State Bank of NSW v Kerswell

[1999] NSWSC 1023

CITATION:	State Bank of NSW v Kerswell [1999] NSWSC 1023
CURRENT JURISDICTION:	Common Law
FILE NUMBER(S):	10365/1996
HEARING DATE(S):	21-23 September 1999
JUDGMENT DATE:	12 October 1999
PARTIES :	State Bank of New South Wales Limited (Plaintiff) v Kerry Gretton Kerswell (First Defendant) Sally Ann Kerswell (Second Defendant)
JUDGMENT OF:	Master Malpass

COUNSEL :	Mr R Harper (Plaintiff) Mr T Alexis/Mr E White (Defendants)
SOLICITORS:	Garland Hawthorn Brahe (Plaintiff) Burt & Allen (Defendants)
CATCHWORDS:	Banker and customer; who owed the debit balances standing in two accounts; the persons in whose names the account stood or their deregistered company.
ACTS CITED:	N/A
CASES CITED:	N/A
DECISION:	See paragraph 27.

THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

MASTER MALPASS

TUESDAY 12 OCTOBER 1999

10365/1996 STATE BANK OF NEW SOUTH WALES LIMITED v KERRY GRETTON KERSWELL & ANOR

JUDGMENT


1   These proceedings were commenced in January 1996. In the Statement of Claim, the plaintiff sought inter alia possession of a property known as 94 Mona Vale Road Pymble (the property) and a monetary judgment.

2   There have been two summary judgment applications. In July 1996, the plaintiff obtained summary judgment in respect of its claim for possession of the property. A later summary judgment application in respect of the monetary claim was unsuccessful.

3   The property was sold by the first mortgagee. There were no proceeds available to satisfy any part of the plaintiff’s monetary claim.

4   The present dispute between the parties is restricted to the monetary claim. The defendants say that they are not liable for at least part of that claim (it is said that a company K G & S A Kerswell Pty Ltd had the liability for the rest of the claim).

5   This company was used in the conduct of a strata management business. The defendants were directors of that company. There was also another company (National Strata Management Pty Ltd).

6   The dispute concerns two accounts with the plaintiff. The first account was opened in December 1988 and was numbered 53002 - 00. The second was opened on 15 November 1989 and was numbered 53002 - 16. The first account was opened as a cheque or current account. It later became an overdraft account. The second account was opened for the purposes of a term loan facility. An advance of $38,000 was made. A second mortgage was given over the property. It contained an all moneys clause.

7   Generally speaking, both accounts had a troubled history (by at least early 1990). The company was deregistered on 27 February 1992. The two accounts were amalgamated on 16 March 1993. The debt standing in the second account was transferred to the first account. Thereafter, there was one account which continued under the number of the first account.

8   The hearing commenced on 21 September 1999 and occupied three days. The plaintiff read three affidavits (the deponents were Messrs Egan, Hanrahan & McCarthy). Mr McCarthy gave supplementary oral evidence and was cross-examined. Each of the defendants has sworn an affidavit. Both of them gave supplementary oral evidence and were cross-examined. Both parties tendered documentary material.

9   Before seeking to deal with other matters, I should digress at this stage to deal with one matter that cropped up during the trial. The plaintiff moved for dismissal of a claim for damages contained in a Cross-claim brought by the defendants. The claim for damages was mixed in nature being a combination apparently founded upon allegations of representations and failure to inform. The pleading was somewhat confusing and deficient in a number of respects. Apart from these problems, there were insurmountable evidentiary deficiencies. As the claim was clearly hopeless and doomed to failure, I granted the application for dismissal. The alternative would have led to the wasting of court time and a needless throwing away of costs. It seemed to me that the interests of justice were best served by the granting of the application.

10   In 1988, the defendants had banking arrangements with Westpac Banking Corporation (Westpac). Statements were sent to “The Secretary - K G & S A Kerswell” and the account stood in the name of “K G & S A Kerswell Pty Ltd Strata Management”. There were also separate strata management accounts. It is said that the defendants were unhappy with the services provided by Westpac. An approach was made to the plaintiff. The defendants say that two conversations were had with officers of the plaintiff (including one officer who was understood to be the manager).

