Spice, C.H. v Westpac Banking Corporation

Re: CHARLES HENRY SPICE
And: WESTPAC BANKING CORPORATION
No. G49 of 1987
FED No. 487
Trade Practices - Negligence - Damages

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Foster J.(1)

CATCHWORDS

Trade Practices - Foreign currency loan - uncrystallized loss due to exchange rate fluctuations - whether lending bank's conduct misleading or deceptive

Negligence - Foreign currency loan - content of duty of care owed by lending bank to borrower - whether such duty breached - scope of lending bank's duty to explain to borrower the extent of the risk involved in such borrowing and how such risk can be managed - consequences of positive misrepresentation made by bank officer to borrower - consequences of the supply by bank officer to borrower of a misleading graph.

Damages - Appropriate measure to apply - effect of the absence of crystallization of damage - whether failure to bring loan on-shore constituted a failure to mitigate - consideration of the appropriate form of relief - grant of injunctive relief.

Trade Practices Act 1974 - s 52, s 87

The Federal Court of Australia Act 1976 - s 23

Cornish v. Midland Bank (1985) 3 All ER 513

Gates v. City Mutual Life Assurance Society Ltd (1986) 160 CLR 1

Gould v. Vaggelas (1985) 157 CLR 215

Henjo Investment Pty Ltd v. Collins Marrickville Pty Ltd (1988) 79 ALR 83

Hopkinson v. Rolt (1861) 9 HL CAS 514

Matzner v. Clyde Securities Ltd (1975) 2 NSWLR 293

The Mutual Life & Citizens' Assurance Company Limited and Another v. Evatt (1968) 122 CLR 556

Northwestern Utilities v. London Guarantee and Accident Co Ltd (1936) AC 108

San Sebastian Pty Limited v. The Minister Administering the Environmental Planning and Assessment Act and Another (1986) 162 CLR 340

Shaddock and Associates Pty Limited v. The Council of the City of Parramatta (1981) 150 CLR 225

Swinton v. The China Mutual Steam Navigation Co Ltd & Ors (1951) 83 CLR 553

Taco Company of Australia Inc & Anor v. Taco Bell Pty Ltd and Ors (1982) 42 ALR 177

HEARING

SYDNEY

#DATE 1:9:1989

Counsel for the applicants: G. A. Palmer QC with

J. Chippindall

Counsel for the respondents: R. A. Conti QC with

N. C. Hutley and J. Stevenson

ORDER

That the respondent be restrained from exercising or enforcing any of its rights under the Loan Facility Agreement between the applicant and the respondent dated the 22nd of February 1985 ("The said Agreement") or under Real Property Act mortgages registered nos. V745473, V425774 and R013074 ("the said mortgages") in respect of the repayment of principal and interest due thereunder, except upon the following terms, namely, that:

a) The respondent accept in full and final satisfaction of the obligation of the applicant to repay the principal sum due under the said Agreement and under the said mortgages the sum of 800,000.00 Australian dollars;

b) The respondent accept in full and final satisfaction of the obligation of the applicant to pay interest under the said agreement and the said mortgages interest calculated as follows:- i) Interest to be payable in accordance with the loan facility agreement but on the basis that the principal sum lent was 800,000.00 Australian dollars; ii) Rates of interest to be those appropriate at the stipulated roll-over dates to such a loan made by way of a commercial bill facility of the respondent in circumstances where the borrower is not in default; iii) Credit to be given to the applicant for amounts of interest paid on roll-over dates up to and including the 10th of December 1986; iv) Further interest to be payable by the applicant in respect of the period up to and including the 10th of December 1986 being interest on the amount of the differences between the amounts of interest paid by the applicant in Australian dollars on the said roll-over dates occurring in that period and amounts that would have been so payable pursuant to paragraphs i and ii, the amount of such differences, at the option of the applicant, not to be payable until the termination of the said Agreement, but such interest to accrue until that date or the earlier payment of such differences; v) Interest payable by applicant on roll-over dates since the 10th of December 1986 until the date of termination of the loan to be calculated in accordance with paragraphs i and ii; vi) Further interest to be payable by the applicant in respect of the period from the 10th of December 1986 to the date of judgment, being interest on the amount of the difference between the amounts of interest that would have been paid by the applicant in Australian dollars on the roll-over dates occurring in that period pursuant to the loan said Agreement and the amounts payable as calculated pursuant to paragraphs i and ii, the amount of such differences, at the option of the applicant not to be payable until the termination of the loan but such interest to accrue until that date or the earlier payment of the amount of such differences.

2. The respondent not to exercise any of its rights in relation to any default by the applicant in the payment of principal and interest or in compliance with the terms of clause 13.1 of the said Agreement occurring prior to the date of this order.

3. Upon payment by the applicant to the respondent of the principal sum and interest in accordance with the terms of paragraph 1. the respondent shall deliver to the applicant a duly executed acknowledgement by deed of acceptance of those amounts in full discharge of the applicant's obligations under the said Agreement and duly executed discharges in registerable form of the said mortgages together with the Certificates of Title referred to therein.

4. That the cross-claim be dismissed.

5. That each party have liberty to apply.

6. That the respondent pay the applicant's costs of the Application and Cross-Claim.

JUDGE1

In these proceedings the applicant Charles Henry Spice ("Mr Spice") sues the respondent Westpac Banking Corporation ("Westpac"), seeking remedies at common law and under the Trade Practices Act 1974 ("The Act") in respect of a borrowing made by him from Westpac in March 1985. The loan was drawn down in Swiss francs to the equivalent of $800,000.00 Australian. The period of the loan has not yet expired but the decline in value of the Australian dollar against the Swiss franc has produced a situation where the amount required in Australian dollars to meet interest payments and to cover the repayment of capital has increased enormously. The loan agreement contained a "top-up" clause, requiring, in the usual way, the provision by the borrower of additional security to cover the increasing drop in the value of the Australian currency against the Swiss. Late in 1986 Westpac invoked this clause, but the applicant has refused to comply, claiming that alleged breaches of duty to him on the part of the bank, in effect, exonerate him from compliance. Westpac has refused to accept this contention and has taken action in conformity with the default provisions of the loan agreement. These actions to enforce the loan are currently restrained by interlocutory injunction pending the outcome of these proceedings. Westpac brings a cross-claim against Spice in respect of his alleged default under the loan agreement between them.

The causes of action upon which the applicant sues are set out in his Amended Statement of Claim. Although a series of amendments where made shortly before the hearing, the causes of action set out in these amendments were not, in fact, relied upon. These claims depended upon representations express and implied in advertisements placed by Westpac in the Australian Financial Review newspaper at various times in 1984 by which Westpac allegedly held itself out as willing and able to supply advice and assistance of an expert kind in relation to foreign exchange dealings through highly qualified and experienced foreign exchange advisors employed by it. Early in his evidence in chief Mr Spice quite candidly indicated that he had no specific recollection of reading any of these advertisements and was not directly influenced by them in his approach to Westpac in relation to the Swiss franc loan. These portions of the Amended Statement of Claim have, accordingly, not been proceeded with.
It is convenient, at this stage, to set out the applicant's claim as it is finally pleaded. There is no dispute that at all relevant times Mr Spice was a customer of Westpac at its Liverpool and Castlereagh street branch in Sydney. The case pleaded in the Amended Statement of Claim is as follows:-

"4. . . . . on or about 9 January 1985 the applicant attended at the respondent's said branch to enquire whether any risks existed in obtaining a foreign currency loan from the respondent. Particulars

The applicant met with Mr Lee, the Manager of the respondent's said branch on 9 January 1985.

5. At the same time referred to in paragraph 4 hereof, the respondent by its servant, Barry Lee, and in the ordinary course of its aforesaid business, made the following representations to the applicant:

(i) that there was no catch attached to the borrowing of moneys off-shore by Australians at low interest rates;

(ii) that there was then no reason for borrowers to extricate themselves from off-shore borrowing;

(iii) that it was advisable for the applicant at or about that time to enter an off-shore borrowing arrangement with the respondent;

(iv) that the applicant should only consider borrowing Swiss francs because that currency has the best interest rate for borrowers;

(v) . . . .

(vi) that further advice would be given to the applicant in respect of foreign currency borrowings by one Cecil Geddes, who was one of the respondent's experts in foreign currency loans.

6. Shortly after 9 January 1985 the respondent by its servant or agent, Cecil Geddes, and in the ordinary course of its aforesaid business represented to the applicant that:

(i) a graph showing the movement of the Swiss franc against the Australian dollar was typical and sufficient history of the relative performance of the two currencies to be the basis of a decision to borrow Swiss francs;

(ii) that the Swiss franc was a relatively more stable currency with respect to the Australian dollar than other currencies such as the yen, sterling, the U.S. dollar or the deutschmark.

7. The making of the representations referred to in paragraphs 5 and 6 hereof, were made in trade and commerce and were made for the purpose of inducing the applicant and caused the applicant to enter a contract on or about 22 February 1985 with the respondent for the provision of a Swiss franc loan facility of up to A$800,00 ("the loan facility").

8. In late February and early March 1985, the respondent by its servant or agent, Cecil Geddes, and in the ordinary course of its aforesaid business further represented to the applicant that there was no reason why he should not draw upon the loan facility.

9. The making of the representation described in paragraphs 5,6, and 8 hereof caused the applicant to draw down borrowings upon the loan facility on 7 March 1985.

10. The representations set forth in paragraphs 5,6 and 8 hereof were, at the time they were made, misleading or deceptive or likely to mislead or deceive.

Particulars

(a) The borrowing of Swiss francs involved the applicant in the potential liability of substantial loss if the Australian dollar moved adversely against the Swiss franc;

(b) . . . .

(c) at the time the representations were made, there was a substantial prospect of a decline in the Australian dollar against the Swiss franc for which reason it was undesirable for a borrower to enter into a foreign currency facility;

(d) that the Australian dollar had over a long period declined in value against the Swiss franc and the graph presented to the respondent failed to show such long term decline;

(e) that the Australian dollar performance against the Swiss franc had been worse than its performance against the U.S. dollar, the sterling or the deutschmark or the yen.

