McCourt v National Australia Bank Ltd [No 2]
[2017] WASC 370
•14 DECEMBER 2017
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: McCOURT -v- NATIONAL AUSTRALIA BANK LTD [No 2] [2017] WASC 370
CORAM: TOTTLE J
HEARD: 27-29 NOVEMBER, 4-8, 11, 13 DECEMBER 2017
DELIVERED : 14 DECEMBER 2017
FILE NO/S: CIV 1809 of 2010
BETWEEN: DANIEL PATRICK REDDEN McCOURT
Plaintiff
AND
NATIONAL AUSTRALIA BANK LTD
Defendant
Catchwords:
Contract - Where the plaintiff alleges an oral agreement between himself and the defendant - Whether defendant made representations to the plaintiff upon which he relied
Equity - Unconscionable conduct - Whether defendant bank obstructed the plaintiff from refinancing with another bank
Property - Power of sale - Mortgagee's power of sale - Where defendant exercised power of sale over properties of the plaintiff - Whether defendant breached duty to act in good faith in respect of the sale of those properties
Compromise - Whether defendant conceded liability in course of interlocutory hearing
Legislation:
Nil
Result:
The action is dismissed
Category: B
Representation:
Counsel:
Plaintiff: In person
Defendant: Ms P E Cahill SC & Mr C P K Russell
Solicitors:
Plaintiff: In person
Defendant: Minter Ellison
Case(s) referred to in judgment(s):
Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95
McCourt v Cranston [2009] WASC 56
McCourt v National Australia Bank [2010] WASC 121
Vantage Systems Pty Ltd v Priolo Corporation Pty Ltd [2015] WASCA 21; (2015) 47 WAR 547
Table of Contents
Introduction
Evidence
Assessment of the reliability of Mr McCourt's evidence
Mr McCourt's background and property interests
Bank officers
The alleged 21 October 2008 agreement
Mr McCourt's pleaded case
The Facility and the events leading up to the 21 October 2008 meeting
The 21 October 2008 meeting
No binding agreement was made at the meeting on 21 October 2008
The alleged representations made by Mr Kappler to Mr McCourt
27 October 2008 increase in Facility limit
3 December 2008 Meeting
Telephone conversation on 20 December 2008
No unconscionable conduct in relation to refinancing
Mr McCourt's pleaded case
Mr McCourt's case at trial
The facts do not support Mr McCourt's unconscionable conduct case
The sale of 1 Agett Road and the Joel Crescent properties
The principles governing the exercise of a mortgagee's power of sale
The pleaded case in respect of 1 Agett Road
The steps taken by the Bank to sell 1 Agett Road
The Bank did not wilfully and recklessly sacrifice Mr McCourt's interests when selling 1 Agett Road
The pleaded case in respect of the Joel Crescent properties
Steps taken by the Bank to sell the Joel Crescent properties
The Bank did not wilfully and recklessly sacrifice Mr McCourt's interests when selling the Joel Crescent Properties
No concession of liability at 8 June 2016 hearing
TOTTLE J:
Introduction
In 2009 the defendant, the Bank, terminated a finance facility that it had made available to the plaintiff, Mr McCourt, and his former wife, Mrs McCourt. Mr McCourt claims damages arising from the termination of the finance facility and the enforcement by the Bank of its securities over properties owned by him and Mrs McCourt.
For a number of years preceding the events with which this case is concerned Mr McCourt traded successfully as a property developer. He focussed on relatively small scale developments.
In 2005 Mr McCourt transferred his banking to the Bank and thereafter the Bank financed his business.
Since August 2012 Mr McCourt has represented himself though he received assistance with various aspects of his trial preparation from counsel on a pro bono basis. The efficient conduct of the trial was made possible by the courteous and helpful approach adopted by the Bank's lawyers towards Mr McCourt (amongst other things this included the preparation of a nine volume trial book).
Mr McCourt's case rests on five allegations against the Bank. They may be summarised as follows:
(i)The Bank breached an oral agreement he says was made at a meeting on 21 October 2008. The substance of Mr McCourt's case is that the Bank agreed that provided he paid to the Bank his share of the proceeds of sale of an interest held by him in the Clifton Motel, the Bank would not terminate the Facility; it would not enforce its securities and would continue to provide him with financial accommodation.[1] Mr McCourt maintains that the Clifton Motel proceeds were not subject to any security arrangement in the Bank's favour.
(ii)Mr Jeff Kappler, a senior Bank officer, made representations to him between 21 October 2008 and 26 February 2009 to the effect that provided he paid the Clifton Motel proceeds to the Bank, the Bank would not terminate the Facility and would continue to provide him with financial accommodation. Mr McCourt says that he relied on the representations and had they not been made he would not have paid the Clifton Motel proceeds to the Bank but would have used those funds to assist him in refinancing his business with one or more other financiers.
(iii)The Bank acted unconscionably by denying Mr McCourt the opportunity to refinance with the Bank of Queensland in October 2009.
(iv)The Bank wilfully and recklessly sacrificed his interests when exercising its power of sale over two of the properties over which it held security.
(v)The Bank conceded liability on 8 June 2016 in the course of a hearing before Master Sanderson.
[1] As explained below Mr McCourt was a partner in a partnership that owned the Clifton Motel. The partnership was dissolved and the Clifton Motel sold. In this judgment I will refer to the transaction as the Clifton Motel sale even though this may not be a strictly accurate description of the transaction and to Mr McCourt's interest in the proceeds as the Clifton Motel proceeds.
I have concluded that Mr McCourt's claims are without merit and should be dismissed for the reasons set out in the balance of this judgment.
Evidence
Mr McCourt's evidence‑in‑chief comprised a principal witness statement and four supplementary statements addressing issues raised in the Bank's witness statements. These were tendered as his evidence‑in‑chief. Mr McCourt was given leave to supplement his written evidence with oral evidence. Mr Michael Glossop, a former officer of the Bank, gave evidence in answer to a subpoena issued to him at Mr McCourt's request. Mr Glossop's evidence was of little relevance to the issues. In addition Mr McCourt called Mr Travis Styles, a finance broker who assisted Mr McCourt in attempts made in 2009 and 2010 to refinance his debt to the Bank, and Professor Luc Delriviere, a friend of Mr McCourt, who attended the hearing on 8 June 2016.
The Bank relied upon the evidence of four bank officers: Mr Jeff Kappler, Mr Michael Killeen, Mr Vic Yaschenko and Ms Christine Facius. The witness statements of Mr Killeen, Mr Yaschenko and Ms Facius were tendered by consent as Mr McCourt did not wish to cross‑examine them. Mr Kappler attended the trial. His witness statement was tendered as his evidence-in-chief and he was cross‑examined by Mr McCourt.
Ultimately the factual issues in this case were narrow and it is unnecessary to refer to much of the evidence adduced at trial in order to explain the reasons for my judgment.
Assessment of the reliability of Mr McCourt's evidence
Mr McCourt's case depends to a significant extent on his evidence of the relevant events being accepted. Having observed Mr McCourt as he gave his evidence and having read the contemporaneous documents I find that I am unable to rely on Mr McCourt's evidence unless it is corroborated by some other reliable evidence.
My impression of Mr McCourt is that he has a profound and seemingly unshakeable belief that he has been the victim of commercial immorality on the part of the Bank. This belief has led Mr McCourt to make allegations of impropriety for which there is no factual foundation. A further consequence of this belief is that Mr McCourt is unable to consider his relationship with the Bank with any objectivity. Mr McCourt's recollection of events is distorted by his need for those events to fit his perceptions of how he was treated by the Bank. In critical respects Mr McCourt's perceptions do not accord with the reality of what occurred, as established by contemporaneous documents.
Mr McCourt explained that 2008 was a very stressful year for him and that he had to deal with many different issues.[2] My impression is this stress combined with passage of time have contributed to Mr McCourt's evidence being the product of a poor recollection supplemented by reconstruction calculated to fit the case advanced by him, albeit, as I say later, I do not think that Mr McCourt consciously set out to give untruthful evidence.
[2] ts 510, 563.9-564.1.
In making my assessment of the reliability of Mr McCourt's evidence I make allowance for the very considerable difficulties he experienced in giving his oral evidence. On many occasions Mr McCourt was so emotionally distressed that he was unable to continue with his evidence.[3] Mr McCourt explained that he had difficulty in understanding questions and focussing on documents to which his attention was directed in the course of cross‑examination.[4] Mr McCourt explained that his difficulties were due to Post Traumatic Stress Disorder. I accept Mr McCourt suffered from the difficulties described by him in his evidence and that, as he said, those difficulties were manifestations of his poor mental health.
