Raymond James Campbell and Veronica Mary Campbell v National Australia Bank Limited Nos. SCGRG 90/1909 and SCGRG 90/1394 Judgment No. 4526 Number of Pages 17 Banking and Financial Institutions
[1994] SASC 4526
•29 April 1994
COURT IN THE SUPREME COURT OF SOUTH AUSTRALIA MATHESON J
CWDS
Banking and financial institutions - Guarantees and indemnities - plaintiffs being parents of borrowers from bank - basic liability of $300,000 - mortgage over plaintiffs' house - notice of sale by bank - whether documents explained by bank officers - whether bargain was unconscionable - mortgage originally stamped for $100 and upstamped to $300,000 - whether s.44 of ConsumerTransactions Act could be invoked by plaintiffs - pleas under Misrepresentation Act and Trade Practices Act - plaintiffs' claims fail and order for declarations and for possession by bank granted. Real Property Act1886; Evidence Act 1929; Consumer Transactions Act 1972; Consumer Credit Act 1972; Misrepresentation Act 1972; Trade Practices Act 1974 and Stamp DutiesAct 1923. In Re Dehy Fodders (Australia) Pty Ltd and Commercial Banking Co of Sydney Ltd v Love (1974) 133 CLR 459 and Karrawirra Wines Pty Ltd v State Bank unreported judg. no. 54424, 25.2.94, applied. Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; Contractors Bonding Ltd v Snee (1992) 2 NZLR
157 and O'Brien v Australia and New Zealand Bank Limited (1973) 5 SASR 347, distinguished.
HRNG ADELAIDE, 31 January-10 February, 28 April 1994 #DATE 29:4:1994
Plaintiffs (Campbell): In person
Counsel for respondent: Mr N J T Swan
Solicitors for respondent: Finlaysons
ORDER
Judgment for defendant.
JUDGE1 MATHESON J In the principal action, namely Action No. 1909 of 1990, the plaintiffs, who are husband and wife, ("Mr and Mrs Campbell"), claim against the defendant that a mortgage they gave to the defendant over their house and land at 146 Watson Avenue, Toorak Gardens ("the said property") and three consecutive linking guarantees are void. By its counterclaim, the defendant claims declarations that the said mortgage and guarantees are valid and enforceable, and claims the amount due and owing by the plaintiffs pursuant to the terms of the third of the guarantees and the mortgage. In Action No. 1394 of 1990, which was listed for trial at the same time, the defendant is the plaintiff and pursuant to Part XVII of the Real Property Act 1886 claims against Mr and Mrs Campbell an order for possession of the said property.
2. Paul Raymond Campbell ("Paul Campbell") and Theresa Ann Campbell ("Ann Campbell"), the son and daughter of the plaintiffs, carried on business at all material times as computer programmers under the business name Crown Business Systems. In August, 1986, they applied to the defendant for a loan to enable them to promote their software systems. They were not customers of the defendant, but approached a branch of the defendant nearest to their then place of business, namely the branch at 63 Greenhill Road, Wayville. The plaintiffs were not customers of the defendant at the Wayville branch, but at all material times they did have a savings account with the defendant at its Norwood Branch into which their aged pension cheques were paid. That was the plaintiffs' only association with the defendant. Mr Campbell was aged 79 at the date of trial and Mrs Campbell was 74. Ann Campbell was 42. There is no evidence as to her brother's age.
3. The person to whom Paul and Ann Campbell spoke in relation to their application for a loan was Mr D J Walton, then Relieving Manager of the Wayville branch. Subsequently, Mr Walton inspected the said property, and a document was then prepared by the defendant and called "Customer Statement of Position" relating to the plaintiffs' assets as at 1 September, 1986. It showed the market value of the said property as $220,000 and of the furniture as $15,000. Both the plaintiffs signed that document.
4. On 5 September 1986, the plaintiffs and Paul and Ann Campbell attended at the Wayville branch and the plaintiffs then signed a mortgage over the said property. The mortgage stated, inter alia, that it secured payment of "Loans advances or banking accommodation provided or to be provided by the Bank to or at the request of" the plaintiffs. The plaintiffs also signed a guarantee and indemnity ("the first guarantee"). It stated that in consideration of the defendant at the request of the plaintiffs ("the guarantors") making loans to Paul and Ann Campbell ("the customers"), the plaintiffs guaranteed to pay on demand the moneys secured by the guarantee. Page l of the document stated that "the basic liability" was $150,000. Mr Walton explained in evidence that the defendant required the guarantee to link the mortgage to the borrowings of Paul and Ann Campbell. If the said property had been in the name of Paul and Ann Campbell, a guarantee would not have been required. At the same meeting as that at which they signed the mortgage and the first guarantee, the plaintiffs also signed a letter addressed to the Manager of the Wayville Branch promising to insure the said property against loss or damage by fire, storm and tempest. All these documents were witnessed by Mr Walton.