11. In February and March 1985 and thereafter the Australian dollar's exchange rate deteriorated against the Swiss franc whereby the applicant's liability on the loan facility to the respondent was greatly increased. FOR A SECOND AND ALTERNATIVE COUNT

13. The applicant repeats the allegations made in the above paragraphs.

14. By reasons of the facts alleged in paragraphs 4,5,6,7,8,9, and at all material times the respondent was under a duty:

(a) To investigate and research fully whether there was any risk, and if so, the degrees of such risk, that the Australian dollar would over the term of the proposed facility, fall substantially as against the Swiss franc so as to expose the applicant to substantial loss under the terms of the loan facility agreements proferred (sic) by the respondent to the applicant;

(b) to ensure that those of its officers who were advising the applicant in connection with the said borrowing were sufficiently knowledgable

(sic) and qualified to give such advice;

(c) to tender full, accurate and sound advice as a banker to the applicant in and about the making of enquiries by the applicant as to the risks referred to in (a);

(d) to advise the applicant fully and accurately as to any protection against the risks referred to in (a);

15. In breach of its duty of care described in paragraph 14 hereof, the respondent negligently failed to tender full, accurate or sound advice as a banker to the applicant and the respondent tendered advice to the applicant which was not full, accurate or sound in respect of the taking and use of the loan facility.

Particulars

The respondent was negligent in:

(a) failing to advise the applicant as to the substance or extent of the risk in obtaining a foreign currency loan from the respondent;

(b) making the representations described in paragraphs 5,6 and 8 hereof;

(c) failing to alert the applicant to the likely consequences for him of currency losses after the Australian dollar had commenced to fall against the Swiss franc in February and early March 1985 and before the applicant drew down upon the loan facility.

(d) . . . .

(e) failing to advise the applicant adequately or at all that he was able to protect himself to some degree against the exchange risks or a foreign currency loan by the application of such procedures as hedging, loan management, or borrowing against a basket of foreign currencies.

16. As a result of the matters set forth in paragraph 15 hereof, the applicant did the acts described in paragraphs 7 and 9 hereof and suffered the losses described in paragraph 11 hereof.

Particulars

If the applicant had been given proper and adequate advice by the respondent as to all or any of the matters alleged in paragraphs 14 and 15, the applicant would not have entered into the loan facility at all."
I shall refer to the relief claimed later in these reasons.
Although a number of individual matters of commission and omission are set out in this pleading, they were not, in the ultimate, relied upon separately. The applicant's case really amounted to a claim that Westpac, through Messrs. Lee and Geddes, misled him into a belief that there was no significant risk involved in taking out the loan in Swiss francs, whereas if they had fully and properly explained the financial risk involved and the complex decisions and transactions necessarily involved in guarding against the risk, the applicant would simply have declined to enter into the transaction at all. This is not a case where claims are made for particular losses that might have been avoided if particular advice, such as to take out a hedging contract, had been given at appropriate times during the course of the loan. The applicant merely asserts that had he received correct and complete information and advice from Westpac as to what was involved in the taking out of a foreign currency loan both as to the real nature of the risks and the means of mitigating them, he would have foregone the apparent financial advantages involved in an offshore borrowing and have accepted the higher interest rates involved in on-shore borrowing in Australian dollars.
The first matter to be decided in the case is what, if any, representations were expressly or impliedly made to the applicant by Messrs. Lee and Geddes in January 1985 and thereafter, and whether the applicant relied upon those representations in entering into the loan in March of that year. In reaching a conclusion as to what was said, or not said, in the conversations between the applicant and Messrs Lee and Geddes referred to in the pleadings, and also on the question of reliance, it is necessary (inter alia) to determine the state of knowledge of the applicant as to off-shore borrowing, its risks and procedures, prior to his approach to Westpac and also the state of knowledge of the bank officers themselves as to these matters and as to relevant bank policies.
There is indeed considerable conflict between the evidence of the applicant and the evidence of Messrs. Lee and Geddes as to what was said and not said in the relevant conversations. This is a case where the demeanour of the witnesses and the manner of the giving of their evidence has been of importance. Considerable assistance has been rendered by the careful oral and written submissions of counsel on questions of fact and credibility of the witnesses. I do not intend to refer to all these factual submissions in these reasons. All submissions have been taken into account in the reaching of the decisions set out hereafter.
The evidence establishes that Mr Spice left school in 1947 and then went to work as a clerk in the office of the Public Trustee in the years 1948 to 1950. During this period he commenced the study of law. From 1951 to 1956 he worked in the office of the New South Wales Crown Solicitor, being engaged in conveyancing and resumption work. Whilst so employed he continued his studies at Sydney University, graduating in law in 1952. By 1957 he was working as a solicitor in a Sydney legal firm being employed in conveyancing matters. In 1962 he became a partner in that firm and continued in the work of local domestic conveyancing and associated financing.
Whilst so working he became personally involved in real estate investment. In 1965 he became associated with a Mr Teicher, a client, in real estate purchase and investment. These investments consisted of the purchase, renovation, and subsequent sale in strata units, of elderly blocks of flats. Spice attended to the necessary conveyancing and finance documentation involved in these transactions. It is clear that all necessary financing was effected by way of borrowing in Australian currency from finance companies, banks, and private lenders.
In 1971 Spice retired from practice in the partnership and thereafter devoted himself to real estate investment. He ceased his investment partnership with Mr Teicher in 1972 and thereafter continued on his own, investing in blocks of flats in the same way as before. In 1975 he financed his activities by a substantial borrowing of some $300,000.00 from the Public Trustee. It appears that he later changed this borrowing to one on a commercial bill line from Westpac. This borrowing was in place, attracting increasing domestic rates of interest, at the time he approached Westpac in relation to off-shore borrowing. It is clear that the off-shore loan into which he entered on the 7th of March 1985 was taken in substitution for the commercial bill line facility which was set to expire at that time.

The evidence indicates quite clearly that prior to his approaching Mr Lee, his bank manager, on the 9th of January 1985, he had not made any foreign currency borrowings in respect of his real estate investment business.
He was not unaware, however, of problems associated with foreign currency and exchange rates. He had travelled overseas and, in the usual way, made use of travellers cheques in appropriate foreign currencies. Perhaps more significantly, he had been for a time associated with Mr Teicher and his brother-in-law in a small importing business which purchased clothing made in Hong Kong for sale in Australia. It also sought to import merchandise from Romania. The operation of the business in involved the opening of letters of credit, in the usual way, to enable payment for the imported goods in the currency of the country of purchase. I am satisfied, on the evidence, that Mr Spice, although being generally aware of the basis of these transactions, did not, himself, play any part in actually establishing the letters of credit. I am satisfied that at the time when he first became interested in the question of foreign currency loans in respect of his real estate business, his knowledge of foreign currency matters was fairly rudimentary. He knew that it was possible to make use of foreign currency and that to do so involved risk of adverse movement of the exchange rate. He regarded this as "axiomatic". In this, he merely evinced the knowledge of any reasonably educated person. I am satisfied, however, that he had no knowledge of the extent of the risks involved in the borrowing of foreign currencies or of the sophisticated techniques of risk management which have been the subject of evidence in this case. His only connection with anything approximating such techniques was during his days in the importing business when, apparently, the question of forward buying of foreign currency to meet a future commitment in that currency was discussed between himself and his partners on what would appear to be only one occasion. On that occasion he opposed it. Mr Spice was cross-examined about these early contacts with foreign currency dealing but, in my view, there emerged no significant indication of any worthwhile prior knowledge of such matters on his part.
It appears from the evidence that Mr Spice had heard of the existence of off-shore loans in the course of his legal practice but had no understanding of how they operated and had gathered no experience of them. He said that they came within the category "of things that were too good to be true".
The evidence satisfies me that Mr Spice became interested in the question of taking an off-shore loan for the purposes of his business in early 1985 when the roll-over date of his current commercial bill loan was approaching. He knew a Mr Paradis who was, apparently a successful real estate investor and developer. He had known him as a past employer of Mr Teicher and a client of Mr Spice's firm in his days as a solicitor. He had considerable regard for his business acumen which was apparently demonstrated by his commercial success. Mr Paradis told Mr Spice that he had the previous year borrowed a sum in Swiss francs at a low rate of interest through Westpac. Mr Spice was not informed as to any specific details of the loan arrangement by Mr Paradis but the conversation, as he said in evidence, prompted him "to think that if a very capable and cautious man like Mr Paradis like I knew him to be, would be involved in that sort of thing then I should at least find out for myself what it was all about." Spice then spoke to a friend who was, apparently, an academic economist, but was unable to obtain any information. He also spoke to a Mr Cameron who was a mortgage broker with whom he had some dealings as a solicitor. He had a telephone conversation with him in which he asked about foreign currency loans. He was told there was no problem about them if he went about them the right way, that there were two currency markets, London and Singapore, and that most people were "going for Swiss francs". Mr Cameron told him that he charged a brokerage fee of 1% and that he could introduce Mr Spice to a bank manager who could handle the matter for him. I am satisfied that Mr Spice formed the view fairly quickly that Mr Cameron was seeking to acquire him as a client and that, if it were only a question of approaching an appropriate bank manager, he would prefer to deal with his own bank rather than one of Mr Cameron's choosing. By doing so he would be dealing with a major trading bank of which he was already an established customer, and in which he reposed trust; he would also be saving the 1% brokerage fee. I am confident that Mr Spice made this commercially oriented decision early in his conversation with Mr Cameron and consequently terminated the discussion before any detailed consideration of off-shore borrowing and its risks could occur. Mr Spice stated in his evidence, which I accept, that his reason for going to Westpac after speaking to Mr Cameron was that "it was only a matter of seeing one's bank manager and I figured I already dealt with Westpac whom I knew to be experts in all fields of banking including foreign currency and I thought the obvious thing to do was to see them."
I am satisfied, accordingly, that at the time Mr Spice approached his bank manager Mr Lee, he could properly be described as quite unsophisticated in the matter of overseas borrowing. The evidence also satisfies me that Mr Spice was an intelligent person with legal training but whose practice had not involved him in matters appertaining to overseas finance; that he was by nature careful, cautious, and not given to risk taking. He had built a successful but modest real estate investment business from small beginnings by dint of local borrowing and wise investment. Increasing interest rates on Australian borrowings were obviously a source of commercial irritation but not of grave concern. Whilst the borrowing of money required for the business at significantly lower interest rates was attractive to him as it would have been to any business man, he was under no commercial necessity to make such a borrowing. I am quite satisfied that he would have continued with his high interest on-shore borrowing rather than take any significant risk of substantial loss through borrowing in foreign currency. I am also satisfied that nothing he had heard on the topic of off-shore borrowing had suggested to him the existence of substantial as opposed to acceptable risk.
Moreover, the branch of Westpac of which he was a customer, the Liverpool and Castlereagh Street branch, was a large and important one dealing extensively with commercial customers. Mr Spice was a fairly long standing customer and had had prior dealings with the manager Mr Lee who was, quite clearly, a senior bank officer in a highly responsible position. I am satisfied that Mr Spice shared in the general public perception of Westpac as a major Australian financial institution, with a long historical tradition of providing sound conservative advice and assistance to its customers. Finally, I am satisfied that Mr Spice, although his interest had been aroused by the information he had received as to the low interest benefits of borrowing in Swiss francs, was by no means persuaded he should enter into such a loan. He denied the suggestion put to him in cross-examination that he had made a decision to seek such a loan after discussion with Mr Cameron and that, in approaching Westpac, he was merely seeking to avoid the payment of the brokerage fee. I accept that denial. I formed the view that Mr Spice had an open mind on the subject when he approached his bank manager and, if anything, was inclined to be sceptical about the benefits of such a borrowing.
Before I consider the evidence relating to the conversation between Mr Spice and Mr Lee on the 9th of January 1985, it is convenient to refer to evidence indicating the state of knowledge within Westpac of foreign currency loans, their ramifications and risks. The evidence, in this regard, is largely provided by documents produced on discovery and tendered in the case.
Exhibit T (1), consists of minutes of a meeting of a committee described as the Advance Policy Committee of the Bank held on the 12th of October 1981, as they are set out in a memorandum to the Chief State Manager N.S.W. Division. The document refers to the discussion at the meeting of the topic of off-shore loans. There is an indication that it was felt that "this form of lending does not contravene RBA guidelines and that we now should expand our financing via this medium". A fresh Policy Manual page was to be prepared. The principal lending guidelines were "Borrowers to be of sufficient standing to warrant access to this type of financing; generally amount borrowed is to be no more than 50% of the value of acceptable security/Chief Managers to have discretion to approve proposals outside this guideline; hedging is to be mandatory except that Chief Managers may waive at their discretion: this form of lending may be provided for any reasonable purpose, including investment: lending is to be centralised in each Chief Manager's office."
A memorandum to the State Manager Lending from the assistant to Manager Legal (Research) of the 27th of July 1983 makes suggestions in relation to documentation for off-shore loans. One is that letters of approval in relation to future loans contain the following paragraph:-

