Nobile, S. v The National Australia Bank Ltd

[1987] FCA 217

CATCHWORDS

CONTRACT OF GUARANTEE - e x e c u t e d o v e r b a n k a c c o u n t o f b u i l d i n g

company - g u a r a n t o r s b e i n g p r i n c l p a l s of company and t h e i r

pa ren t s and pa ren t s - in - l aw - a p p l i c a t i o n t o se t a s i d e

g u a r a n t e e a n d a suppor t ing mor tgage - claim by bank for a l l

mon ies due unde r gua ran tee - claims by c o - g u a r a n t o r s a g a i n s t

e a c h o t h e r f o r c o n t r i b u t i o n i n t h e e v e n t of l i a b i l i t y -

w h e t h e r c e r t a i n r e p r e s e n t a t i o n s made by the bank - whether

s u c h r e p r e s e n t a t i o n s were m i s l e a d i n g or d e c e p t i v e - whether

bank g u i l t y of u n c o n s c i o n a b l e d e a l i n g when e n t e r i n g g u a r a n t e e .

T r a d e P r a c t i c e s A c t 1974 s . 52 (1 ) , 87

Blomley V . (1956) 99 C.L.R. 362.

Commercial	Bank of	A u s t r a l i a L t d v .	Amadio	(1983)
151 C.L.R.	447

Hamil ton v . Watson (1845) 12 c l . & F. 109

J o n e s v. A c f o l d I n v e s t m e n t s P t y L t d ( 1 9 8 5 ) 59 A.L.R. 447

Rhone-Poulenc Agrochimie S.A. v . U . I . M . Chemica l Serv ices pty

- Ltd (1986) 68 A.L.R. 7 7 .

Ste inberg v . Commiss ioner o f Taxat ion (1975) 134 C.L.R. 640.

SALVATORE NOBILE & FRANCESCA NOBILE V . THE	NATIONAL	AUSTR4LIA
BANK LIMITED
QLD. G22 OF 1986

Jackson J

1 1 t h May	1987
Sydney

I

L

IN THE FEDERAL COTJRT OF AtJSTRAT.TA

QUEENSLAND DISTRICT	REGISTRY	1
GENERAL DIVISION	) No. QLD. G22 of 1986

BETWEEN : SALVATORE NOBILE and FRANCESCA NOBILE

Applicants

AND : THE NATIONAL AUSTRALIA BANK

Respondent

AND : THE NATIONAL AUSTRALIA BANK LIMITED

Cross Claimant

I AND : SALVATORE NOBILE and FRANCESCA NOBILE

Cross Respondents

AND : DOMENICO MARTELLI

First Third Party

AND : CATENA MARTELLI

Second Third Party

AND : DOMENICO MARTELLI and CATENA MARTELL1

Cross Claimants

AND : THE NATIONAL AUSTRALIA BANK LIMITED

First Cross Respondents

AND : SALVATORE NOBILE and FRANCESCA NOBILE

Second Cross Respondents

AND : THE NATIONAL AUSTRALIA BANK LIMITED

Cross Claimant

AND : DOMENICO MARTELLI and CATENA MARTELLI

Cross Respondents

2.

CORAM:	JACKSON J
PLACE :	Sydney
DATE :	1 1 t h May 1987

MINUTES OF ORDER

1. T h e a p p l i c a n t s ' c l a i m a g a i n s t t h e r e s p o n d e n t f o r a

d e c l a r a t i o n t h a t t h e c o n t r a c t o f g u a r a n t e e ( E x h i b i t 3 ) was

r e s c i n d e d by them o n or a b o u t 1 9 t h March 1 9 8 6 i s r e f u s e d .

2. The c o n t r a c t o f g u a r a n t e e E x h i b i t 3 ( i n s o f a r as i t a p p l i e d

t o t h e a p p l i c a n t s h e r e i n ) a n d t h e b i l l o f m o r t g a g e E x h i b i t

4 a r e d e c l a r e d t o b e v o i d and t o h a v e b e e n v o i d a b i n i t i o .

3 . I t

i s t o e f f e c t t h e d i s c h a r g e o f o r d e r e d t h a t t h e r e s p o n d e n t d o a l l t h i n g s n e c e s s a r y

t h e b i l l of mor tgage , Exh ib i t

4 .

4 . The r e s p o n d e n t ' s c r o s s - c l a i m a g a i n s t t h e a p p l i c a n t s is

d i smis sed .

5. The a p p l i c a n t s ' c l a i m a g a i n s t t h e t h i r d p a r t i e s f o r

c o n t r i b u t i o n	as	c o - s u r e t i e s	i s	d i s m i s s e d ,	w i t h	no	o r d e r a s
t o c o s t s .

6. I t is ( i n s o f a r a s d e c l a r e d t h a t t h e c o n t r a c t of g u a r a n t e e E x h i b i t 3

i t a p p l i e s t o t h e t h i r d p a r t i e s ) o u g h t t o b e

set a s i d e , o r d e r e d t h a t s u c h c o n t r a c t o f g u a r a n t e e ( i n s o f a r a s	a s f r o m t h e	time	of	i t s	e x e c u t i o n	a n d	it	is
i t

a p p l i e d t o t h e t h i r d p a r t i e s ) be so set a s i d e .

7. The r e s p o n d e n t ' s c r o s s - c l a i m a g a i n s t t h e t h i r d p a r t i e s is

d i s m i s s e d .

8. The t h i r d c o n t r i b u t i o n a s c o - s u r e t i e s par t ies ' c r o s s - c l a i m a g a i n s t t h e a p p l i c a n t s f o r

i s d i s m i s s e d w i t h no o r d e r a s

t o costs.

9 . I t is o r d e r e d t h a t t h e r e s p o n d e n t p a y t o t h e a p p l i c a n t s

t h e i r c o s t s t h e s e p r o c e e d i n g s ( i n c l u d i n g t h e i r i n c l u d i n g r e s e r v e d c o s t s o f a n d i n c i d e n t a l t o

c o s t s o f t h e

p r o c e e d i n g s f o r c o n t r i b u t i o n a g a i n s t t h e t h i r d p a r t i e s ) t o

be t axed .

10. I t

i s t h e i r c o s t s o f a n d i n c i d e n t a l o r d e r e d t h a t t h e r e s p o n d e n t p a y t o t h e t h i r d p a r t i e s

t o t h e p r o c e e d i n g s

( i n c l u d i n g t h e costs o f t h e p r o c e e d l n g s f o r c o n t r i b u t i o n

a g a i n s t t h e a p p l i c a n t s ) t o be t axed .

- NOTE : Sett lement a n d e n t r y o f o r d e r s i s d e a l t w i t h i n Order 36

o f t he Fede ra l Cour t R u l e s .

” , ,

I-

;

IN THE FEDERAL COURT OF AUSTRALIA i

QUEENSLAND DISTRICT	REGISTRY	1
GENERAL DIVISION	) NO. QLD. G22 Of 1986 I

AND : THE NATIONAL AUSTRALIA BANK LIMITED

Respondent

AND : THE NATIONAL AUSTRALIA BANK LIMITED

Cross Claimant

I AND : SALVATORE NOBILE and FRANCESCA NOBILE

Cross Respondents

AND : DOMENICO MARTELLI

First Third Party

AND : CATENA MARTELLI

Second Third Party

AND : DOMENICO MARTELLI and CATENA MARTELLI

Cross Claimants

AND : THE NATIONAL AUSTRALIA BANK LIMITED

First Cross Xespondents

AND : SALVATORE NOBILE and FRANCESCA NOBILE

Second Cross Respondents

AND : THE NATIONAL AUSTRALIA BANK LIMITED

Cross Claimant

AND : DOMENICO MARTELLI and CATENA HARTELLI

Cross Respondents

2.

CORAM: JACKSON J

I

PLACE:	Sydney
DATE :	1 1 t h May 1987

REASONS FOR JUDGMENT

These p roceedings relate t o a n i n s t r u m e n t of guarantee

bear ing d a t e 26 October 1984 and gua ran teed given by s i x p e r s o n s i n f a v o u r of

the r e sponden t Nominees bank P ty L td ( "Suesha . The deb t s a re t h o s e of Suesha

Nominees") , a company which went i n t o

v o l u n t a r y l i q u i d a t i o n o n 30 September 1985. Two of t h e g u a r a n t o r s ,

Carlo Rober t Martelli a n d h i s wi fe P i e r i n a G r a z l e l l a Nobile

Martelli were t h e directors of a n d s h a r e h o l d e r s i n Suesha Nominees.

The o t h e r g u a r a n t o r s were Sa lva to re Nob i l e and F rancesca Nob i l e

(who a re P i e r i n a Martelli's p a r e n t s ) a n d Domenico Martell i and

Catena Martelli (who a r e Carlo Martelli's p a r e n t s ) . The Nobiles

a r e t h e a p p l i c a n t s i n t h e p r o c e e d i n g s a n d t h e e l d e r Martellis a re

t h e t h i r d p a r t i e s .

Carlo a n d P i e r i n a Martelli were made b a n k r u p t o n t h e i r own

p e t i t i o n s i n September 1985.

By n o t i c e s s e r v e d o n 4 t h J u l y , 6 t h A u g u s t a n d 1 1 t h

September 1985 the respondent had ca l led on t h e a p p l i c a n t s t o pay

t h e amount due under the guarantee and on 1 2 t h March 1986 had glven

not ice t o t h e a p p l i c a n t s t h a t i t proposed t o e x e r c i s e i t s power of

sale p u r s u a n t t o a B i l l of Mortgage executed 26th October 1984

which t he app l i can t s h a d g i v e n i n f a v o u r of t h e r e s p o n d e n t t o

s u p p o r t t h e g u a r a n t e e . T h e g u a r a n t e e i n q u e s t i o n was one under

w h i c h t h e g u a r a n t o r s were ~ o i n t l y a n d s e v e r a l l y l i a b l e to t h e

r e s p o n d e n t i n r e s p e c t o f " t h e m o n e y s h e r e b y s e c u r e d " , t h e l i a b i l i t y

of t h e $250,000.00 g u a r a n t o r s , h o w e v e r , b e i n g l i m i t e d b y c 1 . 3 ( i ) t o a t o t a l of

p l u s cer ta in sums f o r in te res t and cha rges and o the r

expenses .

3 .

I t is ag reed by t h e p a r t i e s t h a t a s a t t h e d a t e o f

de l ive r ing j udgmen t i n t hese p roceed ings t he amoun t due u n d e r t h e

g u a r a n t e e i s $420 , 238.69.

I n a p p l i c a n t s t h e s e p r o c e e d i n g s , w h i c h were i n s t i t u t e d o n 2 6 t h March

1 9 8 6 , t h e c l a i m to b e r e l i e v e d o f t h e o b l i g a t i o n s t o

wh ich t he gua ran tee and mor tgage sub jec t them.

