, he stated to Carmel.
On 12 August a letter in the usual form was sent to the defendants advising that the suggested small business loan (which I find Carmel had concurred in) was approved to assist to repay the existing fully drawn loan debt of approximately $16,500 and inject funds into the shop account to regularise the account. The approval was on the bank's usual terms and conditions and subject to requirements as to security (being the Williams Road and orchard properties), repayments, interest rate, fees and charges and documentation set out. Carmel signed and returned to the bank a copy of the letter as acknowledgment of acceptance of the terms and conditions. She also provided an acknowledgment under the Sale of Land Act signed by both defendants.
Carmel saw Christie again on 13 September 1985. The shop account had been over the limit. Carmel deposited a cheque which brought the account within the limit. The cheque was not proceeds from the shop. In discussion Christie advised Carmel to use trade terms and not pay for supplies on delivery and requested that the limit be respected. He returned to the matter of the term deposit but Carmel was reluctant to use it to reduce debt.
Later in 1985 the defendants sought from and were granted by the Commonwealth Development Bank ("CDB") a loan of $40,000 for capital expenditures at the orchard. The CDB forwarded the loan funds for the credit of the defendants' account at the Shepparton branch of the bank. The security was a registered mortgage over the orchard block and the Williams Road property. Each mortgage was provided and duly registered on title. To ease the burden on the defendants the bank extended the period of the term loan and small business loan and reduced the monthly payments.
1986 was an eventful year. On 14 May there was the annual letter advising the interest rate on the term loan for the next year. But the day before the defendants' house at the orchard block was destroyed by fire. On 15 May Shepparton Insurance Loss Adjusters wrote to the bank to formally notify it of the fire and that the dwelling and contents were destroyed. They wrote because, as the letter stated, Mr and Mrs Longo had advised that the bank held a mortgage over the property. The bank was requested to advise the amount outstanding under the mortgage and the course of action it desired when the loss had been calculated. The bank replied on 22 May advising that contact had been made with "our clients" who advised that once their claim was approved construction of a new dwelling would commence; funds were to be controlled through the bank. On 19 June the loss adjusters wrote again advising the claim had been accepted at $48,600 and that in respect of re-building the insurer would make progress payments on production of invoices signed by Mr and Mrs Longo and the bank. A copy of a release signed by Mr and Mrs Longo was enclosed.
There is a file note on 27 June which records advice that the plans had been drawn, and costings obtained, for a new brick veneer house. It would be substantially larger than the previous house. The estimated cost was $86,000. To reduce costs the defendants would purchase materials from friends in the building industry and engage tradesmen. The defendants sought a loan of $40,000 for the project. The partnership and personal tax returns of Mr and Mrs Longo for the year to 30 June 1985 were provided to the bank, and among other information Carmel stated she could apply rental income and income from the shop towards the new commitment. An application for accommodation and the usual Sale of Land Act acknowledgment, each dated 7 July, were signed by the defendants. On 9 July 1986 the bank wrote to the defendants advising of approval of a personal credit line facility of $40,000 to assist with the construction of a new dwelling on the orchard block. The letter was in the usual form of the approval letters sent over the years. The approval was on the usual terms and conditions and subject to the requirements as to security (being the existing mortgages), repayments, interest rate, fees and documentation set out. The defendants signed a copy of the letter as acknowledgment of acceptance of the terms and conditions.
For completeness a further reference should be made to the amount remaining owing by the defendants to the vendor of the Lemnos North Road land. On settlement of the sale the vendor had taken a mortgage back in respect of each title to secure a balance not paid at settlement. In other words, the defendants had signed a mortgage in favour of the vendor in respect of each of the two lots, and each mortgage was duly registered on title. It will be recalled that the defendants usual solicitor Cameron & Cameron acted for them in this transaction. The solicitors obviously dealt with the defendants in relation to the mortgages. In due course the mortgages were discharged.
A deal of activity, and further excesses, occurred in 1987. On 15 January Lowrie visited Carmel to discuss the situation; the farm account and the shop account was in excess. Carmel advised him that the cost of the new house could exceed $120,000, and seemed to think she could pay the building costs out of the farm account without regard of the limit of $15,000. Carmel advised they did not wish to use the $40,000 term deposit on building costs.
