State Bank of New South Wales Ltd v Chia

[2000] NSWSC 552

Reported	(2000) 50 NSWLR 587
Decision :

New South Wales

Supreme Court

CITATION :	State Bank of NSW v Kit Cheng Chia & Peng Tin Chia; Peng Tin Chia v Kenneth John Rennie & Anor [2000] NSWSC 552
FILE NUMBER(S) :	SC 50215/97; 50021/98
HEARING DATE(S) :	6, 7, 8, 9, 10, 13, 14, 15, 16, 17, 20, 21, 22, 23, 24, 27, 28, 29, 30, 31/3/00
JUDGMENT DATE :	29 June 2000
PARTIES :	50215/97 State Bank of New South Wales v Kit Chen Chia & Peng Tin Chia 50021/98 Peng Tin Chia v Kenneth John Rennie & Anor
JUDGMENT OF :	Einstein J
COUNSEL :	JC Campbell QC, JE Thomson (Plaintiff) RW Evans (First Defendant) RD Wilson (Second Defendant)
SOLICITORS :	Minter Ellison (Plaintiff) McKell's Solicitors (First Defendant) LMG Solicitors & Attorneys (Second Defendant)
CATCHWORDS :
CATCHWORDS :	Equity - Husband and wife - Wife as guarantor for husband’s debts - Claim to set aside guarantee - Equity in Garcia v National Australia Bank -
Necessity for wife to gain adequate understanding of transaction - Misunderstanding of wife must be material to liability - Whether creditor must show that they had reasonable grounds for believing that wife did have adequate understanding - Knowledge of solicitor of creditor amounting to reasonable grounds is to be imputed to creditor. - Equity - Receivers - Whether privately appointed receiver is a fiduciary - Duties of privately appointed receivers - Whether receiver has a duty to disclose all matters to mortgagor - Whether receiver has a duty to pursue the best price - Whether receiver’s sale may be upheld when there is a relationship between receiver, mortgagor and purchaser. - Equity - Mortgagees - Duties of mortgagees effecting a power of sale - Interference by mortgagee in performance of receiver’s duties - Whether mortgagee is then subject to the same set of duties of receiver. - Equity - Receiver and mortgagee - Whether duties of receiver and mortgagee extend to guarantor of the mortgagor’s debt. - Contract - Banker and Customer - Clause modelled on clause in Dobbs v National Bank of Australasia - Conclusive effect of ‘Dobbs Clause’ - Ability of Bank to rely on conclusive effect - Exception in the case of ‘manifest error’ - What constitutes a ‘manifest error - Whether necessary for ‘statement’ or ‘certificate’ to be issued. - Trade Practices - Misleading and deceptive Conduct - Whether liability may attach to a representation to negotiate - Whether representation to negotiate is too vague or uncertain - Meaning of ‘negotiation’ - Whether a representation to negotiate inherently includes a representation to negotiate in good faith - Requirements of a negotiation in good faith. - Trade Practices - Misleading and deceptive conduct - When silence can be misleading - Whether acting inconsistently with an invitation not accepted or rejected is misleading and deceptive conduct. - Trade Practices - Unconscionable conduct within the meaning of the unwritten law - Whether breach by receiver is unconscionable conduct within the meaning of the unwritten law. - Practice and Procedure - Award of interest - Principles on which interest to be awarded prior to the date for judgment. - Practice and Procedure - Award of interest - Whether claim for interest merged in the judgment - Circumstances in which interest after the date of judgment may be awarded at rates other than the prescribed rate. -
LEGISLATION CITED :	Commercial Arbitration Act 1984 Evidence Act 1995 Fair Trading Act 1987 Real Property Act 1900 Supreme Court Act 1970 Trade Practices Act 1974 (Cth)
CASES CITED :	Adamse v Broadway Credit Union Ltd (1999) NSW Conv R 55-976, Aiton v Transfield (unreported, 1 October 1999, Supreme Court of NSW, per Einstein J) Akins v National Australia Bank (1994) 34 NSWLR 155 American Express v Hurley [1985] 3 All ER Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 ANZ Banking Group Ltd v Carnegie (unreported, 16 June 1997, Supreme Court of Victoria, per Crockett J) Armstrong v Commonwealth Bank of Australia (unreported, 17 June 1999, New South Wales Supreme Court, per Hamilton J), Australia and New Zealand Banking Group Ltd v Bangadilly Pastoral Co Pty Ltd (1978) 139 CLR 195 Australian Apple and Pear Marketing Board v Tonking (1942) 66 CLR 77 Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2000) 169 ALR 324 AWA Ltd v Exicom Australia Pty Ltd (1990) 19 NSWLR 705 B Johnson & Co (Builders) Ltd [1955] 1 Ch 634 Bank of Credit & Commerce v Aboody [1989] 1 QB 923 Bank of Victoria v Mueller [1925] VLR 642. Barclays Bank plc v Thomson (1996) 146 NLJ 1778 Barclays Bank v Boulter [1999] 1 WLR 1919 Barclays Bank v O’Brien [1994] 1 AC 180 Barns v Queensland National Bank Ltd (1906) 3 CLR 925 Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 Boziuk v City of Edmonton [1977] 1 Alta LR (2d) 371 Brick and Pipe Industries Ltd v Occidental Life Nominees [1992] 2 VR 279 Brickenden v London Loan and Savings Co [1934] 3 DLR 465 Briginshaw v Briginshaw (1938) 60 CLR 336 Cape v Redarb Pty Ltd (1992) 8 ACSR 67 Coal Cliff Collieries v Sijehama Pty Ltd (1991) 24 NSWLR 1 Collier Constructions Pty Ltd v Foskett Pty Ltd (1990) 19 IPR 44 Commercial and General Acceptance Ltd v Nixon (1983) 152 CLR 491 Commercial Bank of Australia v Amadio (1982) 151 CLR 447 Commonwealth Bank of Australia v Khouri (Unreported, 4 November 1998, Supreme Court of Victoria, per Harper J) Commonwealth Bank of Australia v Milder Elfman Szmerling Krycer Pty Ltd (unreported, 18 February 1998, Supreme Court of Victoria, per Hansen J) Courtney & Fairburn Ltd v Tolaini Brothers (Hotels) Ltd [1975] 1 WLR 297 Cranfield Pty Ltd v Commonwealth Bank of Australia (unreported, 20 November 1998, Supreme Court of Victoria, per Mandie J). Cuckmere Brick Co v Mutual Finance Ltd [1971] 1 Ch 949 Davies v Australia and New Zealand Banking Group Ltd (unreported, 5 August 1999, Federal Court of Australia, Heerey J) Dobbs v The National Bank of Australasia Ltd (1935) 53 CLR 643 Downsview Ltd v First City Corporation Ltd [1993] AC 295 Duffy v Super Centre Development Corporation Ltd [1967] 1 NSWR 382 Dynamic Lifter Pty Ltd v Incitec Ltd (1994) 30 IPR 198 Economic Life Assurance Society v Usbourne [1902] AC 147 Elizabeth Bay Developments Pty Ltdv Boral Building Services Pty Ltd (1995) 36 NSWLR 709 Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 Esanda Finance Corp Ltd v Tong (1997) 41 NSWLR 482 Eslea Holdings Ltd v Butts (1986) 6 NSWLR 175 European Asian of Australia Ltd v Kurland (1985) 8 NSWLR 192 Ex parte Fewings (1883) 25 Ch D 338 Expo International Pty Ltd v Chant [1979] 2 NSWLR 820 Farrow Mortgage Services Pty Ltd (in Liq) v Victor Tunevitsch Pty Ltd (1998) 8 Tas R 65 Foakes v Beer (1884) 9 App Cas 605 Forsyth v Blundell (1973) 129 CLR 477 G Scammell and Nephew Ltd v HC and JG Ouston [1941] AC 251 Garcia v National Australia Bank (1998) 194 CLR 395 Gaskell v Gosling [1886] 1 QB 669 General Credits (Finance) Pty Ltd v Brushford Pty Ltd [1975] 2 NSWLR 786 Gomba Holdings Ltd v Minorities Finance Ltd [1988] 1 WLR 1231 Gosling v Gaskell [1897] AC 575 Gould v Vagellas (1985) 157 CLR 215 Gould v Vaggelas (1985) 157 CLR 215 Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 Hawkesbury Valley Developments Pty Ltd v Custom Credit Corporation Ltd (1995) NSW Conv R 55-731 Hide and Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 Hillas & Co Ltd v Arcos Ltd [1932] All ER 494 Hilton Hotels of Australia Pty Ltd v Sunrise Resources (Australia) Pty Ltd (Unreported 18 February 2000, NSWSC per Hodgson CJ in Eq) Hooper Bailey Associated Ltd v Natcon Group Pty Ltd (1992) 28 NSWLR 194 Hospitals Contribution Fund of Australia Pty Ltd v Switzerland Australia Health Fund (1987) 78 ALR 483 Jenkins v National Australia Bank (1999) ANZ ConvR 544 Jeogla v Australia New Zealand Banking Group Ltd (1999) 150 FLR 359 Johnson v Buttress (1936) 56 CLR 113 Kennedy v De Trafford [1897] AC 180 Kimberly NZI Finance Ltd v Torero Pty Ltd (1989) ATPR (Digest) 46-054 Knight v Lawrence [1993] BCLC 215 Lee v Ferno Holdings Pty Ltd (1993) 33 NSWLR 404 Lishman v Christie (1887) 19 QBD 333 LLMD of Michigan v Marine Midland Realty Credit 789 F Supp 657 (1992) Long Leys Co Pty Ltd v Silkdale Pty Ltd (1992) NSW ConvR 59, 476 at 5, 482 Sheller JA Macgowan, Macgowan v Murray [1891] 1 Ch 105 Magadi Soda Co Ltd (1925) 41 TLR 297 Maguire v Makaronis (1997) 188 CLR 449 McDonald v Scorbie [1980] Qd R 477 Medforth v Blake [1999] 3 WLR 922 Mercantile Credits Ltd v McDowell [1980] 2 NSWLR 101 Mercantile Credits Ltd v McDowell (1980) 2 NSWLR 101; National Australia Bank Pty Ltd v Sampson (unreported, 9 September 1991, Supreme Court of NSW) National Australia Bank v Garcia (1996) 39 NSWLR 577 Ostrander v Niagra Helicopters Ltd (1973) 20 DLR (3d) 161 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 Peat Marwick Ltd v Consumers Gas Co (1980) 29 OR (2d) 336 Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676 Peters v Commonwealth Bank of Australia (1992) NSW Conv R 55-629 at 59-580 per Brownie J Pinnel’s Case (1602) 5 Co Rep 117A; 77 ER 237 Promenade Investments Pty Ltd v NSW (1992) 26 NSWLR 203 Qorum v Younger (1994) NSW ConvR 55738 RA Price Securities Ltd v Henderson [1989] 2 NZLR 257 Radin v Commonwealth Bank of Australia (Unreported, 23 October 1998, Federal Court of Australia, per Lindgren J). Rhone Poulec Agrochime v IUM Chemical Services Pty Ltd (1986) 68 ALR 77 Ridgway v Wharton (1857) 6 HLC 238; 10 ER 1287 Robinson Printing Company Ltd v Chic Ltd [1905] 2 Ch 123 Ruby v Marsh (1975) 132 CLR 642 Sargent v ASL Developments Ltd (1974) 131 CLR 634 Scott v Avery (1856) 5 HLC 811; 10 ER 1121 Shomat Pty Ltd v Rubinstein (1995) 124 FLR 284, Standard Chartered Bank Ltd v Walker [1982] 1 WLR 1410 State Bank of New South Wales v Vecchio (Unreported, 10 November 1998, New South Wales Supreme Court, per Kirby J) State Bank of NSW v Vincent (Unreported, 7 April 1995 per Giles J), Stoyanovich v National Westminster Finance (1984) 3 BPR 9310 Sutton v AJ Thompson Pty Ltd (1987) 72 ALR 223 Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 The Commonwealth v Verwayen (1990) 170 CLR 394 Trade Practices Commission v Lamova Publishing Corp Pty Ltd (1979) 28 ALR 416 Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 2 NSWR 211 Visbord v Federal Commissioner of Taxation (1943) 68 CLR 354 Vision Telecommunications Pty Ltd v Australia and New Zealand Banking Group Ltd (Unreported, 17 May 1999, Supreme Court of Western Australia, per Master Bredmeyer) Walden Properties Ltd v Beaver Properties Ltd [1973] 2 NSWLR 815 Walford v Miles [1992] 2 AC 128 Walley v Western Australia (1996) 137 ALR 561 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 Warbutron v Whiteley (1989) NSW ConvR 55-453 Westpac Banking Corporation v Kingsland (1991) 26 NSWLR 700 Westpac Banking Corporation v Kingsland (1991) 26 NSWLR 700
DECISION :	Parties to bring in short minutes.
Wilkinson v ASB Bank Ltd [1998] NZLR 674
Yerkey v Jones (1939) 63 CLR 649