The a p p l i c a n t s ' c a s e a g a i n s t t h e r e s p o n d e n t i s pu t on a

number of bases. F i r s t i t is s a i d t h a t manager a t t h e time of e x e c u t i o n of

1 t h e g u a r a n t e e b y t h e a p p l i c a n t s t h e o f t h e r e s p o n d e n t ' s

Zillmere branch , Mr Douglas Wil l iam Bannerman, represented to them

t h a t t h e e x t e n t o f t h e i r l i a b i l i t y u n d e r t h e g u a r a n t e e was

$80 ,000 .00 l imi t ed t o a pe r iod o f t h ree t o fou r mon ths whereas , as

I h a v e s a i d ea r l i e r , t h e l l a b i l i t y u n d e r t h e g u a r a n t e e was i n f a c t

f o r a much l a r g e r sum and was u n l i m i t e d t e m p o r a l l y . I t i s s a i d

t h a t t h e s e r e p r e s e n t a t i o n s were made f r a u d u l e n t l y , t h a t t h e y were

made i n o r d e r to i n d u c e t h e a p p l i c a n t s t o e n t e r i n t o t h e g u a r a n t e e ,

a n d t h a t c o n s e q u e n c e t h e y d i d h a v e t h a t e f f e c t . I t is t h e n s a i d t h a t i n

t h e a p p l i c a n t s a c q u i r e d a r i g h t t o r e s c i n d t h e

g u a r a n t e e , w h i c h r i g h t t h e y e x e r c i s e d by t h e i r s o l i c i t o r s ' l e t t e r

d a t e d 1 9 t h March 1986. I s h o u l d n o t e t h a t i t was n o t a t t e m p t e d t o

prove damages and and i t is a c c e p t e d t h a t , f o r t h e p u r p o s e s o f t h a t

c a u s e o f a c t i o n , i t is unnecessa ry t o d e t e r m i n e w h e t h e r t h e

r e p r e s e n t a t i o n s , i f made, were made f r a u d u l e n t l y . The p a r t i e s

a c c e p t t h a t t h e d e t e r m i n a t i o n of t h e i s sue t o which I have j u s t

r e f e r r e d d e p e n d s i n the end on whether I a c c e p t t h e a p p l i c a n t s '

e v i d e n c e t h a t t h e r e p r e s e n t a t i o n a s t o t h e $ 8 0 , 0 0 0 . 0 0 l i m i t a t i o n

was made, Bannerman d e n y i n g t h a t t h e r e was such a r e p r e s e n t a t i o n

a n d g i v i n g t r a n s a c t i o n e v i d e n c e t h a t h e h a d i n d i c a t e d t h e t r u e n a t u r e of t h e

t o t h e a p p l i c a n t s ,

The s e c o n d b a s i s o n which i t is s o u g h t t o s e t a s i d e t h e

g u a r a n t e e is t h a t i t is a l l e g e d t h a t t h e r e was a f u r t h e r

r e p r e s e n t a t i o n by Bannerman t h a t S u e s h a Nominees "was t h e n t r a d i n g

s a t i s f a c t o r i l y " , t h e r e p r e s e n t a t i o n b e i n g made p r i o r t o t h e

execu t ion o f t he gua ran tee and mor tgage . I am a s k e d , i f I f i n d

t h a t t h e r e was such a r e p r e s e n t a t i o n , a n d t h a t i t i n d u c e d t h e e n t r y

of t h e a p p l i c a n t s i n t o t h e g u a r a n t e e , t o exe rc i se t he powers

4.

c o n f e r r e d by s . 8 7 ( 2 ) ( a ) of t h e T r a d e P r a c t i c e s A c t 1 9 7 4 t o d e c l a r e

t h e g u a r a n t e e i n p a s s i n g t h a t a n d b i l l o f m o r t g a g e v o i d a b i n i t i o . I migh t obse rve

i t was a c c e p t e d by t h e r e s p o n d e n t , p l a i n l y

c o r r e c t l y , t h a t i f t h e g u a r a n t e e were s e t a s i d e on any of the bases

r e l i e d on by t h e a p p l i c a n t s i t would f o l l o w t h a t t h e b i l l of

mor tgage shou ld a l so be set a s i d e .

T h i r d l y , i t is c o n t e n d e d t h a t t h e r e l a t i v e p o s i t i o n s o f

t h e r e s p o n d e n t a n d t h e a p p l i c a n t s were s u c h t h a t t h e r e s p o n d e n t ’ s

conduct i n t h e c i r c u m s t a n c e s was u n c o n s c i o n a b l e , a n d t h a t a g a i n t h e

gua ran tee shou ld be s e t a s i d e o n t h a t b a s i s .

The r e s p o n d e n t d i s p u t e s t h e s e c l a i m s a n d h a s c r o s s - c l a i m e d

f o r a l l t h e m o n i e s d u e u n d e r t h e g u a r a n t e e . I n r e s p o n s e t h e

a p p l i c a n t s i s s u e d a t h i r d p a r t y n o t i c e t o t h e t h i r d p a r t i e s ,

s e e k i n g c o n t r i b u t i o n i n t h e e v e n t t h a t t h e a p p l i c a n t s a r e l i a b l e

t o t h e r e sponden t .

The t h i r d p a r t i e s h a v e c r o s s - c l a i m e d a g a i n s t t h e

a p p l i c a n t s a n d t h e r e s p o n d e n t . The c r o s s - c l a i m a g a i n s t t h e

a p p l i c a n t s seeks c o n t r i b u t i o n f r o m them i f t h e t h i r d p a r t i e s a r e

l i a b l e t o t h e r e s p o n d e n t a g a i n t h e r e s p o n d e n t o n t h e g u a r a n t e e . The cross-claim a g a i n s t

seeks t o h a v e i t d e c l a r e d t h a t t h e g u a r a n t e e

has been resc inded or s h o u l d b e d e c l a r e d t o be vo id ab i n i t i o o n a

number of bases.

I n t h i s r e g a r d it 1 s a g a i n a l l e g e d t h a t t h e c o n d u c t o f t h e

respondent was g u a r a n t e e u n c o n s c i o n a b l e , t h i s time i n r e l a t i o n t o t h e

e x e c u t i o n o f t h e by t h e t h i r d p a r t i e s . S e c o n d l y i t is

a l l e g e d t h a t t h e r e was a f a i l u r e by t he r e sponden t t o d i s c l o s e

f a c t s w h i c h , a s c r e d i t o r o b t a i n i n g a g u a r a n t e e , i t was o b l i g e d t o

d i s c l o s e . T h i r d l y , i t is a l l e g e d t h a t t h e r e s p o n d e n t e n g a g e d i n

conduct which was a c o n t r a v e n t i o n of s . 5 2 ( 1 ) b e c a u s e i t knew o r

ough t t o t h e g u a r a n t e e o n t h e b a s i s t h a t C a r l o M a r t e l l i have been aware t h a t t h e t h i r d p a r t i e s were e n t e r i n g i n t o

had t o l d them t h a t

t h e g u a r a n t e e was i n c o n n e c t i o n w i t h a l o a n of some $ 8 0 , 0 0 0 . 0 0 .

F i n a l l y it is c o n t e n d e d t h a t t h e conduct o f the respondent i n t h e

r e s p e c t s p a r t i c u l a r i z e d i n s u p p o r t o f t h e b a s e s e a r l i e r a d v e r t e d t o

a l s o c o n s t i t u t e d a c o n t r a v e n t i o n of s . 5 2 ( 1 ) .

5 .

I i n t h e p r o c e e d i n g s b e t w e e n t h e a p p l i c a n t s a n d t h e r e s p o n d e n t s h o u l d a d d f o r completeness, t h a t a l t h o u g h t h e e v i d e n c e

was

h e a r d b e f o r e t h e r e s p o n d e n t , e v i d e n c e i n t h e p r o c e e d i n g s between t h e t h i r d

pa r t i e s a n d t h e i t was agreed t h a t t h e e v i d e n c e i n each

p r o c e e d i n g , i n s o f a r a s i t migh t be r e l evan t t o t h e i s s u e s or t o

c r e d i t , s h o u l d b e t r e a t e d a s e v i d e n c e i n t h e o t h e r p r o c e e d i n g .

I t is conven ien t t o commence by reference to t h e e v e n t s

which led t o t h e proposal t o e x e c u t e t h e g u a r a n t e e i n q u e s t i o n .

Suesha Nominees had been acqu i red by Carlo Martell i i n

J u l y 1 9 8 1 a n d t h e r e a f t e r o p e r a t e d a s a b u i l d i n g company. A t

mater ia l times t h e company was t r u s t e e for t h e Elartelli f a m i l y

t r u s t , a n d t r a d e d u n d e r t h e name “Martelli E n t e r p r i s e s “ .

Suesha Nominees f irst became a cus tomer of t h e r e s p o n d e n t

a t i ts Zillmere b r a n c h i n December 1982 and a t t h a t time Carlo

Martelli d i s c u s s e d t h e e s t a b l i s h m e n t of t h e account with Bannerman,

a n d a n o v e r d r a f t limit of $30,000.00 was arranged. During 1983 t h e

b a l a n c e of t h e a c c o u n t f l u c t u a t e d a b o v e a n d below t h e limit so

f i x e d , b u t t h e r e were s u b s t a n t i a l p e r i o d s when t h e limit was

exceeded. I m i g h t s a y t h a t on 1 3 t h December 1982 t h e t h i r d par t ies

had execu r e s p o n d e n t , ted gua ran tees of Suesha Nominees’ l i a b i l i t y t o t h e

t h e g u a r a n t o r s ’ l i a b i l i t y t h e r e u n d e r b e i n g e x p r e s s e d t o

b e l i m i t e d expenses . t o $ 6 , 0 0 0 . 0 0 p l u s c e r t a i n i n t e r e s t , c h a r g e s a n d

A f u r t h e r g u a r a n t e e l i m i t e d t o $ 3 0 , 0 0 0 . 0 0 p l u s i n t e r e s t ,

cha rges and expenses was given by them on 4th February 1983. The

gua ran tee	fo r Bannerman.	$30 ,000 .00	was	e x e c u t e d	i n	t h e p r e s e n c e	of	and
witnessed	by

As I h a v e s a i d d u r i n g 1 9 8 3 t h e o v e r d r a f t of Suesha

Nominees f l u c t u a t e d . D u r i n g t h a t y e a r Carlo Martelli was a l s o

c a r r y i n g on b u s i n e s s w i t h a a n o t h e r man a s M & K E n t e r p r i s e s . I t

is n o t e n t i r e l y c lear whether M E, K E n t e r p r i s e s was i n f a c t a

company b u t i n a n y e v e n t o n 2 7 t h O c t o b e r 1 9 8 6 t h e t h i r d p a r t i e s , i n

t h e p r e s e n c e of Bannerman, executed a g u a r a n t e e i n f a v o u r of t h e

r e s p o n d e n t i n respect of t h e o b l i g a t i o n s of “M & K E n t e r p r i s e s P t y

L i m i t e d ” , t h e g u a r a n t e e b e i n g l i m i t e d t o a t o t a l of $60,000.00 p l u s

c e r t a i n i n t e re s t , charges and expenses .

I

6 .

! ‘

I n March 1984 the account o f Suesha Nominees was j u s t w i t h i n

t h e limit and i t was i n t h a t month t h a t a Mr Gavan Ginn

commenced employment with Suesha Nominees as a f i n a n c i a l

manager. Ginn spoke t o Bannerman on 28th March 1984 and

Bannerman n o t e d i n t e r a l i a t h a t : -

“He h a s r e c e n t l y t a k e n p o s i t i o n o f b u s i n e s s Manager

w i t h Martelli - something badly needed. ...

S t a t e d t h a t C a r l o Martelli had good p o t e n t i a l , b u t

was a b u i l d e r , n o t a businessman.

With h i s g u i d a n c e was sure p o s i t i o n would be g r e a t l y

improved . F inancia l statements were some way o f f as

many s t a t e m e n t s were m i s s i n g & Acct was having

d i f f i c u l t y f o l l o w i n g	Martelli’s	r e c o r d s .
...

I,

The op t imism appa ren t i n t h e i n t e r v i e w p r o v e d t o b e

misp laced . On 8 t h A p r i l Bannerman noted that:-

“Ginn r e q u e s t e d d e b t b e a l l o w e d t o g o t o $ 5 0 , 0 0 0 f o r s h o r t

term to a l l o w O/S a c c o u n t s t o be pa id t o a v o i d p o s s i b l e

l e g a l a c t l o n as they had been O/S f o r some time.

