Saba v National Australia Bank

[2000] NSWCA 278

CITATION:	SABA v NATIONAL AUSTRALIA BANK [2000] NSWCA 278
FILE NUMBER(S):	CA 40817/98
HEARING DATE(S):	4 May 2000
JUDGMENT DATE:	23 October 2000
PARTIES :	Sam Saba v National Australia Bank Limited
JUDGMENT OF:	Handley JA at 1; Giles JA at 21; Heydon JA at 22

LOWER COURT JURISDICTION :	Supreme Court - Common Law Division
LOWER COURT FILE NUMBER(S) :	CL 10195/94
LOWER COURT JUDICIAL OFFICER :	Sully J

COUNSEL:	J M Ireland QC (Appellant) P R Graham QC/D L Williams (Respondent)
SOLICITORS:	Eddy & Moloney (Appellant) Dibbs Crowther Osborne (Respondent)
CATCHWORDS:	CONTRACTS - guarantee and mortgage executed by appellant - appellant claimed to have been misled as to purpose of security - appellant claimed Bank made binding representation to provide finance - finding as to representation crucial to appellant’s case - no error in Judge’s reasons - Judge dealt with all issues - no unconscionability disclosed in Bank’s conduct - GUARANTEE - Bank had no duty of disclosure to director and shareholder of principal debtor
LEGISLATION CITED:	Contracts Review Act (1980) NSW Trade Practices Act 1974 (Cth)
CASES CITED:	Taylor v Johnson (1983) 151 CLR 422 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447
DECISION:	Appeal dismissed with costs

THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

40817/98
CLD 10195/94

HANDLEY JA
GILES JA
HEYDON JA

23 October 2000

Sam SABA v NATIONAL AUSTRALIA BANK LIMITED



CONTRACTS - guarantee and mortgage executed by appellant - appellant claimed to have been misled as to purpose of security - appellant claimed Bank made binding representation to provide finance - finding as to representation crucial to appellant’s case - no error in Judge’s reasons - Judge dealt with all issues - no unconscionability disclosed in Bank’s conduct

GUARANTEE - Bank had no duty of disclosure to director and shareholder of principal debtor

The appellant was a director and shareholder in a company involved in property development which obtained finance from the respondent Bank. The Bank took securities from the appellant in January 1990 in connection with the Company’s activities and later that year the appellant executed a further guarantee. The Bank sued to recover its debt and for possession of the premises over which it held a registered mortgage. The appellant pleaded estoppel and cross-claimed for breach of s 52 of the Trade Practices Act 1974(Cth), breach of a duty of care, unilateral mistake and unconscionable conduct. The appellant failed primarily because he did not establish that the Bank had made a binding promise or representation at a meeting in 1989 that it would provide further finance. The appellant appealed, arguing that: (1) the Judge failed to make necessary findings about his representation case; (2) the Judge erred in holding that the appellant’s case could not succeed unless the alleged representations by the Bank were made out; and ( 3) his Honour did not deal with certain issues at the trial having wrongly concluded that they had been abandoned.
HELD , dismissing the appeal: (1) The trial Judge’s rejection of the appellant’s evidence in relation to the representation made by the Bank at the critical meeting disposed of the case based on other representations alleged by the appellant. (2) The Judge did not overlook any submissions of the appellant at trial based on negligence, unilateral mistake or duty of disclosure . Per Handley JA: Though the “non-disclosure” case was not expressly abandoned it was in any event futile because the principles considered by Gibbs CJ and Wilson J in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 do not require a principal creditor to disclose matters to a director and shareholder of the principal debtor. (3) The Judge did not overlook any case based on unconscionability, nor did he treat his findings in relation to the alleged representation as automatically disposing of the whole claim. His Honour concluded that the claim failed because the evidence did not disclose any unconscionable conduct on the part of the Bank either in taking the guarantee or the mortgage.

ORDERS
Appeal dismissed with costs

THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

40817/98
CLD 10195/94

HANDLEY JA
GILES JA
HEYDON JA

23 October 2000

Sam SABA v NATIONAL AUSTRALIA BANK LIMITED

JUDGMENT

1    HANDLEY JA: This is an appeal by a guarantor from the judgment in favour of the Bank ordered by Sully J on 25 September 1998. The Bank sued to recover its debt and for possession of the premises at 1A Andrew Street, West Ryde, over which it held a registered mortgage. Sully J entered judgment for possession and for $699,996.12 for debt. While the appeal has been pending the Bank recovered possession and the property was sold. 2    The amended notice of appeal filed on 9 February 1999 contained 12 grounds but Mr J Ireland QC, who appeared for the appellant but had not appeared below, abandoned all but grounds 1, 2, 10, 11 and 12. The issues argued at the hearing need to be considered in the light of the pleadings and the conduct of the trial. 3    The Bank, in its amended statement of claim of 4 July 1995, sued on its mortgage dated 31 December 1991 which was registered on 22 January 1992. It alleged that the mortgage secured the defendant’s liability under a guarantee of the debt of Tanamond Pty Limited dated 15 May 1990, the defendant’s personal overdraft of $100,000, which was approved on 5 January 1990, and his personal home loan of $65,000 granted on 20 September 1990. The appellant’s liability for his personal debts to the Bank was not in dispute by the end of the trial. 4    The defendant, in his further amended defence and cross-claim of 7 August 1995, so far as relevant to this appeal, pleaded the making of representations on behalf of the Bank in December 1989 and May 1990 which grounded a defence based on estoppel and cross-claims for misleading and deceptive conduct in trade and commerce, breach of a duty of care, unilateral mistake, and for unconscionable conduct and relief under the Contracts Review Act. 5    The critical representations were alleged to have been made by Mr Limbrick, the new Manager of the Bank’s Terrigal branch, at the Branch on 15 December 1989 in the presence of Messrs Van Poppell and Vickers, who were associated with the appellant in Tanamond. At an early point in his reserved judgment the Judge said:

“… during the course of exchanges with learned counsel for the defendant, I sought to establish clearly a point which seemed to me at the time and seems to me now, to be crucial to a resolution of the present litigation: namely, that it is essential to the defendant’s case, both on his defence and on his cross-claim, that there should be made in his favour a finding of fact that the version for which he contends as to what passed between him and Mr Limbrick … should be accepted … I take this exchange as establishing that the defendant accepts that he cannot succeed either on his defence to the plaintiff’s claim or on his cross-claim unless it is found in his favour that Mr Limbrick led him, the defendant, ‘to believe that the Bank would approve finance for about $3,000,000 for the purchase and development of Coast Road’ …”.

6    The Judge then considered the evidence about the events at the meeting in Terrigal on 15 December 1989. The appellant did not call Mr Van Poppell and the Judge said that he preferred “on the probabilities” the evidence given by Mr Limbrick about that meeting rather than the competing version given by Mr Saba and Mr Vickers. He then said:

“Such a finding … entails that I reject such part of the defendant’s defence and cross-claim as depends upon the allegations made in paras 7, 8 and 9 of the amended defence and cross- claim … It follows, further, that I reject that portion of the defendant’s case that is postulated upon the propositions that the Bank wrongfully refused .. to provide the $3.2 million or thereabouts … and wrongfully refused to return the defendant’s certificate of title for the Doonside property, and … to release the defendant from the guarantee for $800,000 which the defendant undoubtedly executed on 3 January 1990”.

7    The Judge found that the subject mortgage had been granted to replace an earlier mortgage of 18 October 1989 following a sub-division of the Ryde property. Both were “all moneys” mortgages. The guarantee sued upon, which was for $330,000, was signed on 15 May 1990 by Mr and Mrs Van Poppell, Mr and Mrs Vickers, and the appellant and his wife. The Judge considered that the defendant’s case with regard to the guarantee sued upon was predicated upon the proposition that the Bank had engaged itself in a legally binding fashion to provide finance of $3.2 million or thereabouts to Tanamond and then wrongfully refused to honour that commitment. He continued:

“Once that basic proposition is rejected, then the whole of the defendant’s case with regard to the subject guarantee must depend upon the proposition that [it] … was negotiated in such circumstances as involved unconscionable conduct on the part of the Bank, being conduct unrelated to the alleged fundamental binding engagement to provide $3.2 million … The fundamental proposition once rejected, the defendant seems to me to be left with a position not easily defended”.

8    The Judge then considered the evidence relevant to that question and held that it did not disclose any unconscionable conduct on the part of the Bank. 9    The grounds of appeal pressed by Mr Ireland QC included in ground 1 error by the trial Judge in finding that the appellant accepted that he could not succeed unless a finding was made that Mr Limbrick had led him to believe that the Bank would approve finance for about $3 million for the purchase and development of the Avoca property. Ground 2 alleged that the Judge had overlooked the case pleaded and maintained by the appellant that the Bank had a duty to disclose the existing indebtedness of Tanamond on 3 January 1990 when it took the guarantee for $800,000 and obtained possession of the appellant’s certificate of title to the Doonside property. Grounds 10 and 11 alleged that the Judge had failed to make relevant findings concerning the events on 15 May 1990 when the guarantee sued upon was obtained and ground 12 alleged that the Judge had failed to consider the appellant’s defence of mistake in relation to the execution of that guarantee. 10    The written submissions of the appellant at the trial made no reference to the pleaded claims in negligence and unilateral mistake of the nature considered in Taylor v Johnson (1983) 151 CLR 422. The addresses of counsel were transcribed and have been included in vol 2 of the black appeal book. I have carefully reviewed all the passages to which we were referred in the written and oral submissions of counsel. 11 Nothing was said in the oral submissions of counsel for the appellant at the trial to support his case on negligence or mistake and thus those claims were effectively abandoned. Counsel then appearing for the appellant did not expressly abandon the case based on non-disclosure by the Bank on 3 January 1990 of the amount of the debt then due from Tanamond, but that case was hopeless. The appellant at the time was a director and shareholder of the company. Whatever may be the limits of the duty of disclosure that a principal creditor may owe a surety in accordance with the principles referred to Gibbs CJ and Wilson J in their judgments in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447, those principles cannot possibly support a duty of disclosure to a director and shareholder of the principal debtor. 12 The most important exchanges between the trial Judge and counsel then appearing for the appellant are to be found at 2/410 and 419-427. The following exchanges occurred:

“His Honour: … It must be fundamental to your case that I reject the version given by Mr Limbrick … of his relevant dealings with Mr Saba?
[Counsel]: That is absolutely correct”. (2/410)
“His Honour: … Are you saying that you need a finding that Limbrick agreed to make available 3 million dollars and that what was done with the deposit and the stamp duty is corroborative of what you say about the nature and extent of that engagement?
[Counsel]: We need a finding that Limbrick indicated to us that the approval of the National Bank would be available, all other things being equal, to finance Coast Road”. (2/419)
“His Honour: … Fundamental to your case is the finding of fact that the Bank by its authorised servant or agent Mr Limbrick, promised Mr Saba … that in consideration of its making available 3 million dollars for the development of Coast Road he, Mr Saba, would give the guarantee and accept the extension pro tanto of the mortgage given earlier. Now is that not right? It’s absolutely essential to your case because there’s no point in a lot of rhetorical invocation of the Trade Practices Act and the Fair Trading Act and the Contracts Review Act and all the rest of that if the foundation of facts aren’t found. You must have that finding. If there was no contractual engagement, there isn’t anything to misrepresent.
[Counsel]: Your Honour, it’s on that point that I would, with great respect, take issue. We don’t have to for the purpose of finding that there has been a breach of the Trade Practices provision find that there has been a contractual position that has been breached”. (2/421-2)

