St George Partnership Banking Limited v Graeme Webb Investments Pty Limited

[1999] NSWSC 841

CITATION:	St George Partnership Banking Limited v Graeme Webb Investments Pty Limited [1999] NSWSC 841
CURRENT JURISDICTION:	Civil
FILE NUMBER(S):	11201/93
HEARING DATE(S):	21 June 1999 - 29 June 1999
JUDGMENT DATE:	23 August 1999
PARTIES :	Graeme Webb Investments Pty Limited (Cross-claimant) St George Partnership Banking Limited (Cross-defendant)
JUDGMENT OF:	Newman J

COUNSEL :	P Biscoe QC/R Kaye (Cross-claimant) M Slattery QC/R Newlinds (Cross-defendant)
SOLICITORS:	Robilliard & Robilliard (Cross-claimant) Cutler Hughes & Harris (Cross-defendant)
CATCHWORDS:	Banker and customer; Cross action; Negligence; Contract; S 52 Trade Practices Act 1974 ; Negligent misrepresentation
ACTS CITED:	Trade Practices Act 1974
DECISION:	Judgment for the cross-defendant plus costs

THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

NEWMAN J

MONDAY, 23 AUGUST 1999

11201/93 - ST GEORGE PARTNERSHIP BANKING LIMITED v GRAEME WEBB INVESTMENTS PTY LIMITED

JUDGMENT

1    HIS HONOUR: This is a cross-claim brought by a lender against a cross defendant bank which, as the plaintiff in the action, has obtained and executed a judgment for possession. The cross-claim alleges breaches of common law duty, contract, s 52 of the Trade Practices Act 1974 and further alleges negligent misrepresentation.

2    The relevant banker and customer relationship between the parties commenced on 1 June 1989 when the cross claimant (which I shall hereinafter refer to as GWI) executed a mortgage in favour of the cross defendant (then known as Barclays Australia Pty Ltd, hereinafter referred to as St George), over premises at 561-565 Church Street, North Parramatta. The purpose of the mortgage was to secure borrowings. An independent valuation obtained by the bank valued the subject realty at $2,650,000.

3    At all relevant times GWI had interests in a number of companies and was itself controlled by a Mr Graeme Webb. One of these companies, then known as Parramatta Glass and Aluminium Pty Ltd, in 1991 acquired a controlling interest in a glass manufacturer called Advanced Glass Technologies of Australia Ltd (hereinafter referred to as AGTA).

4    AGTA carried on its business from premises at Wetherill Park. Its business involved two important facets. First, it carried out the activity of cutting glass to a particular size. This activity utilised a glass cutting table. Second, and more importantly, it carried out glass toughening which involved the use of a special furnace of Scandinavian origin, known as Tamglass furnace - it being one of the only two in operation in New South Wales. This latter part of AGTA’s operation and particularly the furnace itself, played a significant role in the events which lead to this litigious exercise.

5    In addition to the equipment already mentioned, AGTA had in its possession ancillary equipment and motor vehicles in order to carry out its activities. Prior to entering into two securities with St George on 31 July 1991 over its business, AGTA had financed its plant and equipment by hire purchase and leasing arrangements with CBFC.

6    Those matters were still on foot and remained so when the new securities were entered into on 31 July 1991. The most important of those dealings with CBFC was a hire purchase agreement of 21 December 1990 which covered the furnace and its ancillary equipment. Other equipment, namely the glass cutting table and a truck were subject to leasing agreements.

7    As I have said, on 31 July 1991 two securities were entered into. First, GWI executed a guarantee and indemnity agreement over the obligations of four companies in which it had an interest, including AGTA. Clause 37 of that instrument limited GWI obligations to the extent of the mortgage of 1 June 1989 which I have mentioned earlier in these reasons.

8    Furthermore, it was stipulated that should the bank make demands on GWI under the guarantee for any of the secured moneys, then the bank could only proceed against GWI by exercising its rights under the said mortgage.

