Quade v Commonwealth Bank of Australia

[1991] FCA 24

Re: THOMAS QUADE; MARY QUADE; SHAWN THOMAS QUADE and GERARD WILLIAM QUADE
And: THE COMMONWEALTH BANK OF AUSTRALIA
No. N G734 of 1989
FED No. 24
Appeal and New Trial - Section 52 of Trade Practices Act and Negligence
(1991) 13 ATPR 41-093
99 ALR 567
27 FCR 569

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Neaves(1), Burchett(2) and Einfeld(3) JJ.

CATCHWORDS

Appeal and New Trial - fresh evidence, being documents which ought to have been, but were not, disclosed (under a formal order for discovery) by the respondent who was successful at the trial - whether the ordinary rules concerning the use of fresh evidence upon an appeal apply in these circumstances - whether it is sufficient the appellants lost "a fair prospect of success" by the respondent's failure to comply with the order for discovery.

Section 52 of Trade Practices Act and Negligence - claim against a bank arising out of a foreign currency loan - sufficiency of evidence - relationship of bank and customer - whether bank was in the circumstances under a duty to advise customers - conflict of interest between bank and customer - whether bank should have recommended that customer seek independent advice on whether to take foreign currency loan - whether bank should have advised re precautions required for monitoring foreign currency loan after it was entered into.

Trade Practices Act 1974, s.52

Federal Court of Australia Act 1976, s.27

Federal Court Rules, Order 52 r.36

HEARING

SYDNEY

#DATE 14:2:1991

Counsel for the Appellants: Mr M.L.D. Einfeld QC with

Mr J. Chippindall

Solicitors for the Appellants: Messrs Ferrier and Associates

Counsel for the Respondent: Mr J.R. Sackar QC with

Mr J. Marshall

Solicitor for the Respondent: Mr L.E. Taylor

ORDER

The Court receive the fresh evidence tendered on the hearing of the appeal.

The appeal be allowed; the orders of the learned trial judge made 12 October 1989 be set aside; and a new trial of the action be granted.

The respondent pay the appellants' costs of the trial, of the motion to receive fresh evidence, and of the appeal.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

The circumstances which gave rise to the claim by the appellants against the respondent for damages for negligent mis-statements and for relief under s.52 of the Trade Practices Act 1974 (Cth) and under the Contracts Review Act 1980 (N.S.W.) are fully set out in the judgment of the learned primary judge and are outlined in the judgment to be delivered by Burchett J. There is, therefore, no necessity to repeat them in this judgment.

1. I am satisfied that there was ample evidence before the primary judge justifying the conclusions of fact at which he arrived. No basis has been established upon which this Court would be justified in interfering with those findings. Nor has it been demonstrated that his Honour fell into any error of law in concluding that the claim should be dismissed.

2. The appellants, however, also seek a new trial based on additional documentary material which was not produced by the respondent on discovery but was made available to the appellants after the matter had been heard and determined by the primary judge. I have had the advantage of reading and considering what has been written by Burchett J. on this aspect of the matter. I am persuaded, though not without considerable hesitation, that the additional material is such as to warrant the granting of a new trial. I, therefore, agree in the orders proposed by Burchett J.

JUDGE2

This is an appeal at the hearing of which the appellants also moved the court to receive further evidence pursuant to s.27 of the Federal Court of Australia Act 1976 and Order 52 r.36 of the Rules. It is convenient to commence these reasons by outlining the nature of the case, and then to look at the question of fresh evidence. The appellants, by their action, sought damages for negligent mis-statements, and sought also relief under s. 52 of the Trade Practices Act 1974 and under the Contracts Review Act 1980 (NSW). These claims arose out of a foreign currency borrowing, drawn down on 6 February 1985, of the equivalent in Swiss francs of $600,000. The loan was negotiated during the latter half of 1984; offered by the bank and accepted by the appellants at the end of October 1984; and made the subject of a formal agreement of loan executed on 15 January 1985. Because of the virtual collapse of the Australian currency against the Swiss franc between February 1985 and February 1988, when the loan was brought back on-shore, the appellants now face financial ruin, the amount of their debt, as measured in Australian dollars, having more than doubled.

1. The foreign currency loan was negotiated in order to enable the appellants, who were successful farmers and graziers in the West Wyalong area, to acquire an additional property at a price of $410,000, together with additional farming equipment, while making a contingency provision in respect of increases of interest and other payments which might be incurred by reason of movements in the exchange rate. The contingency provision built into the borrowing was in the sum of $100,000. The appellant Thomas Quade, who is the husband of Mary Quade and the father of the other appellants, was the moving force in the arranging of the loan. He knew his own financial position to be such that a borrowing at the then domestic rate of interest of perhaps 15% per annum would be very difficult to service. He went to his bank manager to seek information about borrowing overseas. He was given to understand that there was some element of risk associated with a borrowing in a foreign currency, and was probably told that such a borrowing was "a punt on the foreign exchange". That was on 23 July 1984.

2. On 14 September 1984, Mr Quade met the new manager of the bank's West Wyalong branch, a Mr Plumb, who said he knew nothing about foreign currency loans. It was at that time that the suggestion was made of a borrowing of an additional $100,000 to cover currency fluctuations, particularly in respect of interest payments. Also, Mr Quade then arranged to go to Sydney to talk to the bank's experts. In the meantime, Mr Plumb gave Mr Quade a copy of a document entitled "Foreign Currency Borrowing", to assist his thinking and provide some basis of information on which he could build in Sydney. The document warned that "there is always the risk that the currency concerned will be stronger against the Australian dollar at the time of repayment than at the time of drawdown. As discussed, in such circumstances you will need more Australian dollars than were initially borrowed to purchase the required foreign currency amount to repay the loan." It also stated that this risk could be eliminated or quantified by hedging, although the mechanism of hedging was not really explained. The document then reiterated: "It is more important that you fully understand the potential risks involved in borrowing in a foreign currency on an unhedged basis." There were other warnings to similar effect. Although Mr Quade may not have fully understood each statement, the trial Judge held "he must have had a general appreciation, if he had read it, that there were risks in borrowing in a foreign currency."

3. On 16 October 1984 Mr Quade, with four of his neighbours, Messrs Connell, M. Staniforth, K. Staniforth and Tull, conferred in Sydney with two officers of the bank, Messrs Herden and Bennett. Mr Quade's account of this conference makes it plain that the bank officers indicated there was a risk of currency fluctuations; but his case was his attention was not drawn to any risk that the Australian dollar could fall in value by a significant amount, nor to the catastrophic effect such a fall could have on interest payments and on the principal of the loan. It was not suggested he should hedge the loan, and it was pointed out that hedging would take away any advantage of borrowing off-shore, by increasing the costs of the loan to the equivalent of domestic interest rates. He said he was led to believe there was no great risk involved. There was a suggestion that the exchange rate might vary by about 5% or 10%, "but", it was said, "it recovers over a period". This evidence was confirmed by Mr M. Staniforth, who recalled they were told the Swiss franc "varies a few cents either way but it moves back". According to him, one of the bank officers said it was a "good proposition". Mr Connell and Mr Tull also confirmed Mr Quade's account.