TABLE OF CONTENTS

Page Paragraph

THE DISPUTE 1 1

DR CHIA’S FACILITY 3 7

DIVISION OF THE CASE 6 18

THE BANK’S CAUSES OF ACTION 7 21

Debt against Dr Chia 7
Principal and accrued interest to date
Special rate of interest on judgment debt
Indemnity costs
Debt against Mrs Chia 8

Principal and accrued interest to date

Special rate of interest on judgment debt

Indemnity costs
Estoppel arising from 1991 Consents

Estoppel arising from acknowledgment of

11 March 1993

Possession of Strathfield land, against Mrs Chia
Possession of Campbelltown land, against

Dr & Mrs Chia

MRS CHIA’S CASE 9 22

(i) As to the Strathfield mortgage 10

(ii) As to the Campbelltown mortgage 12

The particular documents in focus on Mrs Chia’s case 13 25
Mrs. Chia’s evidence in chief 14 26

Initial acquisition of Strathfield property 19 50

THE FIRST PERIOD OF TIME 20 56

The Strathfield mortgage - document 1A 20 57
Evidence given by Mr Harkness 20 59
Evidence given by Ms Sandeman 24 71
The Campbelltown mortgage - document 5 27 80
Evidence given by Ms Mijatovich 27 80

Evidence given by Mr Iuliano 33 101

The Assessment of Witnesses relevant

to Mrs Chia’s Case 51 139

Mrs Chia 51 139
Dr Chia 53 143
Mr Harkness 56 157
Ms Sandeman 56 158
Ms Mijatovich 56 159
Mr Iuliano 56 160
Principles Applicable to Mrs Chia’s Defence 57 161
Onus of Proof 63 170
Importance of Materiality 65 177

The question for the Court 67 180

Did Mrs Chia’s have an adequate understanding of

the nature and purport of the transactions 68 183

Was Mrs Chia a Volunteer 76 213

Did the Bank Know Mrs Chia and Dr Chia

were married 77 215
Did the Bank have reasonable grounds on which to
to believe that Mrs Chia adequately understood the
transaction 77 216
(i) The Strathfield mortgage 77 218

(ii) The Campbelltown mortgage 80 227

Findings 84 236

DR CHIA’S CASE 84 238

Dr Chia’s defence 84 238
Debt against Dr Chia 85 241
Dobbs clause 86 243
Efficacy of the Dobbs 88 250
Manifest error 90 253
(i) alleged errors of calculations in the affidavit
of Mr Moulds 90 254
(ii) alleged overcharging of interest 90 255
(iii)‘Rebate’ or ‘Refunds’ of interest 92 258
(iv) alleged multiple accounts, undefined
transfers and deductions 92 259
(v) range of different bank officers with
different skills dealing with the account 93 260
Effect of the Dobbs clause 93 261
Dr Chia’s cross-claim 93 262
The allegations made in the cross-claim against the

Bank 94 263

(i) The alleged negotiations 94 264
(ii) The alleged representations 94 265
(iii) The alleged reliance and inducement 94 266
(iv) The section 51A allegation 95 267
(v) The section 52 allegations 95 268
(vi) Reliance and breach of obligation to
negotiate in good faith allegation 95 272
(vii) The alleged unconscionable conduct 96 277
(vii) The fiduciary obligation counts 97 279