9    The second security comprised a charge by AGTA in favour of the bank over all its assets and undertakings. In August 1991 Gray Eisdell and Timms Pty Limited (hereinafter referred to as GET) carried out a valuation on behalf of the bank.

10    That organisation firstly valued AGTA’s plant and equipment at $2,975,000 on a going concern basis and secondly at $759,150 on a forced sale basis. The Tamglass furnace (which had been supplied in 1987) was valued at $2,500,000.

11    In the light of subsequent events, it is of some importance to note that GET valued, as a component part of its valuation of the furnace, local installation and incidental costs at $1,000,000.

12    While the evidence is not specific in this regard, it is plain that AGTA, at least in early 1992, began to feel the effects of the recession which had by then struck the national economy. So much so, that Mr Webb attempted to sell AGTA.

13    On 1 June 1992 a company known as Flat Glass Industries Pty Limited, which was a competitor of AGTA, made what has been described by counsel as a conditional offer for the purchase of AGTA’s assets and shares. The sum of $4 million was mentioned as the price to be paid. To describe what was proposed by Flat Glass as a “conditional offer” is perhaps to elevate its status. Why I say this may be easily gleaned from a plain reading of the subject document, particularly the last sentence which states “This is an offer and acceptance of this offer is not legally binding on either parties (sic).”

14    On 3 June 1992 the bank, not being satisfied with its security position, appointed a chartered accountant, one Geoffrey David McDonald, as its agent for a mortgagee in possession.

15    While at the time AGTA was meeting its obligations to the bank it was in default on the hire purchase agreement with CBFC concerning the Tamglass furnace by not paying its monthly instalments of $40,000 under that agreement. It was not at that time in default on the leasing agreements with CBFC relating to its other equipment.

16    After Mr McDonald’s appointment, negotiations for the sale of AGTA’s business to Flat Glass broke down. According to Mr Webb, Mr Neil of Flat Glass (who was the signatory on the letter of 1 June 1992 which made the so-called offer) discontinued negotiations by advising him that “No, the bank has a Receiver now, we should be able to buy it cheaper.”

17    Mr McDonald in fact was appointment Receiver of AGTA by the bank on 6 July 1992. That appointment was made pursuant to the Deed of Charge I have already referred to dated 31 July 1991.

18    After his appointment as Receiver, Mr McDonald made attempts to sell AGTA’s business as a going concern. At the same time Mr Webb continued his efforts to achieve the same end. Both were unsuccessful in their attempts.

19    In August 1992, Mr McDonald appointed Iven James Page as General Manager of AGTA. In so doing Mr McDonald advised Mr Page of his intention to sell the business of AGTA as a going concern. It is a matter of common ground between the parties that Mr Page carried out his task effectively. Mr Page was of the view that by 12 March 1993 he had succeeded in restoring the morale of AGTA’s employees and the confidence of its customers. As of that time he was hopeful that the business could operate in a viable manner.

20    However, as I have said, AGTA was at the time of Mr McDonald’s first appointment and continued to be , in default on the hire purchase agreement over the Tamglass furnace. Because of the importance of the furnace to AGTA’s business it was obvious to all concerned that CBFC had to be persuaded from taking action under the hire purchase agreement to enable Messrs Webb and McDonald to continue their efforts to sell the business as a going concern.

21    In the meantime GET provided a further valuation of AGTA’s assets to Mr McDonald. As of 8 July 1992 they valued that company’s assets at $3,264,800 as a going concern and $965,535 on a forced sale basis. This valuation underscored the importance of the business being sold as an ongoing concern and not by way of a forced sale. I should add that no challenge was mounted by either party as to the accuracy of GET’s valuation.

22    Thus the problem of persuading CBFC to stay its hand was obvious to all. CBFC itself had a problem. By about October 1992 the amount owing under the hire purchase agreement amounted to some $1.2 million. The land on which the company operated had previously been owned by a company known as Soerpyk Pty Limited. GWI had entered into a contract to purchase the land from that entity. While a dispute had arisen between Soerpyk and GWI, causing GWI to seek an order for specific performance from this Court, GWI was essentially the landlord of the premises at all relevant times.

