National Australia Bank Ltd v Mcnab No. DCCIV-97-38 Judgment No. D2

[1999] SADC 2

NATIONAL AUSTRALIA BANK LTD v McNAB

[1999] SADC 2

Judge Lowrie
Civil

BACKGROUND AND PLEADINGS
1 The plaintiff bank commenced this action against the defendant alleging that the amount claimed was owing by him under two documents of personal guarantee executed by the defendant to secure advances made to two companies, Hydro-Thermal Engineering Pty Ltd (in liquidation), hereinafter referred to as "Hydro", and Ficom Pty Ltd, hereinafter referred to as "Ficom".
2 The defendant was at all times the major director and shareholder of these companies. Hydro was an engineering company involved in the manufacture of air conditioning towers for major projects.
3 The defendant is an engineer with a vast experience in this specialty field of engineering.
4 Hydro had on 1 July, 1992, executed a mortgage debenture over its assets to secure a principal advance of $40,000 together with interest and costs and, on that day, the defendant had signed a document of guarantee and indemnity in favour of the plaintiff to further such advance. I will call this document the "Hydro guarantee".
5 Hydro breached the terms of such debenture and by 2 December, 1996, was indebted to the plaintiff for a sum in excess of $25,000.
6 The affairs of the company were wound up on 1 October, 1996, and a liquidator appointed to take charge of its assets.
7 It was further alleged that at an earlier date in September 1990 the plaintiff provided Ficom with overdraft funds to a limit of $15,000, and again, such borrowing was secured by a guarantee executed by the defendant on 12 September, 1990. I will refer to this document as the "Ficom guarantee".
8 The plaintiff alleged that Ficom defaulted in the repayment of the amount owing, and, eventually by December 1996, Ficom was indebted to the plaintiff for a sum in excess of $16,000.
9 The liquidator of Hydro sold the assets and, by virtue of the debenture security, accounted to the bank for moneys received from such sale.
10 Subsequently the plaintiff made demands on the defendant for the balance owing to it under such guarantee documents.
11 The plaintiff issued these proceedings in 1997, and, as at that date, alleged that the defendant owed it the sum of $42,012.36 together with interest accruing thereon.
12 The defendant appeared and admitted the relevant paragraphs of the statement of claim particularly the drawing of Hydro on its overdraft facility. He further admitted that he signed the guarantee document on 1 July, 1992. However, he claimed that:
"The plaintiff, by its servant/servants or agents, Dianne Rigowski and/or Steven Smith, advised the defendant that the economy was improving in the building and manufacturing industry and that increasing borrowing was a good business decision. The said advice was given to the defendant on several occasions, namely the 17th of February 1992, the 10th of March 1992 and the 19th of June 1992."
He pleaded further that such advice was given despite a report prepared by Hydro which "was negative about market trends".
13 The defendant then further alleged that:
"The plaintiff by its servants or agents Dianne Rigowski and/or Steven Smith confirmed previous advice given to the defendant that the guarantee was a lower security than a mortgage and that the guarantee was only enforceable by the plaintiff in the event that the defendant acted fraudulently in relation to any borrowing."
The defendant said he relied upon the plaintiff to advise him as to "market trends".
14 The defendant also pleaded that the plaintiff failed to advise him on the meaning and consequences of the guarantee documents.
15 The defendant said, in relation to the guarantee signed in 1990, that he was "not aware of the terms and conditions at the time of signing" and relied on advice given to him by the plaintiff’s then servant or agent, Mr Hughes. He sought that the guarantees be set aside or rescinded or declared void in view of the nature of his allegations.

HEARING
16 The matter came on for hearing. The plaintiff was represented by its counsel and the defendant appeared in person.
17 As I have mentioned, the defendant is an engineer by profession and clearly is well respected in the specialised area of thermal engineering.
18 The defendant conducted his defence in a proper and detailed manner. It can be said that there was little he overlooked in relation to any matter arising out of these documents either in his cross-examination of witnesses or in his own evidence. He finally addressed me in detail and at length concerning his allegations, and clearly, what he perceives to be the extremely unsatisfactory and/or negligent conduct of the bank in its dealings with him. These issues have no doubt developed into a fixation and preoccupation since the liquidation of his company and I consider this has led him into error.