11   Paragraph 7 of the first defendant’s affidavit deposes to the first conversation in the following terms:-
“In or about December, 1988 I approached the State Bank (‘The Bank’) at its branch at 235 Clarence Street, Sydney with a view to doing all my banking with them and I spoke to an officer of the State Bank who I understood to be the manager of the branch, regarding the transfer of the Strata Management accounts and the other accounts from Westpac to the State Bank and generally about financial facilities that my business could expect to obtain. I recall having a conversation with this bank officer as follows:-
I said ‘I operate a Strata Management company
KG & SA Kerswell Pty Limited. We have approximately 60 Strata Management accounts in our portfolio. We have a couple of very large managements such as the Neutral Bay Shopping Village and Pacific Towers in Coffs Harbour. A number of the accounts have relatively big budgets and they normally operate through a cheque account. As a result a bank with these types of accounts can do quite well because interest is not paid and normal bank charges are applied. Currently we are banking with Westpac but we’re unhappy with their service and procedures. They don’t know how to look after us. We are also looking for a facility from the bank to pay out a company loan from Westpac in due course. I am able to start an account with you by depositing $30,000.00. We want to use this account for company purposes’.
The Bank
Officer
Said: ‘That sounds good I’m sure the bank can
service your needs’.”

Paragraph 8 of that affidavit deposes to the second conversation in the following terms:-

“On or about 21st December, 1988 I again attended the bank and spoke to a bank officer as follows:
I said ‘I have made arrangements with the manager
to open a cheque account for my business at this branch and I would like to deposit a cheque for $30,000.00 into it and also collect a temporary cheque book’.
The bank officer then proceeded to open the cheque Account No: 53-0002-00 (‘Company Account No. 1’) and handed me a number of temporary cheques which could be used until a proper printed cheque book was provided.”

12   The first account was opened and operated from 21 December 1988. It appears to have always stood in the name of the defendants. The second account was opened and operated in the names of the defendants. It is conceded that the defendants have personal liability in respect of that account (by reason of the personal covenants contained in the mortgage).

13 By the time of the amalgamation of the two accounts, the company had ceased to be a legal entity (it had been dissolved under the Corporations Law). An approach was made to the plaintiff to amalgamate the accounts. There was a letter signed by the first defendant. It had a letterhead (New South Wales Strata Management Pty Ltd). The plaintiff responded with a letter directed to the defendants. It is contained in Exhibit LAMC 1 (see page 110). The letter refers to the representations made by the defendants. It set out an approach which the plaintiff said that it was prepared to consider. The approach identified the present balance outstanding in respect of the amalgamated account (and stipulates an amount of interest to be paid). There was to be a forbearance of legal action for a period of six months. The defendants assented to that approach and the amalgamation then took place. The amount of interest was paid. The amalgamated account was thereafter operated by the defendants (inter alia there were two deposits from personal funds). There was a history of default and contemplated legal action. As open offers of settlement did not produce a resolution, these proceedings were then commenced.

14   This is a case in which credibility has been seen as a question of some importance. I have closely observed the demeanour of witnesses during the giving of evidence. In assessing credibility, I have had regard to both demeanour and evidence. The credibility of the defendants has been seen as crucial to their case.

15   The first defendant can be described as a very unimpressive witness. His affidavit contains statements that were untrue. There was material which could be seen as standing in conflict with what had been said by his wife. His oral evidence stood in conflict with what had been said in his affidavit. It was in conflict with things said and done in the past (including what appeared from documentation). He made implausible and/or unpersuasive attempts to explain away the inconsistencies between the present case and what had been done in the past. He persisted with a practice of giving unresponsive answers to questions. There was a contrast in manner when answering questions which he thought would assist his case as opposed to those which sought an answer that he did not see as assisting his case.