23    CBFC’s problem was that if it wished to sell the furnace itself on a going concern basis (which as is apparent from GET’s earlier valuation was a more profitable means of disposition than an auction sale) it would require the agreement of AGTA’s landlord to lease the premises on which the furnace stood to its prospective purchaser.

24    The landlord being GWI, which like AGTA was controlled by Mr Webb, left CBFC (like most others involved in these events) with an obvious problem. I say most others because Flat Glass, a prospective purchaser, had no problem other than the desire which Mr Neil had communicated to Mr Webb to buy the furnace at a cheap price.

25    In these circumstances it is not surprising that CBFC were willing to enter into discussions with Mr McDonald and Mr Webb. It is not unimportant to note than on 26 October 1992 a liquidator was appointed to AGTA.

26    Discussions did ensue between a Mr Williams from CBFC and either Mr Webb or Mr McDonald. Written correspondence was also raised, which is in evidence. While Mr Webb was called as to the content of oral discussions both with Messrs Williams and McDonald, neither of the latter were called by the parties.

27    While neither Messrs Williams nor McDonald were called, there is documentary evidence which is indicative of the actions they took and the attitudes they adopted. As far as their lack of testimony is concerned I draw inferences in accordance with the majority judgment in the High Court in Jones v Dunkel 101 CLR 298 particularly per Menzies J at 312.

28    Mr Williams and others at CBFC during 1992 had formed views relating to Mr Webb, personally, AGTA and CBFC’s relationship with either entity which were not favourable to them.

29    Additionally, expressions of unhappiness with Mr McDonald and his employees arose . I illustrate why I so find by extracting a number of comments made in writing by Mr Williams and others from the CBFC file notes which are in evidence:

“Mr Williams - memorandum 13 May 1992:
Messrs Webb and Manderson called as arranged. Both gentlemen would probably be in their late 20’s/early 30’s and during the course of the discussion, I gained the impression that they are overawed by the enormity of the debt-load and that they do not really have the business acumen necessary to deal with problem and are looking for any advice they can get.
In many ways, the interview was a waste of time as Mr Webb merely revisited old ground and had nothing concrete to add.
Mr Webb was almost reduced to tears on a number of occasions during the interview, and it is obvious that the pressure is getting to him.”
Uknown - memorandum 3 September 1992:
“Whilst obvious items such as the glass furnace and associated items such as Transformer, switch board and distribution board, together with Kone double girder crane were inspected, identification of all items proved extremely difficult as our invoices do not show serial numbers etc.
The General Manager of AGTA, Barry Livingston endeavoured to help with the identification and whilst some items appear to be ours formal identification cannot be established due to lack of serial numbers. Mr Livingston suggested that some of our goods may have been removed before he was appointed General Manager.
Noted with displeasure. Please let me know who was responsible for accepting the documentation for this business. A proper description of all goods with supporting invoices sufficient + identify all items and (in this case) a landlord (indecipherable) is the most basic of requirements. The failure to meet these requirements (if in fact that is the case) is absolutely inexcusable.
As well, I wish to be assured that such sloppy work would not be likely to happen under current management of NSW Division.”
Mr Williams - memorandum 25 September 1992:
“I had previously been informed by the Receiver/Manager that Webb was fighting to save liquidation actions against another of his companies - apparently three actions are on foot. The reason behind the defence is that if two of Webb’s companies are liquidated (one already has been) then the ASC would debar him from being a director of any other company. He was fighting to avoid this. In order to provoke a reaction, I suggested that CBFC may determine the contracts, get what it could and then seek winding up of both Advanced and Parramatta Glass. Webb suggested that this could be a way to go, but it certainly did not appear to bother him in any way at all.
The meeting went for about 45 minutes and it was obvious that Webb was not going to co-operate in any way at all. His only comment was along the lines that CBFC had got itself into this mess by financing specialised equipment and would have to wear any loss. He would not be contributing anything further towards the debt. As mentioned earlier, he was also very critical of Barclays and the Receiver/Manager and mentioned that he had again commenced working at Advanced in order to increase sales and thereby should improve sale price. It remains to be seen whether this will be achieved.”
Mr Leggett - memorandum - 29 October 1992:
“Greg Bridge and Danial Civil of receivers Love & Rodgers called at our request to discuss the problem in regard to their refusal to accept our ownership of the furnace.
Considerable difficulty was experienced in actually getting these people to the meeting due to their high handed attitude which has been evidence from the date of their appointment by Barclays.”