Ar ranged execu t ion of f r e s h G’tee by Xartcll i S n r t o c o v e r

&	agreed . ”
A	guaran tee fo r $50 ,000 .00 was i n f ac t execu ted by t h e

t h i r d p a r t i e s o n t h a t d a y i n t h e p r e s e n c e o f G i n n a s w i t n e s s and ,

o n t h a t o b l i g a t i o n s o f d a y t h e y a l s o e x e c u t e d a g u a r a n t e e f o r $ 4 0 , 0 0 0 . 0 0 o f t h e

M & K E n t e r p r i s e s P t y L i m i t e d t o . t h e r e s p o n d e n t .

Again Ginn w i tnes sed t he execu t ion o f i t .

Suesha Nominees’ overdraf t a t t h e close o f b u s i n e s s o n

t h a t d a y was $43,556.26. By the end of the month i t had r i s e n t o

$59,633.24 and by the end of May i t had reached $90,677.09. I t had

grown f u r t h e r b y 1 0 t h J u n e t o $106,916.44 when a meet ing t o o k p l a c e

between Ginn and Bannerman. Bannerman’s note of the mee t ing was

t h a t G i n n t o l d him t h a t : -

I, ... They have had discussion with Deposi t & I n v e s t

Co. re f inance on up t o 18 houses t o be e r ec t ed by

Martelli. I n i t i a l l y t h e y wou ld be l ooked a f t e r by D

& I however on l a s t 6 houses would be required t o

r each l ock -up s t age be fo re D & I p a i d o u t 6 X $25000.

Es t imated maximum of 2 m t h s t o t h i s s t a g e , by which

time t h e y would be c l e a r o f d e b t o r a t l eas t w i t h i n

t h e i r l i m i t . I n v i ew o f sho r t terms invo lved &

I

I

1 .

f o l l o w i n g p r o d u c t i o n of c a s h flow to end of Oct.

a g r e e d t o assist t o $150,000 on execut ion of f r e s h

G'tee by pa ren t s "

I n f ac t a f r e s h guarantee to t h e limit of $150,000.00

was executed b y t h e t h i r d p a r t i e s o n 1 1 t h Bannerman J u n e 1 9 8 4 , t h e i r

execut ion of i t being witnessed by Ginn. was n o t

p r e s e n t	a t	t h e e x e c u t i o n	of	any	of	t h e g u a r a n t e e s w i t n e s s e d b y
Ginn.

A t t h e e n d o f J u n e t h e o v e r d r a f t h a d r i s e n t o

$140,790.51 and by 10th J u l y was $167,655.87, r i s i n g t o

$179,804.15 on the next day. On t h e l a t t e r day Bannerman was

t o l d by G i n n , a s he noted:-

"Four houses completed to l o c k u p s t a g e & funds from D &

I d u e o n t h e m s h o r t l y f o l l o w i n g i n s p e c t i o n & a p p r o v a l .

Wet w e a t h e r h a s d e l a y e d l e v e l l i n g o f b l o c k s f o r o t h e r

two & because o f r e d s o i l , d e l a y could be up t o 3 weeks

from first a n t i c i p a t e d time f o r completion f irst week i n

August. Asked t h a t t h e y e n d e a v o u r t o c u r t a i l

e x p e n d i t u r e a s f a r a s p o s s i b l e . "

The bank s ta tements show tha t two cheques , each for $5,000.00,

were d i shonoured by t he r e sponden t on t ha t day.

.

The o v e r d r a f t c o n t i n u e d t o increase d u r i n g J u l y a n d

by 31st July had reached $203,563.16, peaking a t $204,689.81

t h e n e x t day. Some d e p o s i t s b e g a n t o be made, however, and by

22nd August t h e o v e r d r a f t h a d r e d u c e d t o $145,663.36. On t h a t

day Ginn telephoned Bannerman t o s a y , a s Bannerman reco rded ,

t h a t : -

". . . a l l should be well by 4/9 , a s by t h a t time t h e y

w i o n h o u s e s b u i l t l from D & I." l h a v e r e c e i v e d a p p r o x $ 1 0 8 , 0 0 0 i n v a r i o u s d r a w s

u n d e r c o n t r a c t / s p e c s p l u s $50 ,000

I

On 4 th September a depos i t o f $91 ,167 .00 was made and

d e p o s i t s of $550.00, $123.00, $21,154.00 and $13,011.20 were made on

6 t h , 7 t h , 1 2 t h a n d 1 3 t h S e p t e m b e r r e s p e c t i v e l y .

8.

I n the meantime Bannerman's conduct i n p e r m i t t i n g t h e

o v e r d r a f t t o i n c r e a s e a s i t had was t h e s u b j e c t of some

a d v e r s e comment by the respondent ' s Regional Lending Manager ,

a Mr Werda, who on 24th August send a Memorandum t o Bannerman

s ta t ing : -

"We expect a p p r o p r i a t e a p p r o v i n g a u t h o r i t y b e f o r e t h e Branch Manager t o r e q u e s t p e r m i s s i o n o f t h e

Bank

p r o v i d e s e x c e s s e s t o t h e l e v e l g r a n t e d .

One p r e r e q u i s i t e o f s u c h a p p r o v a l would be the

e x e c u t i o n o f a G u a r a n t e e t o c o v e r t h e e x c e s s e s o n a

Category "A" o r "B" b a s i s . "

Bannerman's a u t h o r i t y , i t may be no ted , was l i m i t e d t o

approving a n o v e r d r a f t limit of $ 3 0 , 0 0 0 . 0 0 .

On 4 th September a n a p p l i c a t i o n f o r a c o m m e r c i a l b i l l

f a c i l i t y i n a n amount of $ 7 0 , 0 0 0 . 0 0 was forwarded by

Bannerman, and i t was approved by Werda on 10th September .

The p r o c e e d s o f t h e s a l e o f t h e b i l l of exchange were

$66,490.75, which sum was p a i d i n t o t h e a c c o u n t o n 2 1 s t

Sep tember r educ ing t he ove rd ra f t t o $101 ,484 .63 .

Bannerman commenced h o l i d a y s on 8 th September and

d u r i n g h i s a b s e n c e , i n d e e d o n t h e f i r s t w o r k i n g d a y

t h e r e a f t e r , t h e r e l i e v i n g manager Mr Hayes, who was normal ly

t h e a c c o u n t a n t a t t h e b r a n c h , d i s h o n o u r e d three o f t h e

company ' s cheques for a m o u n t s t o t a l l i n g n e a r l y $ 2 0 , 0 0 0 . 0 0 . He

s a i d t h a t he d id so because t hey were n o t i n a list of cheques

which Ginn a s s e r t e d t h a t t h e m e e t i n g w i t h G i n n h a d b e e n w h i l e h e	had	shown	t o him	f o r a p p r o v a l	ea r l ie r ,	b u t	s ince	he
was

re l i ev ing manage r , I f i n d t h i s h a r d t o a c c e p t . I n t h e end i t

seems not t o matter.

S h o r t l y a f t e r Hayes became r e l i e v i n g manager, Mr

Perrem, a Regional Manager , v i s i ted the Z i l lmere Branch on h i s

r e g u l a r v i s i t . He t h e n d i s c u s s e d w i t h Nominees H a y e s t h e " I r r e g u l a r

Accounts Lists", on which Suesha appeared . T h a t l i s t

. 9 .

showed t h a t as a t 1 3 t h S e p t e m b e r t h e o v e r d r a f t was $144,688,

t h a t the ove rd ra f t l l m l t was $30,000 and t h a t t h e r e was

"Commercial B i l l $70,000". Perrem noted on t h e l i s t t h e

i n s t r u c t i o n "Continue t o cont ro l under $150,000 a l l up.

Report 15/10/84 ."

After t h e p r o c e e d s of t h e sale o f t h e b i l l of

exchange were p a i d i n t o t h e c o m p a n y ' s a c c o u n t , some f u r t h e r

d e p o s i t s were made. On 24th September a depos i t o f $41 ,436 .20

was made and t h a t deposi t , t o g e t h e r w i t h d e p o s i t s of

$53,650.80, $260.00 and $19,804.33, k e p t t h e o v e r d r a f t below

$ 8 0 , 0 0 0 u n t i l 8 t h O c t o b e r . T h e r e a f t e r , h o w e v e r , t h e o v e r d r a f t

rushed upwards $ 1 5 1 , 8 3 3 . 9 8 being $97,940.90 on the 12th, $137,905.73 on

t h e 1 9 t h a n d o n t h e 2 6 t h . T h o s e f i g u r e s l e a v e o u t

of account , r e sponden t of c o u r s e , the l i a b i l i t y t o indemni fy t he

on ma tu r i ty of t h e b i l l of exchange.

I

On 28th September , whi le Hayes was re l i ev ing manage r ,

he had "draws" a d i s c u s s i o n w i c h G i n n i n w h i c h G i n n t o l d him c h a t

on loans shou ld be ing i n $65,000.00 by 5th October

( r e d u c i n g t h e t h e n o v e r d r a f t t o $5 ,000 .00) and tha t

"suppl iers" and "wages" would be about $ 8 0 , 0 0 0 . 0 0 . Hayes t o l d

Ginn t h a t t h e maximum deb t wh ich cou ld be pe rmi t t ed was

$85,000.00 by way of o v e r d f a f t , t o g e t h e r w i t h t h e $ 7 0 , 0 0 0 . 0 0

t o become d u e o n t h e b i l l of exchange. He n o t e d t h a t " G a v i n

(F inance Mgr) knows t h a t t h e a/c i s n o t t o p a s s as shown".

As I have said, however , the account went well o r a l l y , beyond

those a r rangements and a t some po in t Hayes ob ta ined ,

a p p r o v a l from the Regional Lending Manager t o al low t h e t o t a l

t o i n c r e a s e from $150,000.00 t o $190,000.00. The increase was

pe rmi t t ed because Ginn a n d h i s w i f e were p repa red t o g i v e a

g u a r a n t e e for $40,000 . O O , t he gua ran tee be ing suppor t ed by a

d e p o s i t of $40 ,000 .00 by the Ginns . The g u a r a n t e e was

executed by the Glnns on 15 th October . Why t h e G i n n s would

a d o p t t h i s course is n o t e n t i r e l y c lear b u t i t may b e t h a t , a s

Bannerman mentioned i n t h e a p p l i c a t i o n f o r t h e b i l l f a c i l i t y ,

Ginn in tended t o buy a n i n t e r e s t i n t h e b u s i n e s s .

I

1 0 .

Bannerman r e t u r n e d f r o m h o l i d a y s i n mid October ,

p r o b a b l y o n t h e 1 5 t h . He gave ev idence , which I a c c e p t , t h a t

on h i s r e t u r n from leave C a r l o M a r t e l l i a n d G i n n came t o see

h i m , a n d $ 2 5 0 , 0 0 0 . 0 0 , a s k e d t h a t t h e o v e r a l l limit b e i n c r e a s e d t o

s t a t i n g t h a t t h e N o b i l e s were p r e p a r e d t o a s s i s t

a n d o f f e r i n g s e c u r i t y o v e r l a n d a t C a b o o l t u r e .

Bannerman, a s I f i n d , a r r a n g e d f o r Hayes t o c o n t a c t

t h e r e s p o n d e n t ' s C a b o o l t u r e b r a n c h t o v a l u e t h e a p p l i c a n t s '

l a n d a t Caboo l tu re , and a v a l u a t i o n was done on 16th October .