4. The learned trial judge rejected this evidence in the following terms: "I am confident that neither Herden nor Bennett stated that the (variations in) exchange rates were as limited as the applicants' witnesses claim they said they were." His Honour did not suggest there was anything about the witnesses, or the manner of their giving their evidence, to lead to this conclusion; rather, he based it on his own analysis of documents which appear to have been available at the meeting. Properly understood, those documents did show that "borrowing in Swiss francs was a risky exercise". It seems to me, with respect, that the trial judge's approach to the question whether the bank officers had in fact made the statements alleged was unexceptionable. The documents should have led the bank officers to be cautious, and in the absence of sufficient evidence to the contrary, it was appropriate to decide the question, on the probabilities, on the footing that the bank officers had expressed the natural conclusions to which their documents led, or, at least, had not expressed plainly contradictory conclusions. His Honour said:
   

"I am satisfied on the whole of the evidence that neither Herden nor Bennett conveyed to those attending the meeting on 16 October that currency fluctuations in the future would be as limited as is suggested by the applicants' witnesses. The written material, which was produced at the meeting, showed quite plainly that currency fluctuations might be quite considerable. Neither Herden nor Bennett had any reason to represent that future currency movements would not be great. The fact that an example was given of an effective interest rate of 50% per annum, admittedly over a short period, is quite inconsistent with the bank officers representing that a borrower could safely assume that future currency variations would not be great. I do not accept that the officers led Quade to believe that there was no great risk in foreign currency loans."

1. In the absence of anything of the nature of fraud (which was never suggested), to have reached a different conclusion would have involved taking the view that the bank officers were blinded by optimism or by the unconscious influence of some strong motivation to endeavour to sell foreign currency loans to customers such as Mr Quade. There was simply no evidence before his Honour to justify either of these conclusions.

2. But it now appears that there is evidence to suggest the bank was, at the time, actively promoting foreign currency loans as a matter of policy, so that its officers would in fact have had strong conscious and subconscious motivation to put the best complexion on the exchange situation. Furthermore, the bank seems to have been promoting such loans to customers who were inadequately informed on the subject, so that its own senior management had expressed a number of concerns, including concern about the level of understanding of the complex issues involved shown by loans officers and bank managers. In particular, it is plain that the appellants did not nearly meet the criteria set by the bank itself for borrowers who could safely venture into the foreign exchange market. Only extreme optimism could have thought otherwise. Even assuming the appellants had met those criteria, the bank's own expert assessment was that it would have been necessary for them to have had the loan constantly monitored, so that at any time it could have been promptly "hedged" in order to anticipate or contain any adverse movement of the exchange rate. If this material had been before the court, in the wealth of detail that is now available, it would not have been possible for his Honour to have said that "neither Herden nor Bennett had any reason to represent that future currency movements would not be great". They had the reason that the bank was actively marketing this particular type of loan, and the fact was that some of their colleagues did appear to have succumbed to the temptation involved of promoting loans inappropriately. Had the evidence been considered free of any a priori presumption of the unlikelihood of the bank officers mis-stating the position, Mr Quade's evidence, supported as it was by a number of relatively independent witnesses, might have carried the day.

3. Some brief (not at all exhaustive) examination should be made of the documents now available (which I shall call "the new documents"). They are bank documents produced, after the conclusion of the hearing, in recognition of the fact that they had been wrongly omitted from the bank's affidavit of documents filed and served in purported compliance with an order for discovery. A fairly small proportion of them consists of documents that were also produced after the hearing in David Securities Pty Ltd v. Commonwealth Bank of Australia (1990) 93 ALR 271, although there no formal discovery had taken place. The documents comprise a somewhat heterogeneous collection, from which the following points may be noted:
   . A memorandum for the general manager, stamped with the
   

date 16 March 1982 and headed "FOREIGN CURRENCY LENDING TO AUSTRALIAN CUSTOMERS", speaks of the "considerable difficulty" of the bank in meeting borrowing requirements from domestic funds, which gave importance to lending not similarly constrained. It also speaks of the importance of "match(ing) the competition". It discusses the desirability of the bank making more use of its own overseas assets, and of directing "to the small and medium size business area" foreign exchange loans which would be very profitable for the bank. It makes fairly scant mention of the foreign exchange risk, commenting "it is now possible to use the hedge market to cover the risk which should mean that all-up costs should broadly match the cost of AUD finance." The conclusion is reached: "There should be greater consideration given to this source of finance (i.e. foreign currency lending) as a means of satisfying customers' requirements."

. A document dated 17 March 1982, headed "CHIEF MANAGER'S

COMMENTS", appears to deal with the subject of the last mentioned memorandum. It describes as "urgent" the taking of a number of steps "to make several moves now to try and promote the full range of foreign currency lending". It recommends that "now (this week)", among other things, there be "a spirited promotion" of foreign currency lending as a way of beating lending quota restrictions. It speaks of the bank's "critical liquidity position" as making such action urgent.

. A memorandum dated 2 April 1982, signed by the bank's

assistant general manager, headed "FOREIGN CURRENCY FACILITIES FOR AUSTRALIAN CUSTOMERS", speaks of thought being given to "how the CTB can make greater use of foreign currency facilities to satisfy the needs of its customers". It describes foreign currency lending as "an underdeveloped segment of the CTB's lending services" and concludes: "(T)here would seem to be considerable advantage in present circumstances in giving this type of business more emphasis."

. A further memorandum on the subject of foreign currency

loans to Australian borrowers, dated 15 April 1982, sets out an objective as follows:

"In a total foreign currency asset book of some AUD 1,700m, a reasonable objective for loans to Australian borrowers (other than large corporates, project finance and semi-government) would be AUD 100m. This should be capable of achievement within a 12 month period." Specific State by State target figures, aiming at this total, are then set out.