30    Despite these misgivings, an agreement was reached following a meeting between inter alia, Messrs Williams and McDonald on 3 September 1992, the terms of which were encapsulated in a letter of 12 September 1992 over the hand of Mr Williams.

31    The conditions referred to in this letter were amplified in a further letter over Mr Williams’ signature of 12 October 1992 in which it was stated:

“We refer to our meeting in your office on 3 September 1992.
CBFC Leasing Pty Limited confirms that it has no objection to the sale of Advanced Glass Technologies of Australia Pty Limited (AGTA) proceeding.
However, sale proceeds should be held in trust pending confirmation of ownership of plant and equipment the subject of CBFC Leasing Pty Limited contract number 232 542552.
The goods subject of CBFC Leasing Pty Limited contracts with Parramatta Glass & Aluminium Centre Pty Limited are to be accounted for separately.”

32    On 12 November 1992 a meeting was held at CBFC office between Messrs Webb, McDonald (and his associate Bridge) and Mr Williams and two other CBFC officers. This produced an offer from CBFC:

“CBFC later contacted this firm and advised that they would accept$600,000, for all equipment governed by the three finance agreements in full and final satisfaction of their debt. This fact has been relayed to Mr Webb for his consideration.”

33    According to a file note Mr McDonald accepted the offer by phone.

34    That an offer was made by CBFC in the terms set out above is not a matter of dispute in these proceedings.

35    What is in dispute is whether or not Mr McDonald did in fact accept that offer. Indeed, this is the central factual issue in the case. As I have said, Mr McDonald was not called in these proceedings and in accordance with what fell from the High Court in Jones v Dunkel I draw the inference that anything he could say on this topic would not assist St George’s case.

36    However, for reasons to which I shall now turn, Mr McDonald’s absence from the witness box does not resolve the dispute in GWI’s favour.

37    After 12 November 1992 no communication between Messrs McDonald and Williams happened until March 1993. On the other hand there was no dispute that communication was had during this time between first, Messrs McDonald and Webb and second between Messrs Webb and Williams.

38    The reason for the latter discussions was that Mr Webb had heard a rumour that CBFC were negotiating with a prospective purchaser of AGTA’s plant and equipment. Later he had heard that Flat Glass was that prospective purchaser. As it happens the rumours represented the fact.

39    By letter dated 28 January 1993 Flat Glass over Mr Neill’s signature wrote to CBFC. That letter reads as follows:

“Please find below a rough sketch of the agreement for the purchase of the equipment that we have on lease to AGTA as follows:
(a list of equipment followed)
Flat Glass Holdings the purchaser will be responsible for transportation and re-installation. CBFC warrants that the equipment that Flat Glass Holdings purchases in this agreement will be free of any encumbrance and that CBFC is the legal owner of the above mentioned goods. Flat Glass Holdings will pay 5% deposit with a bank guarantee payable in 20 days after the safe removal of the above plant and equipment.
I understand the difficulties that we may encounter, but I will give every assistance even to the point of recommending the right people to remove the equipment in a expedient manner.”

40    On 1 February 1993 an internal memorandum was raised by one T W Leggett of CBFC dealing with Flat Glass’s proposed purchase. It also dealt with the problem adverted to in CBFC’s memorandum of 3 September 1992 as to the documentation relating to AGTA’s indebtedness to CBFC. A handwritten addendum to Mr Leggett’s memorandum, presumably written by one of his superiors, indicate a conditional agreement to the sale of the equipment.