The r e s p o n d e n t r e c e i v e d t h e c e r t i f i c a t e s of t i t l e f o r t h e two

b l o c k s o f b i l l o f m o r t g a g e p r e s e n t l y i n l a n d , a n d p r o c e e d e d t o p r e p a r e t h e g u a r a n t e e a n d

issue.

Bannerman's evidence was t h e n t h a t a n a p p o i n t m e n t was made f o :

t h e e x e c u t i o n o f these documen t s , t ha t be ing fo r t he morn ing of 26 th

October . He g a v e e v i d e n c e t h a t t h e N o b i l e s a r r i v e d f i r s t w i t h Carlo

M a r t e l l i a n d G i n n , t h a t a f t e r s e a t i n g h a d b e e n a r r a n g e d h e a s k e d them

i f i t was c o r r e c t t h a t t h e y h a d a g r e e d " t o g i v e a s s i s t a n c e t o C a r l o

a n d P i e r i n a p r o v i d i n g a t h r o u g h s e c u r i t y " . t h e i r company by a c t i n g a s g u a r a n t o r s a n d

He s a i d t h a t p r o c e e d e d t h e y a g r e e d , i t be ing Mr Nobi l e

who s a i d " y e s " . He s a i d t h a t h e t h e n t o t a k e a s t a t e m e n t 0:

assets a n d l i a b i l i t i e s f r o m t h e N o b i l e s , w h i c h Mr N o b i l e s i g n e d .

Bannerman s a i d t h a t h e p l a c e d t h e g u a r a n t e e i n f r o n t o f t h e a p p l i c a n t .

SO t h a t i t was facing them and proceeded t o e x p l a i n t o them t h e

t y p e w r i t t e n e n t r i e s w h i c h a p p e a r o n t h e f r o n t p a g e o f i t .

Those e n t r i e s a r e r e l e v a n t l y a s f o l l o w s : -

I	'
, 11.

"Item 2

SUCSHA NOMINEES PTY LIMITED as T r u s t e e f o r THE MARTELLI

FAMILY TRUST T r a d i n g a s MARTELLI ENTERPRISES

( " t h e customer")

Address .. 1 Lemke Road, TAIGUM ........ ....

Item 3

S a l v a t o r e NOBILE and Francesca NOBILE of 1 6 Garozzo

Street BOONDALL

Carlo Rober to MARTELLI a n d P i e r i n a G r a z e l l a N o b i l e

MARTELLI of Lot 13 B o t t l e b r u s h C o u r t KALLANGUR and

Domenico MARTELLI and

Catena MARTELLI of	Handford	Road,	TAIGUM. ( " t h e g u a r a n t o r " )
Item 4

$250 ,000	(Two	h u n d r e d	a n d	f i f t y	t h o u s a n d ( " t h e b a s i c l i a b i l i t y " )	d o l l a r s )
Item 5

T r u s t Deed da ted Twenty-n in th day of May 1981

Name of T r u s t The Mar t e l l i Fami ly T r u s t

T r u s t e e Suesha Nominees Pty Limited

,I

M a r t e l l i	V i n c e n z o	S e t t l o r
I n	e x p l a i n i n g t h o s e en t r ies he t o ld t hem, h e s a i d , t h a t t h e

g u a r a n t e e was " i n f avour o f Suesha Nominees P ty L imi t ed a s T rus t ee

f o r Martelli F a m i l y T r u s t t r a d i n g a s Martelli E n t e r p r i s e s " , t h a t

t hey were t h e b a s i c l l a b i l i t y e n t e r i n g i n t o t h e g u a r a n t e e w i t h t h e f o u r Martellis, t h a t

was $250,000.00 a n d t h a t t h e y were " j o i n t l y a n d

i n d i v i d u a l l y l i a b l e f o r t h a t a m o u n t " . He s a i d t h a t t h e a p p l i c a n t s

t h e n s i g n e d t o l d t h e a p p l i c a n t s t h a t i f t h e y t h e g u a r a n t e e a s d i d C a r l o Martelli. B e s a i d t h a t he

were themselves t o make

a p p l i c a t i o n s f o r a l o a n , t h e a m o u n t o f t h e i r l i a b i l i t y u n d e r t h e

gua ran tee wou ld have t o be t aken i n t o a c c o u n t . The b i l l o f m o r t g a g e

was t h e n s i g n e d , Bannerman s a y i n g t h a t i t was a normal bank form of

mortgage, no doubt similar t o t h a t wh ich t he app l i can t s had seen

w i t h t h e i r h e a s k e d t h e a p p l i c a n t s own bank. He s a i d t h a t a t t h e c o n c l u s i o n o f t h e m e e t i n g

w h e t h e r t h e y u n d e r s t o o d t h e d o c u m e n t a t i o n

which they had executed and whether they had any ques t ions . He s a i d

t h a t t h e y d i d n o t r e s p o n d i n a n y way w h i c h i n d i c a t e d t h a t t h e y d i d

no t unde r s t and .

Bannerman s a i d t h a t t h e a p p l i c a n t s t h e n l e f t a n d t h e t h i r d

pa r t i e s , who had been wa i t ing ou t s ide , came i n t o h i s o f f i c e . U n l i k e

t h e a p p l i c a n t s , h e had known t h e t h i r d p a r t i e s b e f o r e , b e c a u s e t h e y

were cus tomers o f t he Zillmere b r a n c h o f t h e r e s p o n d e n t . ne had

spoken t o M r Martelli s e n i o r o n odd o c c a s i o n s i f h e had seen him i n

1 2 .

8 .

the banking p a s t when chamber and M a r t e l l i s e n i o r there had been two ear l ie r o c c a s i o n s i n t h e

Mr had d i scussed w i t h him p a r t r i c u l a r

I

I	t r a n s a c t i o n s	i n	w h i c h t h e r e s p o n d e n t ' s	a s s i s t a n c e	was	sough t .
I
I

B a n n e r m a n ' s e v i d e n c e i n r e l a t i o n t o t h e e x e c u t i o n o f

t h e g u a r a n t e e i n q u e s t i o n was t h a t a f t e r t h e t h i r d p a r t i e s

1 e n t e r e d h i s o f f i c e h e a s k e d them whether, a s he had been t o ld ,

t h e y were a g r e e a b l e to t h e e x e c u t i o n o f a g u a r a n t e e f o r t h e

increased amount , and Mr M a r t e l l i i n d i c a t e d t h a t t h a t was so.

He s a i d t h a t h e t h e n showed them t h e g u a r a n t e e a n d r e a d o u t t o

t h e m , a n d e x p l a i n e d t h e e f f e c t of t h e t y p e w r i t t e n p a r t s i n

terms similar t o t h o s e w h i c h h e had used t o t h e a p p l i c a n t s f o r

a similar purpose . The t h i r d p a r t i e s e x e c u t e d t h e g u a r a n t e e

and a t some p o i n t documen t , Bannerman asked them i f t h e y r e a l i s e d t h e

in t en t o f t he and unde r s tood wha "Yes". t he Mrs Martelli s a i d had exp la ined

t o them, and Mr M a r t e l l l s a i d

no th ing .

To t h i s p o i n t P i e r i n a Martelli had no t execu ted t he

guarantee and Bannerman ' s ev idence was t h a t s h e a t t e n d e d l a t e r

t h e same d a y f o r t h a t p u r p o s e . P i e r i n a M a r t e l l i ' s e v i d e n c e

was t h a t s h e had executed the document some d a y s l a t e r , i n t h e

banking chamber and i n t h e p r e s e n c e o f H a y e s , whom s h e knew.

Hayes, however, had himself gone on holidays by t h i s time and

I do no t a c c e p t h e r e v i d e n c e o n t h i s p o i n t . I am s a t i s f i e d

t h a t s h e s i g n e d t h e d o c u m e n t i n t h e p r e s e n c e of Bannerman on

t h e 2 6 t h .

The e v i d e n c e o f t h e a p p l i c a n t s a n d t h e t h i r d p a r t i e s ,

and Ca r lo Martelli, as t o t h e c l r c u m s t a n c e s i n w h i c h t h e

g u a r a n t e e	was	executed	is	q u i t e a t o d d s w i t h t h a t	of
Bannerman.

The a p p l i c a n t S a l v a t o r e N o b i l e was b o r n i n S i c i l y o n

19 th Apr i l 1933 . H e m i g r a t e d t o A u s t r a l i a a t t h e a g e o f 20

and worked a s a cane c u t t e r f o r two yea r s be fo re buy ing a

f r u i t f a r m i n t h e S t a n t h o r p e area. The farm was no t

s u c c e s s f u l a n d h e came t o B r i s b a n e a n d worked a s a p l a n t

o p e r a t o r w i t h B r i s b a n e C i t y C o u n c i l f o r 8 1 / 2 y e a r s . He and

13.

h i s w i f e t h e n o p e r a t e d a m a r k e t g a r d e n a n d s h o p i n S a n d g a t e

Road and con t inue t o do so.

B o t h a p p l i c a n t s agree t h a t t h e g u a r a n t e e a n d b i l l o f

mortgage were signed by them on 26th October 1 9 8 4 , t h e d a t e

wh ich t he i n s t rumen t s bea r and t he male a p p l i c a n t ' s e v i d e n c e

was t h a t a t some time p r i o r t o t h a t d a t e - it is unnecessa ry

t o seek to i d e n t i f y p r e c i s e l y when - C a r l o Martelli came to

I

t h e a p p l i c a n t s ' g u a r a n t e e d h o u s e o n e n i g h t a n d a s k e d i f he could be

f o r $80 ,000 .00 . He t o l d t h e male a p p l i c a n t t h a t h e

had a asked for some l o t of h o u s e s b u i l t b u t t h a t t h e y were s l o w s e l l i n g a n d

h e l p f o r a p e r i o d . What was d i s c u s s e d , t h e

m a l e a p p l i c a n t s a i d , was w h e t h e r t h e g u a r a n t e e c o u l d b e

s u p p o r t e d by a mor tgage over l and . The a p p l i c a n t s , as I have

mentioned, owned two b locks o f l and a t Caboo l tu re , Lots 3 and

4 i n Tomlinson Road. There was a house on Lot 3 . Lot 4 was

vacant l and . b e e n p a i d o u t a l t h o u g h t h e y There had been mor tgages over the l and which had

were n o t f o r m a l l y d i s c h a r g e d .

Accord ing t o Mr N o b i l e , h e t o l d Carlo t h a t h e would d i s c u s s

t h e p r o p o s a l w i t h h i s wife and a f ew days l a t e r , hav ing done

so, t o l d him t h a t h e would guarantee him t o t h e e x t e n t o f

$80 ,000 .00 a n d t h a t g u a r a n t e e . L o t 3 would be made a v a i l a b l e t o t h e Bank

t o s u p p o r t t h e He s a y s t h a t h e a r r a n g e d f o r

release o f t h e d e e d s f r o m h i s b a n k ( W e s t p a c ) a n d t h a t P i e r i n a

c o l l e c t them and take them t o t h e r e s p o n d e n t . A b o u t a week

l a t e r C a r l o came o n e e v e n i n g a n d s a i d t h a t t h e n e x t d a y t h e y

were to go t o t h e bank " t o s i g n t h e d o c u m e n t " . He s a i d t h a t

when h e a r r i v e d a t t h e bank manager 's o f f i ce C a r l o was a l r e a d y

i n s i d e . A f t e r t h e i n t r o d u c t i o n s Bannerman a sked whe the r t he

a p p l i c a n t s were happy t o g u a r a n t e e C a r l o f o r $80,000.00, a sum

which was s p e c i f i c a l l y m e n t i o n e d . He s a y s t h a t Bannerman s a i d

t h a t t h e $80,000.00 g u a r a n t e e was t o b e g i v e n t o h e l p C a r l o

o u t w i t h h i s b u s i n e s s a n d t h a t i t was t o b e for a p e r i o d of 3

t o 4 months. Bannerman s a i d t h a t t h e b u s i n e s s was Bannerman go ing well.