Discussions were resumed on 6 March. Carmel attended at the bank. The house was at lock-up stage. She produced quotes and estimates and said a further $35,000 loan was required to finish the project. It might be noted that the house was large, in the 30 plus square range and included four bedrooms, living areas, double garage and carport and reverse cycle air conditioning. It was a considerable increase or step up on the previous house. Carmel advised the debt on the farm account would return to order on receipt of payments from the canneries. The bank officer's file note of the meeting, which I accept as accurate, because it is probable in its terms in the context and accords with the facts, stated that Carmel agreed the defendants' position had become more and more cumbersome and that it would be practical to amalgamate the small business loan, personal credit loan and term loan. It was noted that the situation had progressively occurred due to capital improvements to the orchard and shop totalling around $100,000. I accept that as an accurate observation. It was noted that a new facility encompassing those accounts and the present requirements to complete the house would allow the defendants a period of consolidation and another fruit season before a principal repayment was established. This was discussed with Carmel. As to security, there was discussion about the value of the orchard block, and it was noted that further security over the Lemnos North Road land would be required. The senior manager read the file note and required further discussion with the customers concerning their requirements.
As a result, on 16 March Lowrie and McAllen called on the defendants at their home at the orchard block. At that time the farm account was in debit $84,336 against the limit of $15,000, the shop account was in debit $20,663 against the limit of $5,000, and the three in reduction loans were in debit as follows: small business loan $31,257, personal credit line $35,589 and term loan $45,025. There was also the CDB $40,000 loan. They still held the $40,000 term deposit and a little over $3,000 was held in a savings account. Lowrie and McAllen sought clarification of the defendants' future needs. Carmel advised income to be received. They discussed how the existing arrangements might be changed to a more workable situation and in that context discussed a re-arrangement under which there would be a housing loan through the Savings Bank of $100,000 repayable over 15 years with a monthly repayment of $1,535, together with a farm overdraft account with a limit of $30,000, a shop overdraft account with a limit of $20,000 and a fixed rate bill endorsement facility of $80,000. At the date of the meeting the total debt to the bank (not including the CDB) was $216,870; under the proposed arrangement the debt would increase to $230,000 but with differences concerning interest and period of repayment that gave comfort to the defendants. The security would be a second mortgage over the orchard block, the existing mortgage over the Williams Road property and a mortgage over the Lemnos North Road land.
Lowrie was careful to obtain relevant financial information to indicate the present and future situation and in that respect, and as to the appropriateness of the proposed arrangement, spoke to Mellino. Lowrie's file note records, and I accept this as his view, reasonably arrived at, that he was satisfied that income from the shop and orchard would be sufficient to service the various loans, and that the security offered would be adequate. The defendants agreed in the proposal. Lowrie recommended it. McAllen approved it on the basis that the defendants be advised this was the limit of assistance. It is a reasonable inference, and one that I draw, that they were so advised.
The next step was that on 20 March Meka prepared a home loan application to the Savings Bank under which the defendants applied for a loan of $100,000 repayable over 15 years with monthly repayments of $1,434 to assist repaying the bank loans and enable completion of the house. The form was typed up and the defendants attended the bank where they were interviewed by Meka. He took them through the application and upon them being satisfied to proceed they signed the application and provided $820 as the establishment fee for which Meka issued a receipt. The form was also signed by Lowrie.
The defendants also signed a document (prepared by Lowrie on 20 March 1987 and, it would seem, signed on that day) addressed to Cameron & Cameron requesting, in effect, the release to the bank of the title documents to the properties at Lemnos North Road.
Also on 20 March Lowrie sent a memo to the CDB requesting, on the basis of an up to date valuation of the Williams Road property, it agree to discharge its mortgage over the orchard block and rely on the Williams Road property for its security. On 9 April the CDB wrote agreeing to this proposal and enclosed its mortgage over the orchard block and a discharge which was registered on title on 24 April. That left the existing mortgage to the bank as the only encumbrance on that title. In return the bank provided a discharge of its mortgage over the Williams Road property.
There is a copy letter to the defendants from Lowrie dated 26 March. It advises approval of an increase in the overdraft limit of the farm account from $15,000 to $30,000, an increase in the overdraft limit on the shop account from $5,000 to $20,000 and a fixed rate bill facility of $80,000, all of which were to provide additional working capital for their business activities. Approval was subject to the bank's usual terms and conditions with security to consist of a mortgage over the orchard block and a mortgage over the Lemnos North Road land. The letter set out further specific conditions concerning the facilities including interest rates and fees. A copy of the letter was signed by Salvatore as acknowledgment of the terms and conditions.