41    While his affidavit evidence suggests a different sequence of events Mr Webb, in cross examination, readily conceded that he first rang Mr McDonald about the rumour.

42    This conversation and a subsequent one with Mr Williams of CBFC happened in February 1993. After discussing the rumour with Mr McDonald, Mr Webb states that he was then told by Mr McDonald that Mr McDonald’s acceptance of CBFC’s offer of 12 November was not in writing, contrary to what he claims Mr McDonald had earlier told him.

43    Not satisfied with Mr McDonald’s assurance that the agreement of 12 November was inviolate, Mr Webb then rang Mr Williams.

44    In his affidavit of 10 June 1994 Mr Webb deposed that his conversation with Mr Williams contained the following exchange:

“To the best of my recollection, the conversation was to the following effect:
I asked: ‘Is CBFC negotiating a sale or other agreement for AGTA’s plant and equipment.’
Harry Williams replied: ‘No. We are not negotiating to sell the AGTA plant and equipment. To the best of my knowledge the agreement reached with the Receivers stands.’
I said: ‘It would be a pity if you were, because business is increasing and looking very promising.’

45    Thus reassured Mr Webb proceeded with negotiations with Mr McDonald over leasing AGTA’s factory premises (which GWI effectively owned) to a prospective purchaser of the business.

46    These negotiations culminated in a deed being entered into between GWI, the bank, Mr Webb personally and GIP Glazing Pty Ltd (which was the new name of the Parramatta Glass & Aluminium Centre Pty Ltd) on 11 March 1993. I shall turn to the ramifications of the conditions of this deed (and in particular clause 7 thereof) later in these reasons.

47    Mr Webb confirmed that until the events of 12 March 1993 (to which I shall shortly turn) he trusted Mr Williams and thought that he had a good relationship with him. The internal memorandum from CBFC to which I have earlier referred demonstrates that Mr Williams did not regard their relationship in the same terms as did Mr Webb.

48    Mr Webb’s reaction to Mr Williams’ reassurance is illustrated by the following exchange in cross-examination:

“Q. I suggest to you that without Mr Williams’ assurance you would have continued to ask for this document in writing from Mr McDonald?
A. Without Mr Williams’ assurance, yes, I think I definitely would have.
Q. Or alternatively what you could have done is pay out CBFC to secure the position, but that is not settling you from something you were likely to do, was it?
A. I am sorry, I think I said on several occasions I trusted what Mr Williams had told me, that the agreement was in place was fine. I didn’t consider any further options because I didn’t believe it was necessary.”

49    It was submitted on behalf of GWI that this last conversation between Messrs Webb and Williams in fact referred to the earlier agreement ie 10 September 1992 and not that of 12 November. In the light of Mr Webb’s evidence as to what was discussed, which I have set out above, and Mr Webb’s own firm belief as to the subject matter, I cannot accede to this submission.

50    While it is true that subsequently Mr Williams claimed in response to a letter of complaint written to him by Mr McDonald after the events of 12 March 1993 that no acceptance of his offer had been made by Mr McDonald, I find Mr Webb’s evidence in this respect to be compelling.

51    Accordingly, I find that in fact an agreement had been made on 12 November 1992 in the terms I have set out above.

52    I turn to the events of 12 March 1993. On that day CBFC transferred its rights under the hire purchase and lease agreements with AGTA to Flat Glass. That very afternoon a group of people at Flat Glass’s behest, including Mr Neill, raided AGTA’s premises. It is apparent from Mr Page’s evidence that the raid had been planned well in advance because of the presence of persons who were expert in the erection and thus the dismantling of the Tamglass furnace. Not only was the raid successfully carried out as far as the removal of the furnace was concerned, items which were the subject of the leasing agreements (which were not in default) were illegally carried away. I accept Mr Page’s testimony that the raid was accompanied by threats of violence.