5. After this meeting, Mr Walton dictated a note relating thereto. I admitted the note under s.34c of the Evidence Act 1929 and refer to my decision in Karrawirra Wines Pty. Ltd v State Bank, unreported judgment No 4424 delivered on 25 February 1994 (available on SCALE.) The note was typed later the same day or on the following day, and signed by Mr Walton. It reads:
"Guarantors - Raymond James CAMPBELL and Veronica Mary
CAMPBELL called and executed Guarantee for $150,000- in
favour of their above son and daughter. They also executed
Memorandum of Mortgage over Certificate of Title Volume 936
Folio 34 being their 146 Watson Ave Toorak Gardens family
home. Both documents were fully explained and Mr and Mrs
Campbell appeared to fully (understand) that they were
liable under the terms of the Guarantee to $150,000- plus
accrued interest should Paul and Anne fail for one reason or
another to cover their commitment to the bank. They are
aware that the Bank is providing finance to Paul and Anne to
cover establishment cost in relation to their new computer
software venture. They also confirmed the work that Paul
and Anne have put into getting their software package to the
stage it currently is. Also explained terms and conditions
of the mortgage and they appeared to understand that this
document provided the Bank with the power to sell their home
and look to personal covenants should principle debtors fail
to meet their commitment to the Bank. Explained that the
Bank was providing one hundred and fifty thousand dollar
($150,000) overdraft facility, interest at 19.25% payable
quarterly and facility to be reviewed at expiry, to assess
the debtors continuing fluctuating and fixed reduction
requirements. Also explained that terms of mortgage called
for the property to be insured for fire storm and tempest
and Mr and Mrs Campbell confirmed that this was the case
with insurance brokers LOUDNES LAMBERT. They signed
declaration confirming that they would continue to insure
property as long as the Bank is relying under the term of
their guarantee. (Signed) D.J.W. Rlg. MANAGER"
6. On 8 September, 1986, Mr Walton wrote to Paul and Ann Campbell in the following terms (my underlining):
"Re: Banking Accommodation Referring to our recent
discussions we are pleased to advise approval of overdraft
facility to assist you with the on-going development and
marketing of your Crown Business System. Facility is
subject to normal banking conditions, and more specifically
as detailed herein:- Overdraft (A/C No. 2-813-6364) Limit:
$150,000-00 Expiry/Review: on or before 30th September 1987.
Interest Rate: to be the Banks base rate plus margin of .5%,
currently 19.25% p.a. variable all up. (the Bank is under
no obligation to advise interest rate changes).
Service Fee: $600-00 per half year as at last day of
February and August.
Establishment $750-00 payable on acceptance of Fee: the
facility.
Repayment: to be a fully fluctuating facility in accordance
with the working needs of your business.
Security: to be Guarantee and Indemnity limited to $150,000
from Raymond James and Veronica Mary Campbell supported by
1st Registered Mortgage over Certificate of Title Volume 936
Folio 34 (property - 146 Watson Avenue Toorak Gardens). The
overdraft facility is granted on normal banking terms and
conditions in additions (sic) to those set out above. It is
intended that this overdraft facility will be reviewed on
the stated review date but at all times the facility will be
available at the discretion of the bank. For your records
we advise it is the Bank's intention to charge interest on
the above loan account on a quarterly basis (i.e. end of
March, June, September and December) as from the end of the
current quarter. We consider lines as detailed above to be
the maximum of our assistance against the security offered.
Request for further increased(sic) would necessitate
lodgement of additional security by yourselves. We welcome
you as a customer of National Australia Bank. Our services
are many and varied, and we would like to point out the
particular benefits of our Travel Service, Call Deposit
accounts and personal banking facilities available to you.
We would like to discuss these products with you in the more
depth at a mutually convenient time. Any further queries
you may have regarding the above, please contact myself at
any time convenient. We look forward to a mutually
rewarding association."
7. The overdraft facility in the sum of $150,000 was apparently twice renewed, but because further borrowings were required by Paul and Ann Campbell, the plaintiffs signed, at the request of the defendant, a second guarantee on 6 September, 1988, the basic liability being stated to be $250,000. The second guarantee was witnessed by the then Manager of the Wayville Branch, Mr J.E. Chard. On the same day, Mr Chard wrote in the names of the plaintiffs, filled in the date and signed a "pro forma" called a "Customer Interview Record" which read:
"Guarantees In respect of Guarantee for Advances dated
6/9/88 completed by (name of Guarantor) Raymond James
Campbell and Veronica Mary Campbell I have explained the
provisions of the Guarantee and confirm that having done so
the Guarantors clearly understand the nature of the document
and the extent of the liability in terms of it - now and in
the future. I, as attesting witness, advised Guarantor that
security documents lodged secure all the liabilities and
obligations including the Guarantee which may apply in the
future in terms of the relevant mortgage or charge. The
Guarantor confirmed that the guarantee was being entered
into freely and with no undue influence on the part of the
borrower or bank staff."