[3] ts 479.6, 599.6, 621.9 ('if I keep pushing myself, I fall into a hole. I'm close to it'), 694.6, 707.4 ('at the moment, I have no recollection of dates at the moment. I'm ‑ I couldn't tell you my own phone number'), 746.9 ('my head is fried').
[4] ts 776.5 ('if you were looking at a ‑ a sheet of paper, you ‑ you essentially have in the centre of the paper a ‑ a section which is unreadable or ‑ or there's no cognizance of what it is, except I can see that it's printed, but I can't take it in').
Unfortunately Mr McCourt prolonged his own cross-examination by the way he responded to questions. He frequently interrupted counsel to try to answer a question before the complete question was asked. On many occasions he did not answer the question asked of him. There were occasions when it seemed to me that Mr McCourt was quite deliberate in his attempts to avoid answering questions.[5] This contributed to the impression I formed that Mr McCourt was anxious to ensure that what he said in answer to questions put to him assisted critical elements of his case.
[5] ts 535.10, 634.1-641.2.
Even making allowances for Mr McCourt's mental health and that, as a litigant in person Mr McCourt had understandable difficulty in separating what he could say in evidence from what he wanted to say as an advocate of his own cause, Mr McCourt's approach to answering questions in cross-examination undermined my confidence in him as a witness on whose evidence I could rely.
My impression is that Mr McCourt did not consciously give evidence that was untruthful but his lack of objectivity was such that he was incapable of distinguishing between his recollection of events and what he considered must have happened as an explanation for the undoubted financial disaster he suffered.
My assessment of Mr McCourt's evidence as unreliable also rests on inconsistencies between various accounts given by Mr McCourt of the same events, and by the fact that he did not raise the key complaints which now form the basis of his claim against the Bank in communications with the Bank in 2009. I will touch upon those inconsistencies in more detail in the course of making factual findings. I will only refer to one such matter at this point. In June 2009 Mr McCourt was trying to refinance the debt due to the Bank. On a number of occasions Mr McCourt had telephoned Mr Yaschenko and either spoken to him or left messages to the effect that the refinancing was imminent. On 26 June 2009 Mr McCourt left a voicemail message for Mr Yaschenko in which he said:
Um, I know you ‑ you've taken steps at the moment. I'm, I'm just ringing to tell you um it is definitely certainly still coming. I know you've heard it as long as you possibly have. But I'm just its, as soon as it arrives um, I'll let you know and we'll do it that day. So not today but in the next day or so it's definitely coming so it's all I can do because I do appreciate what you've been doing um and however it washes up from here I'm, I'm certain that I don't think anyone who is a bystander watching this process would be thinking that you have been unfair to me and the bank is probably at various times unjustifiable criticism for what it does but in my instance in dealing with you I think you've been fair and considerate to me. So, um, I want to thank you for that, regardless of how it all finishes up but I can assure you that if so, my money's on me definitely next week. See you later. Have a good weekend, bye now.[6]
[6] Exhibit D9, TBN 432.
Even making allowances for the fact that Mr McCourt was seeking Mr Yaschenko's assistance to permit the refinancing to take place and thus may have been reluctant to advance criticism of him or the Bank, the contents of the message suggest that Mr McCourt's complaints about the Bank's conduct prior to this telephone message are a product of hindsight.
The most reliable evidence as to the critical events of 2008 and 2009 are the contemporaneous documents, including notes made by Ms Facius and Mr Yaschenko, and the inherent probabilities as to what took place.
Mr McCourt's background and property interests
Until the events giving rise to the present litigation Mr McCourt had been successful in a number of business ventures including property development. By late 2007 he had a property portfolio that included residential properties in the Perth metropolitan area, units in Bunbury and a rural property at Yallingup.
In the context of the litigation properties that were of particular significance were:
(i)1 Agett Road, Claremont. This property was purchased by Mr McCourt and Mrs McCourt in May 2007 for $1,900,000. Mr McCourt renovated the property with a view to reselling it.
(ii)23A and 23B Leon Road, Dalkeith. These properties were purchased by Mr McCourt and Mrs McCourt for $1,750,000 each in October 2007. Mr McCourt demolished an old building that occupied the site and intended to build two new houses, one of which he proposed to live in and one of which he proposed to sell.
(iii)2A and 2B Passmore Avenue, North Fremantle. Mr McCourt and Mrs McCourt as trustees of the McCourt Family Trust had purchased 2A Passmore Avenue in February 2007 for $885,000 and Mr and Mrs McCourt as trustees of the McCourt Family Trust purchased 2B Passmore Avenue in July 2007 for $885,000.
(iv)17 Elizabeth Crescent, South Bunbury. This was purchased by Mr McCourt and Mrs McCourt in 2006 for $680,000 and was the family home.
(v)3 and 5 Joel Crescent, South Bunbury. Mr McCourt and Mrs McCourt had purchased 3 and 5 Joel Crescent, South Bunbury for $875,000 each in 2004. There were seven residential units on the two separate lots.
(vi)Lot 1002 Butterly Road, Yallingup. This property was purchased in 1989. In 2003 the title was registered in Mrs McCourt's name. It was a rural property and Mr McCourt planned to subdivide the property.
Mr McCourt had an interest in a partnership with Mr Clive Melville. The partnership owned a number of properties and owned and operated the Clifton Motel. In November 2007 Mr McCourt and Mr Melville had agreed to dissolve their partnership and Mr McCourt sold his interest in the Clifton Motel to Mr Melville or interests associated with Mr Melville. Settlement of the sale of the Clifton Motel was delayed by many months. The Bank did not have security by way of a mortgage entitling it to payment of Mr McCourt's share of the of the Clifton Motel proceeds. Another property owned by Mr McCourt with Mr Melville was 21 Hollywell Street, Bunbury.
Bank officers
In 2008 Mr Killeen was a business banking manager or relationship manager with the Bank. In early 2008 he was responsible for the management of the Bank's relationship with Mr McCourt.
Mr Kappler was the business banking managing partner responsible for business banking in a large area of south west Western Australia. Mr Killeen reported to Mr Kappler. Mr McCourt considered that he had a good relationship with Mr Kappler and from time to time spoke directly to him about banking matters, bypassing Mr Killeen.
In 2008 and 2009 the Bank operated a separate division known as Strategic Business Services. In 2008 Ms Facius was a senior analyst employed in the Strategic Business Services division. She described the Strategic Business Services as being responsible for developing, implementing and managing turnaround and recovery strategies to assist customers whose loans had become distressed or had 'serviceability issues'. Ms Facius described Strategic Business Services' goal as working through the issues and returning the customer's affairs to the banking division. If that could not be achieved the role of the Strategic Business Services was to manage the recovery of funds due to the Bank by, amongst other things, the sale of assets over which the Bank held security. Whilst a customer's affairs were being managed by Strategic Business Services the bankers within the banking division (such as Mr Killeen and Mr Kappler) had no authority to make decisions in relation to the customer's affairs.
Until about September 2008 Ms Facius reported to Mr Michael Klinkenberg, a manager within the Strategic Business Services division. In about September 2008 Mr Klinkenberg moved to a different position and Mr Yaschenko became the manager to whom Ms Facius reported.
The alleged 21 October 2008 agreement
Mr McCourt's pleaded case
Mr McCourt pleads the agreement he alleges was made on 21 October 2008 in the following terms:
10. On 21st October 2008 the Plaintiff and the Defendant further orally agreed by it servant J Kappler in the presence of Christine Fascias [sic] and Victor Yashenko [sic] (both servants of the Defendant) to amend the Facility on condition that specified properties would be sold within an agreed time table and;
(a)That the Facility would continue for the purpose of enabling the plaintiff to keep trading subject to the following conditions;
(i)the plaintiff kept reducing his debt to the defendant;
(ii)interest on debts accruing would be paid from sale of assets in which the plaintiff had a legal interest ('the agreed conditions');
(iii)[t]he defendant's power of sale would be deferred while the plaintiff complied with 'the agreed conditions';
(b)The defendant agreed to refrain from terminating the Facility if 'the agreed conditions' were met,
And the defendant made representations to that effect on 21 October 2008 and repeated by telephone calls with a servant or agent of the defendant J Kappler.
