Sahin v National Australia Bank Ltd & Ors
[2009] VCC 1512
•27 November 2009
| IN THE COUNTY COURT OF VICTORIA | Revised |
(Not) Restricted
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL LIST
GENERAL DIVISION
Case No. CI-09-00034
| EDLIBAN SAHIN and CETIN SAHIN | Plaintiffs |
| v. | |
| NATIONAL AUSTRALIA BANK LTD and NATIONAL | Defendants |
| AUSTRALIA FINANCIAL MANAGEMENT LTD |
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| JUDGE: | HIS HONOUR JUDGE ANDERSON |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 1,2,5-8 and 16 October 2009 |
| DATE OF JUDGMENT: | 27 November 2009 |
| CASE MAY BE CITED AS: | Sahin v National Bank Australia & Anor |
| MEDIUM NEUTRAL CITATION: | [2010] VCC 1512 |
REASONS FOR JUDGMENT
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Catchwords: | Banking and finance – Loan cover insurance – Whether re-financing of loan caused the insurance cover to cease or be cancelled – Whether plaintiffs declined offer of fresh insurance cover – Whether bank records falsely created after the event. |
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | In person | |
| For the Defendants | Mr R.D. Shepherd | Turks Legal |
| HIS HONOUR: |
1 Edliban and Cetin Sahin have for a number of years been customers at the Mildura branch of the National Australia Bank. In 2002, they sold their 20 acre farm at Red Cliffs, purchased a block of land in Olympic Way, Mildura, and commenced to erect a
$110,000 from the bank. They spoke with a lending manager, Mr Andrew Moss, and
he arranged a variable rate BICOE (Building In Course Of Erection) loan. On
house as owner builders. In about June 2003, Mr and Mrs Sahin sought a loan of defendant, an insurance company which was one of the bank’s subsidiaries.
2 needed further finance to complete the interior and furnish the home. They
approached the bank again and requested an additional $23,000. On this occasion,
Ms Nicole Simmons (later Mrs Nicole Davis) handled the matter on behalf of the
In May 2004, their house was complete to lock-up stage but Mr and Mrs Sahin replaced the existing loan taken out the year before.
3 The defendants contend that, upon the new loan being taken out and the 2003 loan being paid out, the loan cover insurance ceased or was cancelled. There is a factual dispute between the parties as to whether the Sahins told Ms Simmons that they no longer required loan cover insurance. Ms Simmons is recorded as having made
contemporaneous notes in the bank’s computer system that “insurance declined on
loan cover” and “no loan cover wanted on loan, not interested”. Mr and Mrs Sahin
gave evidence that they believed the loan cover would continue and that they were
specifically re-assured by Ms Simmons that there would be “no change in the terms
of the loan”.4 At the time the 2004 loan was taken out, Mr Sahin was not in employment as he was involved in the completion of the house. Mrs Sahin was employed as a fruit packer. On 27 October 2004, Mrs Sahin suffered a workplace accident. She injured her wrist and there were psychological consequences of her physical injury which have prevented her working since that time.
5 In February 2005, Mr Sahin contacted Ms Simmons (now Mrs Nicole Davis) at the bank and was told that there was no loan cover insurance in place. In further conversations with Mrs Davis and other bank officers, the bank continued to assert that the loan cover insurance had ceased when the new loan was taken out in July 2004 and no further loan cover was put in place and that this had been the specific wish of Mr and Mrs Sahin.
6 As Mr and Mrs Sahin were made aware of the bank’s claim that the insurance cover had been cancelled and the bank’s reliance upon Mrs Davis’s notes as recorded in the bank’s computer, they became suspicious as to whether the notes had been entered contemporaneously with the conversation they recorded or had been later placed on the computer to protect the position of Mrs Davis or the bank. Mr and Mrs Sahin continued for some time to make the repayments due under the bank’s loan. However, from a date in 2005, they refused to make any further payments asserting that this was the responsibility of the insurance company or the bank. The bank has threatened to foreclose on the Sahins’ mortgage.
7 The present proceeding was initiated by Mr and Mrs Sahin on 6 January 2009. They have represented themselves throughout the proceeding. Whilst the plaintiffs’ statement of claim formulates the claim on a number of different bases, the factual dispute is relatively straightforward.