(ix) Claim for Excess Interest Charges 97 281

The allegations made in the cross-claim against

Mr Rennie 98 282
(i) The alleged Receivers duties 98 282
(ii) The fiduciary obligation counts 98 283

(iii) The wilful default and neglect counts 99 292

(iv) Further claims in respect of alleged

unconscionable conduct relating to

valuations 100 295

Claims made against Mr Rennie in relation to the

management of the business 101 302

(i) The alleged breaches of duty 101 302

(ii) The claim for an account 102 307

The consequential claims 102 308

THE SECOND PERIOD OF TIME 102 310

Structure adopted for the evidence with regard to the
second period of time 103 312
Evidence given by Mr Hanly 104 317

13 February 1997 106 323 25 February 1997 106 324 26 February 1997 107 328 5 March 1997 108 329

6 March 1997 108 330 7 March 1997 111 335 9 March 1997 112 336 21 March 1997 113 340

27 March 1997 113 342
1 April 1997 115 350
2 April 1997 116 351
4 April 1997 117 354
11 April 1997 118 357
14 April 1997 119 360
17 April 1997 120 365
21 April 1997 121 369
22 April 1997 122 372
23 April 1997 123 375
24 April 1997 124 377
25 April 1997 - 5 May 1997 124 378
28 April 1997 124 379
29 April 1997 125 381
1 May 1997 126 383
2 May 1997 128 386
5 May 1997 131 396
6 May 1997 137 405
Claims arising from the second period of time -
Representational Case 140 417
(i) Representation that the Bank would enter
into a process of negotiation 140 418
(ii) Representation that the Bank would negotiate

with Dr Chia after the completion of the

tender process 145 431

(iii) Representation that the Bank would inform

Dr Chia when the tender process was

complete and the best price offered 148 438

THE THIRD PERIOD OF TIME 150 444

Evidence given by Mr Fuller 150 446 Evidence given by Mr Ryan 155 470 Evidence given by Mr Rennie 158 485

Evidence given by Mr Warbanoff 189 581

Meeting of 17 April 1997 189 584 and Resnick) 189 585

Evidence given by Mr Soulos 200 598
Evidence given by Mr Williams 203 620
Evidence given by Mr Resnick 206 628
Evidence given by Mr Fermanis 213 663
Evidence given by Mr Glover 222 693
Evidence given by Mr Elliott 237 745
Evidence given by Mr Long 240 765
Evidence given by Mr Low 246 788
Evidence given by Mr Moody 247 794
Evidence given by Ms Clements 250 806
Evidence given by Mr Moulds 250 807
Evidence given by Mr Gavan 250 809
Evidence given by Mr Avery 250 810
Evidence given by Mr Malafiej 252 815
Evidence given by Mr Mills 252 817
Evidence given by Mr Allenby 253 821

The Assessment of Witnesses relevant

to Dr. Chia’s case 253 823

Mr Hanly 253 823 Mr Fuller 253 824 Mr Ryan 254 825 Mr Rennie 255 827

Mr Soulos 255 828
Mr Resnick 255 829
Mr Fermanis 256 830
Mr Glover 257 832
Mr Elliott 257 833
Mr Long 257 834
Mr Moody 257 835
Ms Clements 257 836
Mr Gavan 257 837
Mr Moulds 261 860
Mr Avery 261 861
Mr Malafiej 261 862
Mr Mills 262 863

Mr Allenby 262 864

Claims for breach of Receiver’s duty 262 865
Obligations of a receiver appointed out of court 262 866
Relationship Between Receiver and Mortgagee 269 880
Application of principles of the facts 271 887
(i) Failure to inform Dr Chia of intended sale 272 890
(ii) Failure to postpone sale to allow Dr Chia to
make a higher offer 273 893

(iii) Unconscious preference for Hoyts bid 275 898

Conclusion against Receiver and Bank for

breach of duty 279 907

Dr Chia’s claim against the Bank for unconscionable
conduct 279 908

Claim by Mrs Chia against the Receiver and Bank 280 910

Conclusion in Dr Chia’s case 281 913

Claim for special rate of interest 281 916
The two sets of proceedings 284 926

Orders 285 927

Appendix A follows page 285

THE SUPREME COURT
OF NEW SOUTH WALES

EQUITY DIVISION - COMMERCIAL LIST

EINSTEIN J

Thursday 29 June 2000

50215/97 - STATE BANK OF NEW SOUTH WALES LIMITED v KIT
CHENG CHIA AND PENG TIN CHIA

50021/98 - PENG TIN CHIA v KENNETH JOHN RENNIE

JUDGMENT

The Dispute

1 The plaintiff ["the Bank"] claims repayment from the second defendant
["Dr Chia"] as borrower of moneys due by him under a commercial bill
facility, the term of which has now expired, together with interest, fees and

other moneys said to be due to the Bank.

2 The Bank claims repayment from the first defendant, Dr Chia's wife
["Mrs Chia"], as surety, of moneys said to be owing to it by Dr Chia, together

with interest, fees and other moneys said to be due to the Bank.

3 The Bank also claims possession of a property at 19 Barker Street registered proprietor. This property was mortgaged by Mrs Chia to the Bank on 6 December 1989 [dealing number Y 775521] and secured moneys owing, or to become owing to the Bank by Dr Chia.

4 The Bank also claims possession of a property at 1 Bellinger Road, Mrs Chia as joint tenants are the registered proprietors. This property was mortgaged to the Bank on 15 July 1991 [dealing number E 240880] and secured moneys owing, or to become owing, to the Bank by Dr Chia.

5 From approximately December 1987 Dr Chia had become involved in provided for by the initial facility were provided to accommodate cost over- runs. As events unfolded, debt servicing shortcomings became the order of the day and the project experienced a number of difficulties. These included the later impact of competition from Hoyts which by September 1996 had constructed and was operating an eight cinema complex at the nearby Westfield Market Town Centre. Other difficulties had arisen by the use of business profits to rebuild the Strathfield residence in respect of which Mrs Chia was at all material times the registered proprietor. In early 1995 the Bank appointed a receiver to the Astro and its undertaking including the freehold. The registered proprietor of the freehold of the Cinema was Dr Chia.

the tender process concerning the Mt Druitt Cinema complex consisting of
four screens which was a New South Wales government project. The
substantial facilities granted by the Bank to Dr Chia commencing in late
1989 were utilised in relation to the construction of the Astro Cinema [“the

6 These proceedings include not only issues raised by Mrs Chia as to whether or not the security documents she had signed are enforceable against her but also a number of issues raised by Dr Chia relating to the

receivership and to the dealings by the Receivers and by the Bank in and
relating to the ultimate sale of the Cinema, its undertaking and freehold, to
a major customer of the Bank, namely Hoyts Cinemas Ltd. (“Hoyts”). Dr Chia
focuses upon the negotiations leading to this transaction. The negotiations
involved Dr Chia, by himself or his solicitors or financial consultants, dealing
with the Bank in an endeavour to compromise all outstanding indebtedness
to the Bank by a settlement which would release all securities. The
negotiations involved the Receiver’s endeavours to obtain expressions of
interest and firm tenders for the acquisition of the Cinema and related
assets. These endeavours extended to dealings with a number of outside
parties and included the Receiver’s awareness of the ongoing related
negotiations between the Bank and Dr Chia's representatives. A particular
question arises in relation to an attempt by the Bank's senior relationship
manager with responsibility for Hoyts, to directly approach the Receiver
seeking, in the Receiver’s view, to influence the Receiver’s deliberations, to
try to push the price down and to do so by making plain to the Receiver that
the Bank did not want "to be jerked around" and by emphasising the Bank's
substantial ongoing relationship with Hoyts. A number of other matters are
also treated with in the extensive cross-claim pleaded by Dr Chia against
both the Bank as first defendant and the Receiver, Mr Rennie of Ernst &
Young, as the second defendant.

It is convenient to immediately detail the facilities granted by the Bank to Dr Chia.