8. The defendant had the said property valued on 7 September 1988 by Brock Younger, and their valuation was $310,000. Mr Chard wrote the following letter to Paul and Ann Campbell on 11 November, 1988:
"We are pleased to advise approval of the following
facility. Overdraft Amount : $245,000-00 Expiry/review: On
or before 31/1/89. Interest Rate : 16.75% variable (there
is no obligation on the part of the bank to advise interest
rate changes). Interest is charged monthly. Rates are
published in The Financial Press.
Application Fee: $1,000-00 payable immediately and has been
debited to your account.
Line Fee : Current half yearly fee applicable to approved
overdraft of $245,000-00 is $1,000-00 and is payable during
March and September.
Repayment : In line with your cash flow predictions we would
expect the account to be in credit by January '89, at which
time we will again review facilities. It is expected that
account will then be operated on a normal fluctuating basis.
Security for the overdraft will be Guarantee and Indemnity
for $250,000-00 given by Raymond James Campbell and Veronica
Mary Campbell supported by Registered Mortgage Number
6248420 over Certificate of Title Volume 936 Folio 34 being
property situated at 146 Watson Avenue, Toorak Gardens. The
overdraft facility is granted on normal banking terms and
conditions in addition to those set out above. It is
intended that this overdraft facility will be reviewed on
the stated review date but at all times the facility will be
available at the discretion of the Bank. We remind you of
the agreement to transfer the working account from the ANZ
Bank so that we then have a more complete picture of your
operations to assist with future requirements. This has not
been attended to yet and we look to you to call at this
branch to arrange transfer as soon as practical. We wish
you continued success in your venture and look forward to a
mutually rewarding relationship."
9. The new overdraft facility must have been renewed on or before 31 January, 1989, and on 20 April, 1989, the following letter was sent to Mr Chard by Paul and Ann Campbell:
"We write to acknowledge that our account is overdue and to
advise of our actions to rectify same. As you are aware
Banner Hardware contracted with us to write specific
programs for use between their member stores and in addition
to their initial letter and actions confirming a contract
with us further issued an unqualified letter of intent for
us to install systems in all remaining 19 stores. Banner
have failed to perform and we have instigated legal action.
We have issued 3 separate 'Notice pursuant to Section 364
(2) of the Companies (South Australia) Code' for $230,000,
$539,371 and $160,000 respectively on the 3rd March, 1989.
Our legal advisers desire to ensure we win this matter
without delay and have instructed us not to elaborate on
their proposed next course of action suffice to say a well
prepared Barrister needs to be retained and there is
significant legal precedent for our case to succeed. In
addition to pre-paying legal fees we also have a requirement
for some additional working funds. We are prepared to
increase the current mortgage to also pay outstanding
interest. For interest you will recall the subject property
was valued at $310,000 on 6/9/88, however, subsequently -
towards the end of 1988 the property next door (148 Watson
Avenue) was sold by Auction for $445,000 and the property
across the road (corner of Watson Avenue and Moore Street)
was sold by Auction for $585,000. Accordingly the valuation
of 146 Watson Avenue would be significantly increased.
Would you please be kind enough to allow a further $25,000
plus outstanding interest to be advanced. We are advised
judgement should take approximately 4 weeks to obtain.
Yours faithfully, (Signed TA Campbell) (Signed PR Campbell)
We consent to sign necessary papers to increase the loan
over 146 Watson Avenue by $25,000 plus outstanding interest.
(Signed pp R J and V M Campbell R J Campbell)"
10. I draw particular attention to the fact that Mr Campbell signed the form of consent at the foot of the letter on behalf of the plaintiff and his wife.
11. On 23 May, 1989, at the request of the defendant, the plaintiff signed the third guarantee, the basic liability being now specified as $300,000. It was witnessed by Mr A. R. McDonnell, who was then Commercial Business Manager of the Branch. On the same day, Mr McDonnell signed a "Customer Interview Record" in the same wording as that signed by Mr Chard on 6 September 1988.
12. As at 6 December 1989, Paul and Ann Campbell were indebted to the defendant in the sum of $300,000 plus interest in the sum of $26,768.73, bank charges in the sum of $1,200, and Federal Government taxes in the sum of $1.80, making a total $327,970.53. On 20 December 1989, the defendant posted to the plaintiffs by certified mail two notices of demand dated 6 December 1989, wherein the defendant demanded the moneys due and owing by the plaintiffs to the defendant, being the said sum of $327,970.53 together with interest from 6 December 1989 at that time accruing at the rate of $184.93 per day pursuant to the third guarantee and pursuant to the mortgage. On 18 January 1990, the defendant posted to the plaintiffs by certified mail two notices of sale dated 12 January 1990, wherein the defendant demanded payment of the sum of $336,160.70 being the total of the said sum of $327,970.53 plus interest and charges thereon to 12 January 1990, together with interest from 12 January 1990, at that time accruing at the rate of $207.17 per day pursuant to the terms of the third guarantee and the mortgage.