8 The issues raised for determination in the proceeding are:
a.
whether the insurance cover taken out in July 2003 ceased or was cancelled in July 2004 when the further loan was entered into;
b.
whether in July 2004, Mr and Mrs Sahin specifically instructed Mrs Davis that they did not wish to have insurance cover in respect of the further loan;
c.
whether the note by Mrs Davis in the bank’s computer records was created contemporaneously or was later entered to protect Mrs Davis’s or the bank’s position;
d.
whether the bank, in the circumstances in which the further loan was taken out, had discharged any obligations it owed to Mr and Mrs Sahin to ensure that they were aware of the availability of insurance for the further loan;
e.
if the insurance cover remained in place or the bank had breached a legal obligation it owed to Mr and Mrs Sahin, would the continued payment of the loan instalments during Mrs Sahin’s disablement be the responsibility of the bank or the insurance company?
The initial loan contract in July 2003
9 On 25 July 2003, Mr and Mrs Sahin signed a facility agreement by which they borrowed the sum of $110,770.69 repayable over the 25 year term of the loan. The Sahins had requested $110,000, and the additional $770.69 represented the first year’s premium for the loan cover insurance. The loan and the insurance cover was arranged by the lending manager, Mr Moss. Mr Moss said in evidence that initially Mr and Mrs Sahin did not want insurance until he explained the benefits to them. He said that “they then insisted they wanted insurance”. Mr Moss said that he followed his usual practice of adding the first year’s insurance premium to the amount borrowed which he said, from his experience made insurance more palatable to borrowers. Mr Sahin said in evidence that some years earlier he and his wife had approached the bank for a loan of $50,000 and had spoken with the bank manager, Mr John Shee. Mr Shee had strongly recommended that the Sahins take out life insurance in case the family fell on bad times. Mr and Mrs Sahin had followed the bank officer’s advice and had taken out the insurance.
10 In relation to the 2003 transaction, there was some dispute on the evidence as to the extent of documentation provided to Mr and Mrs Sahin in relation to the loan cover insurance. Mr Moss said that, if his usual practice had been followed, the Sahins would have been sent a National loan cover customer information brochure with an attached National loan cover application. At the initial meeting with the customers, when the loan application and the loan cover application forms were completed, Mr Moss said that ordinarily he would give the customer a copy of the loan cover application with a copy of the National loan cover policy document attached. A further copy of the policy document would usually be sent by post by the bank to the customers a short time later. Mr and Mrs Sahin said that they had received a copy of the National loan cover customer information brochure and the loan cover application forms but had not received a copy of the policy document although they had requested it from the bank. It is unnecessary to decide this conflict of evidence as the terms of the information brochure and the policy document were essentially the same.
11 The information brochure, under the heading “When does cover cease?”, provides that:
“Cover ceases on the earliest of:
• rewriting of the loan application; • the fulfilment of your obligations under the loan agreement; •
the anniversary of the policy following your 65th birthday for each life insured under the policy;
Note: When there are two insureds on the policy, the policy ceases on the anniversary of the policy following the 65th birthday of the youngest insured.
• a life cover or critical illness benefit becoming payable for an insured under the policy; • the expiry of the loan term; • your written request to cancel your policy; • your failure to pay any premium due; or • where cancellation by us is permitted by law, upon us giving you at least 30 days written notice of cancellation”.
12 Mr Moss said in evidence that he could not remember if he had discussed in the meetings with Mr and Mrs Sahin what would happen if the “loan closed”. He said that based on his usual practice in interviews at that time, he would not have said that “if the loan was paid out the insurance would close”, although he would usually say that “the cover was only for the period of the loan”. He said he would only vary his script if a customer had not read the documents or something similar, and that this was not the case with the Sahins who were familiar with the documents and had asked him questions about them.
13 The loan application form consists of a single sheet equivalent to three A4 pages folded into three together with an additional instruction form. This form sets out the instructions for completion “at sales interview” by the “banker”. The form also notes that “if the customer does not accept the recommendation for National loan cover the
banker should record in Part 4 ‘Customer Purchase Decision’ of the Customer Advice
Record”.
Form of documentation completed by Mr Moss
14 The customer advice record is dated 25 July 2003 and was signed by Mr Moss as the record notes that the adviser is a bank employee and is authorised to sell the National loan cover. In “Part 3 - adviser recommendation”, the form notes under the heading, “Reasons why the recommended policy is likely to satisfy your needs”, that “if you are disabled by injury or from contracting a sickness or disease, National
Financial Management will pay the loan repayment, after the first 30 days, to your loan account while you are disabled (subject to the terms, conditions, exclusions and
definitions set out in the policy document which is available upon request)”.
15 Under the heading, “Part 4 – customer purchase decision (select one of the
following)”, there are two alternative boxes to tick:
a. “You have elected to purchase the National loan cover policy your adviser recommended in Part 3”, b. “You have decided not to proceed with your adviser’s recommendation and therefore take full responsibility for any detrimental consequences to your financial situation in the event of serious injury, illness, accident or death”. The first alternative had been ticked by Mr Moss.