53    Another illustration of the careful planning of this event was the fact that it was carried out at a time when most of AGTA’s employees were properly absent from the premises.

54    The last paragraph of Mr Neill’s letter on behalf of Flat Glass to CBFC takes on a chilling significance in the light of this event.

55    In short on the evidence before me I find that Mr Williams lied to Mr Webb in February and that by his conduct actively deceived him. Mr Webb’s evidence that when he took the matter up with Mr Williams he was met with the bland response that what happened was the consequence of a “commercial decision” indicates a remarkable attitude to commercial morality on Mr Williams and thus CBFC’s part.

56    Having said that in fairness, I should reiterate that Mr Williams was not called by either party.

57    Following the success of the raid, despite the subsequent return of items which had been illegally seized, the business of AGTA continued on a vastly reduced basis for a couple of months before coming to an end.

58    On 29 March 1993 the bank served a notice of demand on GWI pursuant to its guarantee and on 5 April 1993 commenced these proceedings by way of summons for possession. Appropriate notices under s 57(2)(b) and Pt 40 r 11 were served.

59    In the upshot on 15 June 1994 Windeyer J made orders in these proceedings that St George have possession of the North Parramatta property.

60    On 22 September 1994 Dowd J declined to stay the mortgagee's sale of that property which had been fixed for the next day. His Honour was careful to indicate that GWI was not thus inhibited in pursuing this claim.

61    On 23 September 1994 the premises went to auction and was sold for $1.96 million, albeit that the bank received the sum of $2,129,686.45. It appears that the moneys in addition to the sale price came from the sale of stock and other assets subject to the bank’s charge.

62    As far as the auction sale itself is concerned I accept the evidence given as to the marketing and conduct of the sale. In other words I find that the sale was appropriately advertised and the auction itself was properly conducted.

63    In fact there was no challenge made to the affidavit evidence of Dean Venturato of Colliers Jardine who conducted the sale on behalf of St. George. The challenge made was directed to the bank accepting the highest bid made at auction on the basis that it was so far below the market value of the property that it should not have done so.

64    However, there is no suggestion made that the price obtained at the auction was one other than one representing market value at the time. Indeed, a Mr O’Connor, a valuer who was called by GWI described the then market as being a bottom feeders market. Accepting, as I do, that evidence, I find that the price obtained was an appropriate one and thus I do not accept the submission on this point.

65    I now turn to questions of law which are consequent upon the findings of fact I have made. In dealing with these matters it is necessary for me to deal with other factual matters which are ancillary to legal issues which arise but with which I have not dealt in the general findings I have made.

Breach of common law duty.

66    GWI claims that in breach of its duty the bank failed to make any proper or adequate arrangement, contractual or otherwise, with CBFC which would have avoided CBFC or an assignee from CBFC taking possession of the equipment; and complains of failure to comply with or enforce any such arrangement, contractual or otherwise, made with CBFC by recovering from the assignee Flat Glass the equipment seized in the break-in.

67    Central to the first allegation of breach of duty namely that the bank failed to make any proper arrangement which would have avoided CBFC or an assignee from taking possession of the equipment is the allegation that Mr McDonald did not accept the offer from CBFC of 12 November 1992.

68    I have found as a fact that he did. In so far then as this part of GWI’s cross-claim depends upon Mr McDonald’s failure to reach such an agreement the claim itself must fail.

69    Ancillary to this argument was that if there had been an oral acceptance by Mr McDonald of Mr Williams’ oral offer, Mr McDonald was under a duty to confirm the agreement in writing. It is put that had that occurred CBFC would clearly have been deterred from taking steps to breach such an agreement.

70    However, as was properly conceded in the written submission put forward it is true that while written evidence of agreement goes to ease of enforcement and not enforceability. In these circumstance the duty being (should there by one) to reach an agreement once an agreement is reached there is no breach of duty in failing to document such agreement.

71    I should add that both these arguments depend upon an allegation that Mr McDonald was acting at all times as agent for the bank. While I have severe doubts as to whether this is correct, I have for the purposes of these reasons, accepted that this is so.