13. On 27 March 1990, Paul and Ann Campbell wrote to Mr Paul Smythe, then a bank officer at the Wayville Branch. They said:
"This is to confirm that we are conducting some
international transactions that will earn us a fee payable
in a number of installments(sic) sufficient to discharge all
the obligations we have, including the loan to the National
Bank. We appreciate the National Bank and respect it for
its tolerance and look forward to being a client with a
credit balance in the near future, but meanwhile beg its
further tolerance as we struggle with the difficulties of
overseas communications with its time zone variations. We
expect to have funds sufficient to pay all arrears with a
small amount of principal no later than 10/4/90. We expect
to have funds sufficient to pay the balance no later than
24/4/90. It is also just as possible the whole amount could
be paid out by 10/4/90."
14. The defendant's solicitors, Finlaysons, wrote to the plaintiffs on 30 April 1990 in the following terms:
"Certificate of Title Register Book Volume 936 Folio 34 -
146 Watson Avenue, Toorak Gardens SA 5065 We act for the
National Australia Bank Limited. Our clients have
instructed us that the sum of $336,160.70 together with
interest thereon at the rate of $207.17 per day from 12
January 1990 remains due and owing by you to our client by
virtue of a guarantee dated the 23rd day of May 1989 wherein
you guaranteed to pay to our client on demand the monies
thereby secured. Due to the non-payment of the monies
specified above, our client now wishes to exercise its power
of sale over the above premises, pursuant to the terms of a
memorandum of mortgage executed by you in favour of our
client and dated the 5th day of September 1986. We
understand that our client has already approached you
requesting that you vacate the property and thereby allow
our client to take possession and proceed to auction. We
understand further that, to date, you have not complied with
our client's request. Accordingly, we have been instructed
to commence proceedings by means of an inter partes summons
for ejectment in order to obtain vacant possession of the
property. If our client is successful in obtaining an order
for possession, the Supreme Court may order that the legal
costs incurred by our client in seeking the order, be
reimbursed by you to our client. The purpose of this letter
is to afford you the opportunity to vacate the property
before further legal costs are incurred. Accordingly, we
request that you give up vacant possession of the property
within 14 days of today's date and deliver up the keys of
the premises to a representative of our client, failing
which we will commence proceedings on behalf of our client
seeking an order for possession. In the event that you have
any queries concerning the contents of this letter, we
suggest that you contact your solicitors."
15. Messrs. Bonnins, who were then acting for the plaintiffs, wrote the following letter to Finlaysons on 17 May 1990:
" Campbell and National Australia Bank Ltd First Mortgage
over 146 Watson Avenue, Toorak Gardens Raymond J. Campbell
and Veronica M. Campbell We are acting for Mr and Mrs R.J.
Campbell and understand that you recently wrote to our
clients in relation the above mortgage. Our clients wish to
pay out their indebtedness to your client and, accordingly,
would you please let us have a pay-out figure for settlement
in full on the 6th June, 1990. Please also let us have a
fully itemised account, showing all debts and payments
during the period of the loan to date, as soon as possible
to enable our clients to have the calculations checked and
reconciled. Despite several requests by our client, they
have not received a copy of any documents executed by them,
including documents extending the term of the loan. Please
forward a copy of each such document when supplying details
requested above."
16. They wrote to Finlaysons again on 19 June 1990:
"RE: RJ CAMPBELL and VM CAMPBELL and NATIONAL AUSTRALIA BANK
LTD.
...
Although our clients believe that they will be able to pay
out the mortgage to your client in the near future, if you
insist on issuing proceedings we now have instructions to
accept service on behalf of Mr and Mrs Campbell."
17. It is convenient to state here that the plaintiffs have not made any payment to the defendant.
18. Messrs Walton, Chard and McDonnell were all called as witnesses by the defendant. Mr and Mrs Campbell and Ann Campbell gave evidence. Although Mr Campbell said in his opening that Paul Campbell would give evidence, he did not do so. It appears that Paul and Ann Campbell have been charged with fraudulent conversion in relation to the business of a company called Mortgage Investments of Australia Co-operative Ltd., and Ann Campbell exercised her legal right to decline to answer some questions on the ground that her answers might incriminate her. Mr Campbell told me that Paul Campbell did not give evidence because he had received death threats. Whether that is true or not, I did not understand that the threats were made by anybody connected with the defendant. There is much to be said adverse to the plaintiffs' case in consequence of Paul Campbell's absence from the witness box, but I wish to make it clear in all the circumstances that it has not influenced my ultimate decision. The plaintiffs did not have legal representation at the trial. Mr Campbell, assisted informally by Ann Campbell, called and questioned witnesses, and prepared quite a sophisticated "Summary of Submissions" at the end of the trial. It is also convenient to state here that the proceedings in Action No 1909 of 1990 were issued by Bonnin and Partners on 14 August, 1990, and that firm filed the plaintiffs' More Explicit Statement of Claim on 16 March, 1992 ("the Statement of Claim"). It was not until 29 June, 1993, that the plaintiffs filed notices that they were acting in person. Ann Campbell said in evidence that the defendant had judgment against her and her brother for the amount of their debt. I assume that the defendant has not recovered any portion thereof. I was told that Paul and Ann Campbell are involved in litigation against Esanda Ltd. and Banner Hardware Ltd.