16 In addition, Mr Moss completed Part B of a National loan cover check list which he “Refer to General Manual (GIN–460) for full details on preparation of application form
and issue of policy. This form must be completed, signed and filed on the customer’s
”. Part B of the check list required completion, “if the customer REQUIRES customer(s) DOES NOT REQUIRE National loan coverfile” and provided as follows:
“Please have the customer(s) sign here:
I/We do not wish to purchase National loan cover.
I/We acknowledge that it is not a requirement of the loan to acquire National loan cover insurance and that I/we cannot be required to buy this insurance, and if considered necessary, I/we will make alternative loan protection
insurance arrangements”.
The form then provided for signature by each “customer”.
The further loan in July 2004
17 In late May 2004, Mr Moss left the Mildura branch of the bank. Ms Nicole Simmons (later Mrs Nicole Davis) took over responsibility for the application by Mr and Mrs Sahin for the advance of a further sum of $23,000. The bank required the loan to be rewritten to incorporate the further amount. Mrs Davis said in evidence that it was not possible to make further advances under a BICOE loan. Mr Ian Christie, Mrs Davis’s regional manager at the time of the transaction, agreed in his evidence that if the first loan had been fully drawn down and further loans were required, the loan would need to be rewritten from a BICOE to another type of loan. Mr Moss said that it was part of the terms and conditions of the insurance that when a new loan was entered into, the insurance was automatically cancelled.
18 Mrs Davis said that she interviewed Mr and Mrs Sahin about the loan on 14 July 2004. The facility agreement itself was executed by Mr and Mrs Sahin on 2 August 2004 and their signatures were witnessed by Mr Gary Krueger, a colleague of Mrs Davis. The total loan amount was $133,000 and there was no insurance cover. Mrs Davis said in evidence that on 15 July 2004, the day after the interview with Mr and Mrs Sahin, she made a number of entries in the bank’s computer system including:
a.
In Mrs Sahin’s record in the section, “Borrowing”, she noted, “15/07/2004 finalised $110K BICOE. Need $23K to finish furnishing home and odd jobs around the house. Applied to rewrite h/loan to $133K. Waiting on payslip at this point to finish processing”.
b.
In the section, “Protection”, Mrs Davis noted, “15/07/2004 H & C taken, held NAB. No loan cover wanted on loan, not interested”.
c.
In Mr Sahin’s record in the section, “Borrowing”, Mrs Davis noted, “15/07/2004 H loan approved, $110K BICOE now complete looking for $23K extra funds to complete home. Waiting for updated payslip. Looking to rewrite home loan base
BRh loan $133 requested”.
d. In the section, “Protection”, Mrs Davis noted, “15/07/2004 insurance declined on loan cover. Home and contents held with NAB and I set up at loan drawdown”. 19 Mr Sahin (whose evidence Mrs Sahin adopted as her own) said that he did not have a recollection of a meeting with Mrs Davis on 14 July 2004. Mr Sahin said at another point that he generally could not remember the specifics of conversations with the
bank officers. He said he had asked Mrs Davis whether there was any difference between the new contract and the old loan and Mrs Davis had said that there was not. Mr Sahin said that he had no idea that the second loan was not covered by loan
insurance. Mrs Davis said that in her interview with Mr and Mrs Sahin on 14 July, she used a computer to show them calculations of the repayment instalments they would need to make, both with and without insurance. To calculate the relevant instalments with insurance cover, she needed to enter the dates of birth, gender and whether the insureds were smokers. Mrs Davis said that she offered insurance to both Mr and Mrs
Sahin although the previous insurance had only been for Mrs Sahin.
20 insurance “because the loan amount was going to increase”. Mrs Davis said that she
Mrs Davis said that the Sahins told her they were not interested in the loan cover loans”. She said that she did not fill out the customer advice record on the loan cover application document as you “only fill out the customer advice record if insurance cover is taken”. She recorded the fact that Mr and Mrs Sahin did not want loan cover insurance on the bank’s computer. Mrs Davis said she was not aware in July 2004 of the National loan cover check list.
21 Mr Sahin said in evidence that in the interview with him and his wife, Mrs Davis had seemed unsure of herself and had needed to consult other staff to clarify a number of matters. Mr Moss said that for about six months in 2004, Mrs Davis had worked as an assistant to him and Mr Krueger. Before he left Mildura, Mrs Davis was selected by the bank as his replacement and she had sat in with him during interviews with customers. She followed some procedures differently to him. For example, she updated information on the computer database, including information about a customer’s acceptance of loan cover. Mr Moss said that whilst he did not agree with this process, Mrs Davis had said that this was the way she had been taught. Mr Moss said that he was aware that the bank was updating its procedures at the time, including the recording of information on the computer, and he knew that Mrs Davis had received her accreditation after training in these new procedures.
