Gooley v NSW Rural Assistance Authority (No 3)

[2019] NSWSC 1314

Supreme Court

New South Wales

Medium Neutral Citation:

Gooley v NSW Rural Assistance Authority (No 3) [2019] NSWSC 1314

Hearing dates:

1, 2, 3, 4, 5, 8, 9, 10, 11, 12, 15, 23, 24, 29, 30 April 2019; 15 May 2019; 23 July 2019; further written submissions ending 9 August 2019

Date of orders:

30 September 2019

Decision date:

30 September 2019

Jurisdiction:

Equity

Before:

Parker J

Decision:

See [724].

Catchwords:

EVIDENCE — records of prior communications concerning FOS complaint – admissibility – hearsay – prior consistent statement.

 

EVIDENCE — Opinion evidence — Expert opinion –economist’s opinion about conduct of bank towards customers – admissibility – Makita principles.

 

CONTRACTS – Performance – Variation of Terms –variation of loan repayment terms – need for consideration – assumption of risk that variation may benefit either party.

 

CONTRACTS — Misleading conduct under statute —variation of loan terms purportedly without customer’s knowledge and approval – misleading or deceptive conduct - unconscionable conduct - estoppel.

 

BANKING AND FINANCE — Banks – Statutory unconscionability – two year commercial loan – “asset lending” – breach of term of contract incorporating Banking Code of Practice.

BANKING AND FINANCE — Banks – breach of term of contract incorporating Banking Code of Practice cll 25.2 and 2.2 – requirement under term for co-operation between the customer and Bank – no breach by fixing final date for repayment after period of forbearance.

  BANKING AND FINANCE — Banks — Bank accounts — Interest – entitlement to charge interest at contractual rates following expiry of loan – entitlement to interest on amounts paid and set aside for costs – repudiation – termination.

Legislation Cited:

Evidence Act 1898 (NSW), s 14B
Evidence Act 1995 (NSW), ss 55, 59, 60(1), 69, 79 and 135
Farm Debt Mediation Act 1994 (NSW), ss 4 and 6.

Cases Cited:

Comlin Holdings Pty Ltd v Metlej Developments Pty Ltd (No 3) [2019] NSWCA 214
Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64
Dasreef Pty Limited v Hawchar (2011) 243 CLR 588; [2011] HCA 21
Drivas v Jakopovic [2018] NSWSC 1803
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423; [1978] HCA 12
Elayoubi v Zipser [2008] NSWCA 335
Kowalczuk and Another v Accom Finance Pty Ltd [2008] NSWCA 343
Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305
Neville v Lam (No 3) [2014] NSWSC 607
Parslow v NSW Land & Housing Corporation [2018] NSWSC 843
Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41
Ritz Hotel Limited v Charles of the Ritz Limited (Nos 15 and 16) (1988) 14 NSWLR 107
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4
Tabet v Gett (2010) 240 CLR 537; [2010] HCA 12
Toll (FGCT) Pty Limited v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52
Trilogy Funds Management Ltd v Sullivan (No 2) (2015) 111 ACSR 1; [2015] FCA 1452
Vanbergen v St Edmunds Properties Ltd [1933] 2 KB 223
W J Alan & Co Ltd v El Nasr Export and Import Co [1972] 2 QB 189; [1972] 2 ALL ER 127
Watson v Foxman (1995) 49 NSWLR 315
Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd [1972] AC 741; [1972] 2 ALL ER 271

Texts Cited:

G H Treitel, The Law of Contract (11th ed, 2003, Sweet & Maxwell Ltd)
J D Heydon, Heydon on Contract: The General Part (5th ed, 2019, Lawbook Co.)

Category:

Principal judgment

Parties:

Paul Gerard Gooley (First Plaintiff/First Cross-Defendant)
Susan Jane Gooley (Second Plaintiff/Second Cross-Defendant)
Commonwealth Bank of Australia (Defendant/Cross-claimant)

  Paul Gerard Gooley (First Cross-Claimant)
Susan Jane Gooley (Second Cross- Claimant)
Commonwealth Bank of Australia (First Cross-Defendant)
Bank of Western Australia (Second Cross-Defendant)

Representation:

Counsel:
P E King/I Leong (First and Second Plaintiffs/First and Second Cross-Claimants)
T D Castle (Defendant/Cross-Claimant)

  Solicitors:
McKell’s Solicitors (First and Second Plaintiffs/First and Second Cross-Claimants)
Dentons Australia (Defendant/Cross-Claimant)

File Number(s):

2016/279614

Publication restriction:

Nil

Judgment

1. Paul Gerard Gooley and Susan Jane Gooley are a married couple who used to be farmers near Casino in the Northern Rivers District of New South Wales. About twelve years ago they changed banks, transferring from their former bank to the Bank of Western Australia (“Bankwest”). They proved unable to meet their loan obligations. Their farming properties had to be sold, and they were left with virtually nothing.

2. Bankwest’s assets and liabilities were transferred to the Commonwealth Bank of Australia (“CBA”). The transfer occurred, I assume by statute, as from 1 October 2012.

3. In these proceedings, the Gooleys claim compensation from CBA for alleged breaches of contract and contraventions of credit and consumer laws by Bankwest, and then CBA as its successor. In what follows, a reference to “the Bank” is a reference to Bankwest or CBA as the context requires.

4. The Gooleys’ farming operations were based at a property near Clovass on the Richmond River, about 15 kilometres east of Casino. The property had been in Mr Gooley’s family since the 1920s or thereabouts. Originally it was used mainly for dairying. In mid-2007 the Gooleys ceased dairying operations in favour of a mixed farming business. Over time they concentrated on the fattening of beef cattle.

5. When the Gooleys transferred to Bankwest in December 2007, the Bank provided them three new banking facilities. The largest of those was a $1.2 million fixed interest facility, which is referred to in evidence as a fixed interest commercial loan, or “FICL”. The facility term was fifteen years. For the first five years, the Gooleys were only obliged to pay interest and the rate of interest was fixed. After five years, repayments of principal and interest were required and the interest rate was to be a floating one.

6. Not long after the Gooleys moved to Bankwest, they suffered a damaging flood. This was in January 2008. The Gooleys sought assistance from the NSW Rural Assistance Authority (“RAA”). The RAA was prepared to provide emergency financial accommodation to the Gooleys but wished to take a second mortgage over the Clovass property. The Bank’s consent as first mortgagee was required.

7. In July 2008, fresh loan documentation was drawn up and signed. This provided for the variation of the FICL so as to reduce its term to five years. The Gooleys say that they were not aware of this and it is a major aspect of their complaint against the Bank.

8. In July 2011, the Gooleys took on a further property at Dobies Bight, about 15 kilometres north-west of Casino. The property was known as “Dyraaba” and came from Mrs Gooley’s family. The purchase was funded with a further loan of $550,000 from Bankwest.

9. The Gooleys’ farming operations performed badly over the period from 2008 to 2012 and they accumulated other major creditors apart from the Bank. The most important of these was George & Fuhrmann (“G&F”). G&F was a firm of stock and station agents whose services the Gooleys had used in the past to buy and sell cattle. In March 2011 the Gooleys made a trading arrangement with G&F under which G&F allowed them credit on their purchase account. The Gooleys used this facility to expand their cattle operations. By April 2012, despite applying some of the funds from the Dyraaba facility to the G&F account, the Gooleys owed G&F approximately $400,000.

10. In April 2012, the bank officer handling the Gooleys’ account learned of the Gooleys’ indebtedness to G&F and other suppliers. The Gooleys sought an extension of their facilities by a further $200,000 but this was not granted. The Bank instead transferred the file to the Credit and Asset Management Department (“CAM”), which was responsible for doubtful debts.