16   The second defendant was also an unimpressive witness. The defendants place significance on the evidence given by them concerning the two conversations that they allege took place in or about December 1988 prior to the opening of the first account. Their affidavits had been sworn in December 1996. They had been prepared with the assistance of counsel. The second defendant’s affidavit made no reference to the first of the two conversations. She gave oral evidence by leave as to that conversation. This evidence first emerged during the hearing. There was no satisfactory explanation for it not appearing in the affidavit. Her affidavit gave evidence as to the second of the two alleged conversations. What appeared in the affidavit could be seen to be in conflict with the version given by the first defendant as to this conversation. In her affidavit she deposes to her being the person who spoke to the bank officer. By leave, she gave oral evidence to the effect that this was an error and that it was her husband who had spoken to the bank officer in those terms. This was the version that had appeared in the husband’s affidavit. However, during cross-examination her evidence changed once again and she retreated to the position where she didn’t remember which of them had spoken to the bank officer.

17   In their affidavits the defendants did not identify either of the officers with whom it is said that a conversation took place. However, some years later in their oral evidence both defendants said that they were able to identify Mr Seymour (as the bank officer they had understood to be the manager).

18   Mr Seymour was not called by either party. He is no longer an employee of the plaintiff. The plaintiff had provided the defendants with his last known address. There was some conflicting and inconclusive argument concerning the fact that he was not called.

19   I do not regard either of the defendants as a reliable or credible witness. In the absence of independent corroboration I do not accept their evidence.

20   The issue identified between the parties was said to be who was the customer of the plaintiff. In resisting the finding that it was the defendants themselves, the defendants put stress on certain matters (inter alia the two alleged conversations which have been earlier referred to, certain aspects of the documentation and the fact that moneys payable to the company were deposited).

21   Some relevant documentation is no longer available. The plaintiff does not have documentation relating to the opening of the first account, some statements as to account balances or any cheques. The defendants have tendered certain deposit books used by them. They have not produced any cheque butts. The deposit books suggest that deposits of both personal and company moneys were made. As I read the affidavits of the defendants, I do not understand them to be asserting that the initial deposit of $30,000 was by way of cheque payable to the company.

22   I do not accept the evidence given by the defendants as to the two conversations allegedly had in or about December 1988. However, it seems to me that it matters little whether or not a different view was taken as to that evidence. It must be remembered that the conversations were allegedly had with different bank officers and that there was a temporal interlude between them. In the first of the alleged conversations the expression “for company purposes” appears. In the second of the alleged conversations a different expression “for my business at this branch” appears. Apart from the lack of consistency in terminology, it seems to me that the content of these alleged conversations falls short of establishing what is contended by the defendants. The first of the alleged conversations was of a preliminary nature. It was the second that was followed by the opening of the account. Whatever can be extracted from this material, the fact remains that it does not accord with documentary material relating to the accounts. The documentation evidences that the accounts always stood in the names of the defendants themselves. At the very least, it seems unlikely that an account would have been opened in personal names with the deposit of a company cheque. Further, it would seem unlikely that both of these defendants would have allowed the account to be opened in their personal names if they had in fact wanted to open a company account. I should add that it seems to me to be of little moment that the defendants used the account for both personal and company deposits.

23   There is no evidence to suggest that the defendants, at any stage, ever sought to have either of the accounts placed in the name of the company. There could be no misunderstanding that the plaintiff treated the two accounts as being personal accounts. Consistently with this approach the accounts were not sought to be secured by way of guarantee from the directors. An application was made for the opening of an account in the name of the company. This was an account to provide an overdraft with a limit of $15,000. Approval was given but later cancelled. This may have been at least in part due to the fact that the plaintiff required guarantees from the defendants which were not forthcoming.

24   In the past, various admissions have been made by or on behalf of the defendants which are contrary to the case presented in this Court. There are admissions to the effect that both accounts were personal accounts. There are admissions to the effect that the first account was a personal account. There is documentation from both the defendants and their solicitors which evidences that the second account was a personal account. Admissions have been made in pleadings. Admissions have been made in evidence given by the first defendant before Master Greenwood. The judgment