72    However, for those reasons I have advanced I am of the view that in any event this part of the claim must fail.

73    The second leg of GWI’s claim is an allegation of failure to comply or enforce the agreement reached.

74    The bank commenced proceedings in the Commercial Division of this Court against CBFC on 21 April 1993. Those proceedings were based upon an allegation that CBFC breached the agreement entered into between Messrs McDonald and Williams of 12 November 1992.

75    That gave rise to not only a defence being filed on behalf of CBFC but a cross-claim in the sum of $319,095.78 based upon the use by the bank of the assets of AGTA from the time when Mr McDonald was appointed Receiver on 6 July 1992 to 12 March 1992.

76    As I have said during this time AGTA was in default in making payments under the hire purchase agreement involving the Tamglass furnace.

77    In the event Mr Taylor SC, having considered the valuation evidence flowing principally from Mr Gower (who gave evidence in these proceedings) concluded and advised the bank that “given the conclusions expressed in the preceding paragraph it is essential that the matter be settled.”

78    The bank accepted senior counsel’s advice and the matter was settled on proceedings that each party bear its own costs together with mutual release.

79    It was submitted on behalf of GWI to the extent that it was appropriate to go into settlement, counsel’s advice assumed that the forced sale value put forward by Mr Gower, applied.

80    Even if senior counsel’s advice was incorrect it is difficult to see how a commercial organisation could be said to be acting unreasonably if it acted upon advice of senior counsel. Let me say at once that I am not finding that Mr Taylor’s advice was incorrect.

81    However, the nub of his advice being that on the valuation figures he had available to him there was little likely return from the proceedings. It is again almost impossible to see how one could conclude that the bank was acting unreasonably in accepting his advice.

82    A Mr Jackson who was the senior bank officer who finally gave the instruction to settle as suggested by senior counsel, when cross-examined as to his knowledge of the action, was insistent that what he did was to act upon senior counsel’s advice.

83    For myself, again assuming that Mr McDonald was at all times acting as the bank’s agent, I am of the view that the bank, in accepting counsel’s advice to settle the action against CBFC as it did, was not in any breach of duty to GWI.

84    Accordingly the allegations based on breach of common law duty must fail.

85    Similar considerations apply to the allegation that the bank should have proceeded against Flat Glass.

The claim under s 52 of the Trade Practices Act 1974.

86 Section 52(1) of the Trade Practices Act is in the following terms:

“52(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”

87    The nub of the argument here is that Mr Webb, having been misled by Mr McDonald as to the existence of the agreement of 12 November 1992, Mr Webb claims that having been misled by Mr McDonald he desisted from, in essence, paying out CBFC which had he done so would have obviated the assignment by CBFC to Flat Glass of the hire purchase agreement and thus would have enabled AGTA to keep trading with the consequent opportunity to sell the business on an on-going basis.

88 As I have found that in fact an agreement had been reached it follows that Mr McDonald did not mislead Mr Webb. On the evidence before me the only misleading of Mr Webb which occurred was by Mr Williams in the circumstances which I have set out above. The claim for damages under s 52 must accordingly fail.

Breach of contract.

89    The claim here is dependent upon a number of factors. In particular upon clause 7 of the deed entered into between the bank, GWI and Mr Webb himself and the company formally known as Parramatta Glass and Aluminium Pty Ltd (another Webb company) in which GWI agreed to lease the subject premises at Wetherill Park to whomsoever the Receiver might sell AGTA’s business on an on-going basis.

90    Clause 7 is in the following terms:

“… for so long as the business of AGTA is being conducted by the Receivers, “the Bank”, will not take any action in respect of its security … .”

91    It was put that as the Notice of Demand was served on 29 March 1993 and the summons seeking possession (which started these proceedings) was issued on 5 April 1993 the bank was in breach of clause 7 because the business was still being conducted by the Receiver.