11. December 2012 marked the fifth anniversary of the draw-down of the funds under the FICL. According to the Gooleys, they expected that the interest-only period would come to an end on this date, with principal and interest payments for a further ten year period. But in November they were advised that the whole facility would expire and they would be required to repay the full amount. The Bank urged the Gooleys to refinance the loan, or sell assets so as to repay the debt.

12. Despite this notification, the Bank took no active steps to recover its loans. Instead there was informal moratorium under which the Gooleys paid an agreed sum by way of interest each month. This sum essentially covered the Gooleys’ interest payment obligations, but not principal repayments.

13. The Gooleys’ attempts after December 2012 to refinance their operations and to sell their properties came to nothing. In June 2014 the Gooleys lodged a complaint against the Bank with the Financial Ombudsman Service (“FOS”). The effect of this was to prevent the Bank from taking any enforcement action until the complaint was resolved. The FOS issued its determination in May 2015, dismissing the complaint.

14. The Gooleys’ attempts to negotiate with their other creditors were unsuccessful. Eventually G&F and another supplier brought debt recovery proceedings against them. The G&F proceedings were settled on the basis that the Gooleys would pay a discounted amount within a certain date, but they were unable to make the payment. As a result they suffered default judgment in the sum of approximately $400,000 in November 2015.

15. In February 2016 a mediation took place between the Gooleys and the Bank under the Farm Debt Mediation Act 1994 (NSW) (“FDMA”). The mediation was unsuccessful. In June 2016 the RAA issued a certificate under the FDMA permitting the Bank to commence proceedings to enforce its securities.

Issues for determination

16. The Gooleys commenced these proceedings in September 2016, naming the RAA as the first defendant and the Bank as the second defendant. Their claim was that the RAA acted wrongfully in issuing the FDMA certificate. They contended that, in consequence, it was not open to the Bank to take enforcement action against them. They sought declaratory relief and orders setting aside the certificate.

17. In response, the Bank filed a cross-claim against the Gooleys. This was the first cross-claim in the proceedings. The Bank sought judgment for the outstanding amount under its facilities, and possession of the Clovass and Dobies Bight properties.

18. The Gooleys then filed a second cross-claim in the proceedings, against the Bank as cross-defendant. In this cross-claim, the Gooleys sought damages or compensation and a “reopening” of their accounts with the Bank.

19. The Gooleys “settled” their claim against the RAA. They did so by abandoning any claim for relief; the proceedings were dismissed as against the RAA with no order as to costs in May 2017. At one point in the hearing before me, counsel for the Gooleys maintained that this did not prevent the Gooleys from continuing to claim, as against the Bank, that the FDMA certificate was invalid. But this contention was not pursued in final submissions.

20. Among the possibilities which the Gooleys had considered in 2012 was selling some or all of their property at Casino and moving to a beef fattening operation on the Northern Slopes or the Northern Tablelands. They made some enquiries about properties near Inverell. They did not ultimately make the move, but the idea later became important for the purposes of this case.

21. The Gooleys claimed that they had been considering moving to the Tablelands (which was defined, for the purpose of this case, as an area in the Armidale, Guyra, Glen Innes and Inverell districts) even before 2012. They said that if the Bank had treated them differently, they would have moved their operations to the Tablelands at an earlier point. They presented mathematical modelling designed to show that if this had happened they would have prospered, avoiding the financial disasters which they suffered from 2008-2009 onwards.

22. When the Gooleys began the proceedings they had sold off two of the five blocks which made up the Clovass property, with the proceeds going to the Bank. In May 2018 they sold the Dobies Bight property and the remainder of the Clovass property. After payment of the debt claimed by the Bank, the RAA, and G&F, there was a surplus of approximately $610,000. Pursuant to a consent order made in the proceedings, the surplus was paid into a controlled monies account. In July, Stevenson J decided that the Bank was entitled to retain out of the surplus its costs incurred in the proceedings to that point, together with a further sum of $300,000 on account of costs to be incurred in the future: Gooley v NSW Rural Assistance Authority (No 2) [2018] NSWSC 1049. The Gooleys were left with only $27,000.

23. As a result of the sale of the properties and the discharge of the debts claimed by the Bank, no substantive relief remains for consideration under the Bank’s cross-claim. The only question is costs. The substantive issues arise under the Gooleys’ cross-claim.

24. The hearing began on 1 April and extended over fifteen days up to 30 April. This was followed by various supplementary written submissions from the Bank. These included submissions on the admissibility of publications tendered by counsel for the Gooleys about the failure of Halifax Bank of Scotland (“HBOS”), of which Bankwest was then a subsidiary.

25. Following a further hearing on 15 May, it was agreed that written submissions in reply would be filed on behalf of the Gooleys in June. The parties were also to agree on which documents in the Court Book were to be in evidence.

26. This led to further issues being identified. In particular, the parties disagreed about the admissibility of documents generated as a result of the FOS complaint process. I deal with this issue below. And when the Gooleys’ reply submissions were filed in June (which extended over 109 pages), counsel for the Bank complained that they introduced new arguments which were not confined to reply.

27. These issues made it necessary to have a further hearing which took place on 23 July. At that hearing I decided to admit the FOS correspondence. It was also agreed after some debate that the Gooleys’ June submissions would stand, but that the Bank would have a further opportunity to respond, followed by a final reply from the Gooleys. The last of the submissions was lodged on 9 August.

28. The Gooleys’ case against the Bank was not easy to discern. As ultimately formulated in final submissions, it complained about four aspects of the Bank’s conduct. In chronological order, these are as follows.

29. The Gooleys’ first claim is based on the Bank’s conduct in (as the Gooleys put it) procuring the variation of the loan documentation so as to change the term of the FICL from fifteen years to five. The change was first made in July 2008, and was then carried forward in three subsequent sets of loan documentation signed in September 2009, April 2010 and June 2011.

30. The Gooleys’ contention is that they were misled by the Bank. They allege breaches of the Banking Code of Practice (incorporated into the loan documentation); misleading and deceptive conduct; and unconscionable conduct under the Australian Securities and Investments Commission Act. 2001 (Cth) (see s12BC; I will refer to this as “statutory unconscionability”). The Gooleys also claim that the Bank’s conduct gave rise to an estoppel against it.

31. The Gooleys’ second claim is based on the Bank’s conduct in making the loan for the purchase of Dyraaba in June 2011. The Gooleys’ case characterises the loan as an improper form of “asset lending”. The Gooleys allege breaches of the Code of Practice and statutory unconscionability.

32. The Gooleys’ third complaint is based on the Bank’s alleged failure to support them from April 2012 onwards. The Gooleys allege that this was a further breach of the Code of Practice and a further instance of statutory unconscionability.

33. Fourthly, the Gooleys complain about the Bank’s conduct in treating the FICL as being repayable in full in December 2012. The Gooleys contend that this was a breach of contract by the Bank, or alternatively that the Bank was estopped from taking the course. They also allege breaches of the Code of Practice and statutory unconscionability.

34. The Gooleys have always maintained as part of their case that, but for the alleged misconduct of the Bank, they would have been able to trade out of their difficulties at Casino. But over the course of the trial the Tablelands option emerged as the Gooleys’ preferred damages claim.

35. On the asset lending claim, the Gooleys’ primary case is that if the Bank had not made the Dyraaba loan, they would have moved their operations to the Tablelands in 2011. It now seems that on the FICL variation claim the Gooleys’ primary case likewise is that, but for the Bank’s alleged misconduct, they would have moved their operations to the Tablelands in July 2008 (or, alternatively, at the time of the later variations in 2009, or 2010, or 2011). The Gooleys also contend that but for the Bank’s alleged misconduct in April 2012 they would have moved their operations to the Tablelands at that point.

36. The Gooleys appear to accept that by the time of the conduct which is the subject of the fourth claim against the Bank (December 2012 onwards) it was too late for them to move their operations to the Tablelands. Under this part of the claim, they seek damages on the footing that but for the Bank’s misconduct, they would have been able to continue to farm at Casino.