. A head office memorandum for the general manager dated 6

May 1982, a signatory to which was a Mr Knezevic, who played some part personally in the present matter, refers to "the promotional drive" in respect of foreign currency facilities for Australian customers and suggests an object "to expose as many people as possible to this type of lending". It points out that foreign currency loans provided "a way of meeting domestic loans which may otherwise be declined because of A$ lending constraints". It notes that

"it is highly unlikely clients would readily accept foreign currency loans ... unless they and the CTB are prepared to allow the facility to proceed on an unhedged basis. The statement is regularly made that the cost of hedged foreign currency loans is approximately equal to the cost of borrowing funds in Australia. ... However, there would be occasions where a client would be prepared to accept foreign currency loans on an unhedged basis ... and applications of this type should not necessarily be discouraged." The memorandum suggests in some cases requiring clients to take a foreign currency loan, acknowledging that they might be "reluctant to accept such an arrangement," but adding "they would have no alternative if that was the only way the CTB would provide the accommodation." However, under the heading "HEDGING", the memorandum states:

"While the CTB does not have a published policy on hedging when providing foreign currency facilities to customers, it would be safe to say that the majority of management consider hedging to be an essential ingredient to any foreign currency proposal. There are obviously moral considerations at issue as well as the safety of the CTB's security position. On the moral issue, it is felt that the CTB would protect its banker/customer relationship by fully explaining the inherent risks in borrowing in a foreign currency on an unhedged basis. If after hearing of the risks involved a client wishes to borrow on an unhedged basis then it is not necessarily the CTB's right to dictate otherwise. ...

This leaves the CTB's security question. Foreign exchange rates can move sharply at little notice and therefore regardless of the level of allowances made for this risk, the allowance may be insufficient." A document bearing the same date is headed "SENIOR MANAGERS (sic) COMMENTS". It refers to "the reasons why CTB is keen to develop more foreign currency lending".

. A letter to state managers of the bank dated 12 May 1982

contains the following:

"The present high level of domestic interest rates is creating an awareness of the availability of foreign currency loans, which is being exploited by merchant banks and foreign banks. It is important that the CTB fully exploits this area of business, particularly at a time when lending in traditional areas is being contained. Accordingly I would like you to ensure that loans officers in your capital office, and selected branch managers are aware that the CTB is keen to develop more foreign currency lending. This thrust will have application, not only to new proposals, but to existing business, particularly at time of annual review."

The letter refers particularly to loans of the size of that involved in the present case, and adds that special considerations include "whether the borrower should or should not take advantage of forward cover/hedging as protection against volatile movement in overseas exchange rates". The letter again refers to Mr Knezevic as a source of head office expert guidance.

. A report, dated June 1983, on "THE ECONOMIC AND FINANCIAL

OUTLOOK - 1983 TO 1986", prepared by the Investment and Economic Research Department of the bank, projected some fall in the value of the United States dollar, an appreciation of the Jananese yen against the US dollar and an appreciation of the West German mark against the US dollar. It concluded:

"On these assumptions, the Australian dollar will record diverse movements against the major currencies. Over the period to 1986 it is expected to appreciate noticeably against a declining US dollar and pound sterling, but to fall substantially against the yen and Deutschmark. Exchange rates are expected to continue to exhibit a high degree of volatility." The conclusion of this report provokes the comment that it is one thing for bank officers to warn a customer of a risk that exchange rates may move adversely; it is quite another to say that they are expected to do so. An expectation of volatility involves an expectation that at unpredictable times in the future the rates will be adverse. The loan might fall due for repayment at just such a time. It was not suggested in the bank's evidence in this case that Mr Quade was warned in these terms. Nor was he told, when considering a loan in Swiss francs, that the Australian dollar was expected to fall substantially against the neighbouring West German mark. Indeed, when Mr Quade, on the occasion of the first roll-over of the loan, "requested that (the bank) arrange forward exchange cover for the loan", which would in fact have avoided a great part of the loss, Mr Knezevic "advised", as the branch manager noted, "that such a move would be madness", and Mr Quade was persuaded against his own better judgment to leave the loan off-shore and unhedged. In the light of the new documents, Mr Knezevic's emphatic advice is intelligible, and only intelligible, on the footing he really thought, to use the expression Mr M. Staniforth attributed to one of his colleagues, that the exchange rate "moves back" after a fluctuation.

. An internal memorandum to the head office of the bank from its International Division, dated 18 April 1984, deals with the subject of "NEW PRODUCT DEVELOPMENT MANAGEMENT OF FOREIGN CURRENCY BORROWINGS". It refers to a stepping up of the activity of the bank's International Division in respect of advice concerning foreign currency lending, and notes "considerable scope exists for the generation of a range of corporate business out of this initiative". It says "the level of knowledge amongst the commercial sector generally is poor." It refers to the International Division's "initial aim ... to generate additional foreign exchange activity for the CTB." . A memorandum from the bank's Corporate Banking Division dated July 1984, on the subject of simulated currency loans, contains the statement: "As with the management of an actual foreign currency borrowing, the exchange risk factor should be continuously monitored and remedial action taken when necessary e.g. when there are strong expectations of the exchange rate moving against the borrower consideration should be given by the borrower to closing out (part or all of) the oversold forward position and at the appropriate time re-establishing the original position."

It is also noted:

"The forward/hedge contract should be dealt with in terms of C/I's although it is emphasised that the bank needs to be satisfied (as with an actual foreign currency loan) that the borrower has the capacity to meet any likely foreign exchange losses that may be incurred."

. A memorandum dated 17 July 1984, concerned with "FOREIGN CURRENCY LOANS TO AUSTRALIAN CUSTOMERS", refers to the bank's effort to achieve "an increase in the smaller/higher yielding F/C/L's to Australian customers". It indicates that from 1982 to mid 1984 foreign currency loans by the bank grew from about $5m US to about $100m US - a huge increase. The memorandum states its own object as to set "some direction for the future for the smaller category of F/C loans (non-trade)". It refers to recent market interest in foreign currency loans and to the bank's need of expertise in the area. It concludes that "a reasonable CBA attitude to F/C Loans and a plan for handling this product in the immediate future" would include the following:

"Foreign currency loans to be available as a product to service those customers/non-customers of the necessary credit standing which have foreign currency receivables or the capacity to manage the foreign currency exposure. F/C Loans and simulated loans should not be aggressively marketed. Rather they should be used to meet the genuine needs of customers/non-customers, particularly in the face of competition from other lenders. Group Treasury to have responsibility for providing information/advice to borrowers on a regular basis to assist borrowers manage exposure." . A further memorandum dated 7 August 1984 suggests "(t)he main reason for the lift in awareness of F/C/Ls by our lending staff in the branches is the activity of our competitors. The other trading banks and the merchants are pushing F/C/Ls in the profitable small to medium end of the market as are brokers and accountants. Unless we take a more positive approach we will lose sound opportunities." There is then a reference to doubts "about the desirability of lending to the small end of the market", and to the need "to ensure that the inexperienced are not assisted or encouraged into a situation they cannot handle". There is a comment "we were not instructed to hold back from F/C/Ls but merely to lend judiciously." The memorandum refers to the urgency of the need "to familiarise staff with F/C/Ls at the present". It comments that they "may be marketed to those clients who it is considered may utilise them and who would have the capacity to manage their exposures or meet exchange losses which may occur. F/C/Ls are not a facility for weaker clients."