Dr Chia's facilities

7 On 28 November 1989 the Bank agreed to grant Dr Chia a commercial bill facility of $3.9 million, to convert (within one year, or on completion of construction of the Cinema whichever is earlier) to a fixed rate term loan for

three years at a fixed interest rate, determined at time of drawdown, of cost
of funds plus 2.15%. Drawings under that facility were used in part to pay
out an existing mortgage, to purchase equipment (including second-hand
equipment obtained from the USA for the fitout of the Cinema) and to pay
the builder for construction.

8 Notwithstanding the requirement in the original letter of offer to convert the bill line to a fixed rate term loan, a bill facility continued in place. By the beginning of 1991 it had become clear that the Cinema would cost more to complete than had been first envisaged, and would open later than was first

envisaged. On 11 January 1991 (which was before construction of the limit of the commercial bill facility was increased to $4.525M on 14 January 1991 and to $5,025,000 on 17 April 1991 That facility expired on 31 July 1991. Under the arrangements of January and April 1991, there was no requirement that the loan convert to a term loan on completion of construction. The terms on which the new commercial bill facility was offered included terms about what was to happen on completion on the project, so it was clearly envisaged that the bill line so granted would continue beyond construction of the Cinema. The requirement that there had been, under the original letter of offer, to convert the bill line to a fixed rate loan on completion of construction, was replaced by the new contractual arrangements of January 1991 and April 1991.

9 As early as February 25 1991, Dr Chia was aware that the Bank might require him to sell other property to reduce the debt, if the takings of the Cinema were not adequate in the first 3 months of opening. On March 1

1991 Dr Chia offered “to liquidate some of my properties to reduce some of
my debt”. On 21 May 1991 the Bank wrote to Dr Chia calling a meeting to
discuss ( inter alia) whether it would extend or call up the facility. The Bank
said that if there was an extension, it would be on condition that there be a

debt reduction program.

10 The amount of the bills actually written under the facility agreed to on
17 April 1991 was $5,025,000 by 1 August 1991. $4,785,000 of bills were

repayable on 29 August 1991, and $240,000 on 30 August 1991.

11 On 30 August 1991 the Bank offered Dr Chia a commercial bill facility
of $1.025M for 12 months, and a fixed interest rate term loan of $4M for 12
months at an indicative rate of 10.35% plus fixed margin of 1.5%. That
facility was not drawn down until 17 January 1992 (for the $4M fixed interest
rate loan) and 21 January 1992 (for the bill facility). Between the end of
August 1991, and the drawdowns in January 1992, the amount owing under
the old commercial bill line debt was debited to Dr Chia’s overdraft account,
at reference rate plus 6% (which is the usual rate of the Bank for accounts
in default). Dr Chia asked the Bank to reduce the interest that had been
charged when the money had been debited to his overdraft account. The
Bank wrote to him saying that the reason for the interest rate was that the
facilities were in default. After drawdown of the new facilities the Bank
agreed to, and gave, a reduction of 2.65%, and also a rebating of certain
debt administration fees.
12 The proceeds of the sale of the inner city units were used to reduce the
amount that was owing on the bill line, when the bills fell due for payment.
This was in accordance with the contractual arrangements.
13 Account No. 241076-16 was opened on 17 January 1992 to enable the
drawdown of the $4M term loan to take place. It was closed on 23 March

1993 when that facility was refinanced.

14 Account No. 241076-16 was opened on 17 January 1992 to enable the
drawdown of the $4 million term loan to take place. It was closed on 23

March 1993 when that facility was refinanced.

15 The $4 million term loan was not repaid at the end of its 12 months
term (17 January 1993). On 2 February 1993 the Bank offered Dr Chia a
commercial bill facility of $4 million for three years and an overdraft of
$600,000 repayable on demand. This offer was accepted on 26 February
1993. The first bill was drawn under the new facility on 23 March 1993.
Interest was charged on the amount that had not been repaid on 17 January

1993 at a default rate until 23 March 1993.

16 The facility offered on 2 February 1993 and accepted on 26 February
1993 is the last contractual arrangement concerning bills between the Bank
and Dr Chia. The bills written under that facility were not met at the expiry
of the facility, and Dr Chia has been in default ever since. The last
arrangement concerning an overdraft was arrived at on 15 September
1995, when the Bank agreed to extend the availability of the overdraft until

16 October 1995.

17 On 6 March 1996 the Bank wrote to Dr Chia saying that the
commercial bill facility would, on its expiry later that month, be retired to
his current account at an interest rate of 14.25%. The Bank wrote warning
of its intention to make demand on Dr Chia on 9 May 1996. Demand was
actually made on Dr Chia on 31 May 1996. Demand was made on Mrs Chia
on 26 August 1996. Notices under s 56(2) (b) Real Property Act were
served on 14 October 1996. Mr Rennie was appointed receiver of the land
and business of the Astro Cinema on 7 February 1997. Mr Rennie accepted
an offer to purchase the Cinema on 5 May 1997. That sale was completed,
but the proceeds did not repay the entire debt. Further notices under s 57
(2) (b) were served on 11 June 1997.

A summary of the Bank’s securities has conveniently been tabulated by the Bank as follows:

Mortgaged	Mortgagor	Date security	Fate
property	taken
203 Eagleview	Ontin Pty Ltd	6 December	Building destroyed
Road, Minto	1989	by fire June 1991. Insurance proceeds paid to Bank soon after January 1992. Contracts exchanged for sale prior to 28 November 1995.
47/6 Oxford	Dr Chia	6 December	Placed on market
Street,	1989	July 1991. Sold in
Darlinghurst	course of 1992, and proceeds paid to Bank.
19 Barker Road,	Mrs Chia	6 December
Strathfield	1989
82/30 Jones	Dr Chia	6 December	[as for 47/6 Oxford
Street, Ultimo	1989	St]
162/30 Jones	Dr Chia	6 December	[as for 47/6 Oxford
Street, Ultimo	1989	St]
Astro Cinema, Mt	Dr Chia	6 December	Sold by receiver
Druitt realty	1989	May 1997
Astro Cinema, Mt	Dr Chia	15 July 1991	Sold by receiver
Druitt business	May 1997
assets
1 Bellinger Road,	Dr and Mrs	15 July 1991
Campbelltown	Chia

Division of the Case

18 There are three periods of time in respect of which the facts become
particularly critical. The various claims arising from the facts as disclosed by
the evidence may be referred to and treated with by applying this tripartite
division to the facts. The first covers the periods of time when the security
documents and other acknowledgments and letters offering facilities were
signed. The evidence here relates to the Bank’s claim against Mrs Chia and

to Mrs Chia’s defence to that claim.

19 The second covers the negotiations which extended between 7 the acquisition of the Astro Cinema assets.

February 1997, being the date of the appointment Mr Rennie, and 5pm on 5

20 The third, forming a subset of the second, concerns the precise dealings between Mr Rennie as receiver of the one part and Hoyts in particular of the other part, in respect of the sale of the Cinema assets. In

effect the whole of Mr Rennie’s dealings in and about and relating to the the context in which the Bank came to accept the Hoyts offer. The second and third periods of time relate to Dr Chia’s claim against the Bank and the Receiver and relate to nothing else.

The Bank’s causes of action

21 The Bank's causes of action are reasonably straightforward and the
case presents as essentially one in which Mrs Chia and Dr Chia put forward
the above described defences and Dr Chia's cross-claim in answer to the
Bank's claims.

A short summary of the Bank’s causes of action [taken from pages 4-7 of the Bank’s outline submissions] is in the following terms:

“Debt against Dr Chia

Principal and accrued interest to date

The debt of Dr Chia is secured by (inter alia) the mortgage he
gave over the Astro Cinema (B71), and the Campbelltown
property (B 256). (The personal covenants in the Astro mortgage
survive even though the security has been sold.) The covenants
to pay are in clauses (a) 2 and 4 of the Schedule. Each
incorporates the Memorandum [clause (a) 5 of the Schedule].
See also Memorandum definition of ‘moneys hereby secured’ (B
80). The moneys are to be repaid upon demand (memorandum cl
3.1 B 83). The amount of the debt (including any accrued
interest) can be proved by a certificate of an employee of the
Bank. [Memorandum Clause 5.1.12 - PX 1/80] That amount is
$2,879,807.47 as at 29 February 2000, with interest accruing at

the rate of $1,189.59 per day.