19 There were instances during counsel for the plaintiff’s address when he stated that the defendant had deliberately lied about the presentation of certain matters. That would not be my view. In my opinion, his fixations are so ardent and his criticism of bank officers, in hindsight, so intense that he has accepted any issue, even incorrect, as areas reflecting on the bank and its officers to their discredit.

PLAINTIFF’S EVIDENCE
20 The bank called all the relevant officers who had been involved with the defendant over his long association with the bank, and particularly, the execution of the guarantee documents.
21 The defendant had at all material times dealt with the Law Courts branch of the National Australia Bank Limited.
22 Mr Hughes, now retired, gave evidence. He was the manager at the relevant time who had extensive dealings with Mr McNab in relation to his then business ventures. He was responsible for the preparation of the Ficom guarantee.
23 Mr Hughes outlined that he had been involved with the bank for something in excess of 37 years and was manager of the Law Courts branch between 1989 and 1991. He said that at that time he had many discussions with the defendant, whom he considered to be an astute and clever engineer, and had visited the defendant’s company premises at Marleston.
24 He said that as part of his duties he was responsible for the Hydro and Ficom company accounts. He said he was aware of the operation of the companies and that Mr McNab was a common director, indeed, the principal director, and the person having the day to day charge and control of both companies.
25 Mr Hughes said he was responsible for the preparation and execution of guarantees and his practice was always to say:
".... once this document is signed, it is then a legal, binding document and do [they] understand what a guarantee document is".
26 He said he would always explain what he regarded as the worst case scenario as:
".... being that if the borrowing company failed to meet its obligations under the loan conditions and repay its debt, the bank would then rely on the guarantor to meet any shortfall in principle, plus accrued interest and charges and the bank would pursue this avenue, even it meant bankruptcy and I made that quite clear."
Mr Hughes was confident that this was the manner in which he explained the guarantee document to Mr McNab.
27 Mr Hughes outlined that the Ficom guarantee was to secure an advance of $15,000 and that after it was prepared, he conferred with Mr McNab, explained the document as described and then witnessed Mr McNab’s signature on that guarantee document.
28 Mr Hughes said he regarded Mr McNab as a cautious man and they had often discussed security matters.
29 He reiterated that he had no doubt that he had explained the legal ramifications of the guarantee to Mr McNab.
30 Mr Hughes said he was aware from bank records that prior to this time Mr McNab had previously signed a similar document of guarantee to secure advances to his company and this matter had been attended to by his predecessor.
31 Mr Hughes produced a bank report form which was dated 12 September, and a note for bank records which said that he had explained the guarantee to the defendant.
32 Mr Hughes denied any of the allegations relating to the fact that he had referred to the document as a "lower security than a mortgage" and/or it was only to be enforced if Mr McNab was guilty of fraud.
33 Mr Hughes also mentioned that he was aware of the nature of the business of Mr McNab’s companies and certainly had no idea of that technology and/or marketing and he had to be guided by the defendant’s reports which were provided by Mr McNab’s chartered accountants. He said that during the time he was at the Law Courts branch, he received regular financial reports and statements from the accountants relating to Mr McNab’s companies.
34 Mr Hughes’ denials were quite specific in cross-examination regarding matters raised in the defence and innuendoes of the defendant’s questions about lack of knowledge of the guarantee document on his part.
35 The plaintiff also called its employee, Dianne Rogowski. She outlined that she has been with the plaintiff for something like 20 years and from October 1991 to June 1992 was the manager of the Law Courts branch of the plaintiff bank. She outlined the nature of her various duties at the bank. During this period of employment, she was aware of the defendant and his trading entities and was well aware of the financial details provided by the defendant’s accounts and she relied on the information contained in those reports.
36 Mrs Rogowski outlined that she had never given the defendant advice of the nature referred to in the defence, nor, did she recall that he had ever sought advice from her, nor, did she specifically advise him that "increased borrowing was a good business decision". She said "I would never have said that", because she said she knew nothing about the building manufacturing industry and her expertise was in the area of finance. Further, she did not know anything about the nature of his business and air conditioning plants and/or cooling towers in commercial buildings.