I n t h e c o u r s e o f t h e d i s c u s s i o n w h i c h t o o k p l a c e

took a s t a t emen t f rom Nob i l e o f t he f ami ly assets and he did

no t t e l l him a n y t h i n g a b o u t t h e f a c t t h a t t h e g u a r a n t e e was

for $250,000.00 a p p l i c a n t s , and no t $80 ,000 .00 . I n s i g n e d due course t h e

a c c o r d i n g t o Mr N o b i l e , t h e n t h e g u a r a n t e e .

I 14.

M r N o b i l e d i d n o t , h e s a y s , h a v e h i s glasses w i t h him o n t h e

occas ion and was n o t ab le t o read t h e guarantee and mor tgage .

The f e m a l e a p p l i c a n t was a l so born worked i n S i c i l y a n d s h e

came to Aus t ra l ia when s h e was 22. She had i n

A u s t r a l i a o n the f a rm and i n f a c t o r i e s . Her e d u c a t i o n h a s

beem minimal. She can r e a d E n g l i s h , b u t w i t h d i f f i c u l t y . S h e

s a i d i n e v i d e n c e t h a t b e f o r e g o i n g t o the respondent bank a t

Zillmere f o r t h e s i g n i n g o f t h e g u a r a n t e e t h a t s h e had been

t o l d by h e r h u s b a n d t h a t t h e g u a r a n t e e was to b e f o r

$80 ,000 .00 t o h e l p C a r l o b u t s h e d i d n o t recal l t h e r e b e i n g

a n y l e n g t h o f time m e n t i o n e d f o r t h e o p e r a t i o n o f t h e

gua ran tee . She had been t o ld abou t t he $80 ,000.00 by h e r

husband a coup le o f weeks b e f o r e or pe rhaps o n e month before

t h e d a t e o n w h i c h t h e g u a r a n t e e was s i g n e d . When t h e y wen t t o

t h e bank the manage r s a id t hey were t h e r e t o s i g n t h e p a p e r

f o r $ 8 0 , 0 0 0 . 0 0 a n d t h a t i t was t o be " f o r 3 or 4 months"

a l t h o u g h a t a n o t h e r p o i n t s h e s a i d i t was f o r 2 o r 3 months.

He asked ques t ions abou t t he p rope r ty wh ich t he Nob i l e s had

and i n d u e c o u r s e t h e y s i g n e d t h e g u a r a n t e e . The manager to ld

t h e m , a c c o r d i n g t o h e r , t h a t t h e " b u i l d i n g game" - meaning, a s

I f i n d , t h a t s h e r e a d t h e g u a r a n t e e a n d s a i d t h a t s h e t o o d i d n o t h a v e C a r l o ' s b u s i n e s s - was "going OK" . Mrs Nob i l e den ied

h e r g l a s s e s w i t h h e r a t t h e time and d id no t have h e r glasses

because she had been ca l led on to go t h e r e q u i t e s u d d e n l y a n d

d id no t have her handbag which had her g lasses i n i t .

C a r l o Martelli g a v e e v i d e n c e t h a t a few days before

t h e s i g n i n g o f t h e g u a r a n t e e h e h a d s p o k e n t o Mr Bannerman by

t e l e p h o n e t o c h e c k w i t h him t h e terms of an agreement tha t had

been reached between Ginn and Bannerman a b o u t t h e N o b i l e s

e x e c u t i n g t h e Bannerman g u a r a n t e e . He s a i d t h a t i n t h a t c o n v e r s a t i o n h e

had asked how t h e l o a n f o r $ 8 0 , 0 0 0 . 0 0 was being done

a n d t h a t Bannerman t o l d him i t would be done a s a f u l l y drawn

advance , which would involve an account be lng opened by the

Nob i l e s a t t h e bank w h i c h would t h e n b e f u l l y d r a w n t o t h e

e x t e n t o f $ 8 0 , 0 0 0 . 0 0 , w i t h t h a t sum c r e d i t e d t o t h e a c c o u n t of

I Suesha Nominees P t y L t d . He s a i d t h a t he t o l d Bannerman t h a t

t h e l o a n was o n l y f o r 2 t o 3 months and that Bannerman

i

i *

15.

a c k n o w l e d g e d t h a t t h a t was t h e p o s i t i o n . He s a i d t h a t on t h e

day when a r r i v e d b e f o r e he w e n t w i t h h i s i n - l a w s t o e x e c u t e t h e g u a r a n t e e h e

h i s p a r e n t s - i n - l a w a n d t h a t Bannerman opened

h i s d o o r a n d c a l l e d him o v e r a n d s a i d "I want y o u r p a r e n t s t o

s i g n t h i s t h i n g as well". C a r l o M a r t e l l i s a i d t h a t h e " b l e w

u p " a n d s a i d t h a t no o n e had t o l d him t h a t h i s p a r e n t s had t o

s i g n a n y t h i n g . The manage r , acco rd ing t o Ca r lo Martelli, s a i d

t h a t h e h a d t o l d G i n n t h a t t h e y h a d t o s i g n . He s a i d t h a t

when t h e N o b i l e s a r r i v e d t h e y were b r o u g h t I n t o t h e m a n a g e r ' s

o f f i c e a n d h i s m o t h e r - i n - l a w s a i d t o t h e m a n a g e r "We company want t o

know e v e r y t h i n g " . He s a i d t h a t Bannerman s a i d t h e had

a n o v e r d r a f t of $157,000.00 and that the bank would be

e x t e n d i n g t h e o v e r d r a f t t o $250,000.00 and that Carlo M a r t e l l i

had asked t h a t Bannerman "What abou t t he $70 ,000 .00 commerc ia l b i l l ? " and

had o v e r d r a f t . s a i d t h a t t h a t was sepa ra t e and had no th ing

t o d o w i t h t h e He s a i d t h a t Bannerman t h e n , w i t h

the document i n f r o n t o f h i m , Nab i l e had a sked h im fo r con f i rma t ion s a i d " T h i s is a g u a r a n t e e f o r

$80 ,000 .OO" a n d t h a t M r

t h a t t h e i r l i a b i l i t y was f o r S 8 n , O O O , O O and had rece ived i t .

H e s a i d h e t h e n a s k e d t h e N o b i l e s t o s ign the documents which

t h e y d i d .

Mr Domenico M a r t e l l i was 57 y e a r s o f a g e A u s t r a l i a i n October

1984. He had been born i n S i c i l y a n d m i g r a t e d t o i n

1952. A f t e r a r r i v i n g i n A u s t r a l i a h e w o r k e d f o r a s h o r t

p e r i o d i n a t imber ya rd and t hen as a cane c u t t e r a n d i n a

t y r e r e p a i r s h o p . Later he worked f o r Nanda Macaroni for 17

yea r s and now o p e r a t e s a f r u i t a n d v e g e t a b l e s t a l l on h i s

p r o p e r t y . He s p e a k s n e w s p a p e r s E n g l i s h , t h o u g h w i t h a r e l a t i v e l y h e a v y

a c c e n t , r e a d s i n w r i t i n g i n E n g l i s h . i n E n g l i s h b u t i s n o t v e r y p r o f i c i e n t

I am s a t i s f i e d t h a t h e d o e s u n d e r s t a n d

mos t Eng l i sh spoken t o him a n d t h a t i n t h e w i t n e s s box he

exagge ra t ed	t o	some	d e g r e e h i s d i f f i c u l t i e s	i n unde r s t and ing
Eng l i sh .

Mr M a r t e l l i ' s e v i d e n c e i n r e l a t i o n t o t h e g u a r a n t e e

p r e s e n t l y i n q u e s t i o n was t h a t o n e a f t e r n o o n i n l a t e 1984

C a r l o M a r t e l l i h a d come t o see him a n d h a d s a i d t h a t t h e bank

manager wanted him t o s i g n a document enabl ing him t o borrow

16.

$80 ,000 .00 t o b e u s e d f o r b u i l d i n g a p r o p e r t y a t C a b o o l t u r e .

H e sa id t h a t he C a r l o a s k e d C a r l o why t h e manager wanted h i m t o s i g n

a n d t h a t t o l d C a r l o t h a t h e d i d n ' t had t o l d him he d i d n ' t know. H e s a i d t h a t h e

w a n t wanted t o g o b u t t h a t Carlo r e i t e r a t e d

t h a t t h e bank manager h i m t o g o . He s a i d t h a t a f t e r a

coup le o

f manager . days he went down, by h i m s e l f , t o t h e bank and asked

for the Bannerman He was t a k e n i n t o B a n n e r m a n ' s o f f i c e a n d

s a i d "Mr Martelli, p l e a s e y o u s i g n h e r e " p o i n t i n g t o

a page of paper . M r Martelli s a y s t h a t h e s i g n e d t h e p a p e r

a n d t h e n l e f t .

Mrs M a r t e l l i ' s e v i d e n c e was tha t she had been t aken

t o t h e Zillmere Branch o f t he r e sponden t by Ca r lo and t ha t

when C a r l o p a r k e d t h e car he encountered a f r i e n d of h i s , w i t h

whom h e e n g a g e d i n c o n v e r s a t i o n . Mrs M a r t e l l i d i d n o t wait

u n t i l t h a t c o n v e r s a t i o n was concluded bu t w e n t i n t o t h e bank

where she was met by Bannerman who l e d h e r i n t o h i s o f f i c e a n d

then produced a documen t , i nd ica t ing a p lace where she was t o

s ign and d i d j u s t t h a t a n d t h e n s ay ing "S ign he re" . Accord ing t o Mrs Martelli s h e

l e f t the bank , mee t ing Carlo o u t s i d e

who was st i l l t a l k i n g t o h i s f r i e n d .

Although Mrs M a r t e l l i s p e a k s a n d u n d e r s t a n d s some

E n g l i s h , s h e g a v e h e r e v i d e n c e t h r o u g h a n i n t e r p r e t e r a n d I am

s a t i s f i e d t h a t h e r c o m p r e h e n s i o n o f o t h e r t h a n s i m p l e E n g l i s h

spoken to h e r i s not good. I a c c e p t t h a t s h e d o e s n o t r e a d or

w r i t e i n E n g l i s h .

I t is n e c e s s a r y t h e n t o make some f i n d i n g s a s t o t h e

events which I n f a c t o c c u r r e d . I n t h i s r e g a r d I am hampered

b y t h e f a c t t h a t I am u n a b l e t o r e g a r d t h e r e c o l l e c t i o n o f a n y

of t h e w i t n e s s e s as b e i n g e n t i r e l y s a t i s f a c t o r y .