19. Mr Swan, counsel for the defendant, pointed out that the Statement of Claim has only one paragraph purporting to contain a cause of action apart from statutory causes of action, and that is paragraph 28 which alleges that the guarantees and the mortgage are void for "being associated with unfair and unreasonable conduct". The paragraph then gives numerous particulars of alleged unfair and unreasonable conduct. Mr Swan argued that paragraph 28 does not plead a cause of action known to the law, and that in any event the evidence called did not make out the substantive allegations particularised. Paragraph 29 refers to s.44 of the Consumer Transactions Act 1972. Mr Swan argued that that section does not apply as the principal debt exceeds $30,000. Paragraph 39 seeks to rely on the Misrepresentation Act 1972, and pleads specific representations by reference to paragraph 28. Mr Swan argued that not only are those representations not made out on the evidence, but there was no evidence that the alleged representations in any way induced or were relied on by the plaintiffs, or could in any way be seen as material representations in the context of this case. Paragraph 31 seeks to invoke s.52(1) of the TradePractices Act 1974, and alleges that the defendant's conduct has been misleading or deceptive or likely to mislead or deceive. It refers back to paragraph 28 for particulars of the alleged misleading or deceptive conduct. I will return to these pleas later in these reasons.
20. The plaintiffs, and Mr Campbell in particular, sought to make a good deal of their alleged ill-health. In sub-paragraph (b) of paragraph 28 of their Statement of Claim, they pleaded:
"the plaintiffs were at the time of each transaction in ill
health, which the defendant through its said agents either
knew or should have known; the first named plaintiff had
lost a great deal of weight and was in poor physical
condition - his concentration was poor and he suffered from
glaucoma; the second named plaintiff suffered from high
blood pressure and hypertension;"
21. I agree with Mr Swan that the evidence does not establish that "at the time of each transaction" the plaintiffs were in ill-health, and it does not establish that the defendant knew or ought to have known, or indeed had any means of knowing that they were in ill-health. Mr Campbell has never sought medical attention for any health problem. He has been medically examined for driver's licences, but on those occasions he admitted that he never mentioned any health problem. It was not suggested in cross-examination of the bank officers that he presented as having any relevant health problem at any relevant time. There is evidence that at one stage he lost a significant amount of weight within three weeks, and this may have happened in 1984, but the evidence does not establish that it was a relevant condition at the time of the execution of any of the relevant documents. Furthermore, there is no evidence that any such weight loss is in any way relevant to a consideration of Mr Campbell's ability properly to transact business. There is no evidence to establish that Mr Campbell had any medical problem which would affect his concentration. If he suffers from glaucoma, there is no evidence that it was of any relevance. The defendant called a specialist physician, Dr. Randal Butler, to give evidence. At the request of the defendant, he examined Mr and Mrs Campbell on 24 May 1993. His report on Mr Campbell included the following:
"I came to the conclusion that Mr Campbell certainly knew
the nature of the documents which he was signing, but more
especially as he was an accountant. I do not believe that
he was suffering from any mental or nervous disorder which
stopped him from recognizing the nature of his actions,
although it could be argued that his depression may have
been so severe at that time that apathy rendered him
indifferent to signing or not signing."
22. I agree with Mr Swan's submission that although Mr Campbell is elderly, he displayed remarkable alertness during a long trial. He was alert to take notes at what he obviously regarded as relevant parts of the proceedings, even when he was in the witness box. He was alert and consistent in taking objection to witnesses and evidence when he considered he had grounds to do so, even though the grounds were often misconceived. Moreover, Mr Campbell did not claim he was too sick to realize he was signing a mortgage. He did not claim that he was too sick to audit the accounts of the relevant family companies, or to attend to banking and interest notices on a regular basis, or to attend to other accounting duties.
23. Mrs Campbell apparently suffered from high blood pressure or hypertension, but no evidence was called to suggest that any such condition would in any way be relevant. In his report on Mrs Campbell, Dr. Butler said:
"Mrs Campbell comes across as a pleasant, honest rather
simple soul but certainly not unintelligent. She claims
that she had no real understanding of the legal implications
associated with her signing various documents. I believe
that at the time she signed those documents she had no
mental or nervous disorder which would have impaired her
ability to make an informed judgement about the mortgage if
it had been explained to her."