37 Mrs Rogowski specifically denied that she had ever advised the defendant that the guarantee was only enforceable if Mr McNab was guilty of fraud. She said she was "fully aware of the nature of the guarantee". Mrs Rogowski said she understood that Mr McNab was the controlling director of the trading companies and had expertise in financial matters as he was able to run such businesses.
38 Mrs Rogowski was aware that the defendant had withdrawn $115,000 during 1991 as a repayment in part of shareholder loans to fund research and reimburse or pay for development of patents which were owned by the defendant.
39 She said that at the time of her involvement at this branch, the company applied to increase its overdraft limit from $20,000 to $40,000, and, at that time, to support that increase, she said the defendant had agreed on a registered mortgage debenture and supporting guarantee in favour of the bank. Mrs Rogowski said she requested that such debenture be prepared, but, shortly thereafter she commenced maternity leave and left the bank and did not play any further part in the execution of such documents. This task was followed through by her successor, a Mr Illsley.
40 Mr Illsley was called and outlined how he was employed at this branch from June 1992 to October 1993. He said that whilst at this branch he reviewed the affairs of the companies, Hydro and Ficom, and was aware of the proposal to increase the limit on the account and the additional security arranged by Mrs Rogowski. He was aware that this application was approved and the debenture and guarantee documents were prepared at the head office of the bank and forwarded to him, and, he attended Mr McNab with those documents.
41 Mr Illsley said it has always been his practice to advise clients to seek legal advice about such documents. He said he believed he said this to Mr McNab who declined to seek legal advice and he then attended the bank with the company seal and executed the document. Mr Illsley said he believed the company seal was placed on the document in his presence, but, he could not specifically remember the occasion. However, he specifically remembered going through the guarantee document with Mr McNab, particularly the included separate box which summarised the risk.
42 That bank guarantee indemnity is a detailed document which sets out the name of the defendant’s operating company, Hydro, and the principal liability of $40,000. Shortly before the execution clause the bank had caused to be typed two paragraphs in a box in different type from the printed form stating:
"WARNING:  This is an important document which makes you, as a person signing as ‘the guarantor’, fully and separately responsible for all obligations of all types which the person named as ‘the customer’ now or hereafter owes to the Bank, whether alone or jointly or jointly and severally with any other person and whether or not you have been informed about the size or type of those obligations. Any mortgage or other security which you have given or hereafter give to the Bank in relation to your own affairs might very well apply to any monies due by you under this document.:  Your signing of this document could lead to the loss of any of your property, including your family home. Before signing it, you should seek independent legal and financial advice and check the credit, honesty and financial condition of the customer."

This box was signed by the defendant.
43 Mr Illsley said he remembered the forms and going through the same with Mr McNab who, indeed, signed the warning clause as well as the execution clause of the document. Mr Illsley said, "I’ve brought that to John’s attention and made that very clear what he was signing". Mr Illsley then witnessed Mr McNab’s signature to the document.
44 Mr Illsley also, like the other witnesses, quite specifically denied all the allegations and innuendoes raised by Mr McNab in his defence.
45 The bank finally called Mr Bowles who has been employed by the bank for approximately 12 years and in 1995 was at the Law Courts branch as the business banking manager.
46 Mr Bowles outlined that whilst at this branch he familiarised himself with the financial affairs of both companies, and, at this time, the company accounts started to exceed their noted or agreed limits. He said he had discussions with Mr McNab particularly about Hydro’s account.
47 He said he explained to Mr McNab that the bank would meet temporary excesses and made enquiries as to whether Mr McNab actually wanted this excess to be on a permanent basis. By this time the temporary facility was increased to $46,000. The relevant documentation to support this increase was completed by Mr McNab. Mr Bowles then set about preparing a new guarantee to secure the additional amount and making an overall guarantee to secure the $46,000 rather than $40,000, but that document was never executed. Mr Bowles said that when the document was prepared it was handed to Mr McNab who took it away but never returned the same.