37. As additional relief, the Gooleys sought orders “opening up” their account with the Bank. It seemed to me that, as a matter of substance, the Gooleys were seeking an account from the Bank as mortgagee. In the course of the hearing I required the Gooleys to specify the transaction or transactions that were challenged and the basis for the challenge. Eventually the Summons and Commercial List Statement were amended and particulars were provided.

38. In summary, there are two aspects to the account which the Gooleys challenge. The first is the charging of interest between January 2013 and the sale of the last of the properties in May 2018. The Gooleys contend that the Bank repudiated the banking contract by intimating that the FICL was repayable in December 2012; that they accepted that repudiation, thereby bringing the contract to an end; and that thereafter the Bank was not entitled to charge interest at contractual rates.

39. The second aspect of the Gooleys’ challenge is to the amounts paid and set aside for costs. The Gooleys contend that the Bank had no right to recover costs under the terms of the Bank facilities. Alternatively, the amounts claimed were said to be excessive.

40. The Gooleys complained about the Bank’s conduct after December 2012 right up to, and including, the FDMA mediation. It was unclear what significance these allegations had, and at the hearing I pressed counsel for the Gooleys on this.

41. In response, counsel appeared to clarify the Gooleys’ case. I understood (and counsel for the Bank understood) that no further and independent claim was being pressed concerning the Bank’s conduct of its negotiations with the Gooleys after December 2012. But the written submissions lodged by counsel for the Gooleys after the hearing appeared to go back on this. In particular, it was contended that the Bank’s post-December 2012 conduct involved “enforcement action” which was rendered “void” by the FDMA. As I now understand it, it is not contended on behalf of the Gooleys that this gives rise to some further cause of action sounding in damages or compensation, but it provides a further basis on which the Gooleys can recover interest and costs paid after December 2012.

42. As now formulated, the breaches of the Bank upon which are alleged by the Gooleys occurred between 2008 and 2013. The beginning of this period falls more than eight years before the proceedings were commenced. But the Bank did not plead any limitation defence.

16. The Bank denies that it breached its banking contract with the Gooleys, and also denies that it contravened any of the statutory provisions upon which the Gooleys relied. In addition, the Bank makes an issue of causation. Counsel for the Bank submitted that the Court would not be satisfied that, even if breach of duty or contravention is established, the Gooleys have shown that they had suffered any loss as a result.

17. The Bank disputes the Gooleys’ contentions on interest. On costs, the Bank’s position is that it was entitled to a costs order in its favour and any challenges to individual items of cost should be dealt with by way of assessment. Ultimately it was agreed between the parties that I should deal with the costs issue after delivering judgment on other issues.

Summary and analysis of evidence

Dramatis personae and lay witnesses

45. Both Mr Gooley and Mrs Gooley gave evidence in support of their claims. They were extensively cross-examined, and counsel for the Bank challenged their credit. I deal separately with their evidence below.

46. The Gooleys also called evidence from four other lay witnesses. These witnesses’ evidence concerned discrete points on which their evidence was not disputed; in fact, only one of the witnesses was actually called, and his cross-examination did not involve any challenge to his affidavit. I deal with these witnesses’ evidence at the appropriate places in my detailed review of the evidence below.

47. When the Gooleys banked with ANZ, their bank manager was Rodney James Mitchell. In mid-2007 Mr Mitchell left ANZ and went to Bankwest. The Gooleys followed him there. After the move, Mr Mitchell was the Gooleys’ Relationship Manager (“RM”) until about March 2012 when he left Bankwest.

48. The Bank called evidence from Mr Mitchell and he was cross-examined before me. His credit was attacked by counsel for the Gooleys. I deal separately with his evidence below.

49. In handling the Gooleys’ account, Mr Mitchell was assisted by Steven Avery, who was the Assistant Relationship Manager (“ARM”) for the account until about March 2010. After Mr Avery left, Anne Campbell was the ARM. She assisted Mr Mitchell until he left in 2012.

50. Mr Mitchell does not appear to have been replaced as RM when he left. Ms Campbell continued to look after the Gooleys’ account under the overall supervision of Glenn Triggs who was the Regional Manager for Northern New South Wales. Mr Triggs was responsible for the account when the Gooleys made their unsuccessful application for further loan finance in April/May 2012.

51. The account was referred to CAM in June 2012. There it was handled by Laura Mulligan. Ms Mulligan was the bank officer who notified the Gooleys that the FICL fell due for repayment in December 2012. She relinquished responsibility for the account at some point in 2013, during the informal moratorium. The account was later taken over in December 2013 by Graham Greentree who managed it until the Gooleys made their FOS complaint in June 2014.

52. The Bank served affidavits from Ms Campbell, Mr Triggs and Mr Greentree but in the end did not call any evidence from them. The Bank called no evidence from Mr Avery or Ms Mulligan. It was not suggested that either of them was not available.

Bank documents

53. The initial loan documentation for the Bank’s loan to the Gooleys was drawn up and signed in October 2007. Over the period up to July 2011, there were six variations to the terms of one or other of the facilities. Copies of each set of loan documents were in evidence.

54. The initial granting of the loan, and each of the variations, generated internal applications and approvals. The applications used two types of forms. One was known as a Credit Risk Submission (“CRS”), and the other as a Credit Risk Facility Amendment (“CRFA”). The applications were submitted under the name of the RM (in each case, Mr Mitchell) and the ARM from the Bank’s Lismore branch to its Credit Department in Sydney. Approval or otherwise was notified by the Credit Department in a memorandum which was known within the Bank as a “FATE”. Most of the relevant applications were in evidence.

55. The Bank’s facility terms provided for regular credit reviews. The Gooleys were required to submit financial information for this purpose. The information would then be submitted in the form of a Credit Risk Review (“CRR”) by the Lismore branch of the Bank to the Credit Department. The Credit Department would respond by issuing a FATE, although typically this did not involve any change to the loan terms. The FATE would simply “authorise” (in effect, specify) the next review date. Some of the CRRs were also in evidence before me.

56. The Bank had an internal information and record keeping service known as Genesis. The system allowed the bank officers to enter details of the account and copies of communications relating to it. It seems that Mr Mitchell hardly used the system. There are only a handful of Genesis entries in the system created by him.

57. The Gooleys were apparently provided with copies of at least some of the loan documents when those documents were signed. They received copies of other documents, including internal documents of the Bank, through the FOS process. The Gooleys’ reply affidavits in these proceedings annexed a lot of the FOS material (which, of course, included documents they would not have seen at the time) and engaged in a detailed and argumentative commentary on it. As a matter of expediency the Bank did not object to this but invited me to treat the commentary as a submission. That is the approach I have followed.

58. In the period leading up to the hearing, the Gooleys’ legal representatives raised various questions about the scope and adequacy of the Bank’s discovery. Shortly before the hearing, a Notice of Motion was filed on the Gooleys’ behalf seeking, among other things, orders for further and better discovery. The Bank responded by conducting some further searches and providing some further documents. One of the requests was for production of the original file from the Lismore branch. The Bank was unable to produce the file. Affidavits were filed recording the searches which had been made.

59. The questions about discovery became a recurring feature of the first few days of the hearing. Eventually, on 15 April, counsel for the Gooleys formally moved on the Notice of Motion and sought orders for further discovery of a number of categories of documents. This included the original Bank file from the Lismore branch. But I was satisfied that the Bank’s evidence demonstrated that reasonable searches had been made for the file and there was insufficient prospect of the file coming to light to justify any further order. I declined to order any further discovery on this issue, or on the other issues on which further discovery was sought.

Publications on failure of HBOS

60. It is common ground that by mid-2008, when the term of the FICL was reduced from fifteen years to five years, HBOS, which had expanded rapidly before the Global Financial Crisis, was perceived to be in financial trouble. Counsel for the Gooleys sought to go further, asserting that Bankwest itself had systemic problems at the time involving failure to comply with appropriate lending standards and procedures.