13    The final exchange occurred at 2/423 when counsel for the defendant said:

“… we have to show that Limbrick in essence said ‘it is right’ or ‘it will be right, 3 million dollars is there, you’ve got 3 million dollars’. The only hesitancy that I have is that I don’t want to categorise those sayings as representing an engagement to provide”.

14    In the light of the passages quoted, and the other passages referred to, counsel then appearing for the appellant accepted in his closing address at the trial that his case depended on findings of fact being made in favour of the defendant as to the events at the Bank on 15 December 1989.

15    The appellant’s only other cause of action was that based on unconscionable conduct by the Bank at the meeting on 15 May 1990 when a new guarantee for $330,000 was executed. The Judge did not overlook this aspect of the appellant’s case, and did not treat his findings about the events on 15 December as automatically disposing of this claim. He said, with reference to the appellant’s evidence about the events on 15 December:

“Once that basic proposition is rejected, then the whole of the defendant’s case with regard to the subject guarantee must depend on the proposition that the subject guarantee was negotiated in such circumstances as involved unconscionable conduct on the part of the Bank, being conduct unrelated to the alleged fundamental binding engagement to provide $3.2 million or thereabouts in finance. The fundamental proposition once rejected, the defendant seems to me to be left with the position not easily defended”.

16    The Judge then reviewed the evidence about the events on 15 May 1990 and concluded:

“I am not persuaded that a fair view of the whole of the available evidence discloses any unconscionable conduct on the part of the Bank, either as to the taking of the subject guarantee or as to the execution of the subject mortgage”.

17    The appellant must therefore fail on his basic proposition in this Court that the Judge did not deal with all issues, and that a new trial should be ordered. 18    The pressure on the appellant on 15 May 1990 was real enough but was not created by the Bank which was adequately secured at that stage. Tanamond and its directors needed fresh funds to enable it to complete the purchase of the Coast Road property which was due on that day, time having been made of the essence by a notice to complete. The necessary finance had been arranged from another source but a last minute hitch occurred when a lower than expected valuation was received for one of the assets offered as security. 19    It had originally been arranged that the Bank’s debt would be reduced to $230,000. The low valuation meant that the Bank’s debt could only be reduced to $330,000 and that became the debt guaranteed by the appellant. However as the Judge said: “On the findings that I have made, that situation was not of the Bank’s making”. It must follow that the appellant’s case based on unconscionable conduct by the Bank failed. 20    The appeal must therefore be dismissed with costs. 21    GILES JA: For the reasons given by Handley JA and Heydon JA I agree that the appeal should be dismissed with costs. 22    HEYDON JA:

Background
This is an appeal from a judgment delivered by Sully J for the plaintiff Bank for possession of 1A Andrew Street, West Ryde and for $699,996.12. The orders were made on 25 September 1998 and reasons for judgment were delivered on 24 September 1998.

23 The appeal as argued turned on a single point: “whether … a case which was clearly maintainable was overlooked by [the trial judge] on the footing that his Honour perceived that that case had been abandoned at the trial.” 24 In those circumstances it is not necessary to deal in detail with the case which it is common ground the trial judge did deal with at the trial. The following background is sufficient to permit an understanding of the appellant’s contentions. 25 The Bank claimed monies pursuant to a guarantee signed by Mr Saba on 15 May 1990 and claimed possession of Mr Saba’s property at 1A Andrew Street, West Ryde, over which the Bank had a mortgage. Mr Saba pleaded by way of defence estoppel and unconscionable conduct, and by way of cross-claim breach of s 52 of the Trade Practices Act 1974 (Cth), breach of common law duty of care, unilateral mistake, injustice under the Contracts Review Act 1980 (NSW), and a contention based on Mr Saba being in a position of special disadvantage. These contentions relied on three representations allegedly made in December 1989. As alleged in paragraph 7 of the Further Amended Defence and Amended Cross-Claim, they were:

“(i) the plaintiff had approved finance of about $3,000,000 for the purchase and development of 16 Coast Road, Avoca Beach (the ‘Coast Road Property) by Bill Van Poppel, William Vickers and the defendant;

(ii) the plaintiff would immediately advance the deposit of 10% of the purchase price, amounting to $125,000, and stamp duty; and

(iii) any securities sought from the defendant in connection with any advances to the borrower would be limited to the extent of the borrower’s future exposure to the plaintiff on the Coast Road property project.”

The particulars given were:
“Representations (i) and (ii) were express and were made orally by David Limbrick. Representation (iii) was implied from David Limbrick’s express oral representations as well as from the history of the plaintiff’s dealings with Bill Van Poppel, William Vickers and [Tanamond] Pty Limited in connection with the plaintiff’s financing of the acquisition and planned development of 29 Warren [Avenue], Avoca Beach (and in particular, the defendant’s known refusal to give the plaintiff a guarantee, or contribute to securities, for the Warren [Avenue] project).”