. A memorandum on the Chief General Manager's letterhead, addressed to the managers of all branches, dated 6 September 1984, refers specifically to "FOREIGN CURRENCY RELATED FACILITIES". It mentions "a growing interest" in foreign currency lending and aggressive marketing by competitors. It continues:

"With this increase in interest I consider it imperative that CBA be in a position where it can provide facilities to customers on a competitive and responsible basis. It is vital that the major aspects of these facilities be understood by managers and appropriate CBA lending staff.

In explaining the facilities to customers care should be taken to ensure there is no misunderstanding as to the inherent currency exchange risks if unhedged (uncovered) exposure is involved. However, notwithstanding the exchange risks that may be involved, there are customers of sufficient standing for whom an unhedged foreign currency related facility can be justified. Generally these customers would have demonstrable capacity to meet any losses resulting from currency exchange rate movement. It would also be necessary for the customers to have capacity to manage that risk." . A memorandum dated 8 October 1984, for the General Manager International of the bank, refers to a growing awareness of foreign currency lending, and to a plan to conduct, as soon as practicable, seminars dealing with foreign currency lending techniques. Notes endorsed on it indicate a poor opinion was held of the knowledge of bank managers concerning foreign currency lending, and there is also the comment: "A major (fresh) push into this business demands an improved service to borrowers particularly at or just before rollovers/maturities. I understand group treasury has been looking at this but is anything concrete happening?" . An address by the bank's senior economist delivered on 21 February 1985, just after the drawdown of the loan involved in the present case, emphasizes the complexity of the matters which influence movements in exchange rates. It also says of the banking industry: "There is a tremendous surge towards more innovative products. ... At the same time, international expansion has become attractive for the Australian banks due to the increased integration of domestic and offshore markets." . On 27 February 1985 a memorandum from the Assistant Manager International of the bank, written some three weeks after the loan was drawn down, refers to "the extent of the AUD depreciation which has occurred - ... 6% over 12 months for SFR". It seems remarkable there is no suggestion, in the present case, that depreciation of this extent was drawn to the attention of the appellants, who were borrowing in Swiss francs, at about the end of that very period of 12 months.

1. While, as I have said, the foregoing summary statement of matters raised in the new documents is by no means exhaustive, I think it is sufficient to show that a great deal of material existed, which ought to have been discovered by the bank, bearing on vital issues in the case. Most importantly, that material cuts away the foundation of a major part of the trial judge's reasoning in rejecting the evidence of Mr Quade and his neighbours. But it also suggests that further aspects of the appellants' case might have been elaborated with success, particularly in relation to the adequacy of the information supplied to Mr Quade on the subject of hedging; in relation to the adequacy of the warning concerning the possibility of exchange rate movements (even on the bank's own case, having regard to its expectation that there would, not might, be volatility over the ensuing few years in the value of the Australian dollar); and in relation to the implied representation that Mr Quade was a suitable candidate for a foreign currency loan if he himself chose to take the risk of possible movements in the exchange rate, notwithstanding his extremely marginal income position, and notwithstanding the bank's view that these loans were suitable only for persons with access to foreign exchange, or of substance sufficient to meet losses, or with capacity to monitor exchange movements constantly and react to them appropriately.

2. The bank's first response to the appellants' motion to adduce the new documents was a submission that, if they had been disclosed, their disclosure would have made no difference to the result of the hearing. It was not disputed that the bank had failed in its duty to make proper discovery, fulfilment of which would have involved the disclosure of these documents. But it was said that the new documents are not different in kind from the documents belatedly disclosed in David Securities (supra), which are included among them. In that case, the joint judgment of Lockhart, Beaumont and Gummow JJ. (at 293) contains the statement:
   

"Although the trial judge did not have them, we are not persuaded that these documents, of themselves, or taken in conjunction with the evidence before his Honour, establish that the bank should be held liable for the losses suffered by the appellants."

1. There is more than one answer to this argument. In the first place, evidence may have a cumulative effect, and the opinion of the full court in David Securities that some of these documents would have been insufficient to change the balance of the evidence does not demonstrate that the great quantity of documents now available might not have done so. Furthermore, the standard their Honours set for the documents was that of establishing the liability of the bank. In the light of the authorities concerning the reception of fresh evidence, and with respect, I do not suggest that was an inappropriate standard to set in the particular circumstances of that case. One of those circumstances was the absence of any formal order for discovery, an absence which the full court regarded as actually responsible for the unavailability of the documents at the trial. It stated: "(B)ecause discovery had proceeded in an informal way, the documents had not been discovered." In the present case, in which formal discovery occurred, I think a different standard is appropriate.

2. However, before I turn to an examination of the authorities bearing upon that question, which is in itself an interesting and difficult question of law, I should point out that there is yet another reason why the view taken in David Securities is irrelevant to the present case. In David Securities, the claim against the bank failed on the quite fundamental basis that the relevant advice and information were supplied, not by the bank, but by an independent accountant consulted by the disappointed borrowers, who was said to be "well versed in the intricacies of foreign loans" (at 275), and whose duty it was "to hold (their) hands" in relation to the borrowing "and generally to look after the loan" (276). Obviously, a finding of fact that the borrowers were not looking to the bank, for the relevant advice and information, precluded any rational reliance by them on documents having only the effect of the new documents. The primary ground on which the appellants in David Securities failed in their case against the bank in negligence, on the appeal, was stated by the court (at 292) as being the absence of any reliance or dependence on the bank by the appellants or any assumption of responsibility on its part. The bank had recommended they consult an accountant well versed in the intricacies of foreign loans, and they had done so. It was made clear (at 293) that the case under s. 52 of the Trade Practices Act failed on substantially the same basis. The joint judgment (at 292-293) does add that the bank, if it owed a relevant duty, was not in breach. But the question of breach was inevitably tied up with the extent of the duty owed, and thus raised the same considerations, as is made clear by the court's reference to the bank's indication, not only that there were risks and that hedging was available at a price, but also that "independent expert assistance should be sought".

3. David Securities is thus quite unlike the other full court decisions, Westpac Banking Corporation v. Spice (1990) ATPR 41-024 and Westpac Banking Corporation v. Chiarabaglio (Sheppard, Neaves and Burchett JJ., unreported, 24 August 1990), and the decision of Rogers C.J. Comm D, of the Supreme Court of New South Wales, in Mehta v. Commonwealth Bank of Australia (unreported, 27 June 1990), all of which were concerned with the consequences of a bank undertaking to give some advice or information to a customer concerning the suitability and incidents of a foreign currency loan. The evidence in Chiarabaglio raised the very same questions of principle as are raised by the evidence of Mr Quade, the vital difference between the cases being that Mr Chiarabaglio and his witnesses were accepted, whereas Mr Quade and his witnesses, at a trial at which the new documents were unavailable, were not accepted.