24. The plaintiffs also allege that they were inexperienced "in the obtaining of finance for business purposes". This allegation was only made out in the sense that they themselves had not previously mortgaged the said property for business purposes, or given guarantees for business purposes, but that is only one aspect of their background. Mr Campbell is an accountant, albeit he achieved his qualification by correspondence many years ago. He held a land agent's licence from 1965 to 1986. The defendant called a number of witnesses who established that he had a good deal of experience, especially as a director of Mortgage Investments of Australia Co-operative Ltd., of contact with investors whose investments were on mortgage security. Both Mr and Mrs Campbell had had significant experience of borrowing and lending on mortgage, and signing mortgages. It is clear that each of the relevant transactions was instigated by Paul and Ann Campbell. I do not find - and it was not suggested by the defendant - that they hoodwinked their parents or improperly influenced them. It was alleged in the Statement of Claim that Paul and Ann Campbell were the agents of the defendant, but no evidence was given in support of this allegation, and I reject it. They were a very close family. Paul and Ann Campbell sought their parents' backing and got it, and I think it is probable that they all - parents and children - consistently expected Crown Business Systems to prosper, and that Paul and Ann Campbell would be able to pay off their overdraft. Having said that, I am bound to say that the credibility of the plaintiffs and Ann Campbell as witnesses did not match their past optimism. In short, I reject their evidence that the bank officers involved did not adequately explain to the plaintiffs the documents they were signing, and I reject the evidence of the plaintiffs that they did not understand what they were doing in signing the documents.
25. All the Campbells who gave evidence - no matter what their imperfections of recollection on peripheral matters might be - swore that no explanation was given of the mortgage or of any of the guarantees by any of the bank officers called by the defendant. I agree with Mr Swan that it is inherently unlikely that Messrs. Chard and McDonnell, who witnessed the second and third guarantees respectively, could have any sensible conversation with the Campbells without in some way referring to the guarantees. The guarantee document was the only document being executed on each of their meetings with the plaintiffs. Moreover, each guarantee included the words "SIGNED by the guarantor ..." immediately above the signatures of the plaintiffs. Messrs. Chard and McDonnell had no reason not to explain the relevant guarantee, and every reason to do so. Standard bank procedures required them to do so. Execution of the respective guarantees was the whole reason for the visit to the bank on each occasion. If there was no explanation or reference to the documents being guarantees by the bank officers, it would be incredible that neither of the plaintiffs nor Ann Campbell asked for an explanation. I thought Messrs. Chard and McDonnell were entirely satisfactory and credible witnesses. I accept their evidence and the truth of their statements that they completed the "customer interview records" truthfully after the respective interviews in accordance with what had, by then, become bank policy.
26. I was also impressed by Mr Walton, and I reject the evidence of the Campbells when it is in conflict with his evidence. Even if I erred in admitting in evidence the note that he dictated shortly after the interview on 5 September 1986, I have no doubt it accurately records what was said. Mr Walton clearly had a recollection of the interview. As he said in evidence that it did not need to take very long to explain the essential nature of the guarantee and mortgage, namely, that if the principal borrowers failed in their obligations to the bank, the bank could proceed on the personal covenants under the guarantee and proceed to sell the plaintiffs' house. He recalled a discussion as to insurance, and there clearly was such a discussion given the signed document in relation to that (supra). I have probably said enough to indicate that I reject the evidence of the plaintiffs and Ann Campbell, but I will comment further on their evidence.
27. Mr Campbell took his duplicate certificate of title to the bank on 5 September 1986 because, to use his words, he "knew what a mortgage is". He knew the purpose of going to the bank was to facilitate overdraft credit facilities to his children, and he said that he understood that a mortgage enabled the mortgagee to sell the land in the case of default under the mortgage. He has had that understanding for the last twenty years or so.
28. Mr Campbell said that on the occasions that he and his wife signed the second and third guarantees, he understood that he was signing a document for further security, but said that he thought he was giving additional security by way of additional mortgages. He agreed that it was at least implied from the circumstances that the bank wanted security in relation to his children's credit, and wanted that security over his house. He agreed that if there had been the type of explanation which is in fact alleged by the defendant, it would have been no surprise to him because that is why he was present at the bank. He merely said that the explanation was not in fact given. Mr Campbell admitted eventually that the time he signed each of the relevant documents in this matter, he was still attending at his office on a regular basis and carrying on the business of Mortgage Investments of Australia Co-operative Ltd. He eventually admitted that he was very experienced in obtaining business finance. I agree with Mr Swan that Mr Campbell was selective in what he claims to be able to remember in relation to the meetings with various bank officers. Although he constantly maintained that no explanation was given to him of the relevant documents, he said he was unable to recall other matters which, I find, were certainly discussed such as to the provision of a Statement of Affairs, and the need for the plaintiffs to keep the said property insured.
29. As far as Mrs Campbell was concerned, she clearly understood that she was putting her house up as security for a loan to her son and daughter, although she went on to say that she thought "we took out a loan". It is significant, I think, that she was unable to identify anything to which she had agreed in the relevant documents which she did not intend to agree to. Her evidence wavered between whether she understood that she was securing a loan to her children, or in some way directly receiving the benefits of the loan from the bank which, in turn, was then to be passed on to her children. I agree with Mr Swan that it makes no difference. If she thought that she was in fact borrowing money direct from the bank and then on-loaning it to her children, it would have been even clearer that she was undertaking personal liability to the bank.