Mr Saba then alleged that in consequence of the representations Mr Van Poppel and Mr Vickers caused Tanamond Pty Ltd on or about 22 December 1989 to enter into a contract to purchase the Coast Road property for $1.25 million. Paragraphs 10 and 11 of the Further Amended Defence and Amended Cross-Claim alleged:

“10. The plaintiff subsequently in February or March 1990 refused to provide Tanamond Pty Limited the finance promised, and refused to return the defendant’s Certificate of Title for the Doonside service station and to release the defendant from the guarantee. In addition, when the vendor of the Coast Road property required completion of the contract in May 1990, the plaintiff insisted that the defendant execute a further guarantee in favour of the plaintiff on 15 May 1990 for $330,000 as a condition for making sufficient finance available through an affiliate, KE Financial Corporation Limited. Further, the plaintiff who had had possession of the defendant’s Certificate of Title (Folio Identifier 102/807923: which comprised land that was the defendant’s West Ryde home) as security for advances through the plaintiff’s Lakemba branch to the defendant (unrelated to these proceedings) represented to the defendant that the plaintiff would move on that security if losses resulted from the project involving the Coast Road property not proceeding.

11. In consequence, the defendant executed the further guarantee on 15 May 1990, and signed a mortgage of his West Ryde home (registered as dealing no. E193809) on 31 December 1991.”

26    The trial judge said that he took an exchange between himself and counsel for Mr Saba “as establishing that the defendant accepts that he cannot succeed … unless it is found in his favour that Mr Limbrick led him … ‘to believe that the bank would approve finance for about $3,000,000 for the purchase and development of Coast Road’; and that the expression ‘would approve finance’ means ‘that the bank manager had said they had the approval’” (Red 39T-40C). At Red 44G-H, after setting out Mr Saba’s affidavit evidence about his dealings with Mr Limbrick in December 1989, the trial judge repeated that “the allegations thus made by Mr Saba are fundamental to both his defence and his cross-claim”. The trial judge was thus recording an understanding on his part that Mr Saba’s case was being advanced on the basis that it would fail unless representation (i) were established. 27    After discussing the evidence of Mr Limbrick and Mr Vickers, the trial judge said (Red 53H-55D):

“Mr Limbrick gave evidence generally in accord with his affidavit previously mentioned. He was cross-examined at length, but I do not think that the cross-examination cut down the essential credibility of the version given by him.
I have come to the conclusion that the version given by Mr Limbrick of the meeting on 15 December 1989 is to be preferred on the probabilities to the competing version given by Mr Saba and Mr Vickers. I think that it is contrary to all the rational probabilities that a bank manager new to the particular branch, and wholly unfamiliar with the three individuals with whom he was dealing on the occasion in question, would have given a legally-binding engagement to advance $3.2 million for a speculative real estate development, and upon the basis of nothing more substantial than a few glib generalities and a hand-shake. The contrary proposition goes against the whole grain of observation and experience of the way bank transactions involving such a huge sum of money are normally conducted. Indeed, the version of events for which Mr Saba and Mr Vickers contend is, admittedly, a version contrary to their own respective experiences of such transactions. From what I know of Mr Van Poppel, I would not be surprised to find that he had indeed made some references to a proposed speculative development at the Coast Road premises; and that he had done so in terms of glowing optimism. I can imagine, equally, that it is not at all improbable that Mr Limbrick would have responded in ways apt to suggest that the Bank would certainly look at any concrete proposal. But, as I have said, I simply cannot accept on the probabilities that a person in Mr Limbrick’s position would have committed the Bank, in terms intended and apt to generate binding legal obligations, to make available to Messrs Van Poppel, Vickers and Saba a sum of $3.2 million without there having been set first in place all the necessary and appropriate paper work, and all the necessary and appropriate hard securities.
Such a finding as to the meeting on 15 December 1989 entails that I reject such part of the defendant’s defence and cross-claim as depends upon the allegations made in paras. 7, 8 and 9 of the Amended Defence and Cross-Claim filed on 5 July 1995. It follows, further, that I reject that portion of the defendant’s case that is postulated upon the propositions that the Bank wrongfully refused, - and whether the wrong be defined in terms of contractual obligation or of tortious liability, - to provide the $3.2 million or thereabouts to which I have earlier referred; and wrongfully refused to return the defendant’s Certificate of Title for the Doonside property, and thereupon to release the defendant from the guarantee for $800,000 which the defendant undoubtedly executed on 3 January 1990.
It then becomes necessary to consider further the circumstances surrounding the execution of the subject mortgage and of the subject guarantee.”

28    The trial judge then set out some evidence of Mr Limbrick which related to a meeting of 15 May 1990 attended by himself; Mr Van Poppel, his wife and his mother-in-law; Mr and Mrs Vickers; and Mr and Mrs Saba. At that meeting Mr Saba executed the 15 May 1990 guarantee on which he was being sued. The trial judge then said (Red 59B-60K):