61. For this purpose, counsel tendered extracts from two publications. The first was a book by Stephen Bell and Andrew Hindmoore entitled Masters of the Universe, Slaves of the Market, which was published in 2015. The second was a report of the Bank of England Prudential Regulation Authority on the failure of HBOS, published in November 2015. The extract from the book dealt generally with HBOS’ international subsidiaries. The Bank of England report dealt somewhat more specifically with HBOS’ Australian operations which included Bankwest among others. Counsel for the Bank objected and the issue was held over for further argument.

62. In support of the tender, counsel for the Gooleys referred to the decision of McLelland J in Ritz Hotel Limited v Charles of the Ritz Limited (Nos 15 and 16) (1988) 14 NSWLR 107 and to my decision in Parslow v NSW Land & Housing Corporation [2018] NSWSC 843. The Ritz case concerned the admissibility of a memoir of Cesar Ritz, the founder of the Ritz Hotel, written by his widow. It had been published in 1938. McLelland J discussed admissibility on two bases. One was under the Evidence Act1898 (NSW), s 14B which provided for a previous statement by a person who is not available to be received as evidence despite the hearsay rule (this provision was the precursor to the Evidence Act 1995, s 63(2)(b)). The other was under the principles of judicial notice. In Parslow I considered the admissibility of a report made by the Ombudsman as a business record (Evidence Act1995 (NSW), s 69).

63. In a supplementary written submission, counsel for the Bank contended that none of the extracts tendered in this case was admissible upon any of these bases. Counsel for the Gooleys did not articulate the precise basis or bases of admission of the documents in question and the issue was not taken any further in any subsequent submission.

64. The result of this is that the Court is left with a bare and general assertion that the extracts are admissible on some basis or other. I do not find this satisfactory. The Court should not have to articulate counsel’s arguments for the purpose of ruling on them. It is far from clear to me that any of the bases of admission discussed in the Ritz or Parslow cases are applicable. I would be inclined to reject the tender for that reason alone.

65. But I think there is a further point. The publication extracts are very general in what they say about HBOS’ operations. To be of any use in these proceedings the documents would have to give rise, at least arguably, to an inference specific to the way in which the Gooleys’ particular loans were handled. I do not think that either publication comes close to this. Even the Bank of England report, which discusses HBOS’ Australian operations specifically, does so at a broad level. It is clear from the report that Bankwest had very extensive banking operations all over the country. These included retail as well as business banking. I do not see in the extracts tendered in this case anything which would enable me to draw any particular inference about the way in which the Gooleys’ loans were conducted. Accordingly, I think that the publications are irrelevant; or, if relevant, the relevance is so tangential that they should be excluded under the Evidence Act, s 135.

FOS documents

66. Following the hearing, counsel for the Gooleys sought to have included in the documentary tender bundle a selection of documents from the FOS complaint process. These include the initial complaint itself; subsequent correspondence between the Gooleys, the Bank and FOS; and correspondence containing instructions to, and advice from, the Gooley’s advocate in the FOS proceedings. Counsel for the Bank opposed the admission of these documents. Counsel argued that the documents were irrelevant (Evidence Act, s 55) or hearsay (Evidence Act, s 59) or should be excluded under the Court’s general discretion to exclude evidence (Evidence Act, s 135).

67. As we will see, counsel for the Bank made a wholesale attack on the Gooleys’ credit. This attack included the submission that their account of their dealings with the Bank, and their claims that they would have moved their operations to the Tablelands at an earlier point, were inventions made for the purpose of these proceedings. Counsel for the Gooleys submitted that the FOS correspondence was relevant, as tending to rebut the suggestion of recent invention. In my view they were clearly admissible on this basis.

68. I did not follow the Bank’s objection based on hearsay. At common law, documents admitted for the purpose of rebutting the suggestion of recent invention were relevant only as evidence of the fact that the statements in question were made; they were not evidence of the truth of such statements. But the effect of the Evidence Act, s 60, is that once admitted the documents are now evidence for all purposes: see Comlin Holdings Pty Ltd v Metlej Developments Pty Ltd (No 3) [2019] NSWCA 214 at [77].

69. Nor did I think that the prejudicial effect of, if any, receiving the documents as evidence would outweigh their probative value or that the admission of the documents of the evidence would otherwise result in undue waste of time or be misleading or confusing (Evidence Act, s 135). Of course it must be borne in mind that evidence of this type is not contemporaneous and has the usual frailties inherent in recollections, in the context of legal proceedings, after the event: see Watson v Foxman discussed at [101] below. But taking these limitations into account, the documents can still have significant probative value. They have the advantage of being more contemporaneous than the Gooleys’ affidavits. In fact, as will be seen, the FOS correspondence significantly undermines some aspects of the Gooleys’ case as presented in their affidavits. There was no justification for excluding them under s 135.

70. FOS’ determination was given on 22 May 2015. Although counsel for the Bank objected to the Court admitting the FOS correspondence, counsel submitted that if that correspondence was admitted the Court should also admit FOS’ determination. This was objected to by counsel for the Gooleys.

71. The other FOS documents are relevant because they contain, expressly or by implication, statements by the Gooleys which can be compared with the affidavit accounts given in these proceedings. The FOS determination itself is only FOS’ opinion on the evidence presented to it. It is not a statement by the Gooleys and is not relevant to the question of recent invention. In my view it is inadmissible. I uphold the objection.

Dr McGovern’s report

72. The Gooleys sought to call opinion evidence on liability issues from Mark McGovern, PhD, an economist who is a Visiting Fellow at the School of Economics and Finance in the Queensland University of Technology (“QUT”). Counsel for the Gooleys tendered a report from Dr McGovern. I rejected the tender, concluding that Dr McGovern’s evidence was inadmissible.

73. At the time of rejecting Dr McGovern’s evidence, I said that I would give my reasons for doing so in my judgment. I now set out those reasons.

74. Dr McGovern’s report was dated March 2019. It was entitled: “The Bankwest – Gooley partnership relationship: issues, analysis and findings”. The report contained, as an annexure, what was described as a brief background CV of Dr McGovern and a list of publications.

75. Dr McGovern describes himself as an economist and I assume that his PhD is in this discipline. He was a researcher and lecturer at QUT for twenty-seven years before taking early retirement at the end of 2016. He is currently a Visiting Fellow in Economics and Finance at QUT.

76. According to his CV, Dr McGovern’s career in economics has involved academic work (both on his own account and supervising the studies of students); journal publications; writing of reports for governments and industry; attendance at summits and participation in other areas of public discourse; and media commentary. From the brief description provided in the CV, some of these contributions have touched on agriculture and debt.

77. For the purpose of his report, Dr McGovern was provided by the Gooleys’ solicitors with copies of the current pleadings as at September 2018. The instructions stated:

You are instructed to review the pleaded failure of the Bank with respect to the Gooleys’ credit arrangements and to comment.

The facts and matters which you should assume are set out in the Affidavits of the Plaintiffs and Defendants and miscellaneous documents enclosed.

…

Several exhibits relating to damages and loss have not been forwarded as in all probability they are not relevant and too voluminous. If you believe relevant after perusing the documents now forwarded, we can provide.

78. The evidence did not identify what were the “miscellaneous documents” which were enclosed. Nor did it identify which of the exhibits were not sent to Dr McGovern or whether he called for any further exhibits apart from those which were sent to him. All the report said on the subject is that the affidavit and current pleadings and other documents were provided in two large boxes of folders.

79. The report was discursive in form. As has been seen, no specific questions were asked of Dr McGovern; he was simply invited to “comment”.