4. The general rule concerning the basis on which a new trial may be granted, upon an appellant's claim to have discovered fresh evidence, was stated by Dixon J. in Orr v. Holmes (1948) 76 CLR 632 at 640:
   

"If a trial has been regularly conducted and the party against whom the verdict has passed cannot complain that evidence has been wrongly received or rejected or that there has been a misdirection or that he has not been fully heard or has been taken by surprise or that the result is not warranted by the evidence, the successful party is not to be deprived of the verdict he has obtained except to fulfil an imperative demand of justice. The discovery of fresh evidence makes no such demand upon justice unless it is almost certain that, if the evidence had been available and had been adduced, an opposite result would have been reached and unless no reasonable diligence upon the part of the defeated party would have enabled him to procure the evidence."

1. In the present case, there is of course no difficulty about the question of diligence; the appellants required the respondent to make discovery of documents, and it was entirely the respondent's default which rendered the evidence unavailable to the appellants. The outstanding problem, in applying the rule laid down in Orr v. Holmes, is the effect which the evidence would have had if available, but there is an anterior question - does the rule, in all its strictness, govern such a case as this? The rule is formulated in general terms, and covers situations where third parties withhold, and subsequently reveal, evidence; or where a party's original ignorance and subsequent knowledge of evidence occurs through circumstances beyond anyone's control. Here, the evidence was withheld from the appellants by the default of the respondent in the performance of its obligation to comply with an order relating to the discovery of documents. It seems to me the rule was not formulated to cover such a case. Indeed, the opening words of the passage I have cited from the judgment of Dixon J. in Orr v. Holmes may be wide enough to exclude it. His Honour said: "If a trial has been regularly conducted ... ." (Similarly, in Council of the City of Greater Wollongong v. Cowan (1955) 93 CLR 435 at 444 Dixon C.J. put to one side (inter alia) cases of miscarriage through "error" and cases of "surprise" and "malpractice".) It is only in the narrowest sense that a trial can be said to have been regularly conducted when a vital procedural step involved in the preparation for it has been stultified by one party's default. Certainly, the proceeding of which the trial was the culmination was not regularly conducted.

2. I do not think it can be right to treat the rule, which necessarily sets so stringent a standard for the ordinary cases to which it applies, as applicable to the extraordinary case where a respondent has seriously failed in the performance of its own obligation, and has thereby created the appellant's difficulty. In my opinion, in such a case, the principle on which the general rule is really founded - "interest reipublicae ut sit finis litium" - must be modified by its collision with the equally important principle that a party should not be permitted to mock the orders of the court, which would surely be mocked if the opponent could be deprived permanently of a fair prospect of success by a party's failure to comply with the obligation of an order so important in the conduct of litigation as an order for discovery. That the general rule is subject to exceptions was suggested in Totterdell v. Nelson (Morling, Burchett and Lee JJ., unreported, 6 November 1990), and in the authorities there cited. To revert to the language of Dixon J., in such a situation as this, an appellant is entitled to claim there is an imperative demand of justice to be fulfilled. The case is not different in character from a case of surprise, to which Dixon C.J. expressly referred: there, the need of evidence is concealed by the other party; here, the existence of the evidence was concealed.

3. In the joint judgment of Dixon C.J., Fullagar, Kitto and Taylor JJ. in McCann v. Parsons (1954) 93 CLR 418 at 430-431, the High Court recognised that there are cases in which broad considerations of justice require the grant of a new trial. Their Honours said, of the jurisdiction to yield to those considerations:
   

"But however it (the grant of a new trial) began it came to be regarded as a remedy used by the court in banc to relieve against a verdict when it would be unjust to allow it to stand as a determination of liability. The grounds upon which the court proceeds in granting the remedy have been settled by practice, but they have never become completely stereotyped; they have always possessed some flexibility and have been governed by the overriding purpose of reconciling the demands of justice with the policy in the public interest of bringing suits to a final end."

1. Counsel cited no case which squarely raised the point I am presently discussing. Counsel for the appellants did refer to Skone v. Skone (1971) 1 WLR 812, where vital documents had been withheld by a party, but there no order for discovery had been obtained. (Cf. Council of the City of Greater Wollongong v. Cowan (supra) at 445, 447.) A respondent's solicitor had stated in writing that he had no documents to discover, and the House of Lords treated this as an exculpation of the appellant from any charge of lack of diligence in relation to the fresh evidence he sought to adduce. That, of course, is a different question. Furthermore, the test for the reception of fresh evidence is, in any case, not so stringent in England as it is in Australia; it is sufficient that the evidence "would probably have an important influence on the result of the case, though it need not be decisive" (as Denning L.J. put it in a passage cited by Lord Hodson in Skone v. Skone at 815).

2. In my opinion, if the appellants fail in their other grounds of appeal, they are entitled to have the decision against them set aside, and to be granted a new trial, on the ground of fresh evidence, being evidence which ought to have been made available to them, but was not, pursuant to the bank's obligation to make proper discovery of documents. As the trial has been aborted by virtue of the default of the bank, for which the appellants are in no way responsible, I think they should have their costs of the trial and of the appeal. It is important that this court should not shrink from insisting on the seriousness of a party's duty to comply fully with an order for discovery.

3. As to the other twenty-odd grounds of appeal, I can be brief. The appellants' case on these grounds was dressed up in a number of different ways, but, however it was put, it almost always came down to an attack on the trial judge's conclusions of fact. Without the fresh evidence, this attack cannot succeed; for the findings were well open on the evidence presented at the hearing. The full court, which has not heard or seen the witnesses, is in no position, in a case of this kind, to reconsider those findings for itself: cf. Abalos v. Australian Postal Commission (1990) 65 ALJR 11 at 16; Westpac Banking Corporation v. Spice (supra).

4. A point of law was, indeed, raised by an argument that a foreign currency loan is inherently dangerous, so as to bring into existence a special duty. But this argument is refuted by David Securities (supra, at 291).

5. There was some discussion concerning what was or ought to have been gleaned by the appellants from certain graphs produced by the bank. If the trial judge had accepted the account given by the appellants' witnesses of what the bank officers said, I do not think anything in the graphs could have compelled a different conclusion; for the appellants, if they studied them, might easily have misunderstood material of that kind. When experts spoke, they would, indeed, have been well advised to listen rather than attempt their own interpretation. But the trial judge did not accept their account. The graphs cannot resurrect the claim in the absence of any finding that they were read in a particular sense favourable to the appellants. Nor is there any other basis on which the appellants can be held to have been misled, so long as their version of what they were told and understood remains rejected. In my opinion, the conclusions of fact upon which the case was dismissed are impregnable, except at a new trial at which the fresh evidence is adduced.

6. However, the motion to adduce fresh evidence upon the appeal should be allowed with costs, and the orders I have already foreshadowed should be made.