T u r n i n g f i r s t t o t h e a l l e g a t i o n s by t h e a p p l i c a n t s , I

d o n o t a c c e p t t h e e v i d e n c e o f t h e a p p l i c a n t s a n d C a r l o

I

M a r t e l l i t h a t Bannerman t o l d them t h a t t h e g u a r a n t e e was f o r

$80,000.00 and was t o b e f o r a p e r i o d o f 3-4 months. I t h i n k

t h a t t h e f i g u r e o f $80 ,000 .00 was mentioned i n d i s c u s s i o n o n

t h a t o c c a s i o n , e i t h e r a s b e i n g t h e a m o u n t w h i c h t h e a p p l i c a n t s

17.

t hough t was t o b e t h e a m o u n t o f t h e g u a r a n t e e o r a s b e i n g

about the p e r h a p s a s b e i n g r o u g h l y t h e a m o u n t o f amount by which there was a need fo r a n i n c r e a s e , o r

t h e p o t e n t i a l e x p o s u r e

of t h e a p p l i c a n t s t o l i a b i l i t y , i f e a c h o f t h e t h r e e families

who were t o b e p a r t i e s t o t h e g u a r a n t e e had t o p a y i n t h e e n d

o n e t h i r d specu la t ion , o f a however , l i a b i l i t y of $ 2 5 0 , 0 0 0 . 0 0 . I t is pure

t o	a t t e m p t t o	w o r k	o u t	w h a t	was
- s a i d

a b o u t t h e $80,000.00 on t h a t o c c a s i o n . I t s u f f i c e s t o s a y

t h a t	I	am	s a t i s f i e d t h a t t h e r e p r e s e n t a t i o n r e l i e d	on	was	-	n o t
made.

I s h o u l d s a y i n r e a c h i n g t h i s c o n c l u s i o n I found both

Mr and p a r t i c u l a r Mrs N o b i l e t o b e u n r e l i a b l e witnesses, Mrs Nobi le i n

b e i n g p r e p a r e d t o p a y t a k e n t h e i r s c a n t r e g a r d t o t h e t r u t h . I

f o u n d t h e i r e v i d e n c e t h a t t h e y h a d n o t g l a s s e s t o

t h e bank qu i t e unconv inc ing and I d i d n o t b e l i e v e them o n t h l s

p o i n t . I would a l s o f i n d i t e x t r a o r d i n a r y t h a t Bannerman

would t e l l them t h e g u a r a n t e e was f o r $80 ,000 .00 when o n i t s

f a c e i t showed t h a t i t was f o r $ 2 5 0 , 0 0 0 . 0 0 , a ma t t e r wh ich

could have been seen by anyone. Bannerman was n o t t o know

t h a t , i f i t b e t h e f a c t , t h e y would come w i t h o u t t h e i r

g l a s s e s . I a l so found i t i m p o s s i b l e t o b e l i e v e t h a t , i n t e n d i n g

t o make m o r t g a g e , o n l y one d e e d a v a i l a b l e t o t h e bank f o r t h e p u r p o s e s

o f t h e t h e a p p l i c a n t s were p r e p a r e d t o l e t t h e bank

have mor tgages over bo th , o r t o a l l o w t h e bank t o r e t a i n b o t h

d e e d s . T h i s was a matter never s a t i s f ac to r i ly e x p l a i n e d by

the ev idence .

G e n e r a l l y s p e a k i n g a n d s u b j e c t t o t h e o b s e r v a t i o n I

have made e a r l i e r a s t o t h e $ 8 0 , 0 0 0 . 0 0 , I accept Bannerman ' s

ev idence o f t he e v e n t s which took g u a r a n t e e . place a t t h e time o f t h e

e x e c u t i o n by t h e a p p l i c a n t s o f t h e I d o n o t ,

however , accep t h i s ev idence t ha t G inn was p r e s e n t . I r e g a r d

t h e a u t h e n t i c i t y o f h i s d i a r y note r e c o r d i n g G i n n ' s p r e s e n c e

a s d o u b t f u l , i n t h e sense t h a t I a m n o t s a t i s f i e d t h a t t h e

d i a r y n o t e was made a t t h e time when h e s a i d i t was. G i n n was

a v a i l a b l e a t c o u r t t o g i v e e v i d e n c e a n d I t h i n k t h a t I am

e n t i t l e d t o r e g a r d t h e r e s p o n d e n t ' s f a i l u r e t o c a l l h i m t o d o

so a s i n d i c a t i n g t h a t h i s e v i d e n c e would n o t h a v e a s s i s t e d i t .

i

1	!	%	18.
i	.

I t f o l l o w s from what I s a i d t h a t t h e a p p l i c a n t s claim

t o h a v e b e e n e n t i t l e d t o rescind f o r m i s r e p r e s e n t a t i o n u n d e r

t h e g e n e r a l law f a i l s .

I t u r n t h e n t o c o n s i d e r t h e s e c o n d b a s i s on which t h e

a p p l i c a n t s r e l y , n a m e l y t h e r e p r e s e n t a t i o n b y Bannerman t h a t

Suesha Nominees was t h e n t r a d i n g s a t i s f a c t o r i l y .

There i s no d o u b t t h a t s u c h a r e p r e s e n t a t i o n was

made. Mr N o b i l e s a i d Bannerman t o l d him t h e b u s i n e s s was

"going well", Mrs N o b i l e s a y s h e s a i d i t was "going OK" and

B a n n e r m a n h i m s e l f a g r e e d t h a t h e s a i d t h a t " t h e b u s i n e s s

I appeared t o b e o p e r a t i n g q u i t e s a t i s f a c t o r i l y " .

Mrs Nob i l e , whose ev idence o n t r a n s a c t i o n b e c a u s e t h i s p o i n t I a c c e p t ,

I g a v e e v i d e n c e t h a t s h e i n q u e s t i o n . e n t e r e d i n t o t h e of

t h e r e p r e s e n t a t i o n Mr Nob i l e d id no t g ive such

e v i d e n c e b u t , as t h e F u l l C o u r t s a i d i n Jones v. Acfo ld

Inves tments P ty L td (1985) 59 A.L.R. 613 a t 623-624:-

"Holmes v Jones and Smi th v Chadwick were b o t h c a s e s

w h e r e t h e c a u s e s o f a c t i o n r e l i e d upon were t h e t o r t

o f d e c e i t , b u t a similar onus l i e s upon a c l a i m a n t

who a l l e g e s t h a t h e h a s s u f f e r e d damage a s a r e s u l t

o f mi s l ead ing conduc t i n b reach of S 52 o f t he T rade

P r a c t i c e s A c t . A s t h o s e cases make c l e a r , i f a

r e p r e s e n t a t i o n i s provided which is o f such a n a t u r e

as t o b e l i k e l y t o induce a r e p r e s e n t e e t o a c t upon

i t , t h e i n f e r e n c e may be drawn, i f t h e r e p r e s e n t e e

does a c t , t h a t h e h a s a c t e d i n r e l i a n c e o n t h e

r e p r e s e n t a t i o n . B u t s ince t h e i n f e r e n c e is one of

f a c t i t may b e r e b u t t e d by o ther ev idence which is

i n c o n s i s t e n t w i t h t h e i n f e r e r e n c e : see Holmes v

Jones, s u p r a , a t p 1 7 0 7 , p e r O'Connor J."

The n e x t q u e s t i o n i s w h e t h e r t h e c o n t e n t o f t h e

r e p r e s e n t a t i o n by Bannerman was m i s l e a d i n g o r d e c e p t i v e . I t

was p u t i n a r g u m e n t on b e h a l f of t h e r e s p o n d e n t t h a t Bannerman

was i n t e n d i n g s a t i s f a c t o r i l y b u t t h a t t o c o n v e y n o t t h a t t h e b u s i n e s s was t r a d i n g

i n h i s o p i n i o n t h e company was t r a d i n g

s a t i s f a c t o r i l y . Cases, o f w h i c h t h i s is one, a r e f r e q u e n t

where a statement i n v o l v e s b o t h t h e r e p r e s e n t a t i o n t h a t t h e

s t a t e d f a c t is t rue a n d t h a t t h e maker o f t h e s t a t e m e n t

I

19 .

b e l i e v e s i t t o b e t r u e . I n my o p i n i o n t h e s t a t e m e n t made by

Bannerman was one by which he meant to convey , and d id convey ,

I

t h a t t h e b u s i n e s s - was t r a d i n g s a t i s f a c t o r i l y a n d t h a t h e

b e l i e v e d t h a t t o be t he ca se .

I t s a t i s f a c t o r i l y . is m a n i f e s t i n my v i e w t h a t t h e b u s i n e s s was n o t

t h e n t r a d i n g I a c c e p t t h a t , a s M r Douglas

Q.C. p u t i t , o n e s h o u l d n o t t o o r e a d i l y assume t h a t a b u s i n e s s

i s n o t o v e r d r a f t , t r a d i n g s a t i s f a c t o r i l y s i m p l y b e c a u s e i t h a s a l a r g e

b u t so much d e p e n d s o n t h e p a r t i c u l a r

circumstances. Here the company ' s bus iness was b u i l d i n g a n d

s e l l i n g h o u s e s . I t was bu i ld ing t hem, bu t i t was n o t s e l l i n g

them. Its borrowings had increased dramat ica l ly f rom a round

$30 ,000 .00 i n mid-March t o a b o u t $220,000.00 on 26 th Oc tobe r ,

i n c l u d i n g t h e l i a b i l i t y o n t h e b i l l of exchange , and there was

no r e l i e f statement a s i n f a c t i n s i g h t . I n t h e s e c i r c u m s t a n c e s I r e g a r d t h e

u n t r u e , a n d I so f i n d .

Ir. t h e r e s u l t I am s a t i s f i e d t h a t , i t no t be ing i n

i s sue t h a t t h e r e s p o n d e n t i s r e l e v a n t l y a " c o r p o r a t i o n " , or

t h a t i ts conduct took p lace " i n t r a d e or commerce", t h a t t h e

a p p l i c a n t s h a v e e s t a b l i s h e d t h a t t h e r e was a c o n t r a v e n t i o n o f

s.52(1). I t is i m p o s s i b l e t o s a y t h a t t h e a p p l i c a n t s would

h a v e e n t e r e d i n t o t h e g u a r a n t e e a n d m o r t g a g e i f Bannerman had

n o t s a i d t h a t t h e b u s i n e s s was t r a d i n g s a t i s f a c t o r i l y a n d

a c c o r d i n g l y I would exercise t h e p o w e r c o n f e r r e d t o s . 8 7 ( 2 ) ( a )

t o d e c l a r e t h e g u a r a n t e e a n d b i l l o f m o r t g a g e v o i d a b i n i t i o .

Having taken t h a t v i e w i t i s unnecessa ry i n one sense

to d e a l w i t h t h e o t h e r g r o u n d o n w h i c h t h e a p p l i c a n t s r e l y . I

t h i n k t h a t I should do so, however , because the ground on

which I have j u s t found o n t h i s f a v o u r was added by amendment

d u r i n g t h e t r i a l , a n d i f t h e a p p l i c a n t s were e n t i t l e d t o

succeed i n a g r o u n d o r i g i n a l l y p l e a d e d t h e i r p o s l t i o n a s t o

costs i s s t r o n g e r .

I

1 %

I 20.

! '

I t i s c l e a r , o f c o u r s e , a s C o m m e r c i a l Bank o f

A u s t r a l i a L t d v. Amadio have engaged (1983) 151 C.L.R. 4 4 7 shows , t ha t a

c r e d i t o r may be he ld t o i n unconsc ionable conduct

i n p r o c u r i n g a s u r e t y ' s e n t r y i n t o a g u a r a n t e e , w i t h t h e

r e s u l t t h a t t h e g u a r a n t e e may be o rdered t o be set a s i d e .

For t h e d o c t r i n e t o a p p l y i n s u c h a c a s e it must

a p p e a r f i r s t t h a t t h e s u r e t y was under a " s p e c i a l d i s a b i l i t y "

i n d e a l i n g w i t h t h e c r e d i t o r w i t h t h e c o n s e q u e n c e t h a t t h e r e

was an absence o f any real deg ree o f equa l i ty be tween them.