"'In addition, Branch Manager is to ensure that the following action is taken prior to acceptance of the loan by customer:-

(a) the significant foreign exchange risk being undertaken must be fully explained to borrower(s) in the presence of two officers and these officers are to sign an appropriate diary memorandum to this effect.' The suggestion is also made that a written acknowledgement be obtained from the borrower in a form indicating full understanding on the part of the borrower of 'the significant exchange risk being undertaken in this transaction.'"

On June the 28th 1984, in an internal memo from the Chief Manager Retail Lending to the Treasurer International Division on the subject of off-shore loans Singapore (exhibit T (6)) reference is made to the growth of such loans and to the fact that the bulk of them are un-hedged. The memo states "Our question here is to what extent we need to consider this aspect. As we see it the key here is the lending decision and that the borrower is aware and can contend with the risk. However, our policy has changed over recent times to un-hedged being the 'norm' rather than hedged and without having explored/or knowing the full ramifications this leaves us with some unease." Attached to this memo is a document apparently intended to form part of a manual. It provides, under the heading of "Customers Acknowledgement" that "prior to acceptance of the loan the customer is to provide a written acknowledgement covering his acceptance and understanding of:- The significant exchange risk being undertaken."
Other memoranda in exhibit T sound notes of warning as to the increase in off-shore borrowings and their un-hedged nature and whether personnel are sufficiently versed in this area of borrowing to provide information and assistance. On the 3rd of August 1984, the Chief Manager Retail Lending forwarded a memo to the Chief State Manager Queensland on the subject of off-shore lending (exhibit T (10)) in which concern was expressed in relation to "Lending to Unsophisticated Borrowers" in the following terms: "Whilst it is appreciated that much emphasis is placed on explaining risks involved, we are concerned as to whether our follow-up monitoring is adequate . . . . Does the unsophisticated borrower really appreciate the risk and can he cope with the possible consequences? Whilst Swiss Franc trends have been favourable of late there was a six month period in the early 80's where the effective borrowing rate was 45% and no doubt you are aware of this - obviously it could happen again."
In the same exhibit, a memo from the Manager International Business of the 3rd of August 1984 to State Manager Lending, reference is made to "off-shore lending through Singapore" being "an excellent product which has been selectively and successfully used in this Division. It has proved to be a good avenue for gaining business from our competitors." The memo goes on to the effect that there is growing competition and demand in the market for off-shore facilities and that merchant banks and the ANZ and NAB have been active. Mention is made of the provision of "greater expertise to customers" and to the fact that the bank does not "manage" the loans, an area "where we are finding some merchants/brokers are honing (sic) in on customers". The memo advocates a co-ordinated approach to the product in Australia and a central point of control stating that "as it stands, each Division does its own thing in terms of hand-out material/guidelines etcetera."
It is clear that throughout 1984 and into early 1985 consideration was being given at top level in the bank to the provision of new policy guidelines apparently to be included in official lending manuals circulated to the branches. On the 23rd of January 1985 the Chief Manager Retail Lending in a memo to the Chief State Manager Queensland Division refers to the Division's currently having before it for consideration, "new policy guidelines relative to off-shore lending." He expresses the hope that the guidelines would be finalised shortly together with a detailed management information system. He makes the following further comments:-

"Looking back over the past six months borrowers of Swiss Franc are well placed and this will presumably lead to an escalation of outside advice to borrow offshore and enquiries will, no doubt, increase.

It may be that the margin to be gained on the Swiss Franc has run its race; nevertheless many prospective borrowers will be expecting the same success as those that borrowed six months ago. Your international people are kept appraised of expected currency trends and no doubt keep your lending unit fully informed. However, expected trends do not always eventuate and the need for offshore borrowers to have the resources to cope with exchange losses is essential. The following statement by a financial analyst was recently noted. 'A low interest rate on hard currency borrowings is invariably matched by extraordinary losses on borrowings'.

We see it as timely to sound this warning note and to ensure judgement is not clouded as to the real risk in offshore borrowings by pressures exerted due to favourable exchange rate movement of the Swiss Franc during 1984."

I infer that the views expressed in this memorandum were the subject of current debate at least in the higher echelons of the bank during the period when the applicant was approaching the bank in relation to the Swiss Franc loan which he ultimately drew down on the 7th of March 1985.
There are also in evidence extracts from the bank's lending manual relating to offshore loans from 1980 onwards. Exhibit 1 contains some of these documents. The manual current at February 1980 (Exhibit 1 p259) refers to the Euro-dollar market and indicate that loans in these currencies "are generally limited to first class Australasian/overseas names with priority for proposals associated with Australasian trade and/or economic development. Exchange risk was simply stated to be "for borrower's care." It may be clearly inferred that as at this stage loans were contemplated as being made only to individuals or corporations well able to understand and cope with them.
By June 1982 it would appear that these directions had been superseded by a document containing fresh directions (Exhibit 1 p260). There has been an easing of restriction on the range of borrowers which is now limited only by the words "Companies Preferred". In relation to "Foreign Currency Exchange Risk" the direction is given that "Potential borrowers should be made well aware of the exchange risks involved and advised to seek hedging facility available from the Bank". It is also stated that; "Cover of the borrower's exchange risk is available in most circumstances through the Bank . . - cost/benefit for the borrower's account. Borrowers should be made well aware of the benefit of such a service and in many instances, it may be prudent to make such cover a pre-requisite of the facility being approved."
"Interest Rate Risk" is treated as being "for the borrower's account "and it is said that" the volatile nature of foreign currency interest rates should be clearly explained to our customers".
Further directions were issued in January 1984. The evidence establishes that these were the directions current and known to Mr Lee at the time of the transactions with the applicant. The directions in relation to "Borrowers" and "Foreign Currency Exchange Risk" and "Interest Rate Risk" are unchanged.
It may be noted that the phrase "The significant foreign exchange risk being undertaken" referred to in the memoranda set out above did not find its way into the directions ultimately contained in the official manual.
It is convenient to mention, at this point exhibit B, although this document did not come into existence until the 12th of June 1985. It clearly constitutes the new set of guidelines referred to as being under consideration in the memoranda of 1984. It consists of a draft circular to go to all branches in relation to off-shore commercial loans and also of fresh pages to be placed in the Official Lending Policy Manual and Methods Manual Lending. The draft circular contains the following statement:-

"The substantial growth in lending of this nature in the past two years has seen many less sophisticated borrowers entering this field. With the recent depreciation in exchange rates many borrowers have been placed in a difficult position both in meeting interest and, potentially, in clearing their ultimate debt. To protect both the bank and its clients, all lending areas assessing proposals will be adopting selective policies aimed at insuring future borrowers have:

. . .

appreciation of the additional risks involved."