…
15.These terms were implied of the Agreed Conditions that
(a)The defendant's power of sale would not be exercised while the plaintiff complied with the Agreed Conditions
(b)The defendant would not terminate the facility while the plaintiff was complying with the terms agreed on 21st October 2008
(c)The terms were implied to give effect to the Agreed Conditions and were so obvious as to go without saying
(d)The facility would remain in place while payments were made as agreed between the parties
In answer to a request for particulars of the 'specified properties' and 'agreed timetable' Mr McCourt provided the following particulars:
The properties and the agreed timetable as agreed at the meeting in 21 October 2008 were the properties at:
(a)2A Passmore Avenue, North Fremantle (Lot 7 on Strata Plan 31428, Vol 2210 Folio 747) to be sold by 30 November 2008
(b)1 Agett Road, Claremont WA (Lot 2 on Diagram 5866, Vol 1122 Folio 4) to be sold by 30 November 2008.
In answer to a request for particulars of the 'agreed conditions' Mr McCourt provided the following particulars:
Agreed conditions were conditions in relation to (1) the proceeds of the Clifton Motel Settlement and the (2) Defendant's expectations of the Plaintiff which would result in the continuation of the Facility (collectively 'the agreement').
(1)The agreed conditions relating to the Clifton Motel settlement proceeds were that the proceeds would be applied to the Facility and then made available to:
a.Pay off the Plaintiff and his ex-wife's credit cards;
b.Pay off the Plaintiff s taxation accounts;
c.Reduce debt under the Facility; and
d.be put into an account to cover interest.
(2)The agreed conditions relating to the Defendant's expectations of the Plaintiff which would maintain the Facility were:
a.The Plaintiff would continue to keep the Defendant up to date with the progress of the Clifton Motel settlement;
b.The future of the Facility was contingent on the dissolution of the Clifton Motel partnership;
c.The Clifton Motel settlement would be finalised in the near future or the Plaintiff would refinance the Facility, and only if neither of these occurred would the Defendant take recovery action, but not before.
d. The Plaintiff would continue to endeavour to sell off his properties with proceeds going toward reducing debt with the Defendant.
The Facility and the events leading up to the 21 October 2008 meeting
As at 29 January 2008 the Facility comprised two letters to Mr and Mrs McCourt dated 29 January 2008 entitled 'Your National Portfolio Facility' and 'Portfolio Package' and various other documents recording in detail the terms of the Facility. It is unnecessary to refer to the detail of the terms of the Facility. Relevantly, the commercial terms of the Facility included the following:
(i)2A Passmore Avenue, North Fremantle, was to be listed for sale immediately and a listing authority was to be provided to the Bank by no later than 31 January 2008;
(ii)1 Agett Road, Claremont, was to be listed for sale by no later than 15 March 2008, with anticipated sale and settlement by no later than 30 June 2008; and
(iii)the full proceeds of the dissolution of the Clifton Motel partnership of $850,000 were to be paid to the Bank by no later than 29 February 2008 and these proceeds were to be applied to debt reduction.
Each of the properties to which I have referred in my outline of Mr McCourt's properties was mortgaged to the Bank as security for the amount owing under the Facility.
The Clifton Motel proceeds were not received by 29 February 2008. On 20 March 2008 the Bank sent a letter to Mr McCourt recording that the condition requiring the Clifton Motel proceeds to be paid to the Bank by 29 February 2008 had not been complied with and reserving its rights. Mr McCourt said that all his mail was directed to Ms Dallas Grigo who acted as his bookkeeper and secretary and he did not read correspondence from the Bank.
On 16 April 2008 the terms of the Facility were varied as follows:
(i)$50,000 was released to Mr McCourt from a term deposit account on condition that it was repaid by 31 May 2008 (this was to assist with the funding of renovations to 1 Agett Road);
(ii)1 Agett Road was to be sold with the full proceeds of sale to be paid to the Bank and used in debt reduction by 30 June 2008;
(iii)the Clifton Motel proceeds (in an amount of not less than $850,000) were to be paid to the Bank and applied in debt reduction by 31 May 2008 with corresponding reductions in the Facility limit.
The letter sent to Mr McCourt and Mrs McCourt setting out the variation in the terms of the Facility (and which was signed by them) stated 'Funding is considered to be the maximum of our [the Bank's] assistance pending debt reduction from asset sales'.
As is apparent from the commercial terms of the Facility and the variations to those terms, the Bank wanted to reduce its exposure to Mr McCourt's debt.
In May 2008 Mr McCourt's accounts were referred to the Strategic Business Services for management and Ms Facius and Mr Klinkenberg became involved in the management of the Bank's relationship with Mr McCourt.
To fund the renovations of 1 Agett Road Mr McCourt was provided with $275,000 by Mr Melville. Mr McCourt characterised this as an advance on the payment of the Clifton Motel proceeds. He did not inform the Bank about this advance.
On 13 June 2008 the Bank sent a letter to Mr McCourt recording that the condition requiring repayment of the $50,000 by 31 May 2008 and the condition requiring payment of the Clifton Motel proceeds by 31 May 2008 had not been met and reserving the Bank's rights.
On 3 July 2008 Mr Kappler, Mr Klinkenberg and Ms Facius met Mr McCourt at 1 Agett Road. Ms Facius made notes of what was said at the meeting. Based on Ms Facius' notes and her evidence about the meeting I find that at the meeting:
•Mr Klinkenberg explained to Mr McCourt the role of the Strategic Business Services division;
•there was a discussion about why the Clifton Motel sale had not taken place and a discussion about the sale of 1 Agett Road;
•Mr Klinkenberg said that the previous plan to bring the Facility into order had come to an end and a new plan was required;
•Mr McCourt asked for a further 90 days to sell 1 Agett Road and to reduce debt and he said that he had made inquiries about refinancing the Bank's debt; and
•Mr Klinkenberg said that he would get back to Mr McCourt about his request for an extension of 90 days.
On 25 August 2008 the terms of the Facility were varied as follows:
(i)the Facility was extended to 30 November 2008;
(ii)1 Agett Road was to be sold with the full proceeds of that sale to be applied in full to debt reduction before 30 November 2008 and no consent to an extension of time for settlement was to be agreed without the Bank's consent;
(iii)2A Passmore Avenue was to be sold with the full proceeds of that sale to be paid to the Bank by before 30 November 2008 and applied in full to debt reduction;
(iv)the full Clifton Motel proceeds were to be paid to the Bank and applied to debt reduction; and
(v)Mr McCourt was required to provide the 2007 financials and tax returns for the McCourt group to the Bank prior to 30 November 2008.
In early September 2008 Mr McCourt and Mrs McCourt separated. Ms Grigo informed Mr Killeen of this development. On 19 September 2008 Ms Grigo sent a facsimile to Mr Killeen stating Mr McCourt would no longer take responsibility for any debt incurred by Mrs McCourt or guarantee any further finance.
On 16 October 2008 Mr McCourt sent a letter to Mr Killeen in which he stated, amongst other things, that he had reached an agreement with Mrs McCourt and attached a 'heads of agreement' signed by each of them. Mr McCourt also stated that the Clifton Motel sale should settle within seven days and all proceeds would be applied to debt reduction and that he, Mr McCourt, intended to renegotiate the Facility on 30 November 2008.
On 18 October 2008 Mr Melville sent Mr Kappler an email in which he stated that if the Bank paid $155,000 to Sionyx Pty Ltd settlement of the Clifton Motel 'should happen within 7 days'.
In his evidence Mr Kappler explained that he learned from Mr Melville that Mr Melville had advanced $275,000 to Mr McCourt and he, Mr Melville, required $155,000 to be repaid before the Clifton Motel settlement could occur.[7]
21 October 2008 meeting
[7] Exhibit D5 [98].
Mr McCourt's evidence was that on 21 October 2008 he met Mr Kappler at the West Australian Club on St Georges Terrace, Perth, before he and Mr Kappler attended a meeting with Mr Yaschenko and Ms Facius at the Bank's office on St Georges Terrace. Mr McCourt is adamant that he met Mr Kappler at the West Australian Club and that they had a discussion as Mr Kappler had breakfast. He recalls Mr Kappler giving him some advice about his personal life. Mr Kappler denies that any such meeting took place.
My reservations about the reliability of Mr McCourt's evidence are such that I am not persuaded that a meeting took place between Mr McCourt and Mr Kappler at the West Australian Club as recalled by Mr McCourt.