Special rate of interest on judgment debt

The Bank seeks that the Court should ‘otherwise order’, under s 95 Supreme Court Act , so that a rate of interest different to the statutory rate applies. Dr Chia has agreed that interest on the

Bank debt, and on any judgment, is at the rate applicable by the
Bank to accounts of like type. [Memorandum definition of
‘interest rate’ - PX 1/80] Such contractual provisions provide an
appropriate basis for the Court to ‘otherwise Order’ under s 95.
[Mercantile Credits Ltd v McDowell (1980) 2 NSWLR 101; Gould v

Vagellas (1985) 157 CLR 215 at 273, 276]

Indemnity costs

Dr Chia has agreed to pay the costs of the Bank on a solicitor and client basis arising out of any default, or out of the Bank exercising or enforcing its rights. [Memorandum paragraph (b) of

definition of ‘secured moneys’, - PX 1/81] While the Court has a
discretion about whether to order costs on the basis of a full
indemnity, the proper exercise of the discretion requires that the
Court order reflect the contractual right. [Fisher & Lightwood’s

Law of Mortgage, Australian edition, paragraph 40.2]

Debt against Mrs Chia
Principal and accrued interest to date

As for Dr Chia, save that Mrs Chia’s covenants to pay arise under the Campbelltown mortgage and the Strathfield mortgage (B 61). The covenant to pay in the Strathfield mortgage is in the

mortgage Schedule cl 2, 4 and 5 (B 62) and in Annexure A to that
mortgage (B 63). Mrs Chia admits on the pleadings that she is in
default under the Campbelltown mortgage. [Amended defence,
paragraph 9] It necessarily must follow that she is also in default

under the Strathfield mortgage.

Special rate of interest on judgment debt

As for Dr Chia

Indemnity costs

As for Dr Chia

Estoppel arising from 1991 Consents

Mrs Chia executed the 1991 Consents on or about 30 August secured by the Strathfield mortgage), a conventional estoppel [

1991. They are at B 316 ff.
They were executed at a time when the previous Banking
arrangements of Dr Chia had expired, and as part of the basis on
which the Bank granted fresh facilities to Dr Chia. The Consents
expressly listed the Strathfield property as one of the securities
(B 321). They expressly required 3 other security properties to
be sold (B 326, cl 40). It was only after the 1991 Consents had
been received by the Bank that drawdown of the new facilities
occurred.
The estoppel is an estoppel by representation (arising from Mrs

Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR

641; Eslea Holdings Ltd v Butts (1986) 6 NSWLR 175; Lee v

Ferno Holdings Pty Ltd (1993) 33 NSWLR 404. There is no

problem about there being a conventional estoppel concerning

assumptions as to the existence of private rights - Hilton Hotels

of Australia Pty Limited v Sunrise Resources (Australia)

Pty Limited Hodgson CJ in Eq 18 February 2000 unreported at p

29-30; The Commonwealth v Verwayen (1990) 170 CLR 394]
(where both parties went into the transaction of extending the
new facilities on the conventional basis that the new facilities
were secured by the Strathfield mortgage), and an estoppel

which fits within the general theory of estoppel advanced in

Verwayen.
Estoppel arising from acknowledgment of 11 March 1993

The acknowledgment of March 1993 is at B 484. Mrs Chia are secured over the Strathfield property and the Campbelltown property, and that it is on that basis that the Bank is extending the facilities. The Acknowledgment was sent to the Bank by an independent solicitor (B 483). It was only after the 1993 acknowledgment had been received that the Bank implemented the new facilities. The estoppel is an estoppel by representation, a conventional estoppel, and an estoppel which fits within

executed it at a time when the Banking facilities of Dr Chia had
expired once more, and as part of the basis on which the Bank
granted fresh facilities to Dr Chia.
Verwayen .
Possession of Strathfield land, against Mrs Chia

This follows from the granting of the mortgage, and the admitted existence of default. Non-payment of the debt on the due day is an Event of Default [Memorandum clause 18.1.1 - PX 1/96-97], which entitles the Bank to enter and take possession [Memorandum clause 18.2 - PX 1/98].

Possession of Campbelltown land, against Dr and Mrs

Chia

This follows from the granting of the mortgage, and the admitted
(in the case of Mrs Chia) and established (in the case of Dr and

Mrs Chia) default.”

Mrs Chia’s Case

22 The substantial defence of Mrs Chia, who concedes having executed
both mortgages and a number of other documents to be referred to below
which over a number of years had acknowledged or referred to sundry

borrowings by Dr Chia, concerns her allegations that:

(i) As to the Strathfield mortgage:

A (a) She was ignorant of the contents of the mortgage, the terms of which were incorporated by reference.

(b) She not seen the mortgage document prior to its production
by Dr Chia for execution by her.
(c) She was not afforded any opportunity to negotiate for, reject
or make any alteration to the terms of the mortgage.
(d) She was afforded no reasonable opportunity to obtain proper
independent legal and/or financial advice as to the terms of

mortgage.

(e) None of the provisions of the mortgage and their legal and practical
effect were adequately explained by any person to her.

[Particulars of these allegations are that Mrs Chia was required before signing it or afterwards; that the Bank at or about the time of execution by Mrs Chia of the mortgage, knew or ought to have known, that Mrs Chia was acting under the mistaken belief that the other securities taken by the Bank were more than sufficient to cover any borrowings by Dr Chia. However the Bank is said to have refrained from alerting Mrs Chia to any such mistaken belief]

by Dr Chia to attend at the home of Mr Harkness, Dr Chia's
solicitor; that Mrs Chia was given no opportunity to read the
mortgage document before being required to sign it; that Mrs

[Amended defence of first defendant paragraphs 3(a)-(e)]

B That by reason of the matters referred to in A, the mortgage and its terms and conditions were unjust in the circumstances relating to it at the time was made.

[Amended defence of first defendant paragraph 4]

C Further or in the alternative, that by reason of the matters referred to in A or any one or more of them, Mrs Chia was in a position of special disadvantage at or about the time of the execution of the mortgage, which position of special disadvantage was known, or ought to have been known by the Bank; in the premises it is said to be unfair and unconscientious for the Bank to rely upon mortgage.

[Amended defence of first defendant paragraph 5]

D (a) that the Bank required Dr Chia to procure Mrs Chia's signature to the mortgage.

(b) that Dr Chia did not explain the meaning or effect of the

mortgage to Mrs Chia.

(c) that Dr Chia represented to Mrs Chia that the Strathfield property
was not at risk as there was sufficient security provided by other
properties owned by Dr Chia with which to meet the moneys borrower

from the Bank.

[Particulars of these allegations are that the representation was partly mortgage document. The effect of the conversation is said to have been that the Bank required a mortgage over Mrs Chia's property as part of the Bank's requirements, but that there was sufficient security in other properties being provided by Dr Chia.

express and partly implied; to the extent express, the representation is
said to have been oral being a conversation between Dr Chia and Mrs
Further particulars are that to the extent that the representation was
partly implied, it arose from the following matters:
(a) The Bank had engaged Dr Chia as its agent for the purposes of
procuring the mortgage for Mrs Chia.
(b) The Bank not explain to Mrs Chia any of the terms and conditions of
mortgage.

(c) The Bank made no contact with Mrs Chia regarding
the giving of a mortgage in respect to the borrowings of
Dr Chia from the Bank.
(d) Mrs Chia was not given any opportunity to read the

mortgage before signing the mortgage.

(e) The mortgage was signed at the home of Mr Harkness, at night, and
in those circumstances Mrs Chia was under pressure to sign the

document.

(f) No proper explanation was given to Mrs Chia as to the
purpose and the effect of giving a mortgage in the

circumstances ]

(d) at the time of making the representation, Dr Chia well knew,

or ought reasonably to have known, that:

(i) Mrs Chia relied on him to explain properly and fully the
true effect of the mortgage.
(ii) Mrs Chia would or might act on the representation.
(iii) while acting on the representation Mrs Chia would or

might suffer loss and damage.