80. The report began with a section entitled “Position in outline” which seemed to be an overall summary. Under the subheading “Specific Observations and Deductions” Dr McGovern set out a series of propositions about the dealings between the Bank and the Gooleys. These propositions were critical of the Bank. Under the sub-heading “Conclusions” the report then stated:

Evidence of bank and banker incapabilities and associated failures to act fairly and reasonably, particularly in response to adverse external events, with due regard to GP [Gooley Partnership] interests is considerable.

Various combinations of the above points can provide logical explanations for many relationship incidents. They also suggest the nature and area of Breaches of the Code, and more widely.

Impacts from external events were clearly borne asymmetrically borne. Without effective bank efforts at rectification, negative effects from inadequately accommodated incidents had a cumulative negative effect on GP but no obvious negative effect on the bank.

In combination, failures of BW [Bankwest] and associates resulted in a premature termination of the relationship with needless damage and significant losses experience by GP and the Gooley family more broadly.

Premature termination would have been markedly less likely in a relationship with a well-stanced and properly functioning bank that could aptly act to effectively accommodate adversities affecting the relationship.

Presuming such a bank would so act, it seems more than reasonable and fair to conclude that balance sheet strains would have been more promptly recognised, discussed and ameliorated or resolved. After canvassing options, actions to de-stress balance sheets and the wider relationship dynamic should normally follow. Such a relationship would have been successful for both GP and BW.

However, untoward and unconscionable BW "impatience" means there is scant evidence of any real interest, let alone actions, in "working with" a borrower distressed by events beyond its control.

Difficulties occur and no lender or borrower are ever perfect. Nor is the weather, market or world. In the absence of any ability to make effective responses any relationship will struggle.

It is not abstractions, protocols, plans and the like but real persons with an ongoing intent and capability in making a relationship work as best they can who provide the best chance for success. Gains from the relationship are mutual, for not just the immediate parties but also for the wider industries and society.

Specifically, the Gooley Partnership would likely be successfully farming today had their relationship been with a better bank. ANZ arrangements would have been more suitable with a greater likelihood of a mutually successful investment relationship. However, even with BW arrangements a much better outcome should be expected and could have been achieved if bank agents acted in accord with their duties under Law, Code and Convention.

81. The next section of the report was headed “context”. This discussed the financial stresses on Bankwest and on CBA’s approach to the management of Bankwest’s loan portfolio after CBA acquired it. It referred to evidence given to the Banking Royal Commission by CBA’s Chief Risk Officer about Bankwest’s credit review process.

82. The next section was headed “unconscionable behaviour”. It referred at a general level to legal and economic theories of bargaining and decisionmaking.

81. The next section was headed “specific claims made and my findings”. This set out twenty propositions critical of the Bank, which largely corresponded with the “specific observations and deductions” in the “position and outline” section. The twenty “findings” were supported by further detailed discussion in each case in the following section of the report.

82. The final section of the report was headed “conclusions”. This consisted of a further set of propositions critical of the Bank’s conduct. These are too lengthy to set out in detail but were similar to the conclusions in the “position in outline” section which I have already quoted. The last two paragraphs were:

It will be up to the Court to ultimately judge the responsibility and fairness of lending, the extent of unconscionable conduct, the importance of such things as uncommunicated variations in the loan mix and the seriousness of repeated breaches of the Code of Banking Practice – as well as their particular and cumulative impacts.

There is much evidence of serious incidents with significant adverse impacts on the Gooley Partnership in all such areas.

85. The difficulties with the report may be illustrated by two examples. One of the “specific observations and deductions” was headed “financial product fitness – not fit for purpose”. It stated (footnotes omitted):

●   Incomes fluctuate in agriculture but regular repayments were deemed due in the product as Implemented (61 Mitchell Rod BW, 21 Gooley Paul, and 22 Gooley Susan 2007). This is a product-damning inconsistency unless risk is effectively managed by design.

●   However this was not a problem with the product as initially approved (Business Edge, to 30 years] (61 Mitchell Rod BW, and 71 Administrator08 BW 2007) as it allowed flexibility in repayments.

●   Automatic drawings from an overdraft account to meet property repayments while common can and do disguise capital positions in ways that disadvantage the borrower.

●   The bank failed to effectively react to difficulties encountered by the borrower that prudently would have been anticipated.

●   Such an asymmetric response to external events that disrupted expected GP income flows would,

○   if in a broad policy or organisational stance, deem the offered loan arrangements as not fit for purpose due to foundational design structure

○   if a particular policy, deem the offered loan arrangements as not fit for purpose due to a chosen design implementation

○   if applied particularly to this partnership, deem the offered loan arrangements as not fit for purpose due to design spirit and unjust relationship expectations.

The financial product set supplied and as managed by BankWest was not fit for purpose.

86. Another of the “specific observations and deductions” was headed “financial risk”. It stated:

●   Margins charged on a reference rate appear justifiable only as a risk management surcharge.

●   Failure to exercise this surcharge in way that helped rectify the borrowers position when risks are realised constitute an ongoing fee for no service.

●   The margin on the property loan was less than that of competitors which would indicate a less than usual provision for income shortfalls reducing cash reserve positions and the ability to provide interest payments as scheduled.

●   No accommodations were made by BW or parents despite the public through RAA and GP by increasing off farm work income.

●   Imposts in the later stages of the relationship needlessly and opportunistically accelerated the losses incurred by GP.

●   The relationship was asymmetric in ways the effectively and unethically limited the reasonable prospects of borrower success.

The Gooley Partnership was charged a risk management surcharge. Bank actions do not recognise this, so a “fee for no service” situation exists.

87. The passage I have quoted about lack of fitness for purpose appears to be a reference to the reduction in the term of the FICL. Dr McGovern’s argument boiled down to saying that the Gooleys encountered difficulties in making the “regular repayments” which were due and those difficulties should have been anticipated by the Bank, presumably by making some other provision for repayment. This however had not been a problem with the loan “as initially approved”, it then having a term of “up to” 30 years.

88. Underlying this must have been assumptions about the respective legal responsibilities of the Bank and the Gooleys concerning the repayment terms, and factual assumptions about dealings which took place between the parties in that regard. But the legal assumptions were not articulated and the factual assumptions were not identified, at least explicitly. In general, Dr McGovern seems to have accepted, uncritically, every factual allegation made by the Gooleys about the Bank, but even so it is unclear whether in this part of the report he was assuming that the loan as originally approved was 30 years, which of course was never the case.

89. Similar observations apply to Dr McGovern’s criticisms of the Bank for supposedly charging a “fee for no service”. On the one hand Dr McGovern proceeded on the basis that the Bank in some way had to justify charging a margin on the loan above wholesale interest rates. On the other hand he appeared to accept that the margin charge was actually less than that of competitors. Nevertheless the relationship was “asymmetric” and in some way “unethical”. Again these conclusions must have depended upon a whole array of unstated premises. But this example illustrates another point. There was no case made before me that the interest rate charged to the Gooleys under the FICL (or indeed any of the other loans) was unconscionably, or in some other way unlawfully, high. This part of the report does not appear to have been directed to any actual issue in the proceedings.

90. In Drivas v Jakopovic [2018] NSWSC 1803 I pointed out the problems which can arise where an expert report expresses conclusions on a question of mixed fact and law. On analysis, the conclusions may depend upon assumptions about the applicable legal principles which are incorrect; or they may depend upon acceptance of factual allegations which are contrary to what the Court ultimately finds; or both. In Drivas I concluded that the opinions in question did not satisfy the requirements of admissibility under the Evidence Act, s 79, because they were not based on relevant experience or expertise: see also Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 at 743-744 [85]; Dasreef Pty Limited v Hawchar (2011) 243 CLR 588 at 603-604 [35]. In Trilogy Funds Management Ltd v Sullivan (No 2) [2015] FCA 1452 Wigney J rejected purportedly expert evidence of mortgage fund management practice for substantially the same reasons: see at [724]-[752]. Dr McGovern’s report is another prime example.