See Commercial p e r Deane Bank o f A u s t r a l i a L t d i n t h a t v. Amadio ( s u p r a ) a t 474,

J.. A s the judgments c a s e , ( a n d i n Blomley

v. (1956) 99 C.L.R. 362) show t h e term " s p e c i a l " u s e d i n

r e l a t i o n t o t h e " d i s a b i l i t y " i s n o t i n t e n d e d t o limit t h e

c l a s s e s o f d i s a b i l i t y t o w h i c h t h e p r i n c i p l e may a p p l y , b u t

r a t h e r t o e m p h a s i z e t h a t some c i r c u m s t a n c e d i f f e r e n t f r o m t h e

norm has d i s a d v a n t a g e v is -a -v is had t h e r e s u l t t h a t o n e p a r t y is "a t a serious

t h e o t h e r " (Blomley v . Ryan s u p r a , a t

4 0 5 p e r F u l l a g a r J.).

I am s a t i s f i e d t h a t t h e a p p l i c a n t s were a t a s e r i o u s

d i s a d v a n t a g e v i s - a - v i s t h e r e s p o n d e n t . T h e r e s p o n d e n t , t o u s e

the words Australia of Deane J. on t h e same i s s u e i n Commercial Bank of

Ltd v. Amadio s u p r a a t 4 7 6 , i s a m a j o r n a t i o n a l

f i n a n c i a l i n s t i t u t i o n . I t was i n f a c t aware of a g r e a t d e a l

of i n f o r m a t i o n c o n c e r n i n g t h e s t a t e o f t h e b u s i n e s s o f S u e s h a

Nominees. I t was consc ious o f t he d rama t i c i nc rease wh ich had

o c c u r r e d i n i t s o v e r d r a f t d u r i n g t h e 1 9 8 4 , o f t h e c h e q u e s

which had been dishonoured, and of t h e f a c t t h a t t h e

p r e d i c t i o n s made t o i t a s t o t h e r e d u c t i o n or d i s c h a r g e o f t h e

o v e r d r a f t h a d p r o v e n i n c o r r e c t . I t knew t o o t h a t when t h e

l i a b i l i t y o n t h e b i l l o f e x c h a n g e was t a k e n i n t o a c c o u n t , t h e

company's l i a b i l i t i e s t o t h e r e s p o n d e n t would be i n excess o f

$220,000.00, so t h a t t h e a d d i t i o n a l o v e r d r a f t a c c o m m o d a t i o n

a v a i l a b l e by r eason o f execu t ion of t h e g u a r a n t e e was

r e l a t i v e l y s l i g h t .

21.

The a p p l i c a n t s , i n my view, were i n a c o n s i d e r a b l y

weake r pos i t i on . I a c c e p t t h e i r e v i d c n c c t h a t a t t h e t i m e

when t h e y w e n t t o t h e b a n k , t h e y b e l i e v e d ( b e c a u s e Martelli

had t o ld Mr Nobi l e , who had passed i t on t o Mrs N o b i l e ) t h a t

t h e g u a r a n t e e u n t i l t h e y was t o b e f o r $80 ,000 .00 . I a c c e p t a l s o t h a t

went t o t h e r e s p o n d e n t ' s p r e m i s e s o n t h a t d a y t h e y

d i d n o t know t h a t t h e g u a r a n t e e was t o b e f o r $250 ,000 .00 .

They had l i t t l e knowledge of t h e a f f a i r s o f S u e s h a Nominees

and they had n o t r ece ived any i ndependen t adv ice . I t was

known t o Bannerman t h a t t h e a p p l i c a n t s came to e x e c u t e t h e

gua ran tee and mor tgages because Ca r lo Mar t e l l i had a r r anged

f o r them t h a t t h e male t o d o so, and i t must have been obv ious t o Bannerman

a p p l i c a n t s ' command of Eng l i sh , t hough adequa te ,

was no t good. I t m u s t a l s o h a v e b e e n o b v i o u s t h a t t h e y h a d

come w i t h a wrong view o f t h e i r i n t e n t e d l i a b i l i t y . I am

s a t i s f i e d t h a t t h e a p p l i c a n t s w e r e t h e weaker p a r t i e s t o t h e

t ransact ion v i s - a - v i s t h e r e s p o n d e n t a n d t h a t t h a t weakness -

i .e . " t h e p a r t y i s u n a b l e t o ~ u d g e f o r h i m s e l f " ( C o m m e r c i a l

Bank o f A u s t r a l i a L t d v. Ansd io ( sup ra ) a t 476-477 -

c o n s t i t u t e d a " s p e c i a l d i s a b i l i t y " of t h e a p p l i c a n t s f o r t h e

p u r p o s e s o f t h e a p p l i c a t i o n o f t h e p r i n c i p l e .

It w i l l b e n o t e d t h a t s t a t e m e n t , i n a r r i v i n g a t t h a t v i e w I have

n o t t a k e n i n t o a c c o u n t t h e w h i c h I have found to be

incorrect, by Bannerman that Suesha Nominees was t r a d i n g

s a t i s f a c t o r i l y . I t i s n o t e n t i r e l y c l e a r w h e t h e r t h a t f a c t

g o e s t o ques t ion whe the r t h e e x i s t e n c e of t h e " s p e c i a l d i s a b i l i t y " o r t o t h e

un fa i r advan tage has been t a k e n of t h e

s p e c i a l d i s a d v a n t a g e , o r p e r h a p s t o w h e t h e r r e l i e f s h o u l d b e

g r a n t e d , a n d i f so on what terms. I f i t s h o u l d b e t a k e n i n t o

accoun t on t h e q u e s t i o n o f s p e c i a l d i s a b i l i t y , t h e making of

i t r e i n f o r c e s t h e v i e w a t w h i c h I h a v e a r r i v e d o n t h a t

q u e s t i o n .

The n e x t q u e s t i o n , a s Deane J. pu t i t i n Commercial

Bank o f A u s t r a l i a L t d v . Amadio ( s u p r a ) a t 477:-

!

22.

I,

... is w h e t h e r t h e s p e c i a l d i s a b i l i t y ... was

s u f f i c i e n t l y e v i d e n t t o t h e bank to make it p r i m a f a c i e

u n f a i r o r " u n c o n s c i e n t i o u s " o f t h e b a n k t o p r o c u r e t h e i r

I

execu t ion of the document of guarantee and mor tgage i n t h e

c i r c u m s t a n c e s i n w h i c h t h a t e x e c u t i o n was p rocured . "

I t is clear , i n my v i e w , t h a t t h i s t es t 1s s a t i s f i e d . A l l

t h a t t h e r e s p o n d e n t knew was t h a t C a r l o M a r t e l l i had t o l d i t t h a t

t h e a p p l i c a n t s were p r e p a r e d t o g i v e t h e a d d i t i o n a l g u a r a n t e e

a c q u i r e d , a g u a r a n t e e f o r a d d i t i o n a l a c c o m m o d a t i o n most of which

had a l r eady , h a d a r r i v e d b e l i e v i n g t h e y as a p r a c t i c a l m a t t e r , b e e n g r a n t e d . The a p p l i c a n t s

were t o s i g n a g u a r a n t e e f o r

$80 ,000 .00 , a view from which they had t o be d i sabused . There

was no r e a s o n t o s u p p o s e t h a t t h e a p p l i c a n t s h a d h a d a n y

i n d e p e n d e n t a d v i c e a n d t h e r e was no a c c o u n t s u g g e s t i o n by Bannerman t h a t

t h e y s h o u l d . I f one t a k e s i n t o t h e m i s r e p r e s e n t a t i o n by

Bannerman t h e r e q u i r e m e n t is c l e a r l y s a t i s f i e d . Even i f one does

n o t i t is clear i n my view t h a t t h e r e q u i r e m e n t i s y e t s a t i s f i e d .

The p o s i t i o n which then ob ta ins i s tha t : -

" .. t h e o n u s is cast upon the bank t o show t h a t t h e

t r a n s a c t i o n was " i n p o i n t o f f a c t f a i r , j u s t and

r e a s o n a b l e " ( F r y v . Lane )"

(Commercial Bank o f A u s t r a l i a L t d v . Amadio ( s u p r a a t 479 p e r

Deane J.). It is clear f rom the d i scuss ion by Deane J. a t 480

t h a t t h e issue is no t con f ined t o t h e terms o f t h e t r a n s a c t i o n

b u t t o t h e c o n d u c t l e a d i n g t o t h e m a k i n g .

No more need be s a id on t h i s i s sue , i n my v i e w , t h a n

t o s a y t h a t t h e a p p l i c a n t s e n t r y i n t o t h e g u a r a n t e e was

provided i n p a r t by t h e r e p r e s e n t a t i o n as t o t h e s t a t e o f t h e

b u s i n e s s o f Suesha Nominees. I n t h e s e c i r c u m s t a n c e s t h e

r e s p o n d e n t h a s n o t	s a t i s f i e d t h e	o n u s	r e s t ing	on	i t	o n	t h i s
i s s u e .

The a p p l i c a n t s a r e e n t i t l e d t o h a v e t h e g u a r a n t e e

insofar a s i t a p p l i e s t o them, s e t a s i d e u n c o n d i t i o n a l l y .

23.

I t u r n t h e n t o c o n s i d e r t h e claim o f t h e t h i r d

p a r t i e s t o b e r e l i e v e d f r o m t h e o b l i g a t i o n s u n d e r t h e e v i d e n c e

g u a r a n t e e . A s I h a v e s a i d ea r l i e r I a c c e p t t h e o f

Bannerman, i n p r e f e r e n c e t o t h a t o f t h e t h i r d p a r t i e s a n d

C a r l o Martelli, i n r e l a t i o n t o t h e time a t wh ich t he gua ran tee

was executed by them. I f o u n d t h a t t h e t h i r d p a r t i e s were

b o t h u n r e l i a b l e w i t n e s s e s , b u t t h e matter i s compl i ca t ed by

t h e f a c t t h a t I am n o t a t a l l s a t i s f i e d t h a t B a n n e r m a n ' s

ev idence of t h e e v e n t s t a k i n g p l a c e a t t h e e x e c u t i o n o f t h e

g u a r a n t e e by them is o t h e r t h a n a r e c o n s t r u c t i o n . I n

p a r t i c u l a r I am n o t s a t i s f i e d t h a t h e e x p l a i n e d t h e c o n t e n t s

of t h e t y p e w r i t t e n p a r t s o f t h e g u a r a n t e e i n a m a n n e r s i m i l a r

t o tha t which he used i n r e l a t i o n t o t h e a p p l i c a n t s . Doing

t h e b e s t I can , I t h i n k t h e n Bannerman assumed t h a t t h e t h i r d

p a r t i e s knew what they were t h e r e t o s i g n , a n d s i m p l y i n v i t e d

them to s ign t he documen t , wh ich t hey d id .

I t fo l lows f rom the f i nd ing wh ich I h a v e j u s t made

t h a t t h e c n i r d p a r t i e s ' r e l i a n c e upon s.52 of the T rade

P r a c t i c e s Act i s misp laced . Mere conduct s i l e n c e , i n t he absence o f a

d u t y t o speak, does not amount to which is m i s l e a d i n g

o r d e c e p t i v e o r l i k e l y t o be so. (Rhone-Poulenc Agrochimie

- S.A. v. U . I . M . Chemica l Serv ices P ty L td (1986) 68 A.L.R. 7 7 ) .