92    Furthermore, it was alleged that the bank breached implied terms in the deed as follows:

(a) would not take advantage of its own wrong in taking action in respect of the security;

(b) would do everything necessary on its part to enable GWI to have the benefit of the agreement; and

(c) had done and would do everything necessary to preserve the business as a going concern and permit its sale. The first two conditions are normally implied in contracts: Suttor v Gundouda (1950) 81 CLR 418 at 441; Graeme Webb Investments Pty Ltd v Soerpyk Pty Ltd (5.8.92, unreported, Hodgson J), Australis Media Holdings v Telstra Corp (1998) 43 NSWLR 104, Byrne v Australian Airlines (1995) 185 CLR at 448, Secured Income Real Estate (Aust) v St Martins Investments (1979) 144 CLR 596 at 607-608. The third implied term is really only a specific example of the second and is in any case maintainable by the business efficacy conditions referred to in Byrne at 441.

(d) The bank breached these terms by failing to do everything necessary to preserve AGTA’s business as a going concern.

93    Furthermore, it was submitted that the bank was in breach of clause 37 of the guarantee document to which I have already made reference.

94    The argument was put as follows:

(a) GWI is discharged from its guarantee by reason of the bank’s breach of clause 37 of the guarantee. That breach was constituted by the contravention of clause 37 in its failure to comply with the condition precedent requiring a demand for repayment of the “whole or any part of the Secured Moneys”. “Secured Moneys” are defined in clause 4 of the guarantee and are essentially limited to the moneys in fact owing or which may become payable to the bank.

95    A number of arguments were advanced in support of these propositions. However, counsel for GWI realised that Windeyer J’s judgment granting possession of the North Parramatta premises was a stumbling block for the claims so advanced.

96    Reliance was placed upon a statement in the interlocutory judgment delivered by Dowd J on 22 September 1994 in which Dowd J observed:

“the defendant (GWI) is not precluded from bringing any damages claim, including a claim that the plaintiff wrongfully sold the property if it be ultimately held the plaintiff had no power to enforce its security.”

97    Accordingly it was put that no res judicata could be raised to defeat the claim under this head because Dowd J had expressly permitted GWI to argue absence of power by way of the very cross-claim with which I am dealing.

98    However, Windeyer J in a careful judgment had determined that:

(a) the North Parramatta property was subject to a valued and enforceable mortgage;

(b) that default had been established under the mortgage;

(c) that a demand had been served;

(d) there was no other legal impediment to the bank obtaining possession of the property.

99    In essence what Windeyer J decided that the bank had a right to enforce its mortgage security. To uphold the matters raised by GWI under this head of claim would result in my delivering a judgment which was inconsistent with Windeyer J’s judgment.

100    A primary judge cannot sit in judgment on a final judgment of another primary judge of the court. That is the function of the Court of Appeal.

101    Accordingly I am of the view that Windeyer J’s judgment is determinative of the issues raised under this head and accordingly they must fail.

Negligent misrepresentation.

102    Once again GWI relies upon the representation made by Mr McDonald to him as to the agreement reached on 12 November 1992. For reasons I have already given I have found that in fact such an agreement had been reached. Accordingly no misrepresentation occurred. That being so the claim under this head must fail.

Conclusion.

103    As I have said earlier in these reasons the central factual issue in this matter revolved around the allegation that Mr McDonald had not concluded an agreement with Mr Williams on 12 November 1992. Because I have found that in fact he did and that any misrepresentation which flowed came not from Mr McDonald or the bank but from CBFC through Mr Williams, many of the arguments advanced which include detailed submissions as to the law, must fail.

104    I have also held that Windeyer J’s judgment as to the bank’s right to possession is not one that can be effectively tested before a judge alone. Again, this finding which is in fact in the present proceedings of itself negates many matters of law raised by GWI. It is for these reasons I have not found it necessary to deal with many of the well presented arguments of law advanced on behalf of GWI.

105    It follows from what I have said that I am of the view that the cross-claim must fail.

106    Accordingly there will be judgment for the cross-defendant plus costs.

Last Modified: 09/16/1999