Correspondence received from the bank in June to August 2004
22 Mildura, to live with Mr Sahin’s mother. On 17 February 2003, correspondence from
the bank was addressed to Mr and Mrs Sahin at this address. In the National loan
cover application by Mr and Mrs Sahin dated 25 July 2003, the address of Mrs Sahin
was again recorded as 390 San Mateo Avenue. The address of the house Mr and
After the Sahins had sold their Red Cliffs farm they moved to 390 San Mateo Avenue, by Mr and Mrs Sahin on 2 August 2004 noted that the bank had taken a registered mortgage “over property situate at Lot 47, Plumpic Way, Mildura”. This should have referred to Olympic Way and the lot number changed to a street number when the house was erected.
23 There are a number of items of correspondence received by Mr and Mrs Sahin which should be noted:
a.
A letter addressed to Mrs Sahin at 12 Olympic Way, Mildura, on 15 June 2004 in which the National Australia Bank wrote to Mrs Sahin noting that “you have completed the final drawdown on the above loan account”. The “final balance” of the account was stated to be “$110,710.67”. Repayment was $179.14 weekly
and it was noted “that this payment is inclusive of National Financial
Management insurance premiums”.
b. A letter dated 22 June 2004 from the bank addressed to Mrs Sahin at 12 Olympic Way, Mildura, read in part as follows: “Following the review of the above loan account, and under your authority to the National regarding
insurance premium renewal, the National Financial Management insurance
premium has been debited to your account and requires a change to your
repayments as follows: Your loan contract allows the bank to vary the required
repayments in these circumstances. Accordingly, your minimum weekly loanrepayment is going to change to $179.20 with effect from 12 August 2004”.
c. A letter dated 5 July 2004 from National Australia Financial Management Ltd addressed to Mrs Sahin, at 12 Olympic Way, Mildura, enclosing “a copy of the original letter which was sent to your previous address and then returned back
to us”. The original letter, dated 20 June 2004 and headed “Renewal notice”,
was from National Australia Financial Management Ltd addressed to Mrs Sahin
at Box 98, Red Cliffs, and read in part as follows: “We would like to update youon your National loan cover policy. The anniversary of your loan is approaching
and we will automatically renew your policy and adjust your premium. Each
year we adjust the premium as your loan details change. The calculation of the
new premium is based on your projected outstanding loan balance at policy
renewal date, the remaining loan term, your contract repayment amount and
frequency, your age, smoking status and the benefits you have selected underyour policy”. The letter noted that the total annual premium would be $773.23
from the policy renewal date on 12 August 2004.d. On 5 August 2004, the bank wrote a letter addressed to Mrs Sahin at 12 Olympic Way, Mildura, which read in part as follows: “As a result of your request to us we are able to confirm the following automatic repayment to the
above loan account has today been cancelled”. The letter then noted the
weekly payment of $180 and continued: “For your information we also confirm
the weekly required repayment amount for your loan is $179.15 and the due
date for the next repayment is 9 August 2004”.
e.
On 24 August 2004, the bank sent a letter addressed to Mrs Sahin at 12 Olympic Way, Mildura, which stated in part: “As a result of your request to us
we are able to confirm the repayment to the above loan account has been
established as an automatic direct debit to the following account”. The letter then referred to a weekly drawing of $205 from a particular account with the next due date as 30 August 2004.
f. On 14 November 2005, National Australia Financial Management Ltd sent a letter addressed to Mrs Sahin at 12 Olympic Way, Mildura, referring to an insurance policy and stating in part: “Please find enclosed for your attention a copy of the original letter which was sent to your previous address and then
returned back to us”. Enclosed was a letter dated 5 August 2004 from National
Australia Financial Management Ltd addressed to Mrs Sahin at Box 98, Red
Cliffs, which referred to the National loan cover policy and stated: “We wish toconfirm that your National loan cover policy has been cancelled with effect from
5 August 2004. Should you have any queries regarding the above werecommend you contact your personal banker to discuss further”.