The substituted pages contain a standard form of offer letter to the customer which contains a most detailed warning notice in relation to foreign currency loans. Borrowers are advised to take professional advice in respect of such risks and it is indicated that "the Bank accepts no liability whatsoever for any advice or suggestions that any of its officers may make in respect of any interest rate or exchange rate movements or otherwise on or in respect of foreign currency lending." As two of the matters on which the borrower may require his own professional advice reference is made to "exchange risk", with the indication that "unless the borrowing is hedged losses 'in Australian dollar terms' may be incurred by a borrower as a result of adverse exchange movements". As to "interest risk", it is stated that "this cost cannot be controlled by the Bank and may rise significantly from time to time."
A number of other documents were tendered from Westpac's discovery (eg exhibit C,D,E and F-H) which indicate that there was material in the possession of the Bank which indicated views of varying degrees of strength, in January and February 1985 that the Australian dollar, after having been relatively stable against other currencies in 1984 was heading for instability in 1985. Other documents refer to foreign exchange risk and methods of management and litigation. I shall not refer, at this point, to the detail of any of these documents.
Against this background I turn to consider the evidence relating to the critical conversations between Mr Spice and Messrs Lee and Geddes which are referred to in the pleadings.

Mr Spice gives evidence of seeing Mr Lee by appointment on the 9th of January 1985 at his office in the branch. He gave evidence of the conversation between them in the following terms:-

"I said: Barry, I have heard for many years of people borrowing foreign currency loans at ridiculously (low) interest rates. They always seem to be too good to be true. Now I have heard of another one of your customers who has taken such a loan, what is the catch? And he said without hesitation: There is no catch. I think it is very much the thing to do. There are two foreign currency markets - again I cannot remember if he said London, I think it was London - London and Singapore. The bank would borrow on your behalf through Singapore and add its two per cent profit margin. The interest rate is about five per cent together with that two per cent and you have to reimburse the withholding tax which is another half a per cent, making seven and a half per cent. You can borrow for three or five years. I would suggest you borrow for five years which is a long time and that is the way to take this sort of loan. There are rollovers every three or six months at your option. You can change the currency at each rollover but you can only have one currency at a time unless you were to borrow more than a million. Did you ask Mr Lee any question then? HIS HONOUR: I think you wanted to add something did not you say?

THE WITNESS: Well there is much more to the conversation: There is an establishment fee of half a per cent and you would have to pay the Singapore solicitors fees of about $900. They are both one-off items. Then I asked: Is the interest payable in arrears. He said: Yes. And I asked: What currency should I borrow. And he said: You would only think of borrowing Swiss francs, they have the lowest interest rate but why do not you speak to Ces Geddes about it, he is our expert in these matters, he will tell you whether it is Swiss francs you should borrow. I will just give you his phone number. He have me his phone number and he said: He is our international business manager; and I wrote in the margin of notes I had with me Mr Geddes name, phone number and his designation. And I said to Mr Lee why do not they bring it in themselves and lend it at 14 per cent and he said: No, they cannot do that. And he said: Just lately I have noticed people getting out of foreign currencies but I cannot see any reason for that. Then he said: I will just bring your details up to date. He had my file on his table as was his custom and he said: We have already got security over the Healy Street property but we will need more than that. I think I then volunteered: What about 12 Murdoch Street and he said: Yes, that looks as if it will be enough but I will have to get the local manager to go and have a look at it. I will get that underway now. Then he said: After you have spoken to Geddes give me a ring if you intend to go ahead and I will get the application in. I think you should borrow for five years, that is a long time. He repeated that from earlier and he again said - perhaps I did not say this earlier: The exchange risk is yours. Earlier on in that first group of things he told me about the loan. He said: You have got to repay the loan back in Swiss francs and you have got to pay the interest rate in Swiss francs, the exchange risk of course is yours. It was that latter phrase that he repeated towards the end of that interview and I think that is all he said on that occasion. MR PALMER: Did you ask any questions at that discussion? --- Only the questions I have just indicated. I am sorry there is something else. I said to him earlier on: I notice that the Australian dollar is depreciating, is that only the reverse of the US dollar gaining in value and he said: Yes, that is just because you are seeing the other side of the strengthening US dollar. The currencies in the basket of currencies move together with the Australian dollar against the US dollar.

Now what did you understand by that statement? --- Well I understood that first of all the Swiss franc was included in the basket of currencies including the Swiss franc that there was a certain stability between the Australian dollar and the Swiss franc and that these all moved as he said specifically against the US dollar. I cannot think that I understood anything much more from it."

Mr Spice was then asked whether he made any note of what Mr Lee had said. He replied by saying:-

"Yes I took with me a sheet of notes with questions on to ask him and I made notes on another page, perhaps not contemporaneously, those notes on that first note page were certainly contemporaneous. That is at the discussion - - ? --- At the discussion as he answered me I jotted them down."

The notes and typed copy became exhibit L.
The significant features of this evidence, for present purposes, are firstly the assertion that there was a representation that there was "no catch" in a foreign currency loan: Secondly, Mr Lee's expression of opinion that the taking of such a loan was "very much the thing to do": Thirdly, that a five year period, being a long time was "the way to take this sort of loan": Fourthly, that Swiss francs should be borrowed as having the lowest interest rate: Fifthly, that Mr Spice should speak to Cec Geddes on the question of whether Swiss francs should be borrowed, he being "our International Business Manager": Sixthly, that he could see no reason why people were getting out of foreign currencies: Seventhly, that the exchange risk in relation to repayment of principle and interest would be the applicant's, this warning being repeated towards the end of the interview: and eightly that the currencies in the basket of currencies including the Australian dollar moved together against the US dollar.
It is also to be noted that according to Mr Spice's version, Mr Lee said nothing to him about the necessity or desirability of hedging, nor did he elaborate in any way on the nature or extent of "the exchange risk". Mr Spice also described what had occurred as amounting to an "enthusiastic recommendation" on the part of Mr Lee and that Mr Lee had "expressed himself without reservation and with great enthusiasm". He also said that he believed that Mr Lee had given him "the advice of an expert".
Mr Spice also gave evidence on more than one occasion that after leaving Mr Lee he realised that he had not enquired as to the history of the exchange rate between the Australian dollar and the Swiss franc, that that fact made him uneasy about taking out the loan and that this was something that he needed to clarify with Mr Geddes. I am satisfied that the effect of his evidence is that subject to satisfying himself on this matter he was prepared to accept what he regarded as a recommendation from Mr Lee, his bank manager.
Shortly thereafter Mr Spice had a telephone conversation with Mr Geddes which I shall refer to later. I shall first consider the evidence of Mr Lee and other matters bearing upon my decision as to what representations were in fact made by the bank manager to Mr Spice.
Mr Lee, who is now retired, joined Westpac, then the Bank of New South Wales immediately on leaving school in February 1942. He spent all his working life with the Bank. He achieved managerial status in 1964 and became the Manager of the Liverpool and Castlereagh streets branch in 1983 in which position he remained until his retirement in December 1986. The branch was the third largest Westpac branch in the City of Sydney. At the time he saw Mr Spice in relation to the loan the subject of this litigation there were approximately forty current off-shore loans in the branch and he himself had dealt with a number of the applicants for those loans. He was familiar with the provisions of the manual, current at the time, to which reference has been made above. In his position he was also fully aware of the existence of the bank's International Business Centre which operated in the South Sydney area. He knew Mr Stewart as the manager of that centre and also Mr Geddes whom he regarded as Mr Stewart's first assistant. He had contact with each of them on a regular basis. If Mr Stewart was not available he would speak to Mr Geddes. The reasons for so doing he explained as follows: "They managed a special area of foreign currency dealings, both trade and loan, and if we had queries where we felt we had to refer to higher authority we would do so."
Mr Lee regarded himself as a specialist in lending of all currencies local and overseas, but more particularly in the Australian dollar. It is clear from his evidence that he had personal reservations about the wisdom of borrowing in overseas currency. He would express those reservations to clients that he regarded as "close" by telling them that if it were his own decision he would not go into an off-shore loan because of the risk of exchange rate fluctuations. In the case of customers who did not fall into the "close" category, such as Mr Spice, he did not make these observations as he did not think it was his position to do so. He recollected that he had seen Mr Spice on at least one previous occasion in relation to borrowing. As at the 9th of January 1985 he was aware that Mr Spice had not entered into any previous overseas borrowing. He indicated that he did not make any recommendation to Mr Spice as to his taking an off-shore loan and that, although he was always enthusiastic in his support of an appropriate customers application he never evinced enthusiasm in respect of the taking of off-shore loans.
His version of the conversation with Mr Spice is that Mr Spice said to him "Mr Lee, I am looking at the possibility of taking an off-shore loan to re-finance my existing debts. What is involved?" He says that he responded as follows:-

"I said, Mr Spice, you can borrow in a number of off-shore currencies including yen, US dollars, pounds sterling, Swiss francs and Deutschmarks. The bank is the principal in this area and borrows through its Singapore office and on lends to you in Australian dollars the Australian equivalent. The bank takes security in Australia over your Australian assets and charges you an establishment fee of half of one per cent on a once only basis. It charges you a margin of about 2 per cent above the borrowing rate of the currency you select. You may also be committed to withholding tax, which is a figure of 10 per cent of the interest cost. A borrowing is generally to the terms 3 to 5 years. The exchange risk is for your care and a side letter will be prepared in Singapore for your perusal acceptance and signature." I also mentioned that the cover that the bank would require in the form of freehold security - I think I recall 75 per cent of a managers value, which is generally 90 per cent of market less a further 10 per cent which the bank applied to cover the exchange risk. I mentioned also that the bank would be prepared to accept a reputable valuers market value and further discounted on similar lines, I think adding another 15 per cent in addition to the 10 per cent for the exchange risk."