91. The same conclusion can be expressed in a more fundamental way. The point is that s 79 does not make writings by an expert generally admissible. It is an exception to the opinion rule which provides that a fact cannot be proved by having someone express an opinion that it exists (s 76(1)). For the exception to operate, it is critical to identify the fact which the opinion is supposed to be evidence of. Until that is done the s 79 enquiry into whether the opinion in question is wholly or substantially based on expert expertise cannot even begin.

92. In the present case, no opinion on any such concrete fact, one way or the other, was asked from Dr McGovern. Dr McGovern’s conclusions were expressed at a level of generality that made it impossible even to begin to undertake the s 79 analysis. The statements that the financial relationship between the Gooleys and Bankwest were “inadequate”, were, in this context, merely question begging.

93. I doubt that the reference to Bankwest’s products not being “fit for purpose” and to a “fee for no service” situation was accidental. This is the language of the headlines generated by the Royal Commission into Banking. But that was a broad-ranging enquiry which looked generally at banking practices from the point of view of other interested parties as well as customers.

94. The Court’s task in the present case is quite a different one. The Court must decide, by reference to pleaded allegations and evidence presented before it, whether the Bank breached its legal obligations to the Gooleys, and if so, what legal relief the Gooleys are entitled to as a result. Dr McGovern’s report was of no use whatsoever in discharging this task. I find it hard to see why it was presented to the Court in the first place.

Mr Gooley’s evidence

95. Mr Gooley was born in December 1957. He was brought up in the Casino area and attended school in Casino. When he left school in 1975 there was not enough room for him in the family farming operation at Clovass. He went into banking, working at bank branches at Tamworth, Casino and Macksville for six and a half years. He also worked as a costing clerk in local government for two and a half years.

96. In 1983 Mr Gooley joined the family farming operation at Clovass. He farmed in partnership with his parents and his two brothers.

97. In December 1994 Mr Gooley was elected to the board of Norco Co-operative Limited (“Norco”), a large dairy co-operative company based on the North Coast of NSW. He held that position until 2001 when he resigned to concentrate on farming.

98. At the time Mr Gooley’s dealings with Bankwest began in the second half of 2007, he was forty-nine years old and had twenty-four years’ experience of farming on the property at Clovass. He considered, no doubt correctly, that he was experienced in financial matters. This experience came from his work in banking and his time as a director of Norco as well as from farming.

99. Mr Gooley had always been good with numbers. For the purpose of managing the Gooleys’ farming operations Mr Gooley developed a spreadsheet-based mathematical model which he referred to as the Activity Based Prediction (“ABP”) model. He used this model to budget for income and expenses across the various parts of the mixed farming business which the Gooleys ultimately developed.

100. Mr Gooley used the ABP to produce the regular budgets that he provided to the Bank. The information which Mr Gooley provided was unusually detailed and, according to Mr Gooley, was praised by Mr Mitchell. Mr Gooley also used the model to present calculations relevant to the damages claim in these proceedings, as I will describe in more detail below.

101. The critical aspects of the Gooleys’ case depended upon conversations between them and Mr Mitchell between 2007 and 2011. Mr Gooley found himself in the position of giving evidence about those conversations based on his unaided recollection, many years after they had occurred, and in a litigious context. Counsel emphasised the difficulties of proof that this generally creates: Watson v Foxman (1995) 49 NSWLR 315 at 318-319.

102. These difficulties of proof manifested themselves in Mr Gooley’s evidence. Some of the details in Mr Gooley’s affidavit were demonstrably incorrect, or highly implausible, when compared with the contemporaneous documentary evidence. During Mr Gooley’s cross-examination, I was left with the impression that he has little real recollection of that detail; and this impression was confirmed when his evidence was compared with the instructions he earlier gave, in 2014, for the purposes of the FOS proceedings.

103. The evidence before me also revealed that Mr Gooley was somewhat economical with the truth in dealing with his creditors. On the one hand, I conclude that, contrary to Mr Gooley’s assertions, he did not reveal the cattle trading arrangements he made with G&F to the Bank until he was forced to do so; his earlier written reports to the Bank failed to mention these dealings. On the other hand, Mr Gooley tried to keep G&F in the dark about the fact that the Gooleys’ loans with the Bank had been referred to CAM in 2012. Mr Gooley also falsely claimed to another creditor, Alan Hill, that the Gooleys had the Bank’s support. On Mr Gooley’s own admission, the tactics he used to keep his creditors at bay were less than truthful.

104. I appreciate that Mr Gooley, in giving evidence before me, was appearing in a court of law and swore to tell the truth. But his earlier tactics in dealing with his creditors are not irrelevant when evaluating the weight to be given to his evidence, and they are certainly relevant in assessing the weight of things Mr Gooley said in the contemporaneous documents. At best, his tactics say little for his candour.

105. But counsel for the Bank went even further. Counsel submitted that the evidence presented by Mr Gooley was an elaborate embroidery designed to support the Gooleys’ case in the proceedings, with no basis in fact. I regret to have to say that I think there is force in this submission. At best, these embroidered details represent what Mr Gooley has convinced himself probably happened in his meetings with Mr Mitchell and others. At worst, they are outright inventions.

106. For these reasons, I think that Mr Gooley’s evidence on contentious issues in the case is generally unsafe to rely upon. I have treated his evidence with great caution.

Mrs Gooley’s evidence

107. Mrs Gooley was born in February 1970. I assume that she was also brought up locally. Her family were dairy farmers on “Dyraaba”. Mrs Gooley married Mr Gooley in August 1998. They have two children.

108. After leaving school, Mrs Gooley undertook a Bachelor of Business degree at the University of New England, majoring in accounting and finance and graduating in 1993. In 1997 she obtained work as a senior manager in a local accounting firm known as “Wappetts”. In 1998 she became a full member of the Australian Society of Certified Practicing Accounts (“CPA”).

109. From 2001, Mrs Gooley operated Dyraaba in partnership with her brother. As will be seen, Mrs Gooley and Mr Gooley operated the Clovass property in partnership from 2004 onwards. Although a full partner in both operations, Mrs Gooley left the farming operations to her brother and husband respectively. She continued to work for Wappetts until 2010. From 2010 to 2015 she worked for Southern Cross University in what I assume was an accounting role. She held the position of Manager of Taxation and Transactions.

110. Mrs Gooley was responsible for the book keeping for the Gooley businesses. She used an accounting software package for this purpose. Financial statements and tax returns were done externally, based on Mrs Gooley’s books. As will be seen, Mrs Gooley’s accounts were used in evidence in these proceedings in connection with the assessment of damages.

111. Counsel for the Gooleys submitted that Mrs Gooley was in every respect an equal partner with Mr Gooley in their business. I accept that Mrs Gooley has a strong mind and is an intelligent woman who did not just do what her husband told her. But at the same time I think it is clear that to some extent they operated in different spheres. In particular, it was Mr Gooley who was mainly responsible for finance issues and had most of the dealings with the Bank. Mrs Gooley attended some of the meetings with Mr Mitchell and was required to sign the loan documentation. But she was not present at all of the discussions and not so involved in the detail as Mr Gooley was.

112. Mrs Gooley did give evidence of conversations she had with Mr Gooley about finance issues, and it seems that he regularly reported to her his dealings with Mr Mitchell and others, and discussed major financial decisions with her. But her evidence on these subjects, although admitted as evidence, was second hand. Not surprisingly, there were inconsistencies between it and Mr Gooley’s evidence.

113. Furthermore, the same general comments which apply to the reliability of Mr Gooley’s evidence apply also to Mrs Gooley’s. As with Mr Gooley, Mrs Gooley was giving evidence based on unaided recollection long after the event and in a litigation context. Regrettably, also, her account included embroidered details, which are highly suspect. As with Mr Gooley, I have approached her evidence with caution.