Mrs Sahin’s injury and further dealings with the bank
24 On 27 October 2004, Mrs Sahin suffered a workplace accident and injured her wrist. In December 2004, Mr Sahin said that he telephoned the bank’s insurance company to make a claim on the insurance policy. He spoke to a young male who informed him
that there was no policy. Mr Sahin said that the insurance company officer told him
that “because of the refinancing and the oversight of the bank manager the loan
cover had been cancelled”. He suggested that Mr Sahin “contact the bank manager
and the cover will be reinstated”.25 In early February 2005, Mr Sahin contacted Mrs Davis and told her what had happened and the advice given to him by the insurance officer. Mrs Davis told Mr Sahin that the policy had been cancelled because of the refinancing. Mr Sahin said that Mrs Davis had promised to look into the matter and get back to him. Mr Sahin said that there was no contact from Mrs Davis for about five months. He spoke to her again in about July 2005. In that conversation, Mrs Davis repeated that the policy had been cancelled when the loan was refinanced. Mr Sahin asked for the phone number of the area manager and told Mrs Davis that he considered the insurance company should be making the loan repayments. Mr Sahin said he telephoned the area manager, Mr Christie, who told him that, at the time the second loan was taken out, Mrs Davis “should have offered them insurance and it was not right not to have”.
26 A meeting was arranged between Mr and Mrs Sahin, Mr Christie and Mrs Davis at the the bank’s computer showed that they had been offered loan cover insurance. Mr Sahin said that he and his wife were stunned as there had been “no mention till then” of that fact. He said that at the meeting they were not shown the computer screen or a print-out. Mr Christie told Mr and Mrs Sahin that “people have been known to make false claims after having earlier rejected insurance”.
27 Mrs Davis said that in February 2005, when Mr Sahin had telephoned her, he told her that his wife had hurt her wrist and asked if they had loan cover insurance. She told him that there was no loan cover in place. Shortly afterwards, she made an internal request for copies of the facility agreement “to confirm” her advice to Mr Sahin. Mrs Davis said that the meeting with Mr Christie in September 2005 was to “try and help” the Sahins with “moving forward” to determine how loan repayments would be made. She said that an offer was made to assist in the preparation of a “hardship claim” to the bank and Mr and Mrs Sahin were informed that they could contact the Ombudsman to take the matter further. Mr and Mrs Sahin did make a complaint to the Ombudsman but remained dissatisfied following his decision.
Suspicions by Mr and Mrs Sahin that bank records were falsely prepared
28 Mr Sahin said that there were a number of aspects of their dealings with Mrs Davis and the bank which caused them to suspect that Mrs Davis or the bank were involved in concealing the fact that Mrs Davis had failed to offer them loan cover insurance for the second loan or had wrongly cancelled the insurance taken out at the time of the first loan. The specific matters referred to by Mr and Mrs Sahin were:
a. Mrs Davis had seemed unsure of herself during the initial contacts and had regularly sought assistance from other staff. b. In July 2004, Mr and Mrs Sahin had received a letter from the bank dated 22 June 2004 notifying them that the insurance premium was due and would be deducted from their account. The letter was sent to their correct address. A similar letter from the insurer, dated 20 June 2004, had been sent to the wrong address but had been reforwarded by the insurer to the correct address with a letter, dated 5 July 2004.
c.
A letter dated 5 August 2004, notifying them that the insurance cover had been cancelled was sent to the wrong address and was only forwarded to their correct address on 15 November 2005.
d.
When Mr Sahin spoke to Mrs Davis in February 2005, his evidence was that she was apologetic and confirmed that there was no loan cover in place but did not tell Mr Sahin that there were notes in the bank’s computer that she had made on 15 July 2004 stating that Mr and Mrs Sahin had refused the offer of insurance. This fact was not mentioned until the meeting with Mr Christie in September 2005. At the meeting in September, Mr and Mrs Sahin were not shown the computer records.
e.
When the Sahins did see screen prints of the computer records at a later time, only selective data had been entered on the records by Mrs Davis and there were inconsistencies in the data which led them to conclude that the computer records had been changed after February 2005 to note the rejection of Mrs Davis’s offer of loan cover insurance at the interview in July 2004.
The bank’s computer record system
29 Evidence was given at the trial by three computer experts. Mr Cosima Cirillo has been an IT consultant for 20 years and gave evidence on behalf of the plaintiffs. He said that based upon his experience:
a. system administrators with appropriate permissions would be able to enter the system and modify data in a way that would not be possible by ordinary users; b. most sophisticated databases had a background auditing facility which would record when and by whom all changes were made which would enable all amendments to be tracked at a later time; c. it should be possible to bring up data on a screen, modify the data, print the screen and close the screen without saving the changes to the data so that the original records remained in the computer memory. 30 Mr Stan Gonopoulos is a senior analyst programmer with the bank. From 2003 to March 2009 he worked in a number of positions with the bank directly related to the Siebel customer relationship management system which the bank used to track interactions with customers. Mr Gonopoulos said:
a.