“The whole of the defendant’s case with regard to the subject guarantee is predicated, of course, upon the proposition that the Bank engaged itself in a formal and legally binding fashion to provide finance of $3.2 million or thereabouts; and then wrongfully refused to honour that commitment. For reasons previously explained, I do not accept that basic proposition put forward by the defendant.
Once that basic proposition is rejected, then the whole of the defendant’s case with regard to the subject guarantee must depend upon the proposition that the subject guarantee was negotiated in such circumstances as involved unconscionable conduct on the part of the Bank, being conduct unrelated to the alleged fundamental binding engagement to provide $3.2 million or thereabouts in finance.
The fundamental proposition once rejected, the defendant seems to me to be left with a position not easily defended. The defendant was, after all, a mature and experienced business man. He was not unfamiliar with the raising of finance from financial institutions. It is entirely possible that he was, as it were, borne along by Mr Van Poppel, and to a lesser extent by Mr Vickers. But that is not to say that he did not know what he was doing when he executed, as he undoubtedly did execute, the subject guarantee; and it certainly does not follow that the Bank is in any way answerable for any short-comings on Mr Van Poppel’s part in the way in which he dealt with the defendant. The defendant speaks, especially in his affidavit evidence, of the pressure to which he felt subject at the meeting in May 1990 when the subject guarantee was signed. I have no doubt that he did feel subject to a great deal of such pressure. It was by then apparent to him that he had become caught up in speculative real estate developments which were unravelling in a way that called for urgent re-financing in a situation where the realistic commercial options available to him were few and unattractive. But, on the findings that I have made, that situation was not of the Bank’s making.
I am not persuaded that a fair view of the whole of the available evidence discloses any unconscionable conduct on the part of the Bank, either as to the taking of the subject guarantee or as to the execution of the subject mortgage.”
Grounds of Appeal

29    In the Amended Notice of Appeal there were several grounds (paragraphs 3-9) directed to an attack on credit-based findings of the trial judge in relation to the 15 December 1989 meeting. These were understandably abandoned. The remaining grounds were (Red 78P-81D):

“1. His Honour erred in concluding that the appellant accepted that he could not succeed in his defence or cross-claim unless a finding was made that the respondent’s manager led him to believe that the Bank would approve finance for about $3 million for the purchase and development of the Avoca property.

2. His Honour erred by overlooking the case pleaded and maintained on behalf of the appellant that independently of what was said by Mr Limbrick on or about 15 December 1989:

(a) the respondent had in the circumstances a duty to disclose to the appellant the existing indebtedness of Tanamond Pty Limited at the time the respondent took securities from the appellant and his wife on 3 January 1990 in relation to that existing indebtedness;


(b) the securities given by the appellant and his wife to the respondent on 3 January 1990 were in any event liable to be set aside upon various pleaded grounds.

10. His Honour failed to consider and make relevant findings concerning the competing evidence of the events which took place at the meeting at the Blacktown offices of Traders Collection Agency (NSW) Pty Limited on 15 May 1990.

11. His Honour failed to make findings concerning the significance of the representations made by the respondent’s manager at the meeting on 15 May 1990.

12. His Honour failed to consider the appellant’s pleaded defence of mistake in relation to the execution of the guarantee sued upon by the respondent.”

Mr Saba’s Primary Argument

30    The argument advanced by Mr Saba on appeal was put thus. On 3 January 1990 the Sabas signed:

“a mortgage of their Doonside service station property and they signed a guarantee for $800,000, that guarantee and that mortgage continued to be asserted against them as matters developed into 1990. In particular in February 1990 when Mr Saba was told that the facility that the bank was not prepared to go ahead with the discussed facility for the new venture. He asked for his deeds back for the Doonside property and that’s only reconcilable we would say with the assumption that he thought, as he claimed that the guarantee which he and his wife had given and the associated mortgage on 3 January were referable to future facilities, not past facilities.”

It was submitted:
“… the subject guarantee of 15 May 1990 was obtained in unconscionable circumstances because the bank manager had asserted the validity of 3 January 1990 guarantee as a way of placing pressure upon them saying in effect that that was valid and they were already in hock for Tanamond’s debts. The truth of the matter was that they had either been misled into that earlier guarantee because it was based upon a reasonable view of events that it was not for past indebtedness of a company associated with a project in which they had no interest but for future debts and so in turn the guarantee of 3 January 1990 was voidable.”

31    Mr Saba submitted further that that case was not dependent upon his case based on a promise on 15 December 1989 to advance approximately $3 million. That “was the case at its highest”; it was rejected and no longer pressed; that left:

“… an alternative case that simply went like this, Mr Saba attended the meeting on 15 December. He was never told on that day that his guarantee was required and the debts of Tanamond for any past debt. The letter which the bank handed over on that day did not require as a condition of the December facility any guarantee from Mr and Mrs Saba or mortgage of their property.”

This was said to be an “unconscionable conduct” or “mistake” case.

32    That case was put thus in Mr Saba’s written submissions:

“(a) whether or not Mr Limbrick made a binding contract on 15 December 1989 on behalf of the Bank to fund the Coast Road development, the Bank’s letter of approval of 15 December 1989 did not notify to Mr Saba or anybody else of a requirement that Mr & Mrs Saba should give a guarantee in respect of the past debts of Tanamond;

(b) the Bank at no stage claimed to have notified Mr Saba or Mrs Saba (who had no equity in the project) of any requirement on its part for them to give guarantees in respect of the past indebtedness of Tanamond;

(c) neither Mr nor Mrs Saba had any legal advice when they went to the Bank on 3 January 1990, delivered the certificate of title to their Doonside property and executed a guarantee of Tanamond’s obligations which related to past indebtedness;

(d) the actions of Mr & Mrs Saba in attending the Bank on 3 January 1990 were consistent with their mistaken belief, as they both maintained in evidence, that their securities were being taken in respect of future advances to Tanamond;

(e) it was uncontroversial that in about February 1990, the Bank declined to proceed with a further advance to Tanamond to allow the acquisition and development of the Coast Road property. Nevertheless, the Bank refused to return to Mr Saba and his wife the guarantee and the mortgage over their Doonside property which had been made available to the Bank at its request on 3 January 1990;

(f) on 15 May 1990, Mr Limbrick undoubtedly insisted that Mr & Mrs Saba execute the guarantee bearing that date in favour of the Bank for the debts of Tanamond. Mr Limbrick’s insistence, on his own admission, was based upon his drawing to their attention that they were already bound to the Bank in respect of Tanamond’s debts which then stood in excess of $800,000;

(g) in fact, the securities thus asserted by Mr Limbrick against Mr & Mrs Saba on 15 May 1990 were invalid and unenforceable. To use them as a bargaining tool to obtain the subject guarantee on 15 May 1990 was unconscionable.”