Mr Mitchell’s evidence

114. Mr Mitchell has worked in banking for substantially the whole of his career life. He left school in 1983 and joined ANZ in July 1984. He worked his way up from a teller to a Branch Manager and then to a relationship/lending manager on the north coast of New South Wales. He began work with Bankwest in May 2007 and said that he resigned in about late March 2012 to join St George Bank at Lismore as a relationship manager. He worked there until October 2015 and then joined the Commonwealth Bank in Lismore in November 2015.

115. While employed with Bankwest Mr Mitchell was responsible for loans which typically ranged between about $500,000 and $5 million. By the time he left Bankwest he was working with about sixty customers or customer groups. About half of these customers were agricultural businesses and about half were commercial businesses.

116. Not surprisingly, Mr Mitchell had little, if any, recollection of the details of his dealings with the Gooleys. In his evidence he referred extensively to the loan documentation and the internal bank applications and reviews. Much of his evidence took the form of statements of what he would have done in accordance with his “usual practice”. Thus, for instance, he gave accounts of the sorts of things he said he would in his “usual practice” have disclosed to the Gooleys in meetings.

117. Evidence of practice is frequently given in cases such as this. Indeed, for practical purposes it may well be unrealistic for the evidence of bank officers to be given in any other way. But the utility of evidence of business practice varies, depending on the form which it takes.

118. Strictly speaking, it is not admissible for a witness who cannot remember doing something on a particular day to give evidence directly that, in accordance with his usual practice, he would have done it. What is admissible is evidence of the practice (which can be given by the witness or anyone else having sufficient knowledge of that practice), from which the Court can be invited to infer that the witness did actually so act on the day in question: see Connor v Blacktown District Hospital [1971] 1 NSWLR 713 at 721, per Asprey JA, with whom Mason JA agreed; R v Gordon (No 4) [2016] NSWSC 312 at [14]-[15], [20].

119. The key point is that the drawing of the inference is ultimately for the court. Whether the court draws the inference depends upon how compelling the evidence makes it. Where the business practice in question involves a step which is a mechanical one and does not involve any discretion, it may readily be possible to draw the inference. But where the usual practice described in the evidence is neither regular nor uniform, the court can have less confidence that the step in question was actually taken on the occasion in question. In such a case, the evidence of “usual practice” may in truth be no more than the witness’ reconstruction, or hope, about how he or she would have behaved in the circumstances of the case.

120. This has particular application to the present case where the alleged practice included things which Mr Mitchell said he told his customers. Mr Mitchell’s conversations with the Gooleys would have been specific to their circumstances and would have taken place in the context of Mr Mitchell’s previous dealings with them. Mr Mitchell’s dealings with the Gooleys may, at a broad level, have been similar to Mr Mitchell’s dealings with his other customers, but they would not have been exactly the same.

121. Even if Mr Mitchell did generally have topics which he wished to cover in his discussions with customers on particular occasions, it was not suggested that he had a script which he read out to each of them. Rather, the language he used would have varied from customer to customer, depending on the context of Mr Mitchell’s previous dealings with the particular customer and the customer’s particular circumstances. Furthermore, the conversations Mr Mitchell had with his customers would have been dynamic. Different customers would have reacted differently. Some may have interrupted Mr Mitchell to raise other issues. All of these factors make it difficult for the Court to be satisfied that the conversations between Mr Mitchell and his customers were sufficiently regular and uniform to support an inference that he would have made particular statements to the Gooleys on particular occasions: see Elayoubi v Zipser [2008] NSWCA 335 at [86]; Neville v Lam (No 3) [2014] NSWSC 607 at [107].

686. Part of the Gooleys’ complaint under this head was that the Bank took the position that the FICL was repayable in December 2012. In the light of my conclusions that the variation was contractually effective and that no estoppel or misleading and deceptive conduct arose as a result of what the Bank did, this complaint falls away. On my finding, Mr Gooley must have been well aware as 2012 wore on that the FICL was approaching maturity. Being reminded of this by Ms Mulligan in November 2012 cannot have been pleasant for him; but on my findings, it can hardly have been a surprise.

687. It is notable that neither Mr Gooley, nor Mr Richardson on the Gooleys’ behalf, ever tried to hold the Bank to he ten year principal and interest payment regime specified in the Bank’s letter dated 12 December 2012. The reason for this is plain. The Gooleys were desperately short of money. Asserting an obligation to make further payments by way of principal would have been the last thing they wanted to do.

688. The Gooleys’ affidavits continued to criticise the Bank’s conduct from January 2014 onwards, and in particular they criticised the terms of the proposed Deed of Forbearance. As I understood it, no claim is now made that this conduct amounted to some fresh breach of the Bank’s obligations. But for completeness I will deal briefly with the criticism.

689. In January 2014, the Bank had already allowed the Gooleys a long period of time to sell the property. It was not obliged to wait forever. In my view, there was nothing unreasonable in the Bank seeking to fix a final date by which the Gooleys had to repay their debt. In the end, the Gooleys never tried to negotiate around a fixed date. Instead, they responded by making the FOS complaint. Misconceived as I think that complaint was, it required the Bank not to engage in any enforcement action. The Bank complied and the effect was that the Gooleys obtained for themselves a further period of grace which eventually extended until May 2015. Still they proved unable or unwilling to meet their obligations to the Bank. The Bank cannot fairly be blamed for that.

690. For these reasons, there was no failure or refusal by the Bank to comply with its obligation to assist the Gooleys. Nor, for similar reasons, did the Bank behave unconscionably. The Gooleys’ case on this point fails.

Causation and damages

696. In view of the conclusions I have reached, the Gooleys’ claims all fail on liability grounds. For completeness, however, I will consider whether the Gooleys would have made out an entitlement to damages if breach of the Bank’s obligations had been established.

Move to Tablelands

697. For reasons I have given, I am not satisfied on the probabilities that, if the Gooleys had not been (as they claimed) misled about the variation of the term of the FICL, they would have moved their operations to the Tablelands. Nor am I satisfied that they would have moved to the Tablelands if the Bank had not made the Dyraaba loan at all. Nor am I satisfied that a move to the Tablelands would have resulted in the Gooleys earning the revenue claimed in PG5. On the face of it, the Gooleys’ claim for damages based on a move to the Tablelands fails.

698. Counsel for the Gooleys, however, put forward an alternative claim designed to head off these findings. The alternative claim was characterised as one for damages for the loss of a chance. Counsel argued that the Bank’s misconduct deprived the Gooleys of an opportunity to move to the Tablelands, and that substantial damages should be awarded based on the Court’s assessment of the likelihood that the move would have been profitable. Counsel relied on the High Court decisions in Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 and Sellars v Adelaide Petroleum NL (1994) 179 CLR 332.

699. Both Amann and Sellars involve characterising the loss of a chance as a “valuable commercial opportunity”. In Sellars it was an opportunity to negotiate the sale of shares to a third party. The plaintiff was induced to break off the communications by the misleading conduct of the defendant. In Amann, it was the opportunity to complete the performance of a contract, and possibly to obtain the renewal of the contract, which had been lost as a result of the defendant’s wrongful repudiation.

700. I am not sure that this case is really comparable. A move to the Tablelands was not some sort of independent venture. The “chance” was not a right like an option which had an existence independent of the underlying asset. Nor was it an opportunity which could have been hived off and exploited separately while the Gooleys continued with their farming operations at Clovass. It was just one of many choices the Gooleys could have made in the conduct of their business.

701. Had I concluded that the probability of a move to the Tablelands, but for the alleged misconduct of the Bank, was 51%, the Gooleys would have received an award of 100% of the lost profit on the basis that they had proved their claim on the balance of probabilities. But if I had concluded that the probability was 49%, instead of getting nothing, the Gooleys would get 49% of the damages for the “loss of a chance”. This appears incongruous.