There are “approximately 20 Siebel program administrators working with the bank who would be able to access the Siebel database”. Otherwise employees of the bank would have limited access to enter data on the customer notes program. That data is stored in a high security database. “The date the data is
stored on the Siebel database is automatically entered into the ‘last updated’
box in the user interface. This date cannot subsequently be altered by the user”.
b. Simultaneously with the entry of data on the customer notes program, “an exact replica of the note data is sent to the notes program and is stored indefinitely. directly in the Siebel database, the data would not be altered in the notes program”.
c. He had “reviewed the data stored in the Siebel database, and the data stored in the notes program in relation to the plaintiffs’ data was identical”. d. He did “not believe that the data stored in the Siebel database, in relation to the plaintiffs has been altered in any way since it was originally entered into the
database”.
e. The level of auditing suggested by Mr Cirillo was not available in the Siebel application and had not been implemented by the bank in relation to the database because of the high cost of doing so. f. Inconsistencies in the detail on various screen prints were explicable if the prints were taken at different times, and in the interim, “contact” data about the customers or by whom they were managed had been altered. 31 Mr David Swiggs has been employed by the bank for many years. Since 2008, he has been the systems/project manager of Core Banking Solutions with responsibility for the operation and management of the computers and computer information systems utilised by the bank. He said:
a.
The bank’s information systems include the customer notes program which receives information on the Siebels system and stores it on the bank’s database. Both systems separately store the data entered into the system.
b.
The database containing the customer notes program can only be accessed by the bank’s development or support programmers of which there are less than 20. No such access is available to bank employees at any branch.
c.
Customer notes are archived to a permanent record which can be viewed or printed. Permanent records, such as the entry of data by a named bank officer on a particular date, cannot be changed but other fields – for example, whom the customer is “managed by” – display the current information at the time the screen is viewed or printed. Other sections of the customer notes are accurate at the day they were “last updated”.
d.
inconsistencies shown on different screen prints would be explained by the fact that the screens were printed on two separate dates.
Evidentiary findings
32 Mr Sahin conducted the case on behalf of the plaintiffs. He generally did so competently and effectively although he was clearly hampered by his lack of legal knowledge and forensic experience. He acknowledged that his recollection of the details of his conversations with Mrs Davis was somewhat limited.
33 workplace accident in 2004. She left the Court in a distressed state on a number of
occasions. On the first day of the trial, she was taken by ambulance to hospital. Her
evidence-in-chief was limited to acknowledging the accuracy of her husband’s
evidence which she had sat through. Her cross-examination proceeded with only
limited interruptions. She was assisted by her son who acted as an interpreter into the
Turkish language whilst she gave her evidence. Mrs Sahin said that although she had
been in Australia for about 20 years, she had limited command of the English
language and virtually no reading skills. During interviews at the bank, Mrs Sahin said
that her husband would conduct the conversation and would speak to her in Turkish
Mrs Sahin suffers from moderate to severe depression as a consequence of her asked Mr and Mrs Sahin whether they had read the documents or had sought independent advice. Both had acknowledged that they were ready to sign the documents. Mr Moss said that in his dealings with Mr and Mrs Sahin, Mrs Sahin “conversed fairly fluently” and he was “comfortable she understood”.
34 Mrs Davis appeared to give her evidence in a confident manner. She said she was able to recall details of a conversation with Mr and Mrs Sahin in mid-2004. Her recollection was that her initial contact with Mr and Mrs Sahin was on 4 June 2004 for the purpose of signing a “personal loan” contract and discussing house and contents insurance. Her recollection about a personal loan is not, however, supported by any bank records produced in evidence. In fact, Mr and Mrs Sahin had taken out a personal loan in June 2003 as a forerunner to the housing loan arranged by Mr Moss in July 2004. The personal loan was immediately paid out from the proceeds of the housing loan. Mrs Davis said that her evidence was based on “the best of my recollection and reference to computer records”. Mrs Davis may have had reason to remember the transaction with Mr and Mrs Sahin because it was one of the first she was responsible for in her new position.
35 After the conversation with Mr Sahin in February 2005 (only about seven months after the interview in July 2004), Mrs Davis investigated the matter and would presumably have tried to recollect her dealings with Mr and Mrs Sahin. In September 2005 and at later times, she prepared file notes of the events in July 2004. Nevertheless, it appears that her recollection was not entirely accurate about the personal loan and I consider that the evidence she gave may have been based on her usual practice rather than a specific recollection. Mr Moss was careful to differentiate between his usual practice and matters which he recalled and he gave his evidence in a very helpful way. Mr Christie seemed concerned to emphasise that, apart from the written record, he had little recollection of his meeting with Mr and Mrs Sahin in September 2005.