30. Mrs Campbell initially said that she often signed documents without explanation, but eventually claimed that the documents in this matter were the only documents that she had signed without understanding them. She claimed that the mortgages which she had previously signed were quite simple. I agree with Mr Swan that Mrs Campbell was alert in giving her evidence, and is clearly familiar with her children's business and able to give explanations of it. I thought Mrs Campbell, like her husband, was shrewder than she wished to appear.
31. I found Ann Campbell to be an evasive and unsatisfactory witness, particularly in regard to her father's business affairs. She would have me believe, in her evidence, that her father scarcely engaged in business at all, whereas in an application that was made on behalf of her and her brother by Charthill Limited for finance in or about late 1987, their agent said:
"For the past twenty years Paul and Anne Campbell have
worked closely with their father Ray Campbell, a Chartered
Accountant, who has been involved in numerous successful
enterprises including Waterworth Private Hospital, a Tyre
and Rubber Company, a menswear store at Mount Gambier, South
Australia, a Finance Company and as an independent Real
Estate Agent."
32. I utterly reject her evidence that on each occasion the relevant bank officer merely said to her parents words to the effect "sign here", and nothing more. She did agree that the reason for the visit of her parents to the bank was to accept liability for the debt for herself and for her brother. Furthermore, despite knowing her parents well, she said she had no concerns that they might not understand the nature of the mortgage they were signing.
33. Mr Campbell addressed an argument to me based on the absence from the evidence at the trial of a certificate contemplated by clause 14 of the guarantees, and sought to rely on Dobbs v. National Bank of Australasia Ltd.
(1935) 53 CLR 643. Clause 14 in each of the three guarantees reads:
"14 For the purposes of this Guarantee a certificate stating
all or any of the following -
(i) the amount of the moneys hereby secured or any part
thereof;
(ii) that such an amount falls within a particular paragraph
or sub-paragraph of the definition of the moneys hereby
secured;
(iii)that such an amount is owing or payable to the Bank by
the guarantor or any other person whose indebtedness to the
Bank is intended to be hereby secured;
(iv) that the Bank is entitled to payment thereof on demand,
given to the guarantor by or on behalf of the Bank is
conclusive evidence of the truth of its contents and binding
on the guarantor."
34. I agree with Mr Swan that the argument is misconceived. It is sufficient for me to refer to the case of Dobbs (supra). At p.651, in a joint judgment, Rich, Dixon, Evatt and McTiernan JJ said:
"This clause does not purport to impose upon the bank the
necessity of obtaining the certificate it describes. It is
not a qualification of the undertaking to pay contained in
the first clause. It does not make a certificate a
condition precedent to recovery. The promise remains a
promise to pay the amount owing; it does not become a
promise to pay the amount owing if certified or a promise to
pay only what is certified as owing. The bank could recover
without the production of a certificate if, by ordinary
legal evidence, it proved the actual indebtedness of the
customer."
35. As far as the claim in paragraph 28 of "unfair and unreasonable conduct" is concerned, I am prepared to treat it as an allegation of an unconscionable bargain (see, for example, The Commercial Bank of Australia Limited v Amadio and Another (1983) 151 CLR 447 and Contractors Bonding Ltd v Snee (1992) 2 NZLR 157), and if the necessary evidence was present, I would probably have allowed an amendment to the plea. However, the evidence is not present. I have found that the plaintiffs were aware that the said property - their home - was at risk. They were aware of the essential nature of their actions. This is not a case of exploitation of ignorant people. The plaintiffs had no special relationship with the defendant. The bank's officers told no lies. There was no misrepresentation (cf. O'Brien v Australia and New Zealand Bank Ltd (1973) 5 SASR 347) and the claim based on Misrepresentation Act must fail. The plaintiffs have not established that the defendant's conduct was misleading or deceptive, or likely to mislead or deceive, and the claim under the TradePractices Act also fails.
36. Paragraph 29 of the Statement of Claim states:
"29. The plaintiffs claim that their Guarantees and
Indemnities and the Mortgage are void and they were not
executed by the plaintiffs in the presence of a legal
practitioner instructed and employed independently of the
defendant, contrary to section 44 of the Consumer
Transactions Act 1972. The plaintiffs say that the said
section applies because:
(a) no amount was drawn down, transferred or otherwise
utilised by the plaintiffs or the Son and Daughter,
(b) the Mortgage was stamped only as security for $100.00,
(c) the Mortgage was not expressed to be for an amount in
excess of $30,000.00,
(d) the first Guarantee and Indemnity when executed secured
less than $30,000.00."