Mr Lee also said that Mr Spice asked questions, took notes and "was very searching in his enquiry as to off-shore loans". He could not remember any particular subject of questioning.
Mr Lee recollected suggesting to Mr Spice that if he were to proceed with off-shore borrowing it would be to his advantage to take a Swiss franc loan because of the lower interest rate, and of telling him what the interest rate and the bank's margin would be, namely 5 per cent plus 2 per cent, a figure which he thought he contrasted with the 11 per cent then applicable in relation to sterling and US dollars.
In answer to a question whether he remembered Mr Spice asking about foreign currency exchange rates he replied that Mr Spice was searching in his enquiry which prompted his suggestion that he meet with "our foreign exchange people from International Business Centre", who are specialists in that area and had access to the sorts of questions he might like to ask, the particular area being foreign exchange currencies and the risk, interest rates." He sought to make telephone contact with Mr Stewart in Mr Spice's presence. He was unable to do so. He was also unable to contact Mr Geddes who was, apparently, temporarily unavailable. He gave Mr Spice Mr Geddes's telephone number and later, when Mr Geddes phoned back he gave Mr Geddes Mr Spice's telephone number.
He stated that to his knowledge Mr Spice did not ask him any questions about foreign exchange rates or movements. He obtained information from Mr Spice as to his current financial position and earnings and gave him particular information about the conditions of an off-shore loan, as to roll-over periods, the bringing of the loan on-shore on thirty days notice at a roll-over period, the fees applicable, the option to switch currencies at roll-over periods, right of early re-payment and the like.
In relation to the specific question "do you recall Mr Spice saying to you towards the beginning of your conversation, "Barry I have heard for many years that Australians are borrowing foreign currency at ridiculously low interest rates, what is the catch?" He replied "I do not recall." He was then asked "Do you recall saying to him words to this effect, "There is no catch. It is very much the thing to do?" To which he replied "I would not have said that."
In light of his previous answer I regard this latter answer as being, in effect, responsive to the question whether he said the words "It is very much the thing to do." It must be noted that, even so, the answer does not operate as a firm denial of his using these words.
In general terms Mr Lee agreed with those portions of Mr Spice's version of the conversation which related simply to the terms of the off-shore loan under discussion either by way of direct recollection or agreement that those things would probably have been said.
In answer to the question whether he had said to Mr Spice "Just lately I have noticed people getting out of overseas currency loans but I cannot see any reason for that" He replied "I do not recall that statement but I was aware at the time of one customer whose name eludes me that had brought back his off-shore loan into local currency." He could not say how long this was before his meeting with Mr Spice.
He said that he did not recall any question by Mr Spice in the terms "I notice the Australian dollar is depreciating in value. Is that only the reverse of the US dollar appreciating?", but that, if it had been asked, he would have answered on the basis of each individual currency being affected by markets and trade situations and the like.
He denied saying anything to Mr Spice to the effect that the Australian dollar was included in a basket of currencies with the Swiss franc. He was, however, aware that at the relevant time, the Australian dollar was compared with a basket of currencies by way of arriving at what was known as the trade weighted index. He did not recall mentioning anything to Mr Spice about baskets of currencies. He knew that in early 1985 the Australian dollar was de-regulated, not subject to monetary controls and was in a floating situation.
Mr Lee said in relation to his receipt of financial information in the Bank, "We used to get several publications, a quarterly economic review, a monthly review. They came in at rapid rate, and I used to peruse them, yes, very often take them home with the Financial Review and the Herald financial papers." He read these latter publications on a regular daily basis.
It is to be observed that Mr Lee, in giving his recollection of the conversation, set out above, gave no indication of recalling anything said by him to Mr Spice on the subject of "hedging" or any other loss-control techniques. This accords with Mr Spice's evidence. Failure to discuss the topic of hedging was a breach of the directions in the manual which have been set out above. Mr Lee gave evidence that it was his practice to mention hedging facilities when discussing off-shore loans with potential borrowers. He also gave evidence that it was the bank's policy that this should be done. He further indicated that had he mentioned hedging he would have also mentioned that "the cost of hedging may well have equated to the cost of local borrowings."
Mr Lee also stated that on occasions he raised the subject of the management of off-shore loans with perspective borrowers, although this was not a matter of practice. He was aware that the bank itself provided no management facilities in respect of off-shore borrowings. It is reasonable to assume, in these circumstances, that on occasions when he mentioned the subject of management he would have pointed out to a potential borrower that the bank provided no such facility. He would also have indicated, at least in rough outline, what was involved in "management".
Mr Lee made a bank diary note of his interview with Mr Spice on the 9th of January 1985 (doc 3 exhibit 1.). It is of a fairly formal nature and throws no light on the substance of the conversations other than indicating that Mr Spice was introduced to the foreign exchange dealers to make "enquiries" through this area.
I am satisfied that Mr Lee, as a competent Senior Branch Manager in an important branch dealing with commercially oriented clients, was well aware of Westpac's requirement that the intending off-shore borrower be made fully aware of the risks involved in such a borrowing and also be informed of the existence of hedging and the like facilities and of the prudence of using them. I am also satisfied, on his evidence, that he made a practice of providing information to intending borrowers in conformity with the banks requirements. However, I am quite satisfied that on this occasion he did no more than indicate to Mr Spice that the exchange risk was his. He did not expand on the nature of the risk or its extent, nor did he deal with the subject of hedging or other forms of risk management. His answers to interrogatories and his evidence in relation to those answers satisfy me that he made no mention of these matters on this occasion. I have come to the view that when Mr Spice commenced to ask what Mr Lee regarded as "searching questions" and was seen to be taking notes of the discussion, Mr Lee fairly quickly formed the view that it was appropriate that Mr Spice be put in touch with Mr Stewart or Mr Geddes so that he might obtain the desired information from one or other of those gentlemen who Mr Lee regarded as appropriately expert. When questioned, in cross-examination, as to whether he had made mention of such matters as hedging, forward cover, monitoring, or stop-loss procedures, Mr Lee answered that that was "precisely the reason he was introduced to Mr Geddes who was a specialist in that area". He further stated that when Mr Geddes phoned him he asked him "to fully explain to Mr Spice the implication and the procedures that were available."
He further said "I had already advised Mr Spice that there was a risk involved in foreign currency borrowings and I repeated to Mr Geddes that he should explain the situation to Mr Spice."
I find that, Mr Lee did not himself embark upon any explanation of hedging or other loss control procedures.
Mr Lee did not see Mr Spice again, at least for the purpose of any discussion, before Mr Spice finally drew down the loan in Swiss francs on the 7th of March 1985. The necessary documentation in relation to the loan was, in accordance with practice, dealt with by the branch. These matters were put in train after Mr Spice had had his conversation with Mr Geddes and had informed the branch that he wished to proceed with the loan. The loan documents contained a "top-up" clause requiring the borrower to provide additional security at the bank's discretion should the debt-security ratio deteriorate to a point where additional security was required. Additionally, before entering into the loan, Mr Spice signed a copy of a standard letter of offer (Doc 15 exhibit 1.) indicating his acceptance of the terms and conditions of the letter, one of which was "foreign exchange risk to be for borrower's care". He also executed an acknowledgement document annexed to the bank's off-shore loan facility letter (doc 35 exhibit 1.), by which he acknowledged that he was "aware that the letter requires the payment of principal and interest and other amounts in foreign currencies and that this may involve exchange losses or gains by me."

For the purpose of a determination as to what was said between Mr Spice and Mr Lee on the 9th of January, it is necessary, in addition to matters already referred to, to have regard to the evidence relating to a conversation between the two men on the 10th of September 1985. This was a date upon which the first payment of interest was due on the off-shore loan. Because the Australian dollar had fallen quite dramatically against the Swiss franc over that six month period, the amount of interest payable was considerably higher than it would otherwise have been. The potential capital repayment had also increased considerably. Mr Spice, at the suggestion of Mr Lee, had attended, in company with other off-shore borrowers of the branch, a seminar conducted by Westpac. This had taken place in July. Mr Spice had interpreted portions of an address given by a Westpac economist, Mr Hewer, as indicating that at the time he was dealing with Westpac in relation to entering into the loan, Westpac was well aware that the Australian dollar would weaken significantly against the Swiss franc in 1985. He took the view that this information should have been made available to him, with the result that he would have refrained from taking the loan.
It is clear that at the conversation on the 10th of September, Mr Spice made it clear to Mr Lee that he was contemplating bringing an action against the bank. Mr Lee made a diary note of this conversation (doc 71 exhibit 1.). It reads as follows:-

"Mr Charles Spice called and left instructions for proceeds of I.B.D plus interest to be put into his current account. He then went on to a more serious matter, in relation to Off-Shore Loan approved 24.1.85 at that time of A$800 equivalent (sic), advising:-

. he acknowledged that at the time the Off-Shore Loan was negotiated that I had warned him of the pitfalls in Off-Shore borrowings relating to movements in exchange rates and that, . we had arranged for him to meet our Foreign Exchange dealers before he decided whether commitment was to be taken up. . He did state that at the time he was negotiating the loan I appeared enthusiastic and that I observed that with the loan having 5 years to run, any downward movements in exchange rates may well be offset by favourable interest rates to his ultimate advantage.

. He then indicated that he was considering a possible action against the Bank on the basis that the Bank - not the branch - should have warned him that in its view the Australian Dollar would weaken against US Dollar.

. He claims to have knowledge that it was the Bank's view to this effect a that time. I informed Mr Spice - the meeting was quite amicable - that in my view in the present scene it would be impossible for any instrumentality financial or government, to forecast in this area with any real accuracy. Certainly warnings handed out by branch would be about the maximum any borrower could expect to receive. Finally, he parted indicating in view of the above advices it seems that he should not be called on to pay the additional $8 (sic) Australian equivalent in interest due today on the off-shore borrowing totalling A$42,218.19. I, in turn, informed Mr Spice that the interest was due and payable and expect him to meet this obligation.