36 The critical issue for determination is whether the computer file notes recording Mrs Davis’s discussion with Mr and Mrs Sahin about the offer and rejection of loan cover insurance was accurate. I consider that based on the evidence the following findings are appropriate:
a. It is highly improbable that the bank’s computer records do not contain entries made by Mrs Davis on 15 July 2004. Any other conclusion would require acceptance that the bank’s computer specialists had participated in a fraud to create false computer records after the event. There is little basis upon which that conclusion could be reached. b. It is likely that Mrs Davis accurately recorded what she considered was the substance of her conversation with Mr and Mrs Sahin on 15 July 2004 in which she had offered them loan cover insurance and they rejected the offer. Mrs Davis did not complete any documentation which was consistent with Mr and Mrs Sahin indicating that they wished to take out loan cover on the new loan. The loan cover application was not completed. The ACAPS application loan checklist note was “ticked” that “loan cover/loan safe” was not applicable. The facility agreement made no reference to insurance and the weekly repayment was calculated without including an allowance for the insurance premium. The insurance premium was a significant factor which would have affected the repayment instalments for the life of the loan. In accordance with bank procedures, it is likely that Mr and Mrs Sahin would have received a copy of the National loan cover customer information brochure with the loan cover application attached. Mrs Davis’s usual procedure would have required her to obtain personal details from at least Mrs Sahin including whether she was a smoker and perhaps her date of birth (if that were not available from the existing bank records), to calculate the insurance premium and to have shown Mr and Mrs Sahin on the computer screen the repayment options both with and without the insurance premium. Mrs Davis said that she specifically carried out these steps with Mr and Mrs Sahin.
c. Sahin would have raised the issue with Mrs Davis themselves. Mr Sahin said
that when he and his wife had obtained an earlier loan from the bank, the then
manager, Mr John Shee had strongly recommended they take out life insurance
It is likely that if Mrs Davis had not referred to loan cover insurance, Mr and Mrs 2003, Mr and Mrs Sahin had taken out loan cover insurance with Mr Moss. Mr Moss said that they were initially reluctant. The loan documentation included the National loan cover customer information brochure, which Mr Sahin said he had read and discussed with his wife, the loan cover application and the customer advice record, both of which were signed by Mrs Sahin, and the reference to the “customer credit insurance premium” in the facility agreement signed by both Mr and Mrs Sahin. On the other hand, Mr and Mrs Sahin assert that their belief was that the existing loan cover insurance would continue, notwithstanding the new loan, and they were reinforced in this view by correspondence received from the bank and the insurance company.
d. The insurance cover taken out in 2003 was for a term of one year. This was specified in the relevant section on “consumer credit insurance” in the facility agreement signed by the Sahins. The National loan cover customer information brochure, in the section, “When does cover cease?” noted that the cover would
cease on the earliest of “rewriting of the Loan Agreement; … the expiry of theLoan Term; or … where cancellation by us is permitted by law, upon us giving
you at least 30 days written notice of cancellation”. If the insurer were simply relying on “the expiry of the loan term” the loan cover would not simply cease after one year. It would continue unless cancelled by the insurer or one of the other provisions for the ceasing of cover becoming operative. This reflected the
provisions on page 9 of the insurance policy which is in similar terms to the
customer information brochure.In the present case, the bank submitted that the insurance cover ceased because the circumstance first listed was fulfilled, namely “rewriting of the loan agreement”. The loan entered into in July/August 2004 involved an advance of $133,000 even though the further amount sought was only $23,000. The balance of the existing loan was repaid. Most likely this had been discussed between Mrs Davis and Mr and Mrs Sahin in the interviews she had with them. In the circumstances, the receipt by Mr and Mrs Sahin of the letter from the insurer on 20 June 2004, stating that the insurance would be renewed and the next year’s premium deducted from their account was of little significance. Similarly, the fact that the notice of cancellation of policy in the letter dated 5 August 2004, sent to the wrong address and not received by the Sahins until 18 months later, was unfortunate but did not affect the cessation of the loan cover insurance upon Mr and Mrs Sahin entering into the second loan.
e.