JUDGE3

Introduction

Thomas Quade and members of his immediate family (the appellants) brought proceedings in this Court against the Commonwealth Bank of Australia (the respondent) claiming damages for breach of section 52 of the Trade Practices Act, of the Contracts Review Act 1980 (NSW), and of its common law duty not to give negligent advice. A breach of a special duty not to subject the appellants to the "dangerous product" of a foreign currency loan was also suggested. The claim arose from significant financial losses suffered by the appellants following a Swiss franc loan to them by the respondent made in January 1985. The appellants conceded that if they failed on one of the three bases, they would also fail on the other two. A judge of the Court (Morling J) dismissed the appellants' claims. They now appeal from that judgment.

Facts

1. In recent times, this Court has dealt with several cases involving foreign currency loans. In each of them, the particular facts regarding what was said and done by both the customer and the bank have been crucial in determining the outcome. This case is no exception. The facts here are lengthy and have been set out in detail by Morling J. As his Honour's findings of fact are not specifically challenged on appeal, it is not necessary to set them out in detail again. It will suffice to summarise that the appellants were farmers from the West Wyalong area of New South Wales who were borrowing the equivalent in Swiss francs of $A600,000 for the purpose of purchasing a property adjoining their farm. Part of the loan was to cover interest liabilities, currency fluctuations and other contingencies. The appellants had no prior experience of borrowing sums of this magnitude, especially not in foreign currency. Their commercial and entrepreneurial skills were substantially limited to their pastoral activities.

2. Thomas Quade was the only one of the appellants who communicated with the respondent. On two occasions he spoke to the manager of the respondent's West Wyalong branch, Neville Plumb, seeking information as to overseas borrowing. At one of these meetings Mr Quade spoke on the telephone to someone from head office. At the branch manager's suggestion, Mr Quade went to Sydney in early October 1984 and spoke to two of the bank's foreign currency experts at head office. The branch manager also presented a document entitled "Foreign Currency Borrowing" to Mr Quade for his information. It was apparently custom-made but appears to have been largely taken from a standard letter probably prepared elsewhere in the bank than at the West Wyalong branch. It is not dated but was given to Mr Quade just before his trip to Sydney. Relevant parts of this document (the Advice) include the following:
   

Many Australian corporates, including a number of clients of the CTB (mainly exporters with foreign currency income) actively utilise the foreign currency market as an alternative to Australian Dollar borrowings.

They are usually encouraged to do so when - * there are lending constraints within Australia and their borrowing demands cannot be met; and * they can arrange foreign currency loans at lower all-up costs than Australia dollar loans.

....

In addition to the normal security considerations, due recognition needs to be given by you to potential "foreign currency exchange risk" attached to offshore loans. Because the loan is denominated in a foreign currency, all repayments of principal and interest need to be effected in that currency. If you have no offshore income in the borrowed foreign currency you are exposed to fluctuations in exchange rates between the Australian and foreign currency (this is commonly known as exchange risk). Consequently there is always the risk that the currency concerned will be stronger against the Australian dollar at the time of repayment than at the time of drawdown. As discussed, in such circumstances you will need more Australian dollars than were initially borrowed to purchase the required foreign currency amount to repay the loan. The currency exchange risk can be hedged for capital transactions, through the facilities of the CTB. Hedge contracts may be taken out at any time during the currency of the loan.

By entering into a foreign currency hedge contract you can determine the amount of Australian dollars you will eventually required to repay the borrowing. In this way you eliminate/quantify your foreign exchange risk and the CTB is in a better position to assess more accurately the adequacy of the security offered.

In some instances such as yours borrowers do not wish to hedge their foreign exchange risk. While the CTB has no basic objection to providing foreign currency loans on an unhedged basis, it is most important that you fully understand the potential risks involved in borrowing in a foreign currency on an unhedged basis. In particular you must understand that you will be required to make a cash adjustment (parity adjustment) at the end of each interest period to meet any adverse exchange rate movements; thereby ensuring that the value of the loan is brought back to the approved AUD amount.

....

I advise you to seek advice on taxation considerations as there are several aspects of foreign currency loans (eg interest, hedging, exchange losses/gains) which are assessed differently for taxation purposes and these could have a bearing on whether or not the proposal is viable for the customer concerned. This withholding tax could make the total interest cost significantly dearer than an Australian funded loan. Assuming the following:- $ Amount Interest Rate of borrowing 6.00% 30,000 Usage and Facility Fee 1.75% 8,750 Withholding Tax 10% of

Interest Amount 0.60% 3,000 8.35% $41,750 Plus any exchange fluctuations Please have a good Accountant check my figures because I am not sure what other tax implications there may be.

1. The words "Plus any exchange fluctuations" were in the hand writing of Mr Plumb. CTB stands for Commonwealth Trading Bank. The use of expressions like "... Australian corporates ... (mainly exporters with foreign currency income) ..." and the apparent gaps in the bank's knowledge of the appellants' personal circumstances, including whether they had "offshore income in the borrowed foreign currency" to enable them to cover currency fluctuations, are significant.

2. Further information was provided by the bank in its letter of offer of a foreign currency loan dated 24 October 1984. Again the letter appears to contain material created for customers other than the appellants, although some of it is obviously personal to them. The principal part of this letter (the Offer) was as follows:
   

Dear Mr Quade

APPLICATION FOR FOREIGN CURRENCY LOAN WITH BILLS DISCOUNT OPTION

The Commonwealth Bank of Australia is pleased to offer you a foreign currency loan with a bills discount option for AUD600,000 to assist with the purchase of a 604ha farm property "Euronga". Approval of this accommodation is on the Bank's usual terms and conditions applicable to this type of facility and will afford you the option of raising funds locally by way of a bills discount facility or in a foreign currency by way of a foreign currency loan.

The principal terms and conditions of the facilities are:

....

FOREIGN CURRENCY LOAN

The loan may be raised in any freely convertible and readily available major foreign currency (eg United States dollar, Japanese Yen, Swiss Francs, Sterling and Deutschmarks). Provision will exist for the loan currency to be switched at the end of each interest period.

....

1. Provision was then made for various requirements such as 'fees', 'security', 'repayment arrangements', 'front end fee', 'stamp duties' and 'draw down'. The Offer went on:
   

EXCHANGE RISK

On the understanding that the exchange risks associated with borrowings in foreign currencies are fully recognised and that any adverse exchange rate movements are for the borrower's account, the Bank is prepared to allow the loan to proceed on an unhedged basis.

However, in these circumstances, it is the Bank's normal practice to require the borrower to regularly meet any sizeable increases in the Australian dollar value of the loan resulting from exchange rate movements in order to maintain a satisfactory security/debt ratio. In this regard, the Bank will require you to meet any increase in excess of 5% in the Australian dollar value of the loan. These adjustments will take place at the end of each interest period or at the expiry of twelve months from drawdown at the Bank's option should the interest period arranged for you exceed twelve months.