48 Mr Bowles produced various internal documents from the bank which contained information provided by Mr McNab about the optimistic trading position of Hydro in this period. However, he viewed the written material, in particular the financial reports, as not supporting the optimistic matters being stated by Mr McNab. He said also in this time, no doubt at head office urging, he was putting pressure on Mr McNab to obtain further security to secure the advances. He had mentioned to Mr McNab the provision of a mortgage over his house, but he refused such suggestion. Subsequently, the matter was placed in the hands of the bank’s legal advisors.
49 Mr Bowles during his evidence outlined from documents and/or internal reports from the bank that he had discussed the guarantees with Mr McNab and how it would be acted upon if there was a shortfall after the debenture assets were realised. He said when discussions proceeded along these lines, Mr McNab had never said anything to the effect that the guarantee documents would only be enforced if he was guilty of fraud. Mr McNab had asked him many questions of a legal nature about the debenture and guarantee and he advised him that he should seek independent legal advice if he had any problems with the bank’s securities.
50 Plaintiff’s counsel subsequently tendered a certificate in accord with the covenants of the documents which set out, at the present time, balance amounts owing under the securities. That certificate stated as follows:
"I, ANTHONY GEORGE CARR, Business Banking Manager of 22-28 King William Street, Adelaide, say:
1.  I am a Business Banking Manager in the employ of the National Australia Bank Limited
2.  I hereby certify that:
2.1  Pursuant to clause 14 of a guarantee and indemnity dated 1 July 1992 which John Leslie Graham McNab gave to the National Australia Bank Limited guaranteeing financial accommodation provided to Hydro-Thermal Engineering Pty Ltd ACN 007 720 596 the following amount is owing or payable to the National Australia Bank Limited by Hydro-Thermal Engineering Pty Ltd
The portion of Hydro-Thermal Engineering Pty Ltd’s overdraft account number 50-801-0218 as at 2 December 1996      $25,508.33
Interest due under the guarantee as at 2 December, 1996      $9.61
Interest at a rate of $9.61 per day from 2 December 1996 until 13 November 1998 (712 days) (interest continues to accrue at the rate of $9.61 from 14 November 1998 up to and including the date of payment)     $6,842.32
Costs as at 12 November 1998 (costs continue to accrue subsequent from 13 November 1998)       $31,232.70
Total      $63,592.96
2.2  Pursuant to clause 14 of a guarantee and indemnity dated 12 September 1990 which John Leslie Graham McNab gave to the National Australia Bank Limited guaranteeing financial accommodation provided to Ficom Pty Ltd the following amount is owing or payable to the National Australia Bank Limited by Ficom Pty Ltd
Ficom Pty Ltd’s outstanding overdraft account number 02-986-8858 as at 2 December 1996       $15,371.15
Interest due under the guarantee as at 2 December 1996 $5.79
Interest at a rate of $5.79 per day from 2 December 1996 until 13 November 1998 (712 days) (interest continues to accrue at the rate of $5.79 from 14 November 1998 up to and including the date of payment)     $4,122.48
Total      $19,499.42"

DEFENDANT’S EVIDENCE
51 Mr McNab gave evidence and outlined in detail how he obtained his engineering qualifications and how in the early period of his study at university he became interested in the study of fluid and thermal dynamics. Since that time, he clearly has obtained a vast knowledge in these areas and their application to air conditioning.
52 The defendant outlined the details of his employment, including his employers in both Sydney and Melbourne, and, the details of commencing his own engineering venture in Adelaide. By the early 1970s he had moved to Adelaide with his family and had become involved in this specialised area of engineering.
53 He said that eventually his partner became very ill and he became the person solely involved with the running of the business.
54 He outlined how he initially banked with the Commercial Banking Company of Sydney and how, whilst in Melbourne, he met a bank officer. After moving to Adelaide he went to the King William Street Branch where he met the man he had formerly dealt with in Melbourne.
55 He said that during his business life here he has always employed the one accounting firm.
56 The defendant said in that business operation capital was required initially and that he had then executed a guarantee with a bank to secure advances. His house was initially mortgaged to the Commercial Banking Company of Sydney, but, this mortgage was subsequently discharged.
57 In dealing with Mr Hughes he said:
"I’m quite confident in my mind that he told me that I had nothing to worry about and that my risks were minimal and, ‘John, you are not the sort of fellow, we can see from your history, to run away with the assets of the company.’"