There is a distinction, in law, between the cessation of cover under a policy and the cancellation of the policy (see Waterman v Gerling Australia Insurance Co. Pty Ltd (2005) 65 NSWLR 300). For the reasons given by Brereton J in that
Insurance Contracts Act 1984
circumstances in which a policy of insurance may be cancelled, did not apply. Indecision, the provisions of the relating to the circumstances of the late payment of premiums, which would ordinarily have meant that under the policy, cover was “deemed to have ceased”.
f. and the insurer with the Sahins between June and August 2004, no
circumstances exist in the present case which would justify a finding of
estoppel. Because of the conclusions I have reached in relation to the computer
Notwithstanding the confused state of the correspondence between the bank essential matters needed to establish an estoppel, particularly reliance, have not been made out.
g. It is likely, in my view, that Mrs Davis’s computer note accurately records the substance of her discussion with Mr and Mrs Sahin on 15 July 2004 and that they consciously made a decision not to take out loan cover insurance on the fresh loan because of the additional cost. Notwithstanding that Mr and Mrs Sahin had taken out a substantial loan the previous year, their house was unfinished and they required an additional $23,000. The premium for continued loan cover would have been greater than the initial premium of $770.69. Mr Sahin said that the premium would have been an additional $195 in the first year of the new loan. Whilst it is simply speculation that this fact might have determined Mr and Mrs Sahin’s attitude to continuing with insurance cover, in my view, there is nothing inherently improbable about Mrs Davis’s note of the conversation. In view of all the circumstances I have referred to, I consider that her version of events should be accepted. If Mr and Mrs Sahin made a conscious decision on 14 July 2004 to reject the offered loan cover insurance, they would not have expected the insurance company to meet their mortgage repayments when Mrs Sahin was injured in October 2004.
h. apparent “inexperience” and the later dealings with Mrs Davis and Mr Christie in
2005 has little relevance. It is clear that in June/July 2004, Mrs Davis did not
have the level of experience that, for example, Mr Moss had, but nevertheless
Mr Moss’s evidence was that Mrs Davis had been appropriately trained and
was capable of performing her role. Any differences in the practices followed by
Mrs Davis and Mr Moss would also have limited relevance. Although Mr Moss
would have obtained the signatures of Mr and Mrs Sahin to the customer advice
record and the National loan cover checklist, if loan cover insurance were
declined, Mrs Davis recorded this decision contemporaneously by making a
note in the bank’s computer system which was available for that purpose. In
February 2005, it appears that in her conversation with Mr Sahin, Mrs Davis did
not refer to the fact that she had made a note in the computer that she had
offered loan cover insurance on 15 July 2004 and that it had been declined.
In these circumstances, the evidence of Mr and Mrs Sahin about Mrs Davis’s place. It is inappropriate to infer anything from Mrs Davis’s failure to refer to the computer note in the conversation in February 2005. She did refer to the note at the meeting in September 2005 and, as I have already found, there is no basis to conclude that the computer note was falsely manufactured between February and September 2005, or at all.
Conclusions
37 In the circumstances, the plaintiffs’ claim must fail. The claim, as pleaded, relies upon a number of causes of action including contract, misleading and deceptive conduct in contravention of s.52 of the Trade Practices Act and s.9 of the Fair Trading Act, false representation, breach of the provisions of the Insurance Contracts Act,
unconscionable conduct, estoppel, fraudulent misrepresentation, negligence and
breach of the Consumer Credit Code entitling the plaintiffs to declaratory relief, the
reopening of the loan cover insurance contract, damages and the return of loan
instalments paid.38 I have been conscious throughout the trial that the plaintiffs have been self- represented. During the trial, the bank produced further documents which should have been discovered earlier. These documents included the bank’s paper file which included the National loan cover checklist. I considered during the trial whether the additional documents, or the evidence which was adduced at the trial, might have assisted the plaintiffs if their claims were differently pleaded. I have previously referred to the different procedures adopted by Mr Moss and Mrs Davis, in circumstances where a customer declined offered loan cover insurance, to record that fact. Even if there had been evidence that the bank’s procedures in July 2004 had been those of Mr Moss, it is difficult to see that the circumstances would amount to any actionable breach of a duty owed by the bank to Mr and Mrs Sahin.
39 I have found that Mr and Mrs Sahin were offered insurance which they declined. They were sufficiently informed from their previous dealings with the bank 12 months earlier, including their knowledge of the National loan cover customer information brochure, to have made a conscious decision. There is little evidence to support a conclusion that Mrs Sahin was not appropriately informed by her husband or was incapable of independently reaching that decision. I see no basis by which the plaintiffs could have succeeded in this action, regardless of how their claims were pleaded.
40 In the circumstances, the plaintiffs’ claim will be dismissed. I will make further orders, including orders as to the costs of the proceeding after hearing further from the parties.
Certificate
I certify that these 18 pages are a true copy of the reasons for decision of His Honour
Judge Anderson delivered on 27 November 2009.
Dated: 27 November 2009.
Hannah Christensen
Associate to His Honour Judge Anderson
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