33    The submissions concluded (paragraph 72):

“The Trial Judge did not determine the case pleaded which was properly maintained by counsel then appearing for Mr Saba, because of His Honour’s erroneous perception that all aspects of Mr Saba’s case depended upon a conclusion that a legally binding agreement had been made by Mr Limbrick on behalf of the Bank at the meeting on 15 December 1989. That error infected His Honour’s judgment and led to a failure to determine essential matters relating to the state of mind of Mr & Mrs Saba when they provided their guarantees on 3 January 1990 and essential matters as to the circumstances which operated at the time of the provision of the further guarantee on 15 May 1990.”

34    When counsel for Mr Saba was asked where this “alternative” case was pleaded, he answered by referring to representation (iii) pleaded in paragraph 7 of the Further Amended Defence and Amended Cross-Claim and to later paragraphs consequential upon it.

The Relevant Pleadings

35    As pleaded, Mr Saba’s case on one reading depended on him succeeding on representation (i). This was because so far as the “alternative” case depended on representation (iii), given that representation (iii) was to be implied from representations (i) and (ii), it depended on representation (i). An alternative reading of Mr Saba’s case might have permitted him to succeed even if representation (i) was not established, because representation (iii) was alleged to be implied not only from representations (i) and (iii), but also from the history of the Bank’s dealings with Mr Van Poppel, Mr Vickers and Tanamond Pty Ltd. There was some force in Mr Saba’s contention on appeal that the “alternative” case was pleaded in such a manner as not to be dependent on the faith of representation (i), though the position was far from clear. 36    As has been noted, representations (i)-(iii) were initially pleaded in paragraph 7 of the “Amended Defence” part of the Further Amended Defence and Amended Cross-Claim. They were also pleaded in paragraph 15 of the “Amended Cross-Claim” part of that document. Paragraph 18 of the Amended Cross-Claim alleged that representation (iii) induced Mr Saba to hand over the Certificate of Title to his Doonside service station and to sign the 3 January 1990 guarantee for $800,000. Paragraph 19 pleaded that representation (iii) was misleading because the guarantee of 3 January 1990 was not limited to future borrowings. It was submitted that the “mistake case” was pleaded in paragraphs 26 and 27 as follows:

“26. Further, the [cross-claimant] handed over his Certificate of Title to the Doonside service station to the cross-defendant on about 28 December 1989, and signed a guarantee as one of several guarantors in favour of the cross-defendant for $800,000 on 3 January 1990 mistakenly believing that the cross-defendant had approved finance of about $3,000,000 for the Coast Road property project, and that any securities sought by the cross-defendant from the cross-claimant in connection with any advances to the borrower on that project would be limited to the extent of the borrower’s future exposure to the cross-defendant on the Coast Road property project.
27. The cross-defendant induced that mistaken belief in the cross-claimant and/or knew that the cross-claimant was acting under that mistaken belief when he handed over the Certificate of Title to the Doonside service station and signed the guarantee on 3 January 1990, and deliberately refrained from disabusing the cross-claimant.”

37    The unconscientious conduct case was apparently pleaded, if anywhere, in paragraphs 29 and 30:

“29. Further, by reason of the foregoing, the guarantees of 3 January 1990 and 15 May 1990 in so far as they relate to the cross-defendant, and registered mortgage no E193809 were unjust at the time they were made within the meaning of the Contracts Review Act 1980 (NSW), regard had to the matters referred to in section 9(2)(a)-(k) of that Act. In addition, the cross-claimant did not see the form of the guarantees which he signed on 3 January 1990 and 15 May 1990 prior to their production by the cross-defendant to the cross-claimant on those dates for execution; did not see the form of the mortgage which he signed on 31 December 1991 prior to its production by the cross-defendant to the cross-claimant on that date for execution; was not shown and was ignorant of the contents of registered memorandum no. W194969, the terms of which were purportedly incorporated by express reference into the mortgage dated 31 December 1991, prior to or at the time of execution of that mortgage; was afforded no opportunity to negotiate any alteration to the terms of the mortgage or the guarantees or to obtain any independent advice thereon at or prior to the respective dates of execution of the mortgage and the guarantees; and was given no or no adequate explanation of the true nature or extent of the guarantees on or prior to the dates of their execution.
30. Further, by reason of the foregoing, the cross-claimant was in a position of special disadvantage at or about the time of execution of the guarantees and the mortgage, which position of special disadvantage was known or ought to have been known by the cross-defendant, and in the premises it is unfair and unconscientious for the cross-defendant to rely upon the guarantees or the mortgage.”


It must be said that so far as this pleading of unconscionable conduct rested on representation (iii), it did so rather obscurely.

Mr Saba’s Argument that Representations (i) and (ii) Were Not Rejected

38    It is convenient to clear one of Mr Saba’s submissions out of the way at the outset. Since, according to the particulars, representation (iii) was implied from representations (i) and (ii) which were alleged to be express oral representations made by Mr Limbrick on 15 December 1989, representation (iii) could not survive any rejection by the trial judge of those representations so far as the implication depended on those representations. Mr Saba contended that the trial judge did not reject those representations, but simply failed to make a finding about them. In my opinion the trial judge’s statement that he preferred Mr Limbrick’s evidence is fatal to this submission. The trial judge said (Red 53H-N):

“Mr Limbrick gave evidence generally in accord with his affidavit … . He was cross-examined at length, but I do not think that the cross-examination cut down the essential credibility of the version given by him.
I have come to the conclusion that the version given by Mr Limbrick of the meeting on 15 December 1989 is to be preferred on the probabilities to the competing version given by Mr Saba and Mr Vickers.”