58 He said he believed he asked if it was a good idea, and it was encouragement from Mr Hughes which caused him to execute the document. He now felt that there had been "deceit and misrepresentation" on the part of the bank and that their conduct was in his view "unconscionable’. He repeated similar allegations against other bank officers.
59 Mr McNab was cross-examined about his business ventures and acumen and his control of these companies. He admitted that in 1991 he had withdrawn $115,000 from the company funds in regard to the ongoing development of patents. He said he felt that this was a good decision. From the actual financial returns the accountants had prepared, it appears that there was a slight excess of liabilities over assets at that time.
60 The defendant also admitted that he initially signed a guarantee with the Commercial Banking Company of Sydney in 1974. Both he and his former partner, Mr Heath, had executed such guarantee. He believed that was necessary to secure financial advances.
61 He was aware that the bank on a number of occasions had reviewed and renewed the overdraft limit of the company. He admitted that after documents were signed, advances were then made to his company in terms of those documents.
62 Recent company correspondence was placed before Mr McNab which he had signed. He confirmed that there was never any reference to the words "fraudulent conduct" or other current allegations against the bank.
63 A letter dated 2 November, 1995, was produced and in the bank’s copy there is a line deleting a paragraph. Mr McNab made a point of this deletion. However, on the original discovered document such paragraph had not been deleted.
64 Mr McNab confirmed that Hydro was in serious financial difficulties in 1995.
65 During his case, Mr McNab produced an affidavit from his accountant, a Mr J A Harvey, which made certain comments about Mr McNab and his companies. I advised Mr McNab that Mr Harvey should be called. Eventually Mr Harvey was called by Mr McNab and I assisted Mr Harvey in regard to the matters that he had set out in his affidavit.
66 Mr Harvey confirmed that his firm and its predecessors had acted for Mr McNab and his companies for many years. He said he first met Mr McNab in 1985. It was his view over that long period that Mr McNab had applied himself very diligently to his engineering business. He was aware, as Mr McNab had mentioned, that he had placed moneys in the company to support such operations, but unfortunately because of various factors the company went into liquidation. However, Mr Harvey viewed him as a very competent engineer and viewed the business as having "got caught in difficult economic times as indeed a lot of other people".
67 Mr Harvey in his affidavit did comment that he viewed Mr McNab as not being "an expert in finance and commerce". However, he admitted that he was the person having the sole responsibility for the day to day management of the companies over many years.
68 He confirmed that over the years, his firm had prepared regular financial reports of the companies and supplied them to Mr McNab. He assumed that Mr McNab understood the same. He viewed him as having a good grasp of financial matters, and, would not have "thought he was naive in that sense". He believed he was really committed to the company, Hydro, right until the time of its liquidation.
69 He was asked:
"Q.  If a bank manager said to Mr McNab, got your application to increase your overdraft, you have got to sign a personal guarantee before we advance the moneys, do you believe he would understand what a personal guarantee would be.
A.    I think he would in broad terms, yes."

FINDINGS
70 I have no doubt in accepting the evidence of the plaintiff’s witnesses and their explanations which accompanied the execution by the defendant of the guarantees. I accept Mr Hughes’ evidence that he was responsible for the preparation of the Ficom guarantee, and indeed, that its terms were explained to Mr McNab on 12 September, 1990. I find that these terms were accepted by Mr McNab and he executed it in order to secure the advance of $15,000 for his company, Ficom.
71 I reject the defendant’s suggestion that there was anything untoward or there is any basis for criticism of Mr Hughes’ actions. I have no doubt that Mr McNab was aware that the document was his guarantee of his company’s advance and of his contingent responsibility. Mr McNab may not have availed himself of time to read the totality of the document, but this was of his own making and not that of Mr Hughes. It must be remembered that Mr McNab had previously signed such a document and it has never been suggested that he was otherwise than aware of its terms. Indeed, it may be his own carelessness, but that is certainly no basis for any relief.
72 I accept the evidence of Mrs Rogowski of the background details concerning the preparation of the further guarantee which was eventually executed by Mr McNab before Mr Illsley on 1 July, 1992.