As you are aware exchange risks may be eliminated at any time during the life of the loan by entering into a hedge contract and the Bank would be happy to provide information in this regard on request. WITHHOLDING TAX

Withholding tax must be met by you unless a Section 128H Exemption Certificate is produced to the Bank before the first interest payment is made. Such a certificate must be obtained after each drawdown/renewal and it is your responsibility to produce this certificate to the Bank in order to be exempted from 10% withholding tax on the interest payment. However, we make the observation that in the light of recent tax law changes, it is now unlikely that an exemption will be available to you. We suggest you contact your Accountant, once drawdown has been effected, in order that he may put the application in train.

We again point out the potential risk involved in borrowing in a foreign currency without covering your foreign currency exchange exposure and would like to remind you that any adverse exchange rate movements are for your account. As you are aware, your foreign currency exchange exposure may be eliminated at any time during the life of the loan and in this regard we suggest you make regular enquiries about foreign currency movements and the price for hedging the loan amount outstanding. Similarly, we stress the importance of your thoroughly investigating with your accountant (tax consultant) the ramifications of foreign currency borrowings particularly the tax treatment of any exchange rate profits/losses.

1. Again the bank's apparent lack of knowledge of the appellants' capacity to meet periodic currency losses and their ability and arrangements to cover adverse exchange exposure, matters which it emphasised in the Offer, is instructive and of concern. Moreover, the very first paragraph under the heading "EXCHANGE RISK' reveals a significant flaw in the bank's approach to the loan. How could the bank for its part have the "understanding" that the appellants "fully recognised" the exchange risks if the bank did not know, as was apparently the case, that the appellants had read and comprehended the Advice and other documents shown to them and understood the discussions they had held with the bank's officers, and what actions and decisions they had taken on them?
   The judgment at first instance

2. Justice Morling accepted that the respondent assumed the responsibility of giving advice to the appellants in relation to foreign currency loans, and agreed with a submission of the appellants that it "extended to fully and properly explaining the risks involved" (p 35 of the judgment). However, his Honour held that the appellants had a "real and sufficient appreciation of the risk he was undertaking in borrowing in Swiss francs" (p 33), and concluded that the respondent "sufficiently advised the applicants of the nature of the proposed transaction and the risks involved" (p 35). The print of the judgment below appears to have a typographical error of some relevant dates relating to the loan.
   Appellants' Case

3. In the first place, the appellants sought a reversal of the trial result by challenging various of the trial Judge's conclusions of fact. Standing alone on the evidence at trial, this request must fail. It is not to the point that an appellate court might have taken a different view to the trial Judge on some of the evidence as it appears in the transcript.

4. In my view an appellate court ought not to substitute alternative conclusions or findings of fact made at first instance when, as here, it has not seen or heard the witnesses, and the conclusions of the trial Judge were open on the evidence and were based on assessments of credibility requiring at least the weighing of oral and written evidence on important factual issues: Warren v Coombes (1979) 142 CLR 531; S.S. Hontestroom v S.S. Sagaporack (1927) AC 37 at 47 (Lord Sumner) approved in Abalos v Australian Postal Commission High Court 15 November 1990 (McHugh J at page 14) as yet generally unreported except for (1990) 21 Leg Rep 6 at 9.

5. However, the result at trial was placed under more significant pressure by the production by the respondent, on the appeal before this Court, of a large number of documents which by oversight or negligence were not discovered by the respondent at the time of the trial despite an order for discovery. They were referred to as the `G' documents and largely consist of internal memoranda of the respondent. The appellants moved the Court on notice in this appeal to introduce these documents as further evidence under section 27 of the Federal Court of Australia Act.

6. The appellants submitted that the `G' documents portray the respondent as vigorously promoting foreign currency loans at the time it was advising the appellants, to the extent and with the result that they establish deception within the meaning of section 52 of the Trade Practices Act, and a failure to take adequate care in its advice to the appellants as its customers. The appellants said that the documents emphasise only the selling of the concept, not the erection of any safeguards. The respondent conceded, as is clearly the case, that the `G' documents certainly evidence an enthusiasm at the relevant time to expand the bank's commercial opportunities by promotion of this type of loan.

7. The appellants further argued that the `G' documents indicate the respondent's knowledge, at the time it was advising the appellants about and offering them the loan, that foreign currency loans required 'hedging', i.e. insurance against undue falls in the value of the local as against the borrowed currency, and constant monitoring by an expert. Furthermore, these documents were said to show that the respondent knew the dangers of foreign currency borrowing by people such as the appellants and that it should have made itself much more aware of the appellants' financial circumstances and have told the appellants considerably more than it did.

8. As Morling J. was denied the opportunity of doing so, we have been asked to assess the Advice and the Offer, and the rest of the evidence at trial, in the light of these documents. On the basis of these and other suggested features of the 'G' documents, the appellants submitted that Justice Morling would have come to the opposite conclusion.

9. The 'G' documents were not subjected to any testing before us, and of course none of the existing witnesses and none of the documents' authors or readers have been subjected to examination or cross-examination on them. The documents have not been weighed against the evidence presented at trial. Although the respondent did not use the opportunity given by Order 52 rule 36(7) of the Court's rules to address the conclusions to which the documents ex facie appear to lead and did not suggest before us that any evidence was available to refute these conclusions, it did suggest that in their context, alternative interpretations were appropriate.

The bigger the devastation of the possible risk, the greater is the obligation to lay it before the patient so that he or she can make an informed decision.

1. Statements made and not made are to be viewed in the total context of the negotiations: Pappas v Soulac Pty Ltd (1983) 50 ALR 231; Elders Trustees and Executors Co Ltd v E.G. Reeves Pty Ltd (1987) 78 ALR 193 at 242; Foti and Ors v Banque Nationale de Paris (1990) Australian Torts Reports 81-025 (p 67,835), a decision of a Full Court of the South Australian Supreme Court. In the total context of the present case, the extent of the risk being undertaken by the appellants when contracting this loan can hardly be overemphasised.

2. In a lecture entitled "Developments in Foreign Currency Loan Litigation" delivered to the Banking Law and Practice Conference in Melbourne on 24 May 1990, the respected Chief Judge of the Commercial Division of the Supreme Court of New South Wales, Justice Andrew Rogers, drew a distinction between the responsibilities of banks in transactions permeated by a risk element where there is a fully informed client, and the conclusions which pertain when "those who should be making the risk known to the customer and therefore obtaining the customer's consent are insufficiently equipped to do so".

3. His Honour summarised the factual setting that had arisen in many cases as follows:
   

1. The bank knew that such a borrowing was pregnant with the danger of large capital loss unless precautions were taken.

2. The bank knew that its staff was ill-equipped to explain the risk to the borrower.

3. The bank knew that its staff was ill-equipped to explain the nature of the available precautions to be taken.

4. The bank was unwilling to accept the task of management even at a fee, and thereby undertake the task of implementing appropriate safety precautions as and when required.

5. The customer was unaware of the extent of the possible risk and of the available precautions which could be taken and the techniques for implementing such precautions.