The trial judge then gave convincing reasons for that conclusion and concluded by rejecting “such part of the defendant’s defence and cross-claim as depends on the allegations made in paras. 7, 8 and 9 of the amended defence and cross-claim failed on 5 July 1995” (Red 54N-Q). Those passages are findings that representations (i) and (ii) were not made.

Mr Saba’s Argument that the “Alternative” Case Was Not Dealt With

39    Mr Saba submitted that representation (iii) could be implied from the history of the Bank’s dealings with Mr Van Poppel, Mr Vickers and Tanamond Pty Ltd. Full argument on that point was not developed, because the attention of the parties centred on Mr Saba’s primary submission, which consisted of an attack on the trial judge’s statement at Red 59B-E:

“The whole of the defendant’s case with regard to the subject guarantee is predicated, of course, upon the proposition that the bank engaged itself in a formal and legally binding fashion to provide finance of $3.2 million or thereabouts; and then wrongfully refused to honour that commitment.”

Mr Saba said that was not the whole of his case. Rather his case also turned on representation (iii) and on the mistake and unconscionable conduct cases which rested on it. The trial judge’s failure to deal with those cases based on representation (iii), according to Mr Saba, rested upon a misunderstanding of the exchanges between the trial judge and counsel at the trial (who was not counsel at the appeal).

40    The key passages in the exchanges between bench and bar are as follows. At Black 2/421X-422F the trial judge said:

“Fundamental to your case is a finding of fact that the bank by its authorised servant or agent, Mr Limbrick, promised Mr Saba, not that it would think about it but promised him that in consideration of its making available 3 million dollars for the development of Coast Road, he, Mr Saba, would give the guarantee and accept the extension pro tanto of the mortgage given earlier. Now is that not right? It is absolutely essential to your case because there is no point in a lot of rhetorical invocation of the Trade Practices Act and the Fair Trading Act and the Contracts Review Act and all the rest of that if the foundation of facts aren’t found. You must have that finding. If there was no contractual engagement, there isn’t anything to misrepresent.”

Counsel responded (Black 2/422G-H):

“Your Honour, it is on that point that I would, with great respect, take issue. We don’t have to for the purpose of finding that there has been a breach of the trade practices provision find that there has been a contractual position which has been breached.”

Counsel’s point appears to have been that the Bank could have given an assurance which, though of less than contractual force, constituted misleading conduct.

41    The trial judge then said that before engaging on complex legal characterisation of the facts (Black 2/422K-423C):

“… one must be clear what the basic facts are. Your case is the bank promised to finance up to 3 million dollars [for] the Coast Road development. On that basis Mr Saba became involved. On that basis he gave the guarantee from which he now seeks to resile. On that basis he claims that the bank reneged upon its promise and that the promise in the form upon which he relies, that is to say the statement of Mr Limbrick … was a misrepresentation of the bank’s true position and that it induced Mr Saba to put himself at risk in a way that he would not have done without that representation from the bank and it was a misrepresentation by the bank. It is inescapable, isn’t it? Everything comes back to that fundamental engagement. … everything feeds back into that fundamental point of contact between the two of them. Either Limbrick said it or he didn’t. If he did, certain things follow which might issue in a form of relief for you, not the relief I am inclined to think that you intend, but some form of properly calibrated relief, but if he didn't say it, the foundation of the cross-claim seems to me to disappear.”

Counsel responded at Black 423D-E (emphasis added):

“Yes, we have to show that Limbrick in essence said, ‘It is right’ or ‘It will be right, 3 million dollars is there, you’ve got 3 million dollars.’ The only hesitancy that I have is I don’t want to categorise those sayings as representing an engagement to provide.”

That appears to constitute an acceptance by counsel that representation (i), the representation about the Bank’s approval of the $3 million advance, was essential to Mr Saba’s case: it was a necessary element without which the whole case would fail.

42    The trial judge then said (Black 2/423F-N; emphasis added):

“But you have to because that is the very basis upon which your argument then develops. Your argument then develops along these lines, doesn’t it: ‘That engagement was intended by the bank to be firm enough to encourage us to do what we did, to embark upon the projects, to give them the securities for which progressively they asked and so on and so create this situation from which we now seek to withdraw some proper relief’? That is the whole nub of it . … if you can’t get there, well, the rest of it just simply doesn’t arise for there was nothing misrepresented. There is not a succession of misrepresentations as I understand the case as pleaded and argued in the evidence. There is a fundamental deception carried out by the bank in the form of –“.

Counsel interrupted (Black 2/423N-P):

“There is a fundamental piece of misleading and deceptive conduct carried out by the bank.”

The trial judge then said (Black 2/423P-U; emphasis added):

“Exactly and that is what it is. It is the engagement to finance this project up to 3 million dollars for whatever amount, 3.2 or 3.5, it doesn’t matter, but that is what it is. … Now I say again and I want you to tell me if I am missing something as it is entirely possible I am in this welter of documents, but at the end of the day if you can’t get to that point, you haven’t got the basic misrepresentation upon which your case relies . Does that miss something?”

