Natdale Pty Ltd and Watson v CBFC Ltd

[1995] QCA 65

IN THE COURT OF APPEAL	[1995] QCA 065
SUPREME COURT OF QUEENSLAND
Brisbane

Appeal No. 173 of 1994

[Natdale Pty Ltd & Anor v. CBFC Ltd]

BETWEEN:

NATDALE PTY LTD (A.C.N. 010 212 576)

(Appellant/First Defendant)

AND:

AUSTIN JOHN WATSON

(Appellant/Second Defendant)

AND:

CBFC LIMITED (A.C.N. 008 519 462)

(Respondent/Plaintiff)

Macrossan CJ
Pincus JA

Thomas J

Judgment delivered 15 March 1995

Judgment of the Court

APPEAL DISMISSED WITH COSTS

CATCHWORDS:	APPEALS - Whether Trial Judge's primary findings of fact should be reversed - Negligent misstatement.
COUNSEL:	P.D. McMurdo QC with him Mr Bland for the Appellants D.A. Mullins for the Respondent
SOLICITORS:	Holland and Holland for the Appellants David J Frank for the Respondent
HEARING DATE:	8 February 1995

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Brisbane

Before Macrossan CJ

Pincus JA Thomas J

Appeal No. 173 of 1994

[Natdale Pty Ltd & Anor v. CBFC Ltd]

BETWEEN:

NATDALE PTY LTD (A.C.N. 010 212 576)

(Appellant/First Defendant)

AND:

AUSTIN JOHN WATSON

(Appellant/Second Defendant)

AND:

CBFC LIMITED (A.C.N. 008 519 462)

(Respondent/Plaintiff)

JUDGMENT OF THE COURT

Judgment delivered 15 March 1995

This is an appeal against the dismissal of a counterclaim. The appellants comprise a

borrower company (Natdale) and its director (Mr Watson) who guaranteed the loan in question.

The respondent (the plaintiff bank CBFC) obtained summary judgment on its claim under the loan

agreement dated 21 March 1990. The appellant's counterclaim subsequently went to trial. After a

three day trial it was dismissed.

The loan was advanced to enable Natdale to purchase a dwelling house at Chevron Island,

Gold Coast. The contract for that purchase was dated 7 February 1990. The price was $920,000.

The principal actors and witnesses were Mr Watson (who at all material times controlled Natdale

and for whose benefit the house was to be purchased) and Mr O'Meara, the loans officer of the

respondent bank.

The counterclaim was based upon negligent mis-statement allegedly made by Mr O'Meara. The learned trial Judge found that the alleged statement had not been made.

The essential propositions in the appellant's claim were:-

(a)         On or about 7 February 1990 and before the contract was signed, O'Meara advised

Watson (and through him Natdale) that the market value of the property was $1.1 million.

(b)        Such advice was negligently given in that the plaintiff by O'Meara did not exercise

reasonable care in advising that value.

(c)         The property was in fact worth about $620,000.

(d)        In reliance upon the valuation stated by O'Meara, Natdale entered into the contract and

Watson entered into the guarantee that Natdale would repay its loan to the bank.

(e)         Natdale suffered loss on paying $920,000 for a property worth $620,000.

(f)          Watson suffered loss as a result of guaranteeing Natdale's obligations.

The learned trial Judge's finding that the alleged representation was not made was based

upon his view of credibility of the witnesses. Such a finding can be reversed by this court only if it is

vitiated by some error of principle, or if there has been misapprehension of facts, glaring

improbability or palpable misuse of the trial Judge's advantage of observation of the witnesses.

(Devries v. Australian National Railways Commission (1993) 67 A.L.J.R. 528, 531, 533-534).

Counsel for the appellant submitted that the learned trial Judge committed four "errors" in the

course of fairly lengthy observations discussing the evidence and the relative merits of the witnesses.

These will now be considered.

The submissions in support of the first alleged error relate to the respective motivations of

Mr O'Meara and Mr Watson. It was common ground that Mr Watson told Mr O'Meara that he

wanted the bank to advance the full purchase price of the house that he would buy and that

Mr O'Meara had told him that the bank would be prepared to lend the whole of the purchase price

if it did not exceed 85% of the bank's valuation. Mr O'Meara's evidence included having been

advised by Mr Watson at the end of January 1990 that he was interested in a particular property

and that he would pay up to $900,000 for it.

The appellant's counsel submits that Mr Watson would therefore need to have known that

the bank's valuation was such as to enable the bank to advance such a sum as 85% of its value. In

other words, in order to obtain an advance on that level the bank's valuation would need to be at

least $1.059 million and according to the submission Mr Watson would need to have known that the

valuation would reach that level. No doubt Mr Watson would like to have had a preliminary

assurance that the bank's valuation would do so, but that is not to say that such an assurance was

given or even that it was likely to have been given. The appellant however complains that despite his

Honour's finding that in early February Mr Watson intended not to sign the contract unless the bank

valued the property at $1.1 million, his Honour went on to conclude that Mr Watson changed his

mind before signing the contract. The submission is that his Honour should have concluded that it

was very likely that O'Meara said something to Watson about the bank's valuation that satisfied him

that he would get a loan of $900,000. This seems to be something of a bootstraps argument. It is

not inherently unlikely that when the opportunity arrived for Mr Watson to purchase the property for

$900,000, or as it later turned out, for $920,000 he took the risk that the bank valuation would

cover such a price.