Mr McCourt's evidence about the 21 October 2008 meeting was as follows:[8]
[8] Exhibit P3A.
131.I recall the meeting started between 9.15 and 9.30 am and Jeff Kappler began the discussion.
132.Present at the meeting was Christine Fascius (SBS [asset recovery]) ‑ who took shorthand notes that I recall were taken on a yellow Spirotext notepad, Victor Yaschenko (SBS [asset recovery] Manager), Jeff Kappler (South West Regional Manager) and me.
133.The meeting finished around 10 am.
134.I recall Jeff Kappler did most of the talking at the meeting and Vic Yaschenko was at all times present but barely commented during the meeting.
…
136.I recall at the meeting Jeff Kappler said 'Give us a general idea of what's happening at Agett Road. How is the settlement going?'
137.I said to Jeff 'It's due to settle. It was a cash unconditional offer.'
138.I recall Jeff Kappler then said 'The contract has a clause in it that allows you to extend the settlement period. Don't extend, make them settle on time.'
139.I remember at the date of the meeting I was behind with my payments on the facility. However, I would describe the meeting as an amicable one to discuss how to get things back on track.
140.Up until the date of the meeting my dealings with NAB were friendly and I recall the meeting was in this spirit.
141.At the meeting I recall Jeff Kappler said words to the effect that he wanted me to keep trading and we discussed how to do that.
142.I recall at the meeting Jeff Kappler suggested to service my debts with NAB the following be done with the proceeds I expected to receive from the settlement of the Clifton Hotel in Bunbury.
143.Jeff Kappler said 'We want you to pay down some debt and put the balance of the proceeds into an interest bearing account' (or what I understood to be the redraw facility).
144.When the redraw facility was in credit I believe it paid interest.
145.I said 'Hang on, Jeff. I have credit cards that are over their limit and I've got a tax bill of $120K for Ruth and me. I've got to eat. I can't see the point of paying down debt at a time like this. I would prefer to see all of the surplus proceeds go into the redraw facility or an interest bearing account because we are in the middle of the GFC. Everyone is looking for liquidity at the moment and I would like as much breathing space as I can get.'
146.Jeff Kappler said: 'OK we can deal with the credit cards and the tax but the bank is going to insist that some debt is going to be paid down.'
147.I said to Jeff 'Hell, Jeff. I think I need another bank!' (That was just a tongue in cheek throw away line!) Jeff looked me straight in the face and said 'Well, this is what I am proposing is the deal, Dan. This is the only deal. Take it for leave it.'
148.Jeff Kappler said 'Once this is done it will give you independence from Melville and the bank wants to see that. We want to keep you trading.'
149.I put my hand out and Jeff shook my hand and I said 'You've got a deal' and that was pretty much the conclusion of the meeting.
…
152.So, at this meeting my understanding was the proceeds of the sale of the Clifton Motel which was $701K, would cover the following:
(a)Pay off my credit card debt of $30,000.
(b)Pay off my tax bill of approximately $120,000 (see DN‑9‑Trust Deeds and Tax Returns). [VOL 2, TBN 134, PG 754]
(c)Put $155,000 into debt reduction.
(d)Apply the remainder into an offset account to cover interest.
153.Jeff Kappler informed me that in return the NAB would keep the facility operating as normal.
The account given by Mr McCourt of the 21 October 2008 meeting in his evidence‑in‑chief is not consistent with earlier accounts given by him of the meeting.
In a letter dated 30 November 2009 sent by solicitors instructed by Mr McCourt, McKinlays, those solicitors gave an account of the meeting which was materially different from that contained in Mr McCourt's current statement of claim and from the account given in his witness statement.
In an earlier version of the statement of claim in this action Mr McCourt pleaded what took place at the meeting in the following terms:[9]
[9] Exhibit D1 [22] - [23].
22.In or about September 2008, Mr McCourt met with representatives of NAB at the offices of NAB in Perth. At this meeting, NAB represented to Mr McCourt to the effect that NAB would do the following if Mr McCourt paid to NAB the Clifton Motel Sale Proceeds:
a.Maintain Mr McCourt's access to the Varied Facility, including the Sub-Accounts of the Varied Facility; and
b.Not cancel the Varied Facility, including after 30 November 2008 (the date that NAB purported was the 'expiry date' of the Varied Facility).
(the First Representations).
PARTICULARS
The First Representations were made orally by NAB's representatives to Mr McCourt.
In an earlier witness statement prepared for these proceedings Mr McCourt gave the following account of the 21 October 2008 meeting: [10]
[10] Exhibit D2 [31] - [39].
31.To the best of my recollection, on one occasion I met with Jeff Kappler, NAB's South-West Regional Manager, at the offices of National Australia Bank on St Georges Terrace in Perth.
32. At this point I was behind with payments on the Facility, but I would describe the meeting as an amiable one to discuss how to get things back on track. Up until this point my dealings with NAB were friendly and the meeting was in this spirit. At this meeting it was clear to me that Mr Kappler wanted me to keep trading and we discussed how to do that. He suggested I do the following:
a.Apply the proceeds I expected to receive from the settlement of the Clifton Hotel in Bunbury to servicing my debts in the following manner:
i.Pay off my credit card debt of $30,000;
ii.Pay my tax bill of approximately $120,000: see DN9 - Trust Deeds and Tax Returns);
iii.Put $200,000 into debt reduction; and
iv.Apply the remainder into an offset account to cover interest.
b.Mr Kappler informed me that, in return, NAB would keep the Facility going, that is, operating normally.
33.At no stage during my dealings with NAB did it give me the impression that it expected me to repay all sums owed under the Facility by 30 November 2008. The impression it gave me was that the Facility was to continue beyond 30 November 2008 and that the settlement of the Clifton Motel would be a continuation of the arrangements I had with NAB.
Mr McCourt did not mention the agreement he now relies upon in correspondence sent to the Bank in 2009. On 26 March 2009 Mr McCourt sent a letter to Mr Yaschenko in which he outlined what he then perceived to be the 'the makings of my undoing with the Bank'. The letter was written after enforcement action had been commenced by the Bank. Mr McCourt did not make any reference to an agreement made on 21 October 2008. Even allowing for the fact that by the letter of 26 March 2009 Mr McCourt was seeking assistance from the Bank it is surprising that there was no mention of the alleged agreement.
On 8 November 2008 Mr McCourt sent a letter to the Chairman of the Bank complaining about the way in which he had been treated by the Bank. In that letter, he did not refer to an agreement made by the Bank on 21 October 2008. If Mr McCourt thought he had made a binding agreement at the meeting on 21 October 2008 he would have said so in this letter in which he complained bitterly about the conduct of the Bank's officers.
Both Ms Facius and Mr Yaschenko made notes in the course of the meeting on 21 October 2008. In his submissions Mr McCourt sought to cast doubt on the authenticity and completeness of Ms Facius' notes even though he accepted that the first part of her notes was accurate. Mr McCourt submitted that the notes produced by Ms Facius in evidence were not the notes made by her in the course of the meeting but an edited set of notes prepared after the meeting which omitted the critical exchanges that had taken place between him and Mr Kappler. I do not accept Mr McCourt's submissions in this respect.
There are some differences between the evidence of Mr Kappler and Ms Facius and Mr Yaschenko as to what was said in the meeting. Mr Kappler remembers Mr McCourt saying that he needed money to pay his tax and money for living expenses and school fees and saying 'can I get an amount of X dollars' though Mr Kappler could not remember the specific amount. Neither Ms Facius nor Mr Yaschenko remember Mr McCourt mentioning a tax debt.
It is entirely understandable that the recollections of the Bank officers of what was said in the meeting differ.
The most reliable guide to what was said in the course of the meeting are the notes made by Ms Facius and those made by Mr Yaschenko as supplemented by the evidence contained in their witness statements which puts the notes in context. On that basis my findings as to what was said at the meeting are as follows:
(1)Mr Kappler asked Mr McCourt why he had not told the Bank about the loan of $275,000 from Mr Melville.
(2)Mr McCourt explained that when he ran out of money Mr Killeen asked him how much he needed to complete the renovations on 1 Agett Road. Mr McCourt said in excess of $100,000 was provided but more money was required. Mr McCourt said Mr Killeen asked for a spreadsheet which Mr McCourt had provided and which showed a need for $280,000. Mr Killeen declined the request for an advance. Mr McCourt said that Mr Melville had been instructed not to provide any monies to him but to pay all monies to the Bank but that he, Mr McCourt, needed the money, which Mr Melville provided. Mr McCourt said he did not want to tell the Bank in case it interfered with the settlement of the sale of the Clifton Motel and 1 Agett Road did not get finished. Mr McCourt said that he felt he was trapped between Mr Melville and the Bank.