6. The bank was aware of this lack of knowledge on the part of the customer.

7. The customer relied on the fact that the bank gave no warning of any of the foregoing matters. By reason of the omission to warn of the extent of the risk the customer relied on the belief that any risk was limited or slight.

1. Virtually all of these factual criteria apply in this case. As if speaking on some of the problems which existed at the time the appellants' loan was being negotiated and in contemplation, Justice Rogers sought a definition of the bank's duty to advise in the light of this common set of circumstances that existed in many of these loans at the time:
   

First, the risk of depreciation of the Australian dollar against the foreign currency in which the liability of the borrower had to be repaid. Second, the inability and, therefore, unwillingness of the banks to manage customers' exposures to foreign currency fluctuations. That meant that customers were left to their own devices in meeting the admitted risk.

Third, the bank's front-line staff up to and including branch managers were substantially innocent of any real knowledge of the difficulties attaching to foreign currency borrowings. Whilst charged by higher management with the task of promoting such loans they were not equipped to explain to borrowers either the risks attaching to such loans, or the measures that were available and required to contain the risk. Experience has shown that even when bank managers called in "experts" from regional offices the difficulties continued. Higher management was advised that true expertise was restricted to staff of the bank's International Branches.

1. I agree with respect with his Honour that these matters are all distinctly relevant to the definition and delineation of the general duty of care. In my view, the respondent having undertaken to advise the appellants, what was required in this case was:
   

. for the appellants to be advised in plain language of the magnitude of the risks and consequences they faced . for the appellants to be informed what was needed to protect them from the risks and to remove or minimise the possible damage they might suffer, including a detailed explanation of how total or selective hedging works and how it may have such effects on the cost of the money being borrowed as to undermine the financial feasibility of the loan in the first place

. for the bank to acquaint itself with all the personal and financial circumstances of the appellants relevant to their capacity to withstand or meet currency losses

. for the bank to reveal its own commercial interest in the loan and its lack of real knowledge and experience in this area

. for the bank to make clear what type of professional expertise was needed, at what times and intervals and on what subjects, and where it could be obtained . for the bank to advise the appellants that they were not really geared or suitable for a foreign currency loan, and should not contemplate it if they did not have access to and were unwilling to take and continue with the required outside advice . for the bank to satisfy itself that this advice was clearly understood before the loan was undertaken

1. The 'G' documents lend support to the bank's understanding of what was required, and the consequences for unsophisticated borrowers if certain fundamental precautions were not taken. In other words, the risk not being explained and the means of its minimisation by stated precautions not having been identified, the 'G' documents permit a finding, not open at the trial because the documents were not available then, that the appellants were put in the completely deceived and false position of being effectively required to accept the risk of loss. They may be used to show that the bank embarked on and undertook a presentation which was manifestly incomplete, with the consequence for the appellants that they entered the loan agreement under false sense of security or direction. If, as the respondent suggests here, there was no call for further explanation, it may be found that the incomplete information proffered may well have been worse than no information at all. In the absence of full and complete information and advice of this kind, the conclusion is manifestly open that what was imparted significantly failed to fulfil the obligation to advise which the respondent had willingly undertaken and volunteered to perform.
   4. Trade Practices Act

2. As often occurs, there is considerable overlap between the question of breach of section 52 and the question of negligence. Although, as I said earlier, it was conceded that if the appellants fail on one, they will fail on the other, it is useful to examine them separately. Was it misleading or deceptive not to have undertaken the three objectives listed under the previous heading of negligence?

3. Of course intent and knowledge are unnecessary: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 per Gibbs C.J. at 197. But with the 'G' documents accepted into evidence as they appear, this question must be assessed in the context of the bank's policy to promote these loans, their purpose for the bank of urgently improving its liquidity, its own lack of the requisite knowledge and expertise, and the fact that it stood to make considerable profits from their successful marketing. If the 'G' documents are not successfully attacked or weakened, the bank's conduct will also fall to be evaluated in the context of its patent and stark conflict of interest with the appellants which was not even revealed let alone explained, and of the chasm in knowledge between the bank and the appellants.

4. The appellants did not even prepare their own loan application form, which was done by a bank officer. This and other facts found by Morling J. establish the bank's knowledge that the appellants were placing their trust in its advice on the possibility of taking out such a loan. It seems clear that the bank knew that the appellants were unlikely to have ready access to sources other than itself for expert advice. No doubt because a floating currency was so new to Australia, few independent people outside the banks appear to have been readily available in Australia at the time for private consultation who even had the level of knowledge or access to the facts possessed by the bank. If there were such people, they are unlikely to have lived in West Wyalong or conducted a home visiting service to rural areas, and the capital city yellow pages may not readily have provided their names and telephone numbers. In relation to these appellants, who else besides the bank would know who and where these people were? If from their own efforts the appellants had found a person who claimed to be able to advise, how would they know that he/she possessed the necessary skills? What effect would the fees payable to such a person and the costs of carrying out their advice have on their loan costs and outgoings, and therefore its feasibility? It is quite understandable that the appellants would simply choose to trust their own banker, especially this respondent with its statutory accountability to the Australian people: see Commonwealth Banks Act 1959 esp.ss. 9(2), 11(2), 32 and 121, and what they may well have viewed as its special even historical role in the nation.

5. In my opinion, the evidence at the trial, if supplemented by the unsullied or unqualified 'G' documents, manifests a clear case of misleading and deceptive conduct inducing the appellants to accept and enter the loan. It does not seem to be disputed that their subsequent losses flowed from what would then be a contravention of section 52.
   Did Morling J. ask the right question?

6. His Honour found that the appellants were aware of the risks and that there was accordingly no breach by the respondent of section 52 or of the common law duty of care. However, his Honour did not specifically find that the appellants were informed of the true nature and extent of the risks and then advised to manage the risk continuously with the benefit of qualified expert outside assistance to ensure the best possible decisions throughout the loan. This is where, with very great respect, I believe the trial was caused to miscarry by the absence of the 'G' documents. They constitute these as the true matters in issue and the questions to be addressed and answered. In my view, there is only one answer provided for them by the evidence on appeal. It is that if the 'G' documents are accepted as they appear on their face to be, the respondent, having entered upon the task of giving advice to these appellants, failed to ensure that the advice it gave was comprehensive, adequate and accurate in the respects I have earlier outlined.
   Conclusion

7. I have read with care the views of Burchett J, and although in my view there are grounds for concluding that the 'G' documents justify a finding that the respondent's liability has been established, I have, like his Honour, decided that a new trial is the appropriate result.

8. In view of the conclusions reached on the other heads of claim, it is not necessary to pass on any special effects wrought on these facts by the Contracts Review Act 1980 (NSW). I agree with the orders proposed by Burchett J. including those his Honour suggests as appropriate on the question of costs.