A further letter dated 30 March was sent to the defendants informing them the Savings Bank had approved a loan of $100,000 to assist them complete their home. The loan was subject to the bank's usual terms and conditions which included a monthly repayment of $1,447. It also specified a rate of interest.
On 1 April the defendants signed a form authorising the bank to complete documents and draw and apply the loan.
On 9 April the defendants signed an acknowledgment for Sale of Land Act purposes, in the same terms as previously, in connection with the 10 May 1993 mortgage.
On 29 April the defendants signed a mortgage in favour of the bank over the Lemnos North Road land. Lowrie witnessed their signatures. The mortgages were duly registered on title on 15 May 1989.
Also on 29 April the defendants signed an application for the fixed rate bill facility for $80,000. The application specified a termination date of 4 May 1990 at a yield rate of 15.65% and a fixed endorsement fee of 1.75%. The bank wrote to the defendants advising that a bill had been drawn to fall due on 4 August 1987 and setting out details of the allocation of funds.
On 30 April the bank wrote to the defendants advising a transfer of $70,000 from the shop account to the farm account, stated updated balances of those accounts, advised that the new limits were implemented and enclosed a copy of the bill application form for their records.
On 14 May Meka attended upon the defendants, I conclude at the orchard block, for the purpose of execution of the mortgage over that block in favour of the Savings Bank to secure the advance of $100,000. The mortgage was signed and duly registered on title, behind the earlier bank mortgage, on 21 May 1987. Each mortgage remains so registered.
It is important to note that the home loan was applied, in part, to the complete clearance of the small business loan, personal credit line and term loan. That left on foot the two overdraft accounts.
On 26 May the bank wrote to the defendants advising approval of an increase in the limit on the farm account from $30,000 to $70,000 to provide additional working capital. This followed a review of the account, the disclosure that the house costs were higher than budgeted by some $25,000 and that cover was required for excesses, and the defendants agreeing to provide the $40,000 term deposit funds as additional security (and which security they provided under a form signed on 5 June). The letter of 26 May was in the usual form and specified requirements of security (being the existing mortgages and a charge over the term deposit), repayments, interest rate and fees. On 28 May the defendants signed another Sale of Land Act letter concerning the orchard block.
On 29 May the Savings Bank wrote to the defendants advising as to the monthly repayments on the housing loan.
On 4 August the bank wrote to the defendants advising roll over of the bill and details of interest and fees charged. A similar letter was sent in November and subsequently when the bills were rolled over.
Subsequently in 1987 excesses occurred on the overdraft accounts. Explanations were provided by Carmel and information was provided by Mellino. They were confident. Essentially, there was further spending on the house that was not covered by cash in the businesses.
In 1988 the confidence was not reflected in the conduct of the business accounts. Excesses continued and close monitoring was required. I refer to some matters only. On 1 February Carmel was at the bank saying she wished to purchase five lock up shops, a flat and some vacant land in Shepparton for $285,000. She was advised by the bank officer she was fully committed, that they should not extend themselves further, and that the bank would not assist. Notwithstanding, the excesses continued. In April Carmel was advised to make every endeavour to bring the accounts within the formal arrangements. By the end of May the excesses had increased. On 30 May Carmel agreed in discussion with a bank officer that the $40,000 on term deposit be credited to the farm overdraft account which would reduce the debit balance to approximately $72,500, still over the limit, and she signed a form authorising that transaction which was effected on 1 June.
But the excesses continued. On 12 July the orchard account had blown out again to $83,929 and the shop account was at $66,287, an increase of over $13,000 since the last interview on 13 May. The senior manager wrote referring to these increases and stating that the bank was "no longer prepared to tolerate this situation", and threatened dishonour of cheques. As a result she saw Lowrie on 14 July. He kept the matter under review. On 3 October Lowrie wrote to the defendants; the excesses had increased and he advised it was "imperative" she called immediately to discuss future conduct of the accounts. She called on 10 October. She sought to reassure Lowrie by stating the orchard was worth over $400,000 as they had spent some $200,000 on the new house, and that the shop and post office business and land at Lemnos North Road was virtually sold for $350,000. Lowrie spoke to Mellino who provided information on the sale.
On 26 October a bank officer called on Carmel to discuss a restructure of the borrowings to aid their control within the limits. The proposal was for a bills discount facility of $90,000 to be applied to clear the excesses on the overdraft accounts, thus reducing interest charges and reducing control problems. The bank officer attended at the shop and the orchard where he inspected the house. The house was complete with the exception of clean up, cupboards in the "second kitchen", carpets and curtains. The family was living in the garage. The defendants were happy to proceed with the restructure. On 3 November the bank wrote to the defendants advising approval of the bill discount facility of $90,000 to assist them regularise their accounts to within formal arrangements. In the usual way the letter referred to terms and conditions including security, fees and interest. Also on 3 November the defendants signed the usual Sale of Land Act acknowledgment referring to the 10 May 1983 mortgage over the orchard block. On 21 November the bank wrote to the defendants advising draw down of the bill facility and allocation of the net proceeds to the overdraft accounts.
The story goes on in 1989. As early as 3 January the overdraft accounts were in excess. As before, the account was monitored with the bank seeking to have the defendants operate within the limits. In this process there was further reference to the sale of the Lemnos North Road land. In June the defendants applied to the CDB for $85,000 to restructure the bank's short term loans. The application was declined.
On 7 July a bank file note recorded that the shop and post office business had been sold for $130,000 with settlement due on 26 July. The sale price was reduced to $100,000. On 12 July it was noted that Carmel had agreed to a proposed distribution of funds from the sale and to provide the bank with a second mortgage over the Williams Road property.
In August the bank was advised the sale of the business was not proceeding and that the Williams Road property had been sold for $60,000. After clearing the CDB debt there would be a balance of approximately $20,000. The defendants declined to sign the second mortgage over the property in view of the sale. The accounts continued to run in excess.
In a further file note dated 7 September it is noted that the freehold of the Lemnos North Road land had been placed on the market for sale. But in view of the excesses, on 20 September the bank wrote to the defendants concerning the overdraft accounts advising the farm account had been placed in reduction until the balance reduced below $70,000, and that further cheques should not be presented. The present limit of $20,000 was to remain on the shop account with temporary excesses to a total limit of $44,000 until 31 October; a higher interest rate might be imposed if the loan was not conducted on the bank's terms. The letter concluded with a note of fees to be charged. The defendants signed a copy of the letter as acknowledgment of acceptance of the terms and conditions.
In November the CDB wrote to Cameron & Cameron, as the defendants' solicitors, in response to a request, and advised the amount to repay the CDB loan. This request was made because the defendants had contracted to sell the Williams Road property for $60,000. At settlement in November the CDB debt was paid out and a net balance of a little over $21,000 was retained by Cameron & Cameron for the defendants. Of course the bank wished to receive those funds to reduce the excesses but, on inquiry, a senior manager was advised by the defendants' solicitor that Carmel had earmarked the funds for the purchase of another business. The senior manager considered the bank was being "used", determined that a hard line be taken, and that a bill of sale be taken over the shop business.
On 20 December Mellino wrote to Lowrie at the bank. Concerning the defendants he advised that after paying out the CDB mortgage some $15,000 was left which had been used to cover some personal debts and costs incurred as a result of the death of Carmel's mother. He noted that the house was now complete and no further costs were foreseen, hence the overdraft accounts should reduce with normal healthy trading. He stated that these accounts "have not been operated as well as they should have but this trend will now be reversed". Lowrie wrote to the defendants stating the conduct of the accounts was "totally unacceptable" and requested they call the bank as a matter of urgency.
It is obvious that by 1990 the situation had reached a pretty pass. The bank continued in its efforts to bring the defendants under control.
Carmel finally contacted the bank on 5 January 1990 and saw Lowrie. According to his file note, which I accept as accurate, he told her that if the accounts were not in order by 28 February she would have to arrange outside finance to clear the debts or the bank would sell the secured property. He raised with her why the net proceeds of the sale of the Williams Road property had not been paid to the bank in accordance with the prior arrangement. She said the funds had been earmarked to buy a business in Shepparton called Prestige Fashions and Furs for her daughter. She agreed to provide a bill of sale over the shop and post office business conducted at Lemnos North Road. She produced some fruit sale cheques and said she had a large number of cheques at home on the shop account which had not been banked. Lowrie told her to bank the cheques that day.
It is to be noted that in fact Carmel did proceed to purchase the Prestige Fashions and Furs business for her daughter; I have not seen the contract and do not know in whose name the purchase was made. In any event she used the funds in that way and gave no part of them to the bank.
On 10 January the bank wrote to the defendants advising that instalments on the housing loan would increase to $1,538 per month to ensure it was paid within the original approved term. The defendants signed the letter as acceptance of the arrangement.
On 2 February the defendants signed the usual form of Sale of Land Act acknowledgment concerning the 10 May 1983 mortgage.
On 13 February it was noted that in view of excesses both overdraft accounts were "in reduction" and no further cheques would be paid.
" If you had known at the time that you would have need to pay about $800 or $900 a week just to stop the debt increasing what would you have done? --- I would have done something about it, yes. I would have sold the house in Williams Road or I would have sold the house in – near the shop, or the shop itself, or I would have used – you know, the money to reduce the debtedness."
In cross‑examination by counsel for the bank Carmel agreed that she would have sold assets and cleared the bank's debt if she had known exactly what was happening. She said she would not have sold the farm; whatever else she might have done I accept that statement as correct.
It was submitted for Carmel that I should accept her evidence and that, on that basis, and on the basis also that the assets were of a value that would, if sold, have achieved the position contended for, it would be unconscionable for the bank to rely on the "apparent indebtedness … insofar as that would extend to the right to possess or sell" the orchard. On this basis the mortgages were to be set aside and Carmel was to be declared free of any liability.
At its threshold the submission rests on acceptance of Carmel's evidence. I reject her evidence. I regard it as false and made up in an attempt to avoid the unpleasant consequence that even if the mortgage was set aside a condition might be imposed which required repayment of the debt or some part of it. Further, her claim as to what she would have done in the circumstances, that is, to act sensibly and as a prudent person might have done, sits ill with the actual history of her actions over the years which was marked by an overly optimistic attitude that all would be well and a determination to keep spending as she considered appropriate to acquire and improve assets. Time and again up to and including the 1987 transaction, bank officers tried to counsel her, confine expenditures and get the defendants to control their accounts, including by applying the term deposits to reduce debt and conducting the shop business in a prudent way, but the same pattern of behaviour continued. Carmel's evidence is not only improbable in light of her contemporaneous actions but false, in my view. There are other reasons why the defence must be rejected. There is no proper evidentiary basis for the value of the several assets the defendants might have sold. The orchard would not have been sold at all. Then, Carmel's evidence in cross‑examination concerning the term deposit and sale of the Lemnos North Road land, and her conduct in not paying the balance of funds from the sale of the Williams Road property to the bank but instead applying them to the purchase of another business, together with the slow pace at which assets were realised in later years, is sufficient to establish that it is highly doubtful what if any asset would have been sold if things had been left to her devices and, even if some were, at what point in time. I do not accept the case that assets would have been sold in the rigorous way a cold-hearted manager might have done to reduce the debt to less than $50,000, and close bank accounts, by the end of 1987, even if their value would have achieved such a reduction. The defence entirely fails for lack of any evidentiary basis. I should say, for the sake of clarity, that the point was raised only in relation to the 1987 mortgage transaction. It was not raised in relation to the 1983 mortgage.
I conclude with a reference to the requirement in a case of this type that the party in the stronger position take unfair or unconscientious advantage of the opportunity created by the other party being under a special disadvantage. I record my finding that in its dealings with Carmel (she being the only party to raise this defence) in respect of the mortgages sued upon and the related transactions the bank did not take advantage, let alone an unconscientious advantage, of her. The defendants stood to benefit and did benefit, from the transactions. They were enabled to commence the orchard business, to acquire assets, to build a new house of substantial proportions, conduct businesses and support themselves and their families. This was enabled by the provision of funds by the bank, as a result of requests which were dealt with in a considered way. The facts contain no element of unfair or unconscientious dealing by the bank let alone any such element in terms of taking advantage of a person under a special disadvantage. They were commercial transactions of a fair and reasonable nature, reasonably understood in their several respects and freely entered into by the defendants.
In the way that Carmel's case was argued, and having regard to my earlier findings concerning the first mortgage, it is not necessary to analyse further her position concerning that mortgage. It is sufficient to say that her case of unconsionable dealing in relation to the first mortgage is not established.
Conclusion
The defences having failed the bank is entitled to succeed on its claim. It is not necessary to deal with the issues raised by the bank's pleading in reply. There will be judgment for the bank and orders for the amount due at the date of judgment and possession of the orchard block. I will hear counsel on the question of costs.
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