(3)Mr Kappler said that it had always been understood that full proceeds from the Clifton Motel would go to debt reduction.
(4)Mr McCourt said that the Dunsborough property had subdivisional approval (I take this to be the Butterly Road property at Yallingup) and the access issue had been resolved. He said that the property was not on the market yet and he was deciding when would be the best time to market the property.
(5)Mr Kappler said that the meeting was to sort out the issues and then the future management of the file can be explored. Mr Kappler said that the first issue was the payment to Mr Melville.
(6)Mr McCourt said that Mr Melville had taken funds from other projects to fund Mr McCourt's cash flow and he needed the money back. Mr McCourt said that the party from whom the money had come was the purchaser of the Clifton Motel.
(7)Mr Kappler asked about the sale of one of the Passmore Avenue properties. Mr McCourt replied that the sale had fallen through. He said the frontage had been upgraded and both Passmore Avenue properties were on the market for $1,175,000.
(8)Mr Kappler asked if anything else had changed or moved and Mr McCourt said 'no'.
(9)Mr Kappler said that funds from the sale of properties had to be used to service debt.
(10)Mr McCourt said that the purchasers of 1 Agett Road had requested an extension of time for settlement. He said that he was not obliged to agree to an extension and had declined the request at present but that he had been advised it would be prudent to agree to an extension of one month to allow the purchasers to sell their property because the sale price was a good price.
(11)Mr McCourt said that the agreement he had reached with Mrs McCourt was not binding unless there could be an amicable refinancing.
(12)Mr Kappler asked what Mr McCourt wanted and Mr McCourt responded that he wanted an advance of funds to Clive of $155,000. He said that $155,000 had come from the syndicate that was purchasing the Clifton Motel and the balance of the $275,000 that had been provided to him, that is $120,000, had come from the Clifton Motel account. Mr McCourt said that he wanted $50,000 for living expenses. I accept it is possible that Mr McCourt also mentioned that he needed funds to pay tax and pay school fees.
(13)Mr McCourt said that 21 Holywell Street Bunbury was due to net $1,200,000 for each of him and Mr Melville but there was a requirement for approval of a matter concerning drainage and this was being dealt with by town planners.
(14)Mr McCourt summarised the funds he expected to receive from the sale of properties. It appears from the notes that he said:
(a)1 Agett Road was due to settle on 4 December and the proceeds that would flow from the sale were $2,824,878;
(b)2A and 2B Passmore Avenue were going on the market for $1,195,000 and $1,165,000 respectively;
(c)he expected the Clifton Motel proceeds to be $850,000 less $275,000; and
(d)that Hollywell Street was due to settle by the end of December and the proceeds from that sale were $1,200,000.
I infer from the notes that Mr Yaschenko said that the total proceeds were $6,979,000.
(15)Mr Yaschenko and Mr McCourt then discussed the Leon Road properties and the Butterly Road development at Yallingup. Mr McCourt said that these properties were worth at least $7,500,000.
(16)There was some discussion between Mr McCourt and Mr Yaschenko as to whether Foreign Investment Review Board approval was required for one of the proposed sales as the sale was to a foreign buyer. Mr McCourt said that the sale was 'not for a non-residential'.
(17)Mr Yaschenko said that the Bank would need to consider Mr McCourt's request.
(18)Mr Kappler provided Mr McCourt with a document for him to sign reinstating his guarantee of the various facilities and he signed the document. Ms Facius said to Mr McCourt that he needed to be aware that Mrs McCourt could walk into a branch of the Bank and demand funds and the Bank would not be able to stop her. Mr McCourt said that he understood.
I accept that at the conclusion of the meeting those present may have shaken hands but I find that any handshake was not accompanied by the words that Mr McCourt recalls saying, that is 'You've got a deal' or anything to that effect.
No binding agreement was made at the meeting on 21 October 2008
I am satisfied that a binding agreement was not made at the meeting held on 21 October 2008 for two reasons.
First, for the reasons already given I do not accept Mr McCourt's account of what was said at the meeting. I am satisfied that the words alleged by Mr McCourt to have been spoken at the meeting and to constitute the oral agreement for which he contends were not spoken.
Second, even if I was to accept Mr McCourt's evidence to the effect that a consensus was reached at the 21 October 2008 meeting I am not satisfied that the parties intended the consensus to be legally binding, that is I am not satisfied that there was an intention to create binding contractual relations at that meeting.
Shortly stated, whether parties intend to be bound by an arrangement between them is a matter to be determined objectively.[11] The subsequent conduct of the parties may be considered in order to ascertain their intentions at the time of the putative agreement.[12]
[11] Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95 [25] (Gaudron, McHugh, Hayne & Callinan JJ).
[12] Vantage Systems Pty Ltd v Priolo Corporation Pty Ltd [2015] WASCA 21; (2015) 47 WAR 547 [110] (Buss JA, as his Honour then was).
The Facility and all the variations to it had been in writing. In its dealings with Mr McCourt the Bank's practice was to produce documents to embody the contractual arrangements. It is highly unlikely the Bank would depart from its previous practice and make a binding agreement on the basis of an oral agreement and a handshake. As I explain in the next section of these reasons the Bank did prepare a formal letter and Mr and Mrs McCourt signed the letter, thereby signifying in the conventional way their agreement to the terms set out in the letter. When assessed objectively and in the context of the history of the relationship between the parties, there was no intention that the parties would be bound by any consensus reached at the 21 October 2008 meeting.
The alleged representations made by Mr Kappler to Mr McCourt
27 October 2008 increase in Facility limit
The need to pay Mr Melville $155,000 in order to secure the settlement of the Clifton Motel created a difficulty for the Bank. It was obliged to increase the Facility in order to bring about the reduction in debt that it was seeking, and that Mr McCourt had promised. A further variation to the Facility was required to increase the amount being lent to Mr McCourt and Mrs McCourt.
Mr Killeen prepared a draft letter to Mr McCourt and Mrs McCourt varying the terms of the Facility. Mr Yaschenko approved the terms of the draft and the letter was prepared and dated 27 October 2008. The letter recorded that the Facility limit would be increased from $10,300,000 to $10,455,000 and recited the existing conditions of the Facility. The letter went on to record 'Additional Conditions' as follows:
NAB will transfer $155,000 to Clive Melville, St George Bank BSB 116‑879 Acc: 068133900 as per fax request dated 16 October 2008 on condition that:
•NAB is to receive at least $730,000 (unless otherwise agreed by NAB) from dissolution of partnership of the Clifton, Michelle & Jacob partnerships by no later than the 7 November 2008.
•$155,000 is to be immediately repaid from the proceeds from the dissolution of the Clifton, Michelle & Jacob partnership in reduction of the amount outstanding under the National Portfolio Facility and the limit will be reduced by an equal amount.
•the balance of the proceeds from the dissolution of the Clifton, Michelle & Jacob partnership following the $155,000 payment in reduction of the National Portfolio Facility and less any fees/costs applicable, estimated at $575,000 is to be placed on Term Deposit to provision for future interest costs until such time as Agett Rd, Claremont settles.
•A Term Deposit Letter of Set off document will be completed and signed by DPR & RE McCourt
•Consideration of access to any surplus proceeds held in the Term Deposit under the above arrangements will not be considered until such time as Agett Rd settlement has occurred.
•A full review of the Portfolio Facility will be required at settlement of 1 Agett Road, Claremont or by 30 November 2008 (whichever is the earlier).
•A copy of the listing with a real estate agent acceptable to NAB for the sale of the property situated at 2B Passmore Ave, North Fremantle is to be provided to NAB by 31/10/08
•It is an event of default under the Portfolio Facility and the Securities if any of the above conditions are not complied with.
Mr McCourt was asked to attend the Bank's offices in Bunbury to sign the letter dated 27 October 2008. His evidence is that when he read the letter in the Bank's office on 27 October 2008 it was obvious to him that it did not reflect the agreement he contended had been made at the 21 October 2008 meeting and that he tried to speak to Mr Kappler by telephone but Mr Kappler was not available. Mr McCourt signed the letter. In cross-examination he said he signed the letter under duress and he did not agree with its terms. Mrs McCourt signed the letter on 28 October 2008.