We are unable to discern any error on the learned trial Judge's part in failing to accede to

such arguments.

The second "error" according to the appellant's submissions takes issue with the learned trial

Judge's observation in the course of his reasons that he could find "no apparent reason and indeed

no reason for Mr O'Meara to make to Mr Watson the representations on which the (appellant's)

case depends". It is true that Mr O'Meara was, as he wrote in a memorandum on 25 January 1990

"keen to assist in order to foster this connection". It is also true that he later wrote a letter that might

be thought be encouraging a high valuation and that he was under a duty to obtain business for the

bank. Whilst those matters provide a reason for him to be co-operative they fall short of showing

any compelling reason for making representations of the kind alleged here. The objection to his

Honour's use of the words "no reason" is probably correct but on examination it is essentially a semantic point. It does not vitiate the thrust of his Honour's reasoning.

The third alleged error is said to be found in his Honour's finding that the bank's valuer (Mr

Costigan) "had not discussed the property... with O'Meara and that it was not until on or after 28

February 1990 that he (Costigan) formed his opinion that the property was worth $1.1 million".

The challenge is based upon a tenuous concession by Mr Costigan under cross-examination. He

did not actually see the property until 28 February. An earlier appointment had been arranged for

22 February but he could not get access to the property at that time. Under cross-examination he

agreed that he knew Mr O'Meara and sometimes had informal conversations with him. He did not

recall any conversation in relation to this property. Mr Costigan's evidence on this point went no

further than the following:-

"So on an informal basis of the kind that we've been discussing it's quite possible, on your view, to venture some opinion when speaking to somebody within the bank or CBFC that the property in a location like this, with an asking price of $1.5 million at the height of a boom, most probably would value in excess of a million, or perhaps at $1.1 million?-- It is possible.

And doing the best you can with your recollection, and I take the force of what you said about recalling events last week, but doing the best you can in respect of February 1990, you can't say today whether you had such a conversation Mr O'Meara or not, I suppose?-- Absolutely not."

The point is hardly worth discussing further. There is no evidence that any such conversation

happened. To the contrary, Mr Costigan's evidence including the date of his first inspection, tends

to suggest that no relevant conversation or communication between him and Mr O'Meara occurred

until after 28 February 1990.

The fourth alleged error is that his Honour overlooked Mr O'Meara's evidence concerning

the bank's letter of conditional approval dated 7 February 1990. However, that letter is consistent

with Mr O'Meara's evidence. It was hand delivered to Mr Watson shortly before the contract was

signed on 7 February. It conditionally approved the loan of $900,000 and it was made expressly

subject to the requirement that "the valuation of any property offered as security... must be to

CBFC's satisfaction and subject to a lending margin of no more than 85% of valuation". Counsel for the appellant submitted that it was merely a pro forma letter and that that particular paragraph was

not consciously or specifically inserted. The only basis for such assertions is that the same

paragraph was included in a later amended approval (7 March 1990) when the loan was increased

to $920,000. That circumstance is not surprising and does not diminish the prima facie effect of the

statements made in the initial letter of approval which provides some contemporary evidence of the

state of affairs as at 7 February. There was no reason to think that his Honour erred in regarding

that as a circumstance consistent with Mr O'Meara's evidence.

All the above points are arguments of the kind that are commonly addressed to a fact finding

tribunal in an attempt to persuade it to find a particular fact or accept a particular version. None of

them reveals any relevant error on the part of the learned trial Judge and none of them is suggestive

that his Honour reached the wrong result. The submissions do not approach any of the bases upon

which an appeal court may be persuaded to reverse a finding of primary fact based upon credibility.

The whole foundation of the appellant's case is therefore lacking in that there was no

representation.

It is therefore unnecessary to deal with a number of further difficulties in the appellant's path,

which were also raised upon the appeal. One of these was the finding of the learned trial Judge

which accepted valuation evidence indicating that the property purchased by the appellant was

worth the price paid. His Honour found that the appellants had suffered no damage. It is

unnecessary to deal with these arguments.

It should also be noted that the vagueness of the representation alleged ("the valuation is

coming in around $1.1 million ..") leaves open the question whether it was a sufficiently clear or

serious statement as to found an action of this kind (MLC v. Evatt (1968) 122 C.L.R. 556, 572-

573). Counsel for the respondent also raised the question of reliance, pointing to the evidence that

when Mr Watson signed the contract he relied entirely on his own opinion of the value of the

property.

It is unnecessary to say anything further on these points.
The appeal should be dismissed with costs.