37. Section 44 of the Consumer Transactions Act states:
"44.(1) Where a guarantor enters into an agreement binding
the guarantor -
(a) to pay a credit provider an aggregate sum that is larger
than the balance originally payable under the consumer
credit contract to which the guarantee relates;
(b) to perform an obligation that is not imposed upon the
consumer;
(c) to perform any obligation that could not be enforced
against the consumer;
(d) to permit a mortgagee or any person acting on behalf of
the mortgagee to enter upon any premises for the purpose of
taking possession of or inspecting goods subject to a
mortgage;
or
(e) to relieve a mortgagee or any person acting on behalf of
the mortgagee from liability for any such entry, the
agreement so entered into by the guarantor shall be void
unless the agreement is executed by the guarantor in the
presence of a legal practitioner instructed and employed
independently of the credit provider or mortgagee and the
legal practitioner certifies in writing upon the agreement -
(f) that he is satisfied that the guarantor understands the
true purport and effect of the agreement;
and
(g) that the guarantor has voluntarily executed the
agreement in his presence."
38. Section 5 of the Consumer Transactions Act contains a number of definitions. It states: "In this Act, unless the contrary intention appears", inter alia :
'consumer credit contract' means - (so far as material)
(a) a credit contract -
(i) under which the principal does not exceed $20,000;
and
(ii) in respect of which no security is taken over land;
or
(b) a credit contract -
(i) under which the principal does not exceed $30 000;
and
(ii) in respect of which security is taken over land, ...
'credit', 'credit charge', 'credit contract' and 'credit
provider' have the meanings respectively assigned to those
terms under the Consumer Credit Act, 1972:
'guarantor' means a person who guarantees the performance by
a consumer of obligations under a consumer credit contract
and includes a person who undertakes to indemnify a credit
provider for any loss that he might suffer in consequence of
any failure to recover moneys from a consumer under a
consumer credit contract or purported consumer credit
contract (but does not include a person who gives any such
guarantee or makes any such undertaking in the course of
carrying on a business of insurance, or any other
business):'"
39. It is necessary then to look at two of the definitions in the Consumer Credit Act. Section 5 states "In this Act, unless the contrary intention appears" (inter alia):
'credit contract' means a contract or agreement (whatever
its terms or form may be) under which credit is provided by
a credit provider to, or for the use or benefit of, a person
(other than a body corporate) and includes a sale by
instalment ...
'principal' -
(a) in relation to a credit contract (other than a sale by
instalment), means the amount actually lent by the credit
provider, or of which he forebears to require payment, under
the credit contract;
and
(b) ..."
40. Before considering the argument based on the Consumer Transactions Act, it is necessary to look at the question of stamp duty. On 11 September, 1986 the mortgage was stamped for $100. On 6 December, 1989 it was "up-stamped" to $300,000. I am informed that the practice of the Stamp Duties Office in this State at all relevant times has been only to require nominal stamp duty when a mortgage secures a contingent amount. However, it is the law that the appropriate time to consider the stamping is the date at which an attempt is made to enforce the mortgage in proceedings, and that there is no reason why the amount for which the mortgage is stamped can not be varied between the time of its execution and its enforcement by a court of law (see s.79(2) of the Stamp Duties Act 1923, In Re Dehy Fodders (Australia) Pty Ltd (1973) 4 SASR 538 and Commercial Banking Co of Sydney Ltd v Love (1974) 133 CLR 459, especially at p 469).
41. The defendant now seeks to recover substantially more than $300,000, but stamp duty is not payable in respect of the interest component of a debt. Section 79(8) of the Stamp Duties Act 1923 provides that "references to an amount secured or to be secured by a mortgage are, if the mortgage secures both principal and interest, or principal, interests, rates, taxes ... to be read as references to the principal only" (see also Wallace and Zipfinger, Australian Stamp Duties Law, p.1290.21 et seq).
42. In my opinion, the plea based on s.44 of the Consumer Transactions Act fails for the simply stated reason that the principal exceeded $30,000.
43. As would have become apparent from what I have said thus far, I have reached the conclusion that the defendant is entitled to the relief it seeks in its counterclaim in Action No. 1909 of 1990 and to the relief it seeks in Action No. 1394 of 1990. In Action No. 1909 of 1990, I dismiss the claims of the plaintiffs, and make the following declarations:
1. That the three written guarantees and indemnities given
by the plaintiffs in favour of the defendant dated
respectively 5 September 1986, 6 September 1988 and 23 May
1989 are valid and enforceable by the defendant as against
the plaintiffs.
2. That the Memorandum of Mortgage registered no. 6248420
given by the plaintiffs in favour of the defendant and dated
5 September 1986 is valid and enforceable by the defendant
as against the plaintiffs.
44. I heard Mr Swan and Mr Campbell yesterday as to what the appropriate figure would be if the defendant succeeded on its counterclaim and judgment entered thereon on the 29 April, and the figure I was given was $680,206.62. The defendant will have judgment against the plaintiffs for that sum. In case there have been any mistakes in the calculations, I give liberty to speak to the minutes.
45. In Action No. 1394 of 1990, I order that the defendants give up possession of the said property to the plaintiff within twenty-eight days.
46. I order Mr and Mrs Campbell to pay the defendant's costs in both actions.
0
5
0