Mr McCourt said that on 28 October 2008 he spoke to Mr Kappler by telephone and the following conversation took place:[13]
176.I said to Jeff 'This deal doesn't pay my tax. The tax department is going to climb all over me. If I pay all the money to you the tax department will come after the bank.'
177.Kappler said to me 'No problem, we have priority over the tax department.'
178.I said 'That's that problem solved. What about the credit cards. I can't eat. The deal was that I pay down the credit cards so I have money.'
179.He said 'Look, this is the best deal you are going to get now. This is it. Lease one of the cars. You have to cope until the Clifton motel settles.'
[13] Exhibit P3A.
Mr Kappler's evidence is that after the 21 October 2008 meeting he directed all correspondence with Mr McCourt to Mr Yaschenko. He said Mr McCourt telephoned him on a couple of occasions and he said 'Look Dan, I can't talk to you. You need to talk direct to Vic'.
I am not satisfied that Mr McCourt had a conversation with Mr Kappler in the terms Mr McCourt alleges. I consider that had Mr McCourt telephoned Mr Kappler to complain about the terms of the 28 October 2008 letter, Mr Kappler would have referred Mr McCourt to Mr Yaschenko.
3 December 2008 Meeting
The Clifton Motel proceeds were not paid to the Bank by 30 November 2008. On 3 December 2008 Mr Yaschenko and Ms Facius met Mr McCourt at the Bank's offices in Perth. Mr Yaschenko and Ms Facius each made notes in the course of the meeting. It is not clear from these notes whether Mr Kappler was present. Ms Facius' notes suggests that he may have been present but she said that it was possible that Mr Kappler was not present in person but that she and Mr Yaschenko had telephoned him in a break in the meeting.
Mr Yaschenko gave evidence of what was said by him at the meeting by reference to his notes. His evidence, which I accept, was that he told Mr McCourt that if the Clifton Motel proceeds were received by the Bank by 16 December 2008 then the Bank would give consideration to applying $300,000 in debt reduction, paying $350,000 into a term deposit to cover interest on the Facility for a further six months and allowing Mr McCourt $200,000 to meet his expenses, but that he was not making a commitment to that effect. Mr Yaschenko said that if the Clifton Motel transaction did not settle by 16 December 2008 the Bank would take recovery action. Mr McCourt said that $250,000 was not sufficient for his living expenses and he would require $350,000.
Ms Facius' notes record Mr McCourt as saying that he needed $100,000 to pay tax, $38,000 to pay legal fees and $46,000 to pay for 'demolition' and that he needed funds to pay for school fees. Ms Facius' notes record that Mr McCourt spoke about refinancing with another bank. I accept that Ms Facius' notes record what Mr McCourt said about his requirement for funds and that he spoke about refinancing.
The Clifton Motel transaction did not settle before 16 December 2008 and on 19 December 2008 notices of default were served requiring payment of $10,488,802 within 35 days.
Telephone conversation on 20 December 2008
Mr McCourt's evidence was that on 20 December 2008 he telephoned Mr Kappler and told him that he and his wife had been served with a default notice and that this was not what had been agreed at the 21 October 2008 meeting. Mr McCourt's account of what was then said was as follows:
223.Jeff Kappler said 'This is an administrative step the bank is taking. The bank has been told the motel has been settling before and it hasn't settled. If the motel doesn't settle this time the bank is going to proceed with the sale of the properties.
224.I said to Jeff Kappler that that was not in the agreement we made at 21 October 2008 meeting and I felt uncomfortable and wanted the process stopped.
225.Jeff Kappler said the bank was not prepared to stop the process because if the motel didn't settle the bank would have to start the default process all over again.
Mr Kappler could not recall a conversation with Mr McCourt on 20 December 2008 or any conversation along the lines recounted by Mr McCourt. He thought he would have recalled a conversation about a default notice as it was not something that happened all the time. He said that he would not describe a default notice as an administrative step.
I am not satisfied that Mr McCourt had a telephone conversation with Mr Kappler as described by Mr McCourt on 20 December 2008 or at any other time.
Mr Kappler said that he spoke to Mr McCourt numerous times between October 2008 and March 2009. When asked what he meant by 'numerous times' he said that he spoke to Mr McCourt once every two weeks but that Mr McCourt left messages for him on his voicemail service more frequently than that.
Mr McCourt tendered the call records for the mobile telephone he was using in 2008 and 2009. These suggest that Mr McCourt telephoned Mr Kappler's office and mobile telephone numbers more often than once every two weeks but it is not possible to draw any specific conclusions as to how many times the two men actually spoke to each other.
I am not satisfied that Mr Kappler made any representations to Mr McCourt to the effect that if Mr McCourt paid the Clifton Motel proceeds to the Bank the Facility would continue. In addition to the reservations I have already expressed about Mr McCourt's evidence my reasons for finding that Mr Kappler made no such reservations are that I accept Mr Kappler's evidence that when he spoke to Mr McCourt on the telephone he referred Mr McCourt to Mr Yaschenko. Mr Kappler was a senior bank officer of many years' experience. He knew that the Strategic Business Services division was managing the relationship with Mr McCourt. I think it is very unlikely that a Bank officer of Mr Kappler's seniority and experience would have interposed himself in the communications between the Bank and Mr McCourt in the way alleged by Mr McCourt.
No unconscionable conduct in relation to refinancing
Mr McCourt's pleaded case
It is instructive to set out the relevant paragraph of Mr McCourt's pleading:
18. The Defendant acted unconscionably and caused him to suffer financial loss by refusing to co-operate with the Plaintiff by consenting to the transfer of lot 100[2] Butterley Road into his own name when the funds were available from the Bank of Queensland which the Defendant knew having been informed by the Plaintiff.
(a)The Plaintiff was willing and able to pay out the balance owing on the lot 1002 Butterley Road
(b)The Plaintiff was trustee to the Yallingup property as a result of the Family Court Orders but the Defendant (Bank) obstructed the transfer of the property into his name
(c)The Defendant has conceded liability concerning their conduct regarding the others facets of the Statement of Claim with the exception of clause 18.
PARTICULARS
(a) The Plaintiff (McCourt) sought finance and it was approved for four properties in total listed below:
1)17 Elizabeth Crescent, South Bunbury
2)23A and 23B Leon Road, Dalkeith
3)Joel Crescent, South Bunbury
4)1002 Butterley Road, Yallingup
(b)The Plaintiff had approached the Bank around the month of August 2009 and sought a payout figure on the four properties.
(c)The Bank provided on a letterhead, handwritten with various costs (I believe by Vic Yaschenko) ‑ showing a payout figure of $7.1M ‑ this was like a handwritten settlement statement.
(d)The application was approved by the BO[Q] around early October 2009. The approved amount was $7.1M.
(e)The Plaintiff contacted Vic Yaschenko and told him that the finance had been approved for $7.1M.
(f)Vic Yaschenko told The Plaintiff he would get back to him.
(g)When Mr Yaschenko did, approximately the following week, he sent The Plaintiff another handwritten letter (like a settlement statement) with $7.1M on it plus extra costs of approximately $123,000 making it $7.223M approx.
(h)As a result of the conduct of the Defendant the Plaintiff lost the opportunity to dispose of the Butterley Road property
(i)Vic Yaschenko then told The Plaintiff 'You don't have adequate funding. Don't you get it? We are selling you up.'
Mr McCourt's case at trial
As developed, however, at trial Mr McCourt's unconscionable conduct case was premised on the following three allegations:
(a)In August 2009 Mr Yaschenko gave Mr McCourt a handwritten settlement statement which recorded the figure required to pay out the Bank's debt as $7,100,000. Mr McCourt took the handwritten statement to Mr Travis Styles, the finance broker who was assisting Mr McCourt with his efforts to refinance the Bank's debt.
(b)The Bank of Queensland approved finance in the amount of $7,100,000.
(c)When notified that finance of $7,100,000 had been approved the Bank increased the amount of the debt due to it by approximately $120,000, thus frustrating Mr McCourt's attempts to obtain finance.
The facts do not support Mr McCourt's unconscionable conduct case
Mr McCourt's unconscionable conduct case is not supported by the facts evidenced by the contemporaneous documents.