The c a s e i n r e l a t i o n t o s .52 thus merges w i th t he a rgumen t

t h a t t h e r e was a d u t y t o d i s c l o s e u n d e r t h e g e n e r a l law, t h e

du ty be 1 2 C l . & F. 109 a t 119 [8 E.R. ing based o n t h e p r i n c i p l e i n Hamilton v. Watson (1845)

1339 a t 1343-13441 t h a t a

c r e d i t o r t a k i n g a g u a r a n t e e is o b l i g e d t o i n f o r m t h e s u r e t y of

I

a n y t h i n g " n o t n a t u r a l l y t o be expec ted" . See t h e d i s c u s s r o n

o f t he ca ses by G ibbs C . J . i n Commerclal Bank o f A u s t r a l i a L t d

v . Amadio Deane J . a t 485-486. ( s u p r a ) a t 455-457, and by Mason J. a t 463 and by

I n my v iew the two a s p e c t s h e r e u r g e d t o

a t t r a c t t h e p r i n c i p l e d o n o t . The f i r s t i s t h a t t h e a c c o u n t

was a l r e a d y s u b s t a n t i a l l y o v e r d r a w n , a ma t t e r wh ich t he

p a s s a g e s t o w h i c h I have j u s t r e f e r r e d show is by i t s e l f

i n s u f f i c i e n t t o a t t r a c t t h e p r i n c i p l e . The second i s t h a t

p a r t of t h e i n d e b t e d n e s s was t h a t d u e on m a t u r i t y o f t h e

d i s c o u n t e d b i l l o f e x c h a n g e . I a l s o f i n d no d i f f i c u l t y i n

t a k i n g t h e v i e w t h a t t h a t f a c t n e e d n o t h a v e b e e n d i s c l o s e d .

e

2 4 .

P rov id ing f inance by bank-accepted b i l l s o f e x c h a n g e h a s l o n g

bean a wel l - recognized means o f mak ing funds nvn i lnb lc t o t h e

I

cus tomers o f banks , a l t hough t he popu la r i ty o f t he me thod has

I

waxed and waned, and no s i g n i f i c a n t reason was become advanced why

t h e f a c t t h a t p a r t o f t h e money which might payable t o

t h e r e s p o n d e n t was i n r e s p e c t o f h o n o u r i n g c o m m e r c i a l b i l l s o f

I	e xchange ,	r a the r	cheques .	t han	s ay
i
I

I t u r n t h e n t o t h e r e m a i n i n g q u e s t i o n , n a m e l y w h e t h e r

I t he conduc t of t h e r e s p o n d e n t l e a d i n g t o t h e e x e c u t i o n o f t h e

i g u a r a n t e e was u n c o n s c i e n t i o u s .

W h i l s t t h e p e r s o n a l circumstances o f t h e t h i r d

p a r t i e s a r e r a t h e r s i m i l a r t o t h o s e o f t h e a p p l i c a n t s , t h e r e

i s a t h e c a s e o f t h e t h i r d p a r t i e s v e r y d i f f e r e n t f r o m t h a t o f t h e a p p l i c a n t s . f e a t u r e r e l i e d o n by the respondent which is s a i d t o make

That feature is t h a t t h e t h i r d p a r t i e s had a l r e a d y

g i v e n a number i ndeb tedness o f g u a r a n t e e s i n f a v o u r of t h e r e s p o n d e n t i n

r e spec t o f t he o f Suesha Nominees and of M & K

I n v e s t m e n t s . The t h i r d p a r t i e s had a l s o g i v e n g u a r a n t e e s i n

f a v o u r of a number o f s u p p l i e r s t o Suesha Nominees. Although

some of t h e g u a r a n t e e d were e x e c u t e d i n t h e p r e s e n c e o f G i n n ,

I d i d knowledge n o t b e l i e v e t h e t h i r d p a r t i e s i n t h e i r d e n i a l s o f

o f , o r o f t h e e f f e c t o f , t h e s e d o c u m e n t s . I am

e n t i t l e d t o i n f e r , i t seems to me, t h a t t h e c o n t r a r y is t h e

f a c t ( S t e i n b e r g v . C o m m i s s i o n e r o f T a x a t i o n ( 1 9 7 5 ) 134 C.L.R.

640) a n d t h a t i n f a c t t h e y knew t h a t w h a t t h e y were doing was

e x e c u t i n g g u a r a n t e e s o n w h i c h t h e y m i g h t b e c a l l e d t o p a y i f

t h e i r s o n ' s b u s i n e s s e s d i d n o t p a y . I am n o t a t a l l

s a t i s f i e d , h o w e v e r , t h a t t h e k n o w l e d g e t h a t t h e g u a r a n t e e s t o

which I n o t i o n t h a t t h e t h i r d p a r t i e s	h a v e	r e f e r r e d	were	i n	f o r c e m i l i t a t e s a g a i n s t t h e
were r e s p o n d e n t . i n a pos i t ion o f "weakness"

i n t h e r e l e v a n t sense v i s - a - v i s t h e R a t h e r I

t h i n k t h a t i t emphas ises t h e r e l a t i v e s t r e n g t h o f t h e

r e s p o n d e n t , a s a g a i n s t t h e t h i r d par t ies . I f t h e y d i d t h e n

n o t s ign f u r t h e r a c c o m m o d a t i o n , t h e i r l i a b i l i t y what the respondents wanted them t o , i n o r d e r t o g e t

o n t h e e x i s t i n g

I

25.

o b l i g a t i o n s m i g h t b e c a l l e d u p .

I am s a t i s f i e d i n t h e s e c i r c u m s t a n c e s t h a t t h e r e was

a s p e c i a l p a r t i e s . d i s a b i l i t y o f t h e r e q u i s i t e k i n d i n t h e t h i r d

I a m s a t i s f i e d a l so t h a t t h a t m u s t have been obvious

t o t h e r e s p o n d e n t by Bannerman, who knew t h a t t h e e x e c u t i o n o f

t h e g u a r a n t e e c o v e r i n g a l i a b i l i t y of $150,000.00 had been

wi tnes sed by Ginn and could have no idea of t h e t h i r d p a r t i e s '

knowledge of t h e t r u e s i t u a t i o n . He m u s t have known t h a t t h i s

knowledge would de r ive f rom Car lo Martelli or f rom Ginn.

F u r t h e r I am s a t i s f i e d t h a t t h e c i r c u m s t a n c e s i n

which t h e t h i r d p a r t i e s were to execute a g u a r a n t e e f o r a sum

which i f t h e y were c a l l e d upon t o pay the whole or most of i t ,

would t a k e up a l l t h e i r assets, and which was t o p r o v i d e

s e c u r i t y f o r t h e r e s p o n d e n t f o r a d v a n c e s a n d o b l i g a t i o n s w h i c h

l a r g e l y were a l r e a d y made or i n c u r r e d , c a l l e d o u t f o r t h e

p a r t i e s t o b e g i v e n t h e o p p o r t u n i t y t o t a k e s e p a r a t e a d v i c e	o n
che matter.

I am n o t s a t i s f i e d t h a t t h e t h i r d p a r t i e s would have

e n t e r e d	i n t o	t h e t r a n s a c t i o n i f	t h e y	had	had	such	separate
a d v i c e .

I t was n o t s u g g e s t e d t h a t i f I were o f t h i s v i e w , I

s h o u l d n o t se t a s i d e t h e g u a r a n t e e as a g a i n s t t h e t h i r d

p a r t i e s u n c o n d i t i o n a l l y , a n d I s h a l l d o so.

I n t h e l i g h t o f t h e v i e w s w h i c h I h a v e e x p r e s s e d , t h e

c l a i m s f o r c o n t r i b u t i o n s f a i l , a s d o t h e r e s p o n d e n t ' s claims under

t h e g u a r a n t e e .

The orders which I s h a l l make a r e a s f o l l o w s : -

1. The a p p l i c a n t s ' c l a i m a g a i n s t t h e r e s p o n d e n t f o r a

d e c l a r a t i o n t h a t t h e c o n t r a c t o f g u a r a n t e e ( E x h i b i t

3 ) was r e s c i n d e d by them on or a b o u t 1 9 t h March 1 9 8 6

is r e f u s e d .

26.

2. I d e c l a r e ( i n s o f a r a s t h e c o n t r a c t o f g u a r a n t e e , E x h i b i t 3 ,

i t a p p l i e d t o t h e a p p l i c a n t s h e r e i n ) and

t h e b i l l o f m o r t g a g e , E x h i b i t 4 , t o b e v o i d a n d t o

h a v e b e e n v o i d a b i n i t i o .

o r d e r t h a t t o e f f e c t t h e d i s c h a r g e o f t h e b i l l o f m o r t g a g e , t h e r e s p o n d e n t d o a l l t h i n g s n e c e s s a r y
E x h i b i t 4 .
4 .	The r e s p o n d e n t ' s c r o s s - c l a i m a g a i n s t t h e a p p l i c a n t s
i s d i s m i s s e d .
5.	The a p p l i c a n t s ' c l a i m a g a i n s t t h e t h i r d p a r t i e s f o r
c o n t r i b u t i o n as c o - s u r e t i e s i s d i s m i s s e d , w i t h no
o r d e r a s t o c o s t s .
6 .	I d e c l a r e t h a t t h e contract o f g u a r a n t e e E x h i b i t 3
( i n s o f a r as it a p p l i e s t o t h e t h i r d p a r t i e s ) o u g h t t o
be s e t a s i d e , as from t h e time of i t s e x e c u t l o n a n d I
o r d e r t h a t s u c h c o n t r a c t o f g u a r a n t e e ( I n s o f a r as i t
a p p l i e d t o t h e t h i r d p a r t i e s ) b e so set a s i d e .
7 .	The r e s p o n d e n t ' s c r o s s - c l a i m a g a i n s t t h e t h i r d
p a r t i e s is d i s m i s s e d ,
a.	The t h i r d p a r t i e s ' c r o s s - c l a i m a g a i n s t t h e a p p l i c a n t s
f o r c o n t r i b u t i o n a s c o - s u r e t i e s is d i s m i s s e d w i t h no
o r d e r as t o costs.

3 . I

9. I

o r d e r t h e i r c o s t s i n c l u d i n g r e s e r v e d c o s t s o f a n d t h a t t h e r e s p o n d e n t p a y t o t h e a p p l i c a n t s

i n c i d e n t a l t o t h e s e p r o c e e d i n g s ( i n c l u d i n g t h e i r

costs o f t h e p r o c e e d i n g s f o r c o n t r i b u t i o n a g a i n s t t h e

t h i r d p a r t i e s ) t o be taxed.

1 0 . I

o r d e r t h e i r c o s t s o f a n i n c i d e n t a l t h a t t h e r e s p o n d e n t p a y p r o c e e d i n g s t o t h e t h i r d p a r t i e s

t o t h e s e p r o c e e d i n g s

( i n c l u d i n g t h e c o s t s o f t h e f o r

c o n t r i b u t i o n a g a i n s t t h e a p p l i c a n t s ) t o b e t a x e d .

I c e r t i f y preced ing t h i s a n d t h e 25

pages t o Judgment be a t r u e c o p y of

the Reasons h i s Honour for M r Ju s t i ce Jackson. of

A s s o c i a t e : p H &

Date : 1 1 t h May 1987

I	q
I

1 -, 27.

Counsel for the Applicants:

R.S. O’Regan, Q.C. and

D.A. Reid

Solicitors for the Applicants:

Gabriel Ruddy & Garrett

Counsel for the Respondents:

R.R. Douglas, Q.C. and

S.M. Kieffel

Solicitors for the Respondents:

Cannon and Peterson

Dates of hearing:

14th, 15th, 22nd, 23rd, 24th, 27th, 28th, 29th, 30th April 1987.

Counsel for the Third Party:

G. Brandis

Solicitors for the Third Party:

Seymour Nulty & Co.