Counsel replied (Black 2/423V):

“No, I don’t think so, your Honour. It is just this question of this $800,000. We are asked to and Mr De Castro present, we do guarantee an amount of $800,000.”

That was a reference to the 3 January 1990 meeting with Mr De Castro, but not Mr Limbrick, present from the Bank.

43    The trial judge then said that in truth that event related back to the 15 December 1989 meeting between Mr Saba and Mr Limbrick (Black 2/423W-424C):

“But, you see, that too feeds back. Everything comes back to that original point between Mr Saba and so far as this litigation is concerned, between Mr Saba and Mr Limbrick. What happens afterwards? The bank saying, ‘We took some security but we need more’, Van Poppel saying, ‘Well, you’d better give them what they want or we’re all doomed if you don’t, we are too far in now.’”

The last sentence refers to the events of 15 May 1990.

44    A little later the trial judge said (Black 2/424L-S; emphasis added):

“Now here are all kinds of questions to be raised about every stage of that development, but they are not relevant questions to raise at all unless there was first the engagement by the bank. The case has never been put, as I understood it, it certainly hasn’t been proved, upon the basis that quite apart from the alleged engagement to provide 3 million dollars there were other misrepresentations quite independent of that alleged engagement , so that even if one were to find that Mr Saba was wrong and Mr Limbrick was right about the 3 million dollars, nonetheless other discrete misrepresentations by the bank had given rise to causes of action - well, to the defences in the first instance and then to the causes of action that you plead more or less in the cross-claim. But that is not the way the case is put. Everything comes back to the proposition , ‘The bank promised 3 million dollars and they reneged upon their promise at a time when we’d gone forward on the good faith of it’.”

The significance of the passage to which emphasis had been added is that representation (iii) was not “quite independent” of representations (i) and (ii), but was alleged to have been implied from them.

45    Counsel then sought to qualify what the trial judge was putting (Black 2/424S-T):

“Your Honour, it is the elevation of the circumstances of approval of the loan to an assertion of engagement to provide the loan that I would not seek to follow …”.

The trial judge said (Black 2/424U-V):

“You put for me, just so we can take it up in the terms that you wish to argue, the alternative. I should find that Mr Limbrick did what?”

Counsel responded (Black 2/424W-X):
“He led Saba to believe that the bank would approve finance for about 3 million dollars for the purchase and development of Coast Road.”

That contention was different from how representation (i) was pleaded; counsel eventually retreated to representation (i) as pleaded (Black 2/425M-U) and said (Black 2/426F-G):

“The way we put Mr Saba’s case is Mr Limbrick on 15 December 1989 led him to believe that the bank had approved finance for $3 million for the purpose and development of Coast Road, on the basis of that he gave them his service station.”

46    The exchanges concluded in the following way. The trial judge said (Black 2/427-D-G):

“If I press the point, it is simply because the more I have thought about this matter, the more it seems to me that at its heart is a straightforward question of evidence. Do I accept, or don’t I, the version given by Mr Saba on the one hand or that given by Mr Limbrick on the other, about what passed between them on 15 December in relation to the $3 million. That is the key to this whole case, it seems to me.”

Counsel said (Black 2/427H-I):

“It is certainly central to the case. We say that we were told that the acquisition and development of Coast Road was approved. Therefore that we handed over our Certificate of Title and signed the guarantee.”

The trial judge said (Black 2/427J-K):

“Yes, and that the bank reneged on that deal, thereby, in effect, forcing you into a position where you had to give them additional security as they demanded and that’s the security they now seek wrongfully to enforce. That’s the way the case is put.”

Counsel said “Yes”. The last passage quoted from the trial judge encapsulates the mistake and unconscionable conduct submissions.

47    These passages reveal that on numerous occasions, the trial judge, with characteristic care and fairness, raised the question whether Mr Saba wished to propound any case other than a case dependent on representation (i). In view of the structure of the pleadings, which on one reading appeared to make the mistake and unconscionable conduct cases dependent on representation (i), that was an appropriate question to pursue. Counsel for Mr Saba never answered that question affirmatively. His reasons for not doing so doubtless appeared good to him, and it is not intended to question their merits. The fact is that counsel for Mr Saba unqualifiedly abandoned any case distinct from a case founded on representation (i). 48    On appeal it was conceded that if this Court came to that conclusion, the appeal must fail. That is a sound concession. The conclusion stated in the previous paragraph requires the rejection of grounds 1 and 2 of the Amended Notice of Appeal. It also requires the rejection of grounds 10 and 11, because the events of 15 May 1990, to the extent that they were controversial, ceased to be significant once counsel for Mr Saba conceded that without a favourable finding on representation (i) all of Mr Saba’s case must fail. Further, ground 12 must fail for the same reason. 49    This is a case in which counsel for Mr Saba at trial exercised a forensic judgment to run Mr Saba’s case one way. That way of putting Mr Saba’s case having been rejected, new counsel for Mr Saba on the appeal concluded for good reasons that there was no prospect of successful attack on the trial judge’s reasoning about what he was asked to decide, which led to the abandonment of grounds 3-9 in the Amended Notice of Appeal, and invited the Court of Appeal to consider another way of putting Mr Saba’s case. That is not a course which it is open to this Court to undertake in view of the abandonment of the other way of putting Mr Saba’s case at trial.

Evidence Supporting the “Alternative” Case

50    There was some debate about whether any sufficient attempt had been made to support the “alternative” case by evidence at the trial so as to call upon the trial judge to consider it, but in view of the conclusion just reached it is not necessary to resolve that debate.

Orders

51    I propose the following orders.

1. Appeal dismissed.

2. The appellant is to pay the respondent’s costs.
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