Between March and August 2009 Mr McCourt made efforts to refinance the Bank's debt. In that period he had a number of communications with Mr Yaschenko in which he expressed confidence that he would be able to secure refinancing. It is unnecessary to refer to the detail of the communications but what is apparent is that, amongst many other things done by him, Mr McCourt instructed a firm of settlement agents, Dynamic Settlements, to communicate with the Bank in relation to the transactions that would be necessary to achieve the refinancing.
On 25 August 2009 Mr Facius sent an email to 'Michelle' at Dynamic Settlements in which Ms Facius stated the amount required to pay out the 'McCourt facilities' was $7,830,000.
Between 28 August 2009 and 15 October 2009 the Bank's solicitors, Minter Ellison, exchanged correspondence with Mr McCourt's solicitors, Hotchkin Hanly, about Mr McCourt's proposals to refinance the Bank's debt. I will only refer to so much of the correspondence as is necessary to explain why the facts do not support Mr McCourt's case.
In a letter dated 2 September 2009 to Minter Ellison, Hotchkin Hanly, referred to the monies owing to the Bank as being 'approximately $7.1m'.
By letter dated 4 September 2009 the Bank of Queensland offered 'indicative approval advice' of a commercial rate loan of $3,100,000 and commercial rate loan of $1,800,000.
On 8 September 2009 an acquaintance of Mr McCourt, Mr Rod Carter, made an offer to purchase the Leon Road properties for $3,100,000 which the Bank accepted.
On 10 September 2009 Hotchkin Hanly sent a letter to Minter Ellison in which they stated that as the Bank had accepted Mr Carter's offer of $3,100,000 for the Leon Road properties, the remaining debt to the Bank '… is just over $4 million' and that Mr McCourt was in the advanced stages of obtaining unconditional approval from the Bank of Queensland for the refinance of the balance of the debt due to the Bank, that is $4,100,000.
On 11 September 2009 Minter Ellison sent a letter to Hotchkin Hanly in which they stated that the debt due to the Bank was approximately $7,860,000, adding that the figure was indicative in nature and was provided on a non-binding basis.
On 8 October 2009 the Bank of Queensland sent a letter addressed to the trustee of the McCourt Family Trust recording that it had approved a commercial rate loan of $4,000,000 on condition that security in the form of registered first mortgages were granted to it over the Joel Crescent properties and over the Butterly Road property. On the same day, 8 October 2009, Mr Styles sent a letter to Mr McCourt and informed him that he would look to increasing the funding limit referred to in the offer of a commercial rate loan of $4,000,000 by up to $400,000 once a valuation of the Butterly Road property had been received.
On 24 February 2010 Mr McCourt received a letter from the Bank of Queensland that it had approved a commercial rate loan of $3,000,000 to be secured over the Elizabeth Terrace property and the Leon Road properties (the sale of the Leon Road properties to Mr Carter having fallen through).
On 3 March 2010 Mr Styles wrote to Mr McCourt informing him that a loan application to the Bank of Queensland for $3,360,000 had been approved. In the letter Mr Styles referred to his invoice for his fee which he said was payable on a loan being unconditionally approved. Mr Syles wrote, 'As we have now achieved unconditional approval for two loan applications ($4,000,000 and $3,360,000) the fee charged relates to the higher of the two loan amounts, given the additional work required to secure the second approval.'
At no stage in the correspondence in September and October 2009 was the complaint made on Mr McCourt's behalf that Mr Yaschenko had misled Mr McCourt into believing that the amount required to discharge the debt due to the Bank was $7,100,000.
Having regard to Ms Facius' statement of the amount due to the Bank in her email to Dynamic Settlements of 25 August 2009 and the statements as to the amount of the debt in Minter Ellison's correspondence I consider it highly unlikely that Mr Yaschenko provided Mr McCourt with the handwritten settlement statement recording a pay out figure of $7,100,000 described by Mr McCourt in his evidence. Moreover the objective facts support the conclusion that Mr McCourt knew at least three weeks before the Bank of Queensland approved a finance facility in the sum of $4,000,000 that the amount required to discharge the Bank's debt was over $7,850,000 because that is the figure given by the Bank's solicitors to his solicitors.
The only facility approved by the Bank of Queensland in 2009 was the finance facility for $4,000,000 referred to in its letter of 8 October 2009. In 2010 the Bank of Queensland approved two loans for a total of $7,360,000 but the Bank of Queensland did not approve a loan in 2009 or 2010 of $7,100,000. Moreover, as was apparent from Hotchkin Hanly's letter of 10 September 2009, the 4 September 2009 indicative offer ceased to have commercial significance for Mr McCourt when Mr Carter's offer to purchase the Leon Road properties was accepted.
The sale of 1 Agett Road and the Joel Crescent properties
The principles governing the exercise of a mortgagee's power of sale
Murphy J (as his Honour then was) set out the relevant principles in McCourt v National Australia Bank [2010] WASC 121 at [13] ‑ [16] as follows:
(a)the power of sale is given to the mortgagee for its own benefit;
(b)the mortgagee is not a trustee of the power for the mortgagor and the court will not enquire into its motives for exercising it;
(c)the duty of the mortgagee in respect of the sale itself is to act in good faith;
(d)that concept does not involve a duty of care as understood in the law of negligence, but embraces the notion that bona fide steps must be taken not to 'sacrifice' the mortgagor's interest;
(e)a mortgagee does not act bona fide if it fraudulently, wilfully or recklessly sacrifices the interest of the mortgagor;
(f)the mortgagor's duty is of variable content. It is less intense the smaller the possible surplus that may be due to the mortgagor;
(g)the burden of proof is on the mortgagor, or other person, seeking to impugn the sale to prove breach of duty by the mortgagee;
(h)subject to acting in good faith, the mortgagee may choose the time for sale and may sell when it considers it appropriate to do so; and
(i)the mortgagee is not bound to postpone the sale in the hope of obtaining a better price later, but must allow sufficient time to permit proper advertising so that the best price reasonably obtainable may be obtained.
The pleaded case in respect of 1 Agett Road
Mr McCourt's pleaded case is as follows:
20.In relation to the sale of 1 Agett Road, the Defendant acted wilfully and sacrificed the interests of the Plaintiff.
PARTICULARS
(a)An unconditional cash offer had been made in October 2008 although that offer did not reach settlement.
(b)The property was sold for $2M (two million) and 11 weeks later was sold by the subsequent owner for $2.495 million.
(c)The Defendant failed to allow the property to be put to auction.
(d)The Defendant therefore acted wilfully and sacrificed the Plaintiffs interests
The steps taken by the Bank to sell 1 Agett Road
Save as otherwise stated the following findings as to the steps taken by the Bank in exercising its power of sale are based on the contemporaneous documents. On 26 February 2009 the Bank obtained a valuation of 1 Agett Road from CBRE Richard Ellis which valued the property at $2,120,000.
On 3 March 2009 the Bank obtained a market appraisal of 1 Agett Road from a real estate agent. The market appraisal recommended that various maintenance items be attended to and that furniture be hired to improve the property's appeal. The market appraisal estimated that the property would achieve a sale price in the region of $2,000,000 to $2,200,000. The real estate agent recommended that the property be sold at auction. The Bank accepted the real estate agent's recommendations in relation to the maintenance of the garden and swimming pool and paid for that maintenance work to be undertaken. It also accepted the recommendation of an auction sale. An auction was listed for 18 April 2009.
On 10 March 2009 the Bank appointed the real estate agent to sell the property at auction. Specific instructions were given not to mention that the sale was a mortgagee sale or that there was any urgency associated with the sale. The Bank agreed to meet the cost of hiring furniture to be placed in the property to increase its marketing appeal. In late March 2009 security gates which had been installed but not paid for were removed by the contractor who had installed them. The Bank paid for the gates to be reinstalled and subsequently met the costs of an electrician setting up an intercom system for use with the gates.
In early April 2009 the real estate agent sought the Bank's approval to add the words 'must be sold' in the marketing material. The Bank refused to approve the inclusion of these words or any advertising that expressed that the sale was urgent or that it was a forced sale.
Mr Yaschenko and Ms Facius received reports from the real estate agent as to level of interest in the property and considered recommendations made by the real estate agent as to the fixing of a reserve price. On the day before the auction the advice from the real estate agent was that three potential buyers had expressed serious interest in the property but only one of those was prepared to make an offer ($2,000,000) prior to the auction. None of those interested were prepared to bid for the property at auction. In his evidence, which I accept, Mr Yaschenko stated that he and Ms Facius considered the position. They were concerned that no bids would be made for the property at auction and on that basis decided that the Bank should accept the offer of $2,000,000 and gave instructions accordingly. The offer was accepted and the auction did not take place. Settlement of the sale occurred on 3 July 2009.