702. If the rule that the plaintiff must prove damage on the balance of probabilities can be evaded by characterising the present claim as one for the loss of a chance, why cannot any misleading conduct claim, where it is said the plaintiff might have acted differently if not misled, be so characterised? But it is not necessary to pursue this thought further to resolve the present case.

703. It is clear that the Sellars principle only applies where it can be demonstrated that a valuable commercial opportunity has in fact been lost. This must be proved on the balance of probabilities. Until and unless the Gooleys proved, on the balance of probabilities, that they would have moved to the Tablelands and been better off there, they could not be said to have established that they suffered damage at all. On my findings the Gooleys failed at the first step.

704. In passing, I should refer to another problem with the Gooleys’ claim for damages on this basis. My analysis of the Gooleys’ damages case left me quite unsatisfied that there was any particular property they would have acquired, had they moved to the Tablelands, which would have yielded the results set out in PG5. Not being satisfied on the probabilities where they would have moved, I would find it impossible to make any assessment of the value of the “chance” of profits made from moving. How would that be assessed? Would it be ten per cent of the amount claimed in PG5? Or five per cent? Or one per cent? Or would the assessment ignore PG5 entirely in favour of some other calculation, and if so, what calculation? This would all just be guesswork: cf Tabet v Gett at 573-574 [95]-[96] per Heydon J.

705. I therefore reject the Gooleys’ contention that they can recover damages for the loss of a chance that they would have moved to the Tablelands. The Gooleys’ claims for damages on the Tablelands scenario would fail even if the Gooleys had established breach against the Bank.

Stay put at Casino

706. I am not satisfied that if the Bank had acted differently, then the Gooleys, had they tried to stay on at Casino, would have earned the profits claimed in PG4. On this finding, the Gooleys’ claim for damages on the stay-put scenario would fail even if I had concluded that the Bank’s conduct was wrongful.

The Bank’s entitlement to charge interest at contractual rates

707. The Gooleys’ contention that the Bank was not entitled to charge the contractual rate of interest on the loan had three steps. The first step was that the FICL did not mature in December 2012, and the Bank’s assertion that it did so was a repudiation of the contract. The second was that the Gooleys accepted this repudiation thereby bringing the facility contract to an end. The third step was that once the contract had come to an end, all the Bank was entitled to was repayment of the principal. Counsel for the Gooleys accepted that this would carry interest at court rates but submitted that the Bank should repay the difference between interest at court rates and interest at the (higher) contractual rates in fact charged.

708. I have already concluded that the variation to the term of the FICL was contractually effective. Accordingly, the Bank was within its rights to tell the Gooleys that the debt was repayable. The Gooleys claim fails on this ground alone.

709. But there are other difficulties with the claim. Had the variation not been contractually effective, the Bank would have had no legal entitlement to demand payment of the principal. Any enforcement action taken on the basis that the amount was repayable would have been of no legal effect. But the Bank did not take any such action. All it did was say that the loan was repayable and send statements to the Gooleys calculating interest on that basis. It did not seek to enforce repayment of the principal or the default interest.

710. Merely to assert an interpretation of a contract which proves to be incorrect is not necessarily a repudiation. A party may assert a construction of the contract which later proves to be incorrect but if that party is prepared to accept an authoritative decision to the contrary then the conduct will not be repudiatory. It is only where the party intimates that it will not abide by the terms of the contract as ultimately determined that it repudiates its obligations: DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423.

711. For this reason, even if the term of the FICL had not been effectively reduced from fifteen years to five, the Bank’s conduct in and after December 2012 was not a repudiation of its obligations. But there is yet another point to consider.

712. Counsel for the Gooleys submitted that they accepted the Bank’s “repudiation” in December 2016. Counsel pointed to their opening of a new bank account with Suncorp, and their attempts to refinance.

713. But these steps were not inconsistent with the Gooleys’ obligations under their banking contract. There was nothing which required them to hold all their bank accounts with the Bank, and the Bank never claimed that there was. Nor was there anything in their banking contract which prevented them from making approaches to other financiers. The Bank actively encouraged them to do so.

714. On my findings, the Gooleys never asserted in response to the Bank that the loan term had not expired. They in fact sought, and obtained, a moratorium from the Bank. This was consistent, not inconsistent, with the Bank’s interpretation of the terms of the facility.

715. Had the Gooleys wished to act consistently with the terms of the facility as they now claim them to have been, they should have made principal and interest repayments on the FICL after 12 December. And on the supposed acceptance by the Gooleys of the Bank’s supposed repudiation, the contract would have been terminated and the whole of the unpaid principal would have been repayable. This was the very thing the Gooleys were determined to avoid. Even if, contrary to my views, the Bank repudiated its obligations to the Gooleys, the Gooleys did not accept the repudiation.

716. Finally, counsel for the Gooleys criticised the Bank’s conduct in pressing for the proposed Deed of Forbearance. This was said to be contrary to the provisions of the FDMA. As I understood it, the contention was that in some way this prevented the Bank from charging interest after that date.

717. FDMA s 6 provides:

Enforcement action in contravention of Act void

Enforcement action taken by a creditor to whom this Act applies otherwise than in compliance with this Act is void.

718. FDMA s 4 defines “enforcement action” as follows:

enforcement action, in relation to a farm mortgage, means taking possession of property under the mortgage or any other action to enforce the mortgage, including the giving of any statutory enforcement notice, or the continuation of any action to that end already commenced, but does not include:

(a)     the completion of the sale of property held under the mortgage in respect of which contracts were exchanged before the commencement of this Act, or   

(b)     the enforcement of a judgment that was obtained before the    commencement of this Act.

719. In my view, the term “enforcement action” connotes some sort of unilateral action by the lender. All the Bank did was ask the Gooleys to enter into a contractual commitment to dispose of the properties by 30 September and repay the debt. The Bank could not unilaterally require the Gooleys to agree to this and they did not. In my view, the Bank’s conduct in asking for the Gooleys to sign a deed of forbearance was not “enforcement” for the purposes of the FDMA.

720. This conclusion is reinforced by the fact that the FDMA does no more than render enforcement action “void”. It deprives the action of legal effect. No doubt if the Bank were to seize property by way of enforcement the Bank would have to restore that property if the enforcement action contravened the FDMA. That would be a consequence of the action being “void”. But in this case, there is no action which the FDMA can render void. The Bank asked the Gooleys to agree to a sale and they declined to do so. The FDMA has no role to play.

721. For these reasons, the Bank’s right to interest at contractual rates continued after December 2012 and was not affected by its obligations under the FDMA. The Gooleys’ contention that the Bank was only entitled to charge interest at contractual rates fails.

Conclusions and orders

722. I have concluded that:

(1)   the variation in the Facility Terms made in July 2008, and confirmed in September 2009, April 2010 and June 2011, which rendered the principal amount advanced under the FICL repayable in December 2012, was contractually effective;

(2)   the Bank’s conduct in effecting the variation did not give rise to an estoppel, nor was it misleading or deceptive or unconscionable;

(3)   the Bank’s conduct in making the Dyraaba loan did not involve any breach of the Banking Code of Practice nor was it unconscionable;

(4)   nor did the Bank’s conduct from 2012 onwards involve a breach of the Code of Practice or unconscionable conduct;

(5)   in any event, the Gooleys have failed, on the probabilities, to make out an entitlement to damages for the Bank’s alleged breaches;

(6)   the Bank was entitled to charge interest at contractual rates after December 2012 and no interest refund is due to the Gooleys.

723. It follows that the Gooleys’ claims fail and their cross-claim must be dismissed. I will hear the parties on costs (including the question of the Bank’s entitlement to retain amounts withheld from the proceeds of settlement of the security properties), if orders cannot be agreed.

724. The orders of the Court are:

1.   Order that the second cross-claim be dismissed.

2.   Stand the proceedings over for further submissions and if necessary hearing on the question of costs in accordance with arrangements to be made with my Associate.

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Decision last updated: 08 October 2019