Mr Lee gave evidence in conformity with this note. Mr Spice's evidence is not significantly different except as to matters of expression.
The respondent relies upon this conversation and its record as indicating that the applicant was made aware on the 9th of January conversation as to the risks related to off-shore borrowing and as tending to negate the claims made in this litigation that Mr Lee had himself been guilty of misrepresentation or negligent misstatement of those risks.
On the whole of the evidence, however, I am satisfied that the reference to warning of "pit-falls" referred to in the note and in the evidence, the note being obviously somewhat self-serving, refers only to the fact, which is common ground, that Mr Lee on two occasions told Mr Spice that the exchange risk would be his.
The failure by Mr Spice to tax Mr Lee, in this conversation other than with reference to his apparent enthusiasm on the 9th of January and his statement then as to off-setting advantages that might occur over the five year period does not, in my view, cast any significant doubt upon Mr Spice's assertion that he had been told that there was "no catch" involved in the off-shore loan, especially in light of the fact that Mr Lee acknowledged in his evidence that he could not deny that that phrase had been used by him. Mr Spice gave evidence that Mr Lee specifically said in this latter conversation that the branch had no knowledge of any likely significant weakening in the position of the Australian dollar in 1985 at the time of his discussions with Mr Spice in January.
I have come to the conclusion that I should accept the evidence of Mr Spice, for the most part as to what occurred on the 9th of January. In general terms he is likely to have a better recollection, it being a significant occasion for him whereas for Mr Lee it would have been one of a large number of interviews conducted by him with potential off-shore loan borrowers. I do not fail however, to take into account that Mr Lee's attention was drawn to the conversation at a relatively early date after it occurred, as a result of the September conversation referred to above. I also take into account that the note (exhibit L) made by Mr Spice at the time does not refer to the terms "no catch". The note is a disjointed document. It was clearly not intended to constitute a verbatim record of what was said. It is largely an aide-memoire for Mr Spice in relation to matters which he wished to raise at the meeting. Mr Spice has obviously become fairly obsessive about this case, a fact which appeared quite often in his demeanour when giving evidence. However, his insistence that these words were used could not, in my view, result from any mistake on his part. To find that they were not used would involve a finding that Mr Spice was deliberately seeking to deceive the Court. Although, at times, I certainly felt that Mr Spice was being over enthusiastic in the presentation of his evidence, I do not think that he was consciously fabricating his testimony. In the absence of any positive denial by Mr Lee of the use of these words I conclude that they were said.
On the whole of the evidence I find that Mr Lee made the following representations to Mr Spice in the 9th of January conversation. Firstly, that there was "no catch" in foreign currency loans; secondly, that in his view, foreign currency loans were "very much the thing to do"; thirdly, that a long term loan of five years was the way to take such a loan; fourthly, that Swiss francs in his view was the only currency to borrow; fifthly, that Mr Geddes was an expert in the area of foreign currency borrowing; sixthly, that he had noticed people getting out of foreign currency loans but could see no reason for it; seventhly, that repayments must be made in Swiss francs and the exchange rate risk is the borrower's (a statement which he repeated twice).
I am not satisfied that Mr Lee made any representations about the Australian dollar being part of a basket of currencies moving together against the US dollar. I am of the view that some reference was made by Mr Lee to baskets of currencies in relation to the Trade Weighted Index and that, in the circumstances that he had no real knowledge of the area, Mr Spice misinterpreted this statement. I think that, at best, he carried away from this conversation a rather ill-formed idea that he had been advised that in some way the Australian dollar and the Swiss franc moved together against the American dollar. I think that as time went by he formed the view that he had been so advised by Mr Lee. I do not accept that he was. Nevertheless, I accept that he had some hazy concept along these lines in his mind in the early part of 1985.
I come then to consider what representations, if any, were made to the applicant by Mr Geddes in a telephone conversation which I find to have occurred probably the day after he spoke to Mr Lee. Mr Spice has a brief note relating to this conversation (exhibit M). Mr Geddes made no note.
Before considering the evidence directly relating to this conversation and later conversations between the two men, it is convenient to mention the role played by Mr Geddes in relation to Westpac's lending in foreign currencies, as it appears from the evidence.
In the first place, Mr Geddes did not accept the suggestion put to him by the respondent's counsel that he was the assistant manager of the International Business Centre of Westpac in Sydney. He stated that he was the International Business Officer and that he performed "basically an administrative role" which involved looking after the "day-to-day operations, welfare of the less or the more junior officers in the office and, whenever called upon to do so, offering assistance to the bank's international clients involved in international transactions." He stated that the majority of such transactions involved international trade and that he did not perform any lending function himself. One of his functions was to pass on international information to various departments in the Bank, to the Bank's and other bank's customers who rang up enquiring about exchange rates, the availability of currencies and anything to do with international trade, including foreign currency interest rates. As at January 1985 his main source of information was the dealers' comments, which comprised daily telex information from Westpac's foreign currency dealers in relation to the day's currency trading. The dealers' comments were confined mainly to the day in question, and to their expected trading range over that day, mainly in relation to the US dollar. Apart from that his information came from the morning newspapers.
Mr Geddes had performed this type of role in the International Business Centre of Westpac from 1983. He described that Centre as an "intermediary between the branches that made the loans and Westpac Singapore to enable the branches to pass information on to Singapore more easily." Mr Geddes indicated that it was his practice to give information to prospective borrowers of off-shore currency loans, but that it was not common for him to speak to such persons again prior to the draw-down of the loans, at least on his own initiative.
I am satisfied that, whatever the concept Mr Lee may have had of Mr Geddes' status and capacity, he could not properly have been described as an expert in foreign currency loans. As an assistant International Business Officer he was principally concerned with export and import transactions and office administration. He had received no training from the bank in advising or dealing with off-shore currency loans nor had he attended any seminars or educational discussions or programmes in or out of the Bank in relation to such loans. As at January 1985 he was not even provided with the bank's lending manual dealing with procedures for off-shore currency loans. In particular he had not been provided with a copy of the document (exhibit 1. p 261), already referred to, relating to the guidelines governing loans in off-shore currencies. Furthermore he could not specifically recall speaking to any other customers of Mr Lee's branch in relation to off-shore loans prior to his speaking to Mr Spice. In answer to the question, what did he regard his function to be when answering queries from a potential borrower in foreign currency, he said that it was to pass on information as to "the historical history (sic) that was available to us". He further agreed that his functions in relation to off-shore loans at the relevant time could fairly be described as "mechanical functions" and that he was never put forward as an expert in off-shore currencies or off-shore loans. His function was simply to explain to the customers the mechanics of drawing down an off-shore loan.
Notwithstanding this absence of expertise, it is clear that Mr Geddes, in his conversations with Mr Spice, never asserted any lack of personal qualifications to advise, nor did he suggest to Mr Spice that he should seek information elsewhere or otherwise take independent advice. Nor, would it seem, did he inform Mr Lee that he was not in a position to provide the sort of information that Mr Lee, on his evidence, was asking him to provide to Mr Spice.
Mr Spice gave evidence as to his conversations with Mr Geddes as follows. He said that he had certain telephone conversations with him, the first and longest of which occurred either on the day that he spoke to Mr Lee or within a day or so thereafter. He gave the following evidence of the first conversation:-

"I'm Charles Spice. I have been speaking to Barry Lee, the manager at Liverpool and Castlereagh Streets where I bank, about the prospect of my borrowing a Swiss franc loan, and he has suggested that I should speak to you to make sure that it's Swiss francs that I should be borrowing". And he said "Swiss francs is certainly the most stable currency". And I said, "Well, first of all I'd want to know something about the history of it, of the exchange rate". And he said "I have a chart here that shows the history of the exchange rate from 1979 to 1984. It hasn't altered much since then. This should answer your question. If you like I will send you a copy of it". And I said "Yes, I would like a copy of it, please". He then said "I'll just go through the interest rates with you if you like." I cannot recall the details but in general he gave me high rates of interest and low rates of interest on various dates from, I think, 1980 till then on a number of currencies that included, in addition to the US dollar, Swiss francs, Deutschmark, pounds sterling and yen. Then he said "These currencies move together against the US dollar". That was all that he said to me on the subject of the borrowing specifically, but he went on to say that "I will keep in touch with you if you decide to take the loan and keep you advised on matters. The bank likes to keep foreign currency borrowers well advised, and after the draw-down we will keep an eye on things for you and when the next rollover approaches I shall advise you what currency to stay in".

Mr Spice went on to say that he had made a note of the conversation partly during the course of it and, as to the last part of it, he believed, shortly after the telephone conversation finished. The note is exhibit M. It does not purport to be a verbatim account of the conversation. It clearly confirms, however, that there was mention of a five year graph to be forwarded by post and that the situation as shown by it had not altered. It also indicates that there was discussion about interest rates of the major currencies and that Mr Spice was told that the currencies all moved together on exchange rates in relation to the US dollar.
Shortly thereafter Mr Spice received from Westpac a series of graphs (exhibit N). These graphs showed movements in exchange rates and interest rates of the Australian dollar against a variety of currencies. It is clear that Mr Spice was primarily interested in the rates between the Australian dollar and the Swiss franc. He says that after considering the chart of the Swiss franc his residual suspicions were completely overcome and that his state of mind was "one of perhaps mild exhilaration that I had been directed to such a source of finance at such a low interest rate and that all my past suspicions apparently about it were unfounded." He rang Mr Lee on the 15th of January and told him to go ahead with the loan.
Thereafter, Mr Spice says that Mr Geddes rang him on three or four occasions before he drew down the loan. As to all but one, his recollection was only general and to the effect that Mr Geddes would introduce himself as "Cec Geddes", give him some up-to-date information about the exchange rate such as "the Swiss rate is down a bit this morning" and indicate that he was keeping an eye on things for Mr Spice. The occasion which he remembers with greater clarity and which probably would be the closest in point of time to the draw-down of the loan, proceeded, according to Mr Spice's evidence, as follows:-

"He (Geddes) said; "There is a lot of volatility in the market. The rates are all over the place. I think - I do not think you should draw down at more than 2 francs. What I think you should do is buy forward so that you know where you stand". I said to him "what is involved in doing that?" He said, "Well, I can buy forward at a price now which includes a premium and that is the rate at which you will draw down at. Just hold on a moment and I will see what I can do for you". And he went away from the phone and came back a minute or so later and said "There was a parcel that would have suited but I missed it but I will keep trying for you". And I said "Look, I do not think I want to be involved in that. I would rather just draw down in the ordinary course. I am used to making decisions and sticking to them". And he said "Well, that is good if you are able to make decisions and stick to them that is probably why you have done well in business". And that is all I remember."