The Bank incurred costs of approximately $20,000 in maintaining the property and preparing it for auction and in marketing costs.
On 20 April 2009 Ms Grigo sent an email to the real estate agent on Mr McCourt's behalf complaining about the agent's approach to the sale but the email did not particularise Mr McCourt's complaint.
The Bank did not wilfully and recklessly sacrifice Mr McCourt's interests when selling 1 Agett Road
I am satisfied that the Bank acted properly in all aspects of the sale of 1 Agett Road. The allegation that the Bank sacrificed Mr McCourt's interests and did so wilfully and recklessly had no basis in fact. The Bank officers acted in good faith throughout the sale process. Making the decision to accept the offer of $2,000,000 in the day before the auction involved a judgment call. Deciding to accept the offer was a reasonable decision (and I think the preferable decision). It was certainly not evidence of a lack of good faith.
Two further observations are required. First, the statement in particular (a) to par 20 of Mr McCourt's statement of claim is misleading. A contract formed by way of the standard offer and acceptance form had been made for the sale of 1 Agett Road in July 2008 at a price of $2,875,000 but it was not unconditional.[14] Second, although it was not in dispute that 1 Agett Road was on sold for $2,495,000 some 12 weeks later, having regard to the steps taken by the Bank to sell the property, this is not a fact from which it is possible to draw the conclusion that there was any lack of good faith on the part of the Bank.
The pleaded case in respect of the Joel Crescent properties
[14] McCourt v Cranston [2009] WASC 56.
Mr McCourt's pleaded case is as follows:
19.In relation to the property described as Joel Crescent Apartments, the Defendant acted in a wilful way and recklessly sacrificed the interests of the mortgagee.
PARTICULARS
(a)The Defendant sold each apartment for approximately $265,000 each.
(b)The apartments had been valued at $340,000 each by Jay Standley of Barr and Standley.
(c) The Defendant therefore acted wilfully and sacrificed the Plaintiffs interests.
Steps taken by the Bank to sell the Joel Crescent properties
Save as otherwise stated the following findings as to the steps taken by the Bank in exercising its power of sale are based on the contemporaneous documents.
In February 2009 the Bank appointed Mr Ian Francis and Mr Michael Ryan of the accountancy firm Taylor Woodings as its agent to take possession of the Joel Crescent properties on its behalf. As noted earlier there were seven units located on the two properties. The units were not strata titled. Taylor Woodings recommended that the units be strata titled and the Bank accepted that recommendation and met the associated costs. The process was completed in about March 2010.
In the intervening period the Bank received:
(i)a valuation of the units in April 2009;
(ii)a further valuation of the units in January 2010; and
(iii)market appraisals from three real estate agents, Summit Realty, Barr and Standley and Re/Max Lighthouse.
The January 2010 valuation valued the units (if sold separately) at values ranging between $275,000 and $300,000.
Summit Realty recommended marketing the units at between $260,000 and $280,000 each. Barr and Standley recommended marketing the units at between $330,000 and $350,000. The Barr and Standley market appraisal included a statement by the author of the appraisal, Mr Jay Standley, that he estimated the market value of properties to be between $330,000 and $350,000. Re/Max Lighthouse recommended marketing the units at between $280,000 and $300,000.
Taylor Woodings recommended that Re/Max Lighthouse be appointed to sell the units. In his evidence Mr Yaschenko explained that he agreed with the recommendation and Re/Max Lighthouse was appointed as the selling agent. Mr Yaschenko explained that Re/Max's appraisal was the most consistent with the recent valuation and, in the light of advice he had received about the state of the real estate market in regional Western Australia, he was concerned that if the units were overpriced they would sit on the market and become 'stale' and ultimately achieve lower prices. Mr McCourt was critical of the decision to appoint Re/Max and not Barr and Standley arguing that Barr and Standley were more experienced and successful agents. Mr Yaschenko's choice of real estate agent is not evidence of a lack of good faith on the Bank's part.
The units proved difficult to sell. Taylor Woodings obtained an updated valuation in August 2010 and provided it to the Bank.
By October 2010 only two units had been sold. Taylor Woodings recommended that the remaining units be sold at auction. Two further sales were achieved before an auction was held on 6 December 2010. No bids for any of the units were received at auction. The remaining units were sold between January and September 2011.
In support of his case Mr McCourt relied upon the statement made by Mr Jay Standley in the Barr and Standley market appraisal as to the value of the units. I admitted the market appraisal as evidence of a step taken by the Bank's agent in the process of exercising its power of sale but, not as evidence of the value of the units.
The Bank did not wilfully and recklessly sacrifice Mr McCourt's interests when selling the Joel Crescent Properties
Having reviewed the steps taken by the Bank to sell the Joel Crescent properties I am satisfied that the Bank acted properly. There is no evidence that the Bank officers acted otherwise than in good faith.
Even if I had admitted the evidence that Mr McCourt wished to rely upon, Mr Standley's estimate that the units were worth between $330,000 and $350,000 each, this would not have altered my conclusion. Mr Standley provided an estimate. Proper steps were taken to market and sell the units. Mr Standley' estimate was tested against the market and the market demonstrated that the estimate was overly optimistic
No concession of liability at 8 June 2016 hearing
The hearing before Master Sanderson on 8 June 2016 was of the Bank's application to strike out par 18 of Mr McCourt's statement of claim as it then stood. Mr McCourt appeared in person and the Bank was represented by senior counsel. The hearing was recorded and a transcript of the hearing prepared in the usual way.
At the commencement of the hearing senior counsel outlined the Bank's argument. The Master paraphrased the argument for Mr McCourt and provided him with a copy of the decision on which the Bank relied before adjourning the hearing to give Mr McCourt time to read the decision. After the hearing resumed senior counsel for the Bank made some short submissions developing the Bank's argument. Mr McCourt then addressed the Master and explained the importance he attached to the matters dealt with in paragraph 18 of the statement of claim. The Master explained to Mr McCourt why he could not plead the matters he had pleaded in par 18 of the statement of claim and that he would strike that paragraph out but give Mr McCourt leave to re‑plead.
The hearing was short. The transcript covers just over six pages.
Mr McCourt's evidence was that as he was addressing the Master the Banks' senior counsel stood up and said the Bank had conceded liability. He identified page 52.3 of the transcript for 8 June 2016 as the point during the hearing when this occurred.[15]
[15] ts 761.5.
Professor Delriviere is a friend of Mr McCourt and he attended the hearing on 8 June 2016. He was sitting about five metres from the bar table. His evidence was that he believed he heard senior counsel for the Bank say that the Bank conceded liability. When cross-examined he was asked to identify by reference to the transcript when he said this statement was made. Professor Delriviere identified page 50.2 of the transcript, which was after the short adjournment and as senior counsel for the Bank began her submissions. At that point the transcript records counsel saying:
Your Honour, there has been a series of various minutes of amended statements of claim. We have finally got to the point where the case against the bank is readily understandable now with the exception of this one point.
Professor Delriviere said that he recalled the Master had a surprised expression on his face as counsel said the Bank conceded liability.
Mr McCourt has listened to the recording of the hearing and accepts that the words he and Professor Delriviere believe were said cannot be heard on the recording.
Whilst I accept that Professor Delriviere gave truthful evidence as to what he believed he heard I am satisfied that no concession of liability was made in the course of the hearing on 8 June 2016. I consider that Mr McCourt and Professor Delriviere misheard or misunderstood what was said by the Bank's senior counsel. Not only is the concession not recorded on the transcript but I have no doubt that if the Bank's senior counsel had made any statement to the effect that liability was conceded it would have generated an immediate inquiry from the Master as to the Bank's position given that he was hearing an application by the Bank to strike out a paragraph in Mr McCourt's statement of claim. It is highly improbable that the concession would have been ignored and that the hearing would have proceeded thereafter as it did.
I am mindful that Mr McCourt is a lay person who is not represented in these proceedings. I stress for his benefit that it is inherently incredible that such a concession would have been made given that the Bank had defended the action to that point. It is also inherently incredible that such a concession would be made in the course of the Bank's application to strike out a paragraph in the statement of claim.
Conclusion
Mr McCourt's action is dismissed. I will hear the parties as to costs.
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