(e) Dr Chia made the representation to induce Mrs Chia to enter
into the mortgage.
(f) in the circumstances the Bank is bound by the representations
made by Dr Chia to Mrs Chia, and by the failure of Dr Chia to
explain the mortgage properly or at all to Mrs Chia.
(g) in the premises Mrs Chia is entitled to have the mortgage set

aside.

[amended defence of first defendant paragraph 6]

E Mrs Chia further alleges that any monies due to the Bank under the receive such amounts by reason of [Dr Chia's] amended cross claim”.

(ii) As to the Campbelltown mortgage:

The mortgage ought to be set aside for the same reasons as given in paragraphs 3 (a) and (e) of the defence, namely, that Mrs. Chia was ignorant of the contents of the mortgages, the terms of which were incorporated by reference and also that none of the provisions of the mortgage and their legal and practical effect were adequately explained by any person to her.

23 In answer to the Bank’s reliance on an ‘acknowledgment and consent of third party/guarantor or covenantor’ dated 11 March 1993 signed by Mrs Chia, she says that she was instructed to do so by the Bank without

obtaining independent advice as to the nature and effect of the
acknowledgment. [Amended defence, paragraph 10].
24 In answer to the Bank’s claim that she is estopped from denying the
validity and efficacy of the Strathfield and Campbelltown mortgages or her
liability thereunder, Mrs Chia asserts that “any monies due to the Bank
under the mortgage [sic] are impeached by [Dr Chia’s] entitlement to
receive such amounts by reason of [his] cross claim.” [Amended defence,
paragraph 11].

The particular documents in focus on Mrs Chia's case

25 It is convenient to identify immediately a number of particular
documents referred to by Mrs Chia in her affidavits and in her evidence. I
propose to give the documents an identification number for the purpose of

the judgment. The documents are as follows:

[Document 1A] The Strathfield mortgage dated 6 December 1989.

This is to be found at PX 1/61-64.

[Document 1B] Memorandum Dealing No. X 2082 incorporated by

reference into the Strathfield mortgage.

This is to be found at PX 1/79.

[Document 1C] The solicitor’s certificate dated 6 October 1989 signed

by Mr Harkness.

This is to be found at PX 1/69 & 70.

[Document 2] Acknowledgment that "I/We have read and clearly

understand and accept the above Loan Details and the Terms and
Conditions numbered 1 to 36", dated 14 January 1991. Mrs Chia has
signed over the typed words "Signature of Provider of Security".

This is to be found at PX 1/155-159.

[Document 3] Acknowledgment that "I/We have read and clearly

understand and accept the above Loan Details and the Terms and Conditions numbered 1 to 37" , dated 17 April 1991. Mrs Chia has signed over the typed words "Signature of Provider of Security".

This is to be found at PX 1/177-183 and 187-193.

[Document 4] Acknowledgment and consent of mortgagor or guarantor

dated 1 July 1991.

This is to be found at PX 1/236

[Document 5] The Campbelltown mortgage dated 5 July 1991.

This is to be found at PX 1/256

[Document 6] The Trader's Bill of sale dated 15 July 1991

This is to be found at PX 1/258-275

[Document 7] Acknowledgment that "I/We have read and clearly
understand and accept the above Loan Details and the attached Terms
and Conditions from 1 to 41", signed on or after 30 August 1981. Mrs
Chia has signed over the typed words "Signature of Provider of
Security".

This is to be found at PX 1/316-329

[Document 8] Solicitors certificate dated 5 December 1991.

This is to be found at PX 1/333

[Document 9] Acknowledgment and Consent of Third Party/Guarantor

or Covenantor dated 11 March 1993.

This is to be found at PX 2/484

[ Document 10] Acknowledgment and Consent of Third
Party/Guarantor or Covenantor, dated 11 March 1993. Mrs Chia has
signed as secretary alongside the common seal of Ontin Pty Ltd.

This is to be found at PX 2/487

Mrs Chia's evidence in chief

26 Mrs Chia gave evidence on affidavit and in the witness box in chief.
The convenient course is to commence by detailing her evidence in chief.

27 In her affidavit of 18 December 1997 Mrs Chia deposed that she was born in Singapore in 1947; that she married Dr Chia in 1973 in Singapore; that they came to Australia together in 1976; that apart from working as a certificated general nurse she had no other qualifications; that she had

assisted her husband in his practice as a general medical practitioner in his were borrowed; that she recalled the purchase price was approximately $180,000; that in or about 1987, the funds used to purchase the Strathfield premises and in respect to which there was a mortgage given over that property, were paid out and discharged from the sale proceeds of certain properties which Dr Chia sold at Leumeah and Georges Hall.

surgery in Campbelltown from time to time since 1977; that she and her
husband live with their son at the Strathfield house premises; that the
28 She further deposed that in about December 1989 she had signed a
document entitled "mortgage" in respect to the Strathfield property at the
home of her husband's solicitor, Mr Ken Harkness. She deposed that at no
stage, either at the time of signing the mortgage or before hand, were any
of the terms and conditions of the mortgage explained to her. She recalled
being asked by Dr Chia to attend at the home of Mr Harkness where the
document was placed in front of her and she was told by Dr Chia to sign the
document. She deposed that at no stage did she receive the document into
her possession, nor did any officer of the Bank ever speak to her regarding

the mortgage or in respect to any borrowings by Dr Chia from the Bank.

29 She deposed that at the time of signing the Strathfield mortgage
document, she did not know the extent of borrowings by Dr Chia from the
Bank. Further that at no stage had she ever attended the Bank's offices.
30 She deposed that the time she signed the mortgage, Dr Chia had said
to her words to the effect "I am putting up other properties as security

which are more than sufficient to cover the borrowings".

31 Her evidence was that had she been told before signing the mortgage
document of the extent of the borrowings as set out in the plaintiffs
summons, and/or that the home at Strathfield could be called upon to meet
any of the sums borrowed for the purposes of building a Cinema, she would

not have signed the mortgage.

32 Her evidence was that at no time did she retain Mr Harkness as her
solicitor, either in relation to the matter the subject of these proceedings or

otherwise.

33 She deposed that she did not give any consent to any further disclosed to her.

borrowings by Dr Chia in or about February 1993 and that at no time was
she informed by any officer of the Bank of the contents of the Letter of Offer,
nor did she see any such Letter of Offer. Neither the terms of the Letter of
34 In her later affidavit of 3 February 2000 Mrs Chia deposed that she
recalled in about July 1991, Dr Chia asking her to go with him to execute the
documents over the Campbelltown property; that in her recollection that
mortgage was prepared by the Bank's solicitor and was executed by her in
the Bank's offices before a female solicitor; that she believes she signed the
mortgage in the presence of Dr Chia and the solicitor; that prior to
execution she was not given the opportunity by the Bank to obtain
independent legal advice and that she was not given any advice as to the
nature and effect of executing the mortgage. She further deposed that in
respect of any documentation signed by her, “I was not aware of the legal
implications of any 'all monies clause' whereby the Strathfield property
could be at risk and secured the full amount of my husband’s borrowings

from time to time with [the Bank]”.

35 Mrs Chia further deposed that she had recently perused the original
letter of offer of $3.9 million and gave evidence that at no time did Dr Chia
or the Bank's representatives explain to her that the Strathfield property

would secure those total borrowings.

36 In giving evidence in chief Mrs Chia was shown document 1A and gave
evidence that prior to signing that document, no one had explained to her
what it meant and that as far as her understanding as to what it meant was
concerned, it meant “I have to sign a document that my husband asked me

to so they can borrow some money” [transcript at Page 13].

37 Mrs Chia was then shown document 1C and the schedule forming part
of the document and gave evidence that she had signed against the
common seal of Ontin Pty Ltd on December 29 at the solicitor's house. She
denied that Mr Harkness had asked her the questions set out in paragraph 4
on PX 1/69. Mr Harkness at that point on his solicitor's certificate had
certified that:

“I asked the parties whether he/she has:

(a) compared his/her obligations and responsibilities to the Bank
with those of any person named in the document(s); and
(b) considered the consequences to him/her should there be any
default in those obligations and responsibilities;
and the answer was 'yes'”.