Mr Spice indicated that this conversation caused him no concern in relation to his drawing-down the loan in the near future. It was not suggested to him by Mr Geddes that he should refrain from doing so, having regard to the state of the market or the apparent future prospects of the Australian dollar against the Swiss franc. He interpreted the word "volatility" as meaning merely that "the rate was going up and down, not down. He would have used a different word if it had been a crash of the dollar."
Additionally, Mr Spice was clear in his evidence that, as with Mr Lee, there was no mention by Mr Geddes in the first conversation or any of the subsequent conversations about there being any risk of a substantial fall of the Australian dollar against the Swiss franc or of the mechanisms of hedging or of management of foreign currency loans. Nor was there any mention of borrowing against a basket of currencies, although this particular matter has not, in the ultimate, assumed much importance in the case.
Mr Geddes could remember only two conversations, which clearly enough correspond with the two recollected in detail by Mr Spice. He made no notes of the conversations.
He recollects speaking to Mr Lee before speaking to Mr Spice. He gives no evidence in contradiction of what Mr Lee said as to that conversation. Accordingly, I am satisfied on the probabilities that he was asked, in general terms, by Mr Lee to provide, as an expert, information to Mr Spice bearing upon the taking of an off-shore loan in Swiss francs or any other available currency.
The commencement of Mr Geddes' evidence as to the conversation with Mr Spice indicated a vagueness which I found to characterise the whole of his recollection. He said "I seem to recall that I introduced myself by name, a shortened form of my christian name, Cec Geddes from the International Business Centre, City South . . and I seem to recall that Mr Spice mentioned that he was looking at the possibility of borrowing off-shore". He went on "As far as I can recall, Mr Spice indicated that if he were to borrow off-shore he was looking for a stable currency and I mentioned that the Bank made these loans in five currencies, the five major currencies generally which were the US dollar, Swiss franc, deutschmark, Japanese yen and sterling . . . . I mentioned to him that I considered the US dollar was possibly - the interest rates on the US dollar were too close to the Australian dollar to make it the most favourable currency to borrow at the time" (he recollected that Mr Spice was looking for a currency with a favourable interest rate).

I am therefore of the view that the provision of the graph by Mr Geddes, without any accompanying words of real explanation or admonition did nothing to cure the false impression of insignificant risk produced by Mr Lee's statement. In fact, it served to increase it.
I am also satisfied, on the basis of expert testimony which I accept, that it was incorrect and unreasonable on the part of Mr Lee and Mr Geddes to describe the Swiss franc as being the most stable currency for borrowing purposes. The factors which I have referred to above should, at least, have led to some qualification of that statement as they were all capable of pointing towards an imminent re-adjustment in the exchange rate between the two currencies.
I turn to consider, in relation to the question of breach, the failure of either of the bank officers to refer to "hedging" and other risk management techniques. Was it incumbent upon an advisor of a potential borrower at the beginning of 1985 to mention these matters and provide some explanation of them? Obviously there would be circumstances where an advisor could come under no obligation to do so. The law could never require that he enter into a set form of lecture on the subject, on pain of being found negligent if he omitted some aspects. Clearly the reasonably perceived state of knowledge of the enquirer as to these matters would determine whether the matter was broached at all, or if broached the extent to which it was pursued. Again, this is not a case where it is suggested that the only element of negligent advice was a failure to embark upon a reasonable explanation of these matters. Primarily the case is one of a positive misrepresentation, supported by a misleading graph, the dangerous consequences of which were unmitigated by any reference to risk management. The question whether a failure to mention these matters, standing alone, would be sufficient to establish negligence in an advisor of an unsophisticated borrower must await decision in an appropriate case.
In this case, I am satisfied that it would have been appropriate to bring to the attention of Mr Spice, an obviously concerned potential borrower, all matters that would demonstrate the potential size of the financial risk, should things go wrong, and also the nature and difficulty of the steps and decisions that he would have to take in order to deal with the risk. Having been told that the exchange risk was his, in circumstances where that risk, as I have found, was portrayed as being fairly insignificant, the explanation of risk management techniques and the fact that they would not be undertaken by the bank on his behalf should have been perceived, reasonably, as vital information to be communicated to the borrower as part of a reasonably balanced exposition of the subject.
In reaching this decision I have been much assisted by the evidence of Mr Allaway, a Vice President of Citibank Ltd, with considerable experience in the area of foreign exchange borrowings. He was of the view that foreign exchange borrowing was basically a gamble, but that at the relevant period he had not been expecting a major devaluation of the Australian dollar. However, it is clear from his evidence that Mr Allaway in dealing with an unsophisticated borrower would have at the relevant time taken steps to ensure that the borrower was appraised of the fact that an off-shore loan was essentially a gamble which involved taking a long term view of the currency "because it is very difficult, because they are not sitting in the market to manage and monitor a short-term position. They do not have access to information showing second movements on the exchange rate from minute to minute and they do not have access to go into the market to execute."
He would have pointed out to such a customer that he could eliminate his risk "at any point in time by calling up a bank and purchasing the amount borrowed, the Swiss franc amount borrowed, to . . . next roll-over date."
I further gather from his evidence that he would have made sure that an unsophisticated customer realised that data as to the past performance of the Australian dollar exchange rate could not be sensibly used to quantify the extent of risk in the future and that such risk could be "enormous". I am satisfied, further, that, as a matter of practice, he would have gone on to explain methods of protection against the risk. He would have explained hedging, and regular monitoring of the loan "because exchange rates are volatile and if you do not keep a close eye on it obviously if the exchange rate did fall dramatically you could be well out of money without knowing about it."
Also, I am confident that in providing a full and sufficient explanation of what the borrower might have done to mitigate risk he would have explained, though probably not recommended, "stop-loss orders" by which a borrower could eliminate risk at a particular pre-determined point by the buying of an appropriate amount in Swiss francs. The borrower would then have eliminated risk at a particular point but would have the problem "that the next day or the next hour or the next week the exchange may appreciate dramatically" and the borrower would then be faced with the question "do I go back in again? Is the exchange rate going to continue to fall or is it going to continue - or is it going to retrace . . . All you have done is convert your borrowing costs into Australian dollar borrowing costs. If you come back on-shore permanently you have got to come up with cash to pay out the losses." In light of these problems, Mr Allaway indicated to the Court, and, I am satisfied would have indicated to a potential borrower that "stop-loss" procedures were "not commonly used to manage long-term positions."
I have mentioned these aspects of Mr Allaway's evidence in some detail as they have demonstrated to me quite clearly the topics that could ordinarily be expected to arise in the course of what, on the evidence, I would regard as a reasonable explanation of risk associated with off-shore borrowing, in circumstances where a potential borrower seeking advice indicates expressly or impliedly a lack of appreciation of the true risk involved.
I consider that the bank officers, in fulfilling their obligation to advise in the circumstances of this case, should have entered into explanations of this kind. Their failure to do so, at least when coupled with the positive words of encouragement uttered to Mr Spice, constituted a breach of the duty of care. Had these explanation been given, I am satisfied Mr Spice would not have incurred the obligations of the loan. He would have taken a loan in Australian dollars.
I find it unnecessary to consider in detail the causes of action based upon s 52 of the Trade Practices Act (1974). I am quite satisfied that Mr Lee's statement that there was "no catch" in the context to which I have already made ample reference amounted to misleading and deceptive conduct, as did Mr Geddes proffering of the inadequately explained graph and his references to the stability of the Swiss franc in the circumstances, already set forth. I make it plain that I do not find that there was any wilful misleading by either bank officer of Mr Spice, but merely that breaches of the section were committed within the meaning of the authorities. (Gould v. Vaggelas (1985) 157 CLR 215; Henjo Investment Pty Ltd v. Collins Marrickville Pty Ltd(1988) 79 ALR 83; Taco Co of Australia Inc. & Anor v. Taco Bell Pty Ltd & Ors (1982) 42 ALR 177.)
I am satisfied that the applicant is entitled to relief. The question of the form of that relief has presented some difficulty.
In the first place, the time for repayment of the loan does not arrive until March 1990. If an award of damages be the appropriate form of relief, then, clearly, the amount of that award cannot be calculated with accuracy until the moment of repayment. I reject, however, the respondent's submissions that this fact renders the entire question of the applicant's damage as a result of the respondents breaches merely speculative. It was put, in fact, that insofar as the causes of action at common law and under the statute required damage as an essential ingredient, then that element remained unproved in the applicant's case. In my view the evidence quite clearly establishes, on the balance of probabilities, financial loss on the part of the applicant. The applicant's case has been presented on the basis that, had it not been for the respondent's breaches, he would have made a similar borrowing, similarly secured, in Australian dollars. I am satisfied, despite the evidence as to the availability of a loan from the office of the Public Trustee, that more probably the applicant would have borrowed from the respondent on a commercial bill facility. The probabilities undoubtedly favour his incurring a quite substantial loss, crystallising at the time of the repayment as a result of taking the off-shore loan facility rather than the commercial bill.
It is clear, as a matter of common sense, and on authority, that, in considering damages in a case such as this, it is appropriate to consider the measure applied in the tort of deceit. The court determines what the applicant would have done but for the respondent's wrongful inducement and then determines how much worse off the applicant is as a result of entering instead into the impugned transaction. (Gates v. City Mutual Life Assurance Society Ltd (1986) 160 CLR 1). Were I not satisfied that the applicant has suffered damage as a result of the adverse exchange rate movements amply set out in the evidence, I would, in any event, be satisfied that the respondents exercising of its right under the loan facility agreement to require further security from the applicant, as a result of those adverse movements, amounts relevantly to damage. The requirement that the applicant encumber further property for the purpose of complying with this term of the agreement, obviously restricts the applicant's right to utilise his property. This is a right which is valuable in itself (Hopkinson v. Rolt (1861) 9 HL CAS 514; Matzner v. Clyde Securities Ltd (1975) 2 NSWLR 293).
I am satisfied, therefore, that the absence of any crystallisation of the damage suffered by the applicant does not operate to prevent the Court granting relief. Indeed, the respondent has put arguments to the effect that if damages be the appropriate remedy only restricted amounts should be awarded, on the basis that the applicant could have crystallised his loss by bringing the loan back on-shore at any of the stipulated roll-over dates which have occurred since the date of draw-down of the loan. It is submitted that his failure to do so, has the result in law, that any damages accruing to him from that fact result from his own action and not from any activity on the part of the respondent. I do not accept this submission. In the first place I am satisfied, on the facts as found, that it was reasonably foreseeable on the part of the respondent that a borrower, when faced with rapidly declining value if the Australian dollar as against the Swiss franc might well, as a matter of reasonable decision, decide to keep the loan off-shore, in the hope that the exchange rate situation would improve, rather than bring it on-shore at a point of time when significant loss would be thereby incurred. The decision of the applicant to remain in Swiss francs, in these circumstances, could not operate as an intervening cause severing the legal link between the respondent's breaches and the applicant's damage. Moreover, there is no evidence, which, in my view, suggests that at any roll-over period it was other than a reasonable decision to maintain the loan in Swiss francs. It is not suggested that the respondent would have offered advice to the contrary. Moreover, it appears that Mr Allaway, whom I accept as a competent advisor, would not offer firm advice, even at the time of hearing that Swiss franc loans should be converted into Australian dollar loans, where such loan had a significant period still to run. I am satisfied that Mr Spice was and is entitled as against the respondent to maintain the loan in Swiss francs until its termination and seek appropriate relief on that basis.
I think that it is clearly inappropriate, as a way of granting relief, for the Court to attempt some estimate of the amount of actual damage that will be incurred in the future and make a present award of damages on that sum. The possibilities of doing an injustice to either side are obviously great.
Other approaches to the question of remedy have been submitted on behalf of the applicant. It has been put that the Court should exercise powers, said to exist under s 87 of the Trade Practices Act (1974) and s 23 of The Federal Court of Australia Act (1976) to, in effect, "re-write" the loan facility and associated mortgage documents to convert them into documents appropriate to a loan of $800,000.00 Australian at interest rates applicable to a commercial bill facility from time to time from the date of draw-down of the loan to the time of repayment. I have some hesitation as to the Court's jurisdiction to adopt this course. I do not consider it necessary to deliberate on this question, as I am satisfied that a similar result can be achieved by adopting another submission of the applicants, namely the granting of appropriately formulated injunctive relief. In this regard, I am satisfied, on the facts as found, that there exist no discretionary bars to the granting of such relief, provided that the legitimate interests of the respondent are protected in the orders made.
In granting injunctive relief in this case, the Court, must, in my view, seek to achieve the following results. Firstly, save in one respect to which I shall make reference hereafter, the applicant and the respondent should be put in the same position as if the applicant had borrowed $800,000.00 Australian from the respondent for a period of five years, there being no requirement for repayment of principal until the expiration of that period, with interest payable at prevailing commercial bill rates, on the basis of six monthly "roll-overs". Secondly, the rights of the respondent under the loan facility agreement and all security and mortgage documentation provided by the applicant to the respondent should be restricted accordingly. Thirdly, appropriate financial provision must be made to ensure that the respondent receives, so far as possible and in accordance with the justice of the case, appropriate payments of interest. Fourthly, regard must be paid to the fact that interest payments made by the applicant up to and including the "roll-over" date of the 9th of December 1986 were less than he would have been obliged to make had the loan been in Australian dollars at Australian interest rates; the applicant has had the advantage of the use of the money whilst the respondent has been deprived of the use of it. Accordingly, the applicant should not only pay these additional amounts of interest to the respondent, but should also pay interest on those amounts at ordinary commercial rates appropriate to and calculated by reference to the period of time over which the applicant has had and may in future have the use of the money thus outstanding. Although, on one view of the matter, it could be argued that the applicant should be required to make these additional interest payments immediately, as a condition of relief, I think that the proper approach, in the circumstances as found, the applicant having been induced by the respondent to take the Swiss franc loan rather than the Australian dollar loan, is that the applicant have the option of paying these amounts forthwith or at any time in the future up to the termination of the loan, on the basis, of course, that interest will continue to accrue up to the date of payment. Fifthly, some special provision is necessary having regard to the fact that no interest has been paid by the applicant since the ninth of December 1986. The reason for this appears from the correspondence in Exhibit 1. In 1986 the applicant adopted the stand that the bank had been at fault in relation to his entering into the loan and that he should not be required to provide the "top-up" security then required by the respondent. The issue was debated in the correspondence. The point was finally reached that the bank purported to determine the loan in accordance with its provisions, unless the respondent provided the required top-up security together with a written acknowledgement confirming his "liability to the bank in the full amount of the loan as so defined." Although this demand was not made until the 3rd of February 1987, it is clear from other documents, that the bank had been treating the loan as in default, with the result that interest on the principal was accruing on a daily basis, according to a complicated formula rather than on the previous basis of a fixed rate for the six monthly roll-over periods. The claim for this default interest forms part of the respondent's cross-action in these proceedings.
I am satisfied, in the circumstances as found, that the respondent was not justified in pursuing this course. The result of its having done so is that payments of interest, at the lower rate at roll-over dates, have not been made on the due dates. The receipt of these by the respondent would have been inconsistent with the attitude that it had adopted of the applicant's being in default. Clearly these payments must be made as a component part of the increased amounts of interest which must be paid on the basis of the loan being viewed, constructively, as one in Australian dollars. In all the circumstances, however, I do not think it appropriate that the applicant pay interest on the amounts of the outstanding interest payments at the lower Swiss franc rate. For reasons already expressed, however, I do think it appropriate that he pay interest at commercial bill rates, as applicable from time to time, on the amounts constituting the difference between the interest payments at the Swiss franc rate and the interest payments appropriate to the Australian dollar rate. Again, in all the circumstances, I think it appropriate that these amounts be treated as not payable forthwith but as bearing interest until the date of repayment which can be no later than the terminal date of the loan.
It follows that any proceedings for default under the loan agreement and associated security agreements brought by the respondent in the future, should there be any such proceedings, must be restricted to claims appropriate to a principal debt of $800,000.00 Australian and interest obligations as detailed above. It is also necessary to finalise the relief to which I consider the applicant to be entitled, that the respondent be required to accept these payments of principal and interest in full and final satisfaction of the applicant's obligations under the loan agreement and the various security agreements. It follows that the respondent should be required, upon payment of the appropriate amounts to provide written acknowledgement of the discharge of the obligations under the loan and all necessary conveyancing documents to discharge the mortgages granted by the applicant.
In order to give effect to the relief to which I thus hold the applicant to be entitled I make the following orders:-