73 I accept Mr Illsley’s evidence that the execution of both the debenture document and the guarantee document was in an acceptable and regular manner, and, that he specifically drew Mr McNab’s attention to the "warning" which set out in brief and simple terms his responsibility as the guarantor. Mr McNab initialled such a clause which stated in part:
 ".... it could lead to the loss of any of your property, including your family home. Before signing it, you should seek independent legal and financial advice and check the credit, honesty and financial condition of the customer."
74 My finding has to be that Mr McNab at all times was aware of the extent of the nature of this guarantee document and of his responsibility. Again, he may not have availed himself of sufficient time to read the document, but, accepted the guarantee document and signed the same.
75 There is no basis for any of the allegations contained in the defence concerning suggestions that Mr McNab was relying on financial advice or economic or marketing advice as it pertained to the operation of his companies. I accept the bank officers were at all times acting and advising Mr McNab in and about his company banking with the aid of financial statements from the defendant’s accountants of which he had full appreciation.
76 There is no evidence substantiating allegations that any of the bank officers advised Mr McNab that either of the guarantees would be enforced if he was guilty in some way of fraudulent and/or unconscionable conduct. My finding is that those words or indeed any suggestion of such a position was never said to him by any of the bank officers. Expressions such as "last resort" may well have been used but in a context of a contingent liability after the demise of company assets.
77 There is no doubt that at the relevant times his companies required additional capital funds and Mr McNab was anxious to secure the advance of such funds to continue to operate the same. He freely signed both documents and the bank acted in accord with requests and, on the basis of the guarantees, advanced the funds.
78 As I have mentioned, Mr McNab had executed a prior bank guarantee.
79 Mr McNab has, for some years, been most critical of the bank’s conduct towards him particularly since the unfortunate liquidation of his primary operating company. However, there is no basis for any allegation of deceit or unconscionable conduct by any of the bank’s officers. The evidence shows that Mr Bowles was endeavouring to assist Mr McNab at that point in time despite more direct action being directed by his supervisor. The correspondence from Mr McNab and signed by him at that time raises none of the issues raised in the defence.
80 If there was any suggestion arising from some questions and a rather general statement to me by Mr McNab of a non est factum type of defence, then I reject the same. The defendant had signed a similar document in the past. I believe he understood the nature of the documents which he signed. This type of defence is available to a limited class of people as commented in Petelin v Cullen (1975) 132 CLR 355 at 359.
81 In my opinion, the type of equitable relief as described in Taylor & Others v Johnson (1982) 151 CLR 422, is not open to this defendant in view of my findings.
82 The bank’s servants acted properly, the documents were explained sufficiently to Mr McNab so that he could understand the same. Mr McNab is a highly intelligent man, and no doubt a very competent engineer, and despite his evidence claiming the lack of any knowledge in economic and financial matters, my view is that his conduct in and about his daily control of all aspects of his engineering business and, as his own accountant deposed, was competent to understand financial accounts.
83 The defendant has failed to in any way establish any of the allegations in his defence.

MATTERS ARISING SINCE TRIAL
84 During the presentation of the plaintiff’s case the certificate of moneys now alleged to be owing was tendered. As the defendant was obviously preoccupied with the trial issues, I advised him that at the conclusion of addresses, I would allow him a seven day period to comment on the accounting. The defendant subsequently wrote to me in effect saying he was unable to comment on the accounting.
85 However, one item caused me concern. It was the item attributable to:
"Costs as at 12 November 1998 (costs continue to accrue subsequent from 13 November 1998)       $31,232.70"
86 I advised the solicitors for the plaintiff of this concern and re-listed the matter for a breakdown of such charges.
87 In response to this letter, the solicitors for the plaintiff wrote by letter of 25 November, 1998, acknowledging the re-listing of the matter and stating that by virtue of clause 14 of the Hydro guarantee and, as well, the Ficom guarantee, the plaintiff’s certificate was:
".... conclusive evidence of the truth of its contents and is binding on the guarantor."