38 Mrs Chia was then shown the memorandum No X 208233, document 1B. She had never seen that document nor one like it before [Transcript at Page 13].

39 Mrs Chia was then shown document 2 and gave evidence that there
was no discussion with anyone at the time she signed that document

[Transcript pages 13 and 14].

40 Mrs Chia was then shown a letter from the Bank addressed to Dr Chia
of 11 January 1991 [PX 1/151]. She had not seen that letter. As to the

document, all she knows is that her husband had asked her to sign it.

41 She was asked as follows:

Q. Did you have any beliefs in what it meant, signing that to the Bank? I am asking you now, prior to signing it whether you had any understanding or belief as to how it affected your obligations?

document?
A. He said that it was to borrow money from the Bank.

A. No.

[Transcript at Page 16].

42 Mrs Chia was then shown document 3 and gave evidence that just
before she had signed it, her husband asked her to sign it. He had not
discussed any of the terms in the document with her. Mrs Chia’s evidence
was the she did not have an understanding as to how it might have affected

her obligations to the Bank. [Transcript pages 16 and 17].

43 Mrs Chia was shown another copy of document 3 [to be found at PX
1/194]. Her evidence was that there was no discussion before she signed it
and that she did not have any understanding as to how it might affect her
obligations to the Bank. The same evidence was given in relation to a

further copy of the same document [to be found at PX 1/202].

44 She was then shown document 4 and gave evidence that she did not
have any discussion before she signed it and that she had no understanding
before she signed it as to how it might affect her obligations to the Bank.

[Transcript at Page 18]

45 She was then shown document 5, the Campbelltown mortgage. She mortgaging the Campbelltown property which she and her husband together owned. [Transcript Page 18]

could not recall any discussion with any one about that mortgage document
before she signed it and gave evidence that she had no understanding as to
the effect of signing the document in relation to her obligations to the Bank.
46 Mrs Chia was then shown document 7 and gave evidence that her
husband had asked her to sign it, that she had no discussion with him or
anyone else before she signed it and that she had no understanding as to

how it might have affected her obligations to the Bank. [Transcript Page 19]

47 Mrs Chia was then shown document 8. Her evidence was that she did
not know Mr Iuliano personally but could recall signing documents before
him and in front of him as a witness. This occurred in Campbelltown. She
could only recall where the document was signed but not the date on which
it was signed. The document was signed at the Marsdens’ office. She could
not recall what documents or types of documents were signed in front of Mr
Iuliano on that occasion. She was shown subparagraph 4(e) from Mr

Iuliano's certificate in which he had certified:

"I asked the parties whether he/she has:

(a) compared his/her obligations and responsibilities to the Bank

with those of any person named in the document(s); and

(b) considered the consequences to him/her should there be any
default in those obligations and responsibilities.

and the answer was 'yes’”.

48 She could not recall those questions having been asked. [Transcript

Page 20]

49 She was then shown document 9 and could not recall any discussion
with any one before she signed it. She did not have any understanding as to
how the signing of that document might affect her obligations to the Bank

before she signed the document. [Transcript Page 21]

Initial acquisition of Strathfield property

50 In June 1985 Mrs Chia became the registered proprietor of the Strathfield property. She executed a mortgage over this property to Westpac on 9 July 1985 as security for advances to Ontin Pty Ltd. The only

role of this company was to be trustee of the Chia Family Trust. On 11
December 1987 Mrs Chia executed a second mortgage over the Strathfield
property again to Westpac, but this time as security for advances to Dr Chia.

Both mortgages were discharged on 9 November 1988.

51 In relation to the first of the Westpac mortgages Mrs Chia gave
evidence in chief that "In or about 1987, the funds use [sic] to purchase the
said Strathfield premises, and in respect of which there was a mortgage
given over the said property, were paid out and discharged from the sale
proceeds of certain properties my husband sold at Leumeah and Georges
Hall." [Affidavit 18 December 1987 paragraph 6]
52 Mrs Chia gave the following evidence in cross-examination:

Q. "And indeed you had always understood from the time that the Strathfield property was first purchased that there was a mortgage given over the Strathfield property, didn't you?

A. "I thought it was paid out"

[Transcript page 32]

53 Mrs Chia gave evidence that she understood that the mortgage to page 44 lines 20-25]

54 Mrs Chia gave evidence that she understood at the time that the first
mortgage was given to Westpac, that Westpac was going to lend some
money [Transcript page 34 line 50-53]; that the Strathfield house was in her
name [Transcript page 35 lines 10-15]; that she was being asked to sign
because the Strathfield house was in her name and so she had to sign
[Transcript page 34 lines 15-20]; that the Bank wanted the mortgage to be
sure that just in case something went wrong with Dr Chia's health or
practice, it could be sure of getting its money back [Transcript page 35 lines
45-50]; that the way in which the Bank wanted to be sure that it could get
its money back would be that they ‘had the house to call on so that they
could be sure of getting the money back' [Transcript page 35 line 50-
transcript page 36 line 4]; that if there was no mortgage, the Bank would
not lend money [Transcript page 46 lines 15-26]; that 'the money to pay the
house is from our income so it would be both of us paying off the house'
[Transcript page 47 line 57-transcript page 48 line 1]; and that the Bank

would want to get back the money it lent. [Transcript page 48 lines 30-35]

55 Mrs Chia's evidence was that she remembered nothing at all about
signing the second mortgage to Westpac. [Transcript page 36 line 40-37 line

6]

The first period of time

56 The first period of time has already been covered to an extent in the

detailed outline given above.

The Strathfield mortgage-document 1A

57 There is no issue but that Dr Chia had embarked upon a project
sponsored by the New South Wales government to build a cinema complex
at Mt Druitt. In negotiations with the Bank he had offered the Strathfield
property along with the three other properties owned by him as collateral
security.

58 There is no issue but that although Dr Chia made frequent visits and
telephone calls to the Bank's officers and received regular correspondence,
Mrs Chia was never introduced to the Bank, never visited the Bank and the

Bank never communicated in any way with her directly.

Evidence given by Mr Harkness

59 Mr Harkness, a solicitor, gave evidence of an occasion in December
1989 when Dr and Mrs Chia attended at his home at Rockdale for the
purpose of signing certain loan papers associated with the development by
Dr Chia of a proposed suburban cinema. His evidence in his statement was
that the meeting took at least half an hour. He did not recall advising Mrs
Chia in respect of her obtaining independent advice. He did recall discussing
the mortgage with Mrs Chia and explaining in words to the effect "If project
[sic] does not succeed and the loan is not repaid then your home at
Strathfield could be sold by the Bank to pay the loan". He recalled Mrs Chia
saying words to the effect "Well, that's the way it is". He recalled Dr Chia
being present the whole time. In his statement he gave evidence that Mrs
Chia did not express to him any reluctance to sign the papers and appeared
to have confidence in her husband's business judgment. He had not made
any notes of the conversation. He believed that before signing the
certificate headed "Certificate of Witness", he would certainly have ensured
that its contents were accurate and that he would have specifically asked Dr

and Mrs Chia the questions referred to.

60 Mr Harkness’s Certificate appears at PX 1/69-70. His evidence was that
he had read the Certificate before he signed it. He accepted that the
Certificate did not in the schedule, refer to Dr or Mrs Chia separately. The
request to him to have the subject document executed was constituted by
the letter from the Bank’s solicitors of 4 December 1989 [exhibit PX 1/59].
His letter back to the Bank’s solicitors was dated 8 December 1989 [exhibit

PX 1/104].

61 A statutory declaration signed before Mr Harkness [which appears at
exhibit PX 1/76] includes a paragraph in Mr Harkness's handwriting, reading
'My wife is the registered proprietor of 19 Barker Road, Strathfield". At the
same time as these words were written it is likely that Mr Harkness deleted
the reference in the third line -- the declaration had incorrectly attributed to

Dr Chia, the registered proprietorship of the Strathfield property.