1. That the respondent be restrained from exercising or enforcing any of its rights under the Loan Facility Agreement between the applicant and the respondent dated the 22nd of February 1985 ("The said Agreement") or under Real Property Act mortgages registered nos. V745473, V425774 and R013074 ("the said mortgages") in respect of the repayment of principal and interest due thereunder, except upon the following terms, namely, that: a) The respondent accept in full and final satisfaction of the obligation of the applicant to repay the principal sum due under the said Agreement and under the said mortgages the sum of 800,000.00 Australian dollars;

b) The respondent accept in full and final satisfaction of the obligation of the applicant to pay interest under the said agreement and the said mortgages interest calculated as follows:- i) Interest to be payable in accordance with the loan facility agreement but on the basis that the principal sum lent was 800,000.00 Australian dollars; ii) Rates of interest to be those appropriate at the stipulated roll-over dates to such a loan made by way of a commercial bill facility of the respondent in circumstances where the borrower is not in default; iii) Credit to be given to the applicant for amounts of interest paid on roll-over dates up to and including the 10th of December 1986; iv) Further interest to be payable by the applicant in respect of the period up to and including the 10th of December 1986 being interest on the amount of the differences between the amounts of interest paid by the applicant in Australian dollars on the said roll-over dates occurring in that period and amounts that would have been so payable pursuant to paragraphs i and ii, the amount of such differences, at the option of the applicant, not to be payable until the termination of the said Agreement, but such interest to accrue until that date or the earlier payment of such differences; v) Interest payable by applicant on roll-over dates since the 10th of December 1986 until the date of termination of the loan to be calculated in accordance with paragraphs i and ii; vi) Further interest to be payable by the applicant in respect of the period from the 10th of December 1986 to the date of judgment, being interest on the amount of the difference between the amounts of interest that would have been paid by the applicant in Australian dollars on the roll-over dates occurring in that period pursuant to the loan said Agreement and the amounts payable as calculated pursuant to paragraphs i and ii, the amount of such differences, at the option of the applicant not to be payable until the termination of the loan but such interest to accrue until that date or the earlier payment of the amount of such differences.

2. The respondent not to exercise any of its rights in relation to any default by the applicant in the payment of principal and interest or in compliance with the terms of clause 13.1 of the said Agreement occurring prior to the date of this order.

3. Upon payment by the applicant to the respondent of the principal sum and interest in accordance with the terms of paragraph 1. the respondent shall deliver to the applicant a duly executed acknowledgement by deed of acceptance of those amounts in full discharge of the applicant's obligations under the said Agreement and duly executed discharges in registerable form of the said mortgages together with the Certificates of Title referred to therein.

4. That the cross-claim be dismissed.

5. That each party have liberty to apply.

6. That the respondent pay the applicant's costs of the Application and Cross-Claim.

[1989] FCA 487

01 SEPTEMBER 1989