88 The solicitors, in that letter, advised me that in their view there was no basis for this matter to be re-listed.
89 However, the solicitors did attach to that letter seven separate documents of account from their firm to the plaintiff bank which documents are titled "interim account" for legal costs in and about the claims against Mr McNab. The documents can be summarised as follows:
31/01/97  Charges   $1,005.20
       Disbursements 231.00     $1,236.20
17/09/97  Charges   $3,524.50
       Disbursements 94.40      $3,618.90
19/01/98  Charges   $4,552.00
       Disbursements 99.80      $4,651.80
25/02/98  Charges   $7,245.00
       Disbursements 87.60      $7,332.60
06/05/98  Charges   $5,027.00
       Disbursements 81.00      $5,108.00
26/08/98  Charges   $6,141.00
       Disbursements 224.80     $6,365.80
23/11/98  Our Charges    $12,892.50     
       Disbursements 84.00      $12,976.50
              $41,289.80     $41,289.80
90 The solicitors noted in their letter to me that the "accounts total to more than the sum in the certificate because the last bill is for a period beyond 13 November".
91 Thus I caused the matter to be re-listed for hearing on 30 November, 1998, in the presence of counsel for the plaintiff and, as well, Mr McNab.
92 I reject the suggestion that a certificate is conclusive evidence and not subject to any further debate. Any matters in such a certificate can be subject to rebuttal evidence. A court, when considering matters under a guarantee, has a duty to ensure that the basis of the liability is accurate. Mistakes and/or omissions can occur in such a certificate and it is incumbent on a court to correct the same. When a defendant is not represented, the duty of a court is readily apparent.
93 Further, as I pointed out to counsel, if I found in favour of the plaintiff bank and then make an order for costs, that would mean, on a construction of the accounts, the plaintiff would receive a double benefit as the accounts all relate to legal advice concerning this action.
94 The matter came on for hearing on Monday, 30 November, 1998, when plaintiff’s counsel confirmed that the cost item in the certificate relates to legal costs of this action.
95 The defendant’s liability for the bank’s legal costs are provided in covenant 18 of the deeds. That clause is based, firstly, on what I would consider as the bank’s reasonable "costs charges and expenses", and, then the further provision that relates to the bank’s legal "advice and assistance .... as between solicitor and client".
96 As I have mentioned in comments to counsel, such a quantum of costs cannot be levied on this defendant without either his or the court’s approval. The legal costs of this action must be determined by a taxing officer. I note the recent comments of the Full Court in Citibank v Pirrotta & Others Judgment No S6603 delivered on 1 April, 1998, on this very issue and the debate between an order as to "solicitor and client costs" and "solicitor and own client costs" very much a fine distinction. The deeds in this case as in the Citibank matter have similar provisions where the guarantor indemnifies the bank against all relevant costs and includes a provision to be liable for "solicitor and client" charges.
97 The order I am obliged to make in this case is that the defendant pay the bank’s legal costs in and about the enforcement of the guarantee on a "solicitor and own client basis". I am not prepared to accept the provision in the certificate in regard to legal costs.
98 A situation may arise where, for instance, numerous bank officers in this time of change may continually seek legal advice on relevant issues. A defendant would not be liable for such unnecessary costs, nor, for instance, if solicitors over-serviced such a matter. The last comment is not made in this matter as I have insufficient detail to comment on the figure of $41,289.90. However, notwithstanding that I have heard some limited details of the history of this action and the quantum does cause me concern.
99 I accept such certificate that, as at 13 November, 1998, the amounts owing under the guarantees by the defendant are as follows:
Hydro guarantee     $32,360.26
Ficom guarantee     19,499.42
Total      $51,859.68
100 The defendant contacted my chambers in early December and advised me that, because he was not able to refer to certain of his written material when giving his evidence, he felt he had been disadvantaged at the trial. I advised the defendant that I would be prepared to accept any further written submissions explaining areas where he considered he had been disadvantaged. I subsequently received letters from the defendant dated 19 December and 22 December, 1998, wherein he critically commented at length on the evidence of the plaintiff’s employees alleging the unsatisfactory nature of the same and supporting issues he had made in his pleadings and final address.
101 I have considered such material. It is my view that none of that material in any way has caused me to vary my findings concerning the manner of the execution of the security documents by Mr McNab.
102 Consequently there will be judgment for the plaintiff in the sum of $51,859.68.
103 I make a further order that the defendant pay the plaintiff’s costs of action as between solicitor and own client either to be agreed or taxed.