62 Mr Harkness gave evidence that Dr Chia was the person requiring the was indifferent to her interests. Mr Harkness was asked and answered as follows:

loan and that he understood he was acting for Dr Chia to assist him to
facilitate the loan. He did not regard Mrs Chia as being his client.

Q. "Well, you regarded her did you, in terms of your giving her advice, as some form of third party who was not your client?

A. "It was probably more that I would have wanted to be satisfied that as I was witnessing a document that she was signing, that she understood the character of it. I-yes.

Q. "When you say that you regarded Dr Chia as your client, is that intended to indicate that you regarded yourself as having a duty of care to him as your client?

A. "Certainly I had a duty of care to Dr Chia as my client.

Q . "Did you regard yourself as having a duty of care to Mrs Chia, although she, you didn't consider, was your client?

A. “I think I would more view that I would want to be satisfied that a person whose signature I was witnessing understood the character of the document that they were signing. Whether that is as a sense of duty to Mrs Chia, probably more out of sense of propriety in itself"

(unreported, 18 February 1998, Supreme Court of Victoria, per Hansen J)
Courtney & Fairburn Ltd v Tolaini Brothers (Hotels) Ltd [1975] 1 WLR 297
Cranfield Pty Ltd v Commonwealth Bank of Australia (unreported, 20
November 1998, Supreme Court of Victoria, per Mandie J).
Cuckmere Brick Co v Mutual Finance Ltd [1971] 1 Ch 949
Davies v Australia and New Zealand Banking Group Ltd (unreported, 5
August 1999, Federal Court of Australia, Heerey J)
Dobbs v The National Bank of Australasia Ltd (1935) 53 CLR 643
Downsview Ltd v First City Corporation Ltd [1993] AC 295
Duffy v Super Centre Development Corporation Ltd [1967] 1 NSWR 382
Dynamic Lifter Pty Ltd v Incitec Ltd (1994) 30 IPR 198
Economic Life Assurance Society v Usbourne [1902] AC 147
Elizabeth Bay Developments Pty Ltdv Boral Building Services Pty Ltd (1995)
36 NSWLR 709
Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR
523
Esanda Finance Corp Ltd v Tong (1997) 41 NSWLR 482
Eslea Holdings Ltd v Butts (1986) 6 NSWLR 175
European Asian of Australia Ltd v Kurland (1985) 8 NSWLR 192
Ex parte Fewings (1883) 25 Ch D 338
Expo International Pty Ltd v Chant [1979] 2 NSWLR 820
Farrow Mortgage Services Pty Ltd (in Liq) v Victor Tunevitsch Pty Ltd (1998)
8 Tas R 65
Foakes v Beer (1884) 9 App Cas 605
Forsyth v Blundell (1973) 129 CLR 477
G Scammell and Nephew Ltd v HC and JG Ouston [1941] AC 251
Garcia v National Australia Bank (1998) 194 CLR 395
Gaskell v Gosling [1886] 1 QB 669
General Credits (Finance) Pty Ltd v Brushford Pty Ltd [1975] 2 NSWLR 786
Gomba Holdings Ltd v Minorities Finance Ltd [1988] 1 WLR 1231
Gosling v Gaskell [1897] AC 575
Gould v Vagellas (1985) 157 CLR 215
Gould v Vaggelas (1985) 157 CLR 215
Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641
Hawkesbury Valley Developments Pty Ltd v Custom Credit Corporation Ltd
(1995) NSW Conv R 55-731
Hide and Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR
310
Hillas & Co Ltd v Arcos Ltd [1932] All ER 494
Hilton Hotels of Australia Pty Ltd v Sunrise Resources (Australia) Pty Ltd
(Unreported 18 February 2000, NSWSC per Hodgson CJ in Eq)
Hooper Bailey Associated Ltd v Natcon Group Pty Ltd (1992) 28 NSWLR 194
Hospitals Contribution Fund of Australia Pty Ltd v Switzerland Australia
Health Fund (1987) 78 ALR 483
Jenkins v National Australia Bank (1999) ANZ ConvR 544
Jeogla v Australia New Zealand Banking Group Ltd (1999) 150 FLR 359
Johnson v Buttress (1936) 56 CLR 113
Kennedy v De Trafford [1897] AC 180
Kimberly NZI Finance Ltd v Torero Pty Ltd (1989) ATPR (Digest) 46-054
Knight v Lawrence [1993] BCLC 215
Lee v Ferno Holdings Pty Ltd (1993) 33 NSWLR 404
Lishman v Christie (1887) 19 QBD 333
LLMD of Michigan v Marine Midland Realty Credit 789 F Supp 657 (1992)
Long Leys Co Pty Ltd v Silkdale Pty Ltd (1992) NSW ConvR 59, 476 at 5, 482
Sheller JA
Macgowan, Macgowan v Murray [1891] 1 Ch 105
Magadi Soda Co Ltd (1925) 41 TLR 297
Maguire v Makaronis (1997) 188 CLR 449
McDonald v Scorbie [1980] Qd R 477
Medforth v Blake [1999] 3 WLR 922
Mercantile Credits Ltd v McDowell [1980] 2 NSWLR 101
Mercantile Credits Ltd v McDowell (1980) 2 NSWLR 101;
National Australia Bank Pty Ltd v Sampson (unreported, 9 September 1991,
Supreme Court of NSW)
National Australia Bank v Garcia (1996) 39 NSWLR 577
Ostrander v Niagra Helicopters Ltd (1973) 20 DLR (3d) 161
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191
Peat Marwick Ltd v Consumers Gas Co (1980) 29 OR (2d) 336
Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676
Peters v Commonwealth Bank of Australia (1992) NSW Conv R ¶55-629 at
59-580 per Brownie J
Pinnel’s Case (1602) 5 Co Rep 117A; 77 ER 237
Promenade Investments Pty Ltd v NSW (1992) 26 NSWLR 203
Qorum v Younger (1994) NSW ConvR 55738
RA Price Securities Ltd v Henderson [1989] 2 NZLR 257
Radin v Commonwealth Bank of Australia (Unreported, 23 October 1998,
Federal Court of Australia, per Lindgren J).
Rhone Poulec Agrochime v IUM Chemical Services Pty Ltd (1986) 68 ALR 77
Ridgway v Wharton (1857) 6 HLC 238; 10 ER 1287
Robinson Printing Company Ltd v Chic Ltd [1905] 2 Ch 123
Ruby v Marsh (1975) 132 CLR 642
Sargent v ASL Developments Ltd (1974) 131 CLR 634
Scott v Avery (1856) 5 HLC 811; 10 ER 1121
Shomat Pty Ltd v Rubinstein (1995) 124 FLR 284,
Standard Chartered Bank Ltd v Walker [1982] 1 WLR 1410
State Bank of New South Wales v Vecchio (Unreported, 10 November 1998,
New South Wales Supreme Court, per Kirby J)
State Bank of NSW v Vincent (Unreported, 7 April 1995 per Giles J),
Stoyanovich v National Westminster Finance (1984) 3 BPR 9310
Sutton v AJ Thompson Pty Ltd (1987) 72 ALR 223
Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177
The Commonwealth v Verwayen (1990) 170 CLR 394
Trade Practices Commission v Lamova Publishing Corp Pty Ltd (1979) 28
ALR 416
Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 2 NSWR 211
Visbord v Federal Commissioner of Taxation (1943) 68 CLR 354
Vision Telecommunications Pty Ltd v Australia and New Zealand Banking

Group Ltd (Unreported, 17 May 1999, Supreme Court of Western Australia,

per Master Bredmeyer)

Walden Properties Ltd v Beaver Properties Ltd [1973] 2 NSWLR 815

Walford v Miles [1992] 2 AC 128 Last Modified: 01/07/2002

Walley v Western Australia (1996) 137 ALR 561

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387

Warbutron v Whiteley (1989) NSW ConvR 55-453

Westpac Banking Corporation v Kingsland (1991) 26 NSWLR 700

Westpac Banking Corporation v Kingsland (1991) 26 NSWLR 700

Wilkinson v ASB Bank Ltd [1998] NZLR 674