Goodwin v National Bank of Australasia Ltd

[1968] HCA 30

HIGH COURT OF AUSTRALIA

Barwick C.J., McTiernan, Taylor, Menzies and Windeyer JJ.

GOODWIN v. NATIONAL BANK OF AUSTRALASIA LTD.

(1968) 117 CLR 173

28 May 1968

Banks and Banking

Banks and Banking—Guarantee to bank of customer's account—Customer already surety to bank in respect of account of third person—Duty of bank to disclose to surety existence of customer's guarantee—Matters to be disclosed by bank to intending surety.

Decisions

May 28.
The following judgments were delivered:-
BARWICK C.J. This is an appeal from a judgment of the Full Court of the Supreme Court of Queensland allowing a demurrer to the appellant's statement of claim in a suit in the Supreme Court in which the appellant claims rescission of a registered bill of mortgage of land given by her to the respondent bank to secure the repayment to it of the indebtedness to it of the appellant's son and daughter-in-law. Alternative claims are for declarations that the bill of mortgage is void and that the appellant is entitled to be discharged and exonerated from all liability under the bill. (at p174)

2. The statement of claim alleges that a week before the execution of the bill of mortgage the appellant's son had become surety to the respondent for the account of a person named Cavendish. Whilst it is not so alleged, we are asked to deal with the matter on the footing that the appellant at the time she executed the bill was in fact unaware of the suretyship obligations of her son to the respondent. The statement of claim further alleges that the bill was executed by the appellant at a branch of the respondent and that it was not read over to her by the respondent or any of its officers. Whilst it appears that the appellant was at the time eighty-two years of age, no facts are alleged which would vitiate her execution of the bill, but it is claimed by the appellant that the non-disclosure (which she asserts) by the respondent of the existing suretyship of her son amounted to a misrepresentation warranting the rescission of the bill of mortgage. (at p174)

3. The transaction between the appellant and the respondent was not of a class calling for the fullest disclosure - it was not uberrimae fidei. But it is settled law that a bank in the position which the respondent occupied in relation to the appellant is only bound to disclose to the intending surety anything which has taken place between the bank and the principal debtor "which was not naturally to be expected", or as it was put by Pollock M.R., in Lloyd's Bank Ltd. v. Harrison (1) (1925) (unreported). cited in Paget's Law of Banking, 7th ed. (1966), p. 583 "the necessity for disclosure only goes to the extent of requiring it where there are some unusual features in the particular case relating to the particular account which is to be guaranteed". (at p175)

4. Thus, it is important in this case to observe the precise terms of the appellant's covenant with the bank contained in the bill of mortgage, which is part of the material in the demurrer book. By cl. 1 of the bill, the appellant covenanted "to pay to the Bank on demand in writing all moneys which are now or may from time to time hereafter be owing or remain unpaid to the Bank in any manner or on any account whatsoever by" her son and daughter-in-law "either alone or jointly with any other person or corporation and either as principal or surety including all and every the sums or sum of money (if any) which the Bank . . . has already advanced or paid or is liable to pay or may hereafter . . . advance or pay or become liable to pay . . . ". Thus the guarantee of the appellant was expressly to cover any indebtedness of the son and daughter-in-law or either of them as surety to the respondent. (at p175)

5. The question then is whether in entering into that transaction the respondent was bound to disclose the existence of the current contract of guarantee signed by the appellant's son. Could it be said that the existence of such a contract was not something which a person in the position of the appellant, in relation to the transaction which I have outlined, would not naturally expect? In my opinion, that cannot be said. Just as the fact that the principal debtor is already indebted to the bank need not be volunteered by a bank to an intending surety of the account, so it seems to me that the present existence of a guarantee by the principal debtor where the intended guarantee includes the indebtedness of the principal debtor arising out of any guarantee to the bank need not be volunteered by the bank to the intending surety. (at p175)

6. Apart from the non-disclosure of the existence of the son's current guarantee of the account of Cavendish, nothing is suggested in the pleadings in support of the claim that there was a misrepresentation by the respondent which justifies rescission of the bill of mortgage. As, in my opinion, there was no duty to disclose the existence of the guarantee, there was, in my opinion, no material in the statement of claim to found the prayer for rescission or either of the prayers for a declaration. (at p176)

7. Accordingly, in my opinion, the demurrer was properly allowed and this appeal should be dismissed. (at p176)

McTIERNAN J. I agree. I think the matters pleaded in the statement of claim do not create in the plaintiff an equity to any relief which she claims. It would not, in my opinion, be unconscionable for the defendant to insist upon the instrument attacked if the defendant should choose to do so. (at p176)

TAYLOR J. I agree. (at p176)

MENZIES J. I agree. (at p176)

WINDEYER J. I agree. It seems to me that on the facts as alleged in these pleadings the claim for relief is not made out. (at p176)

Orders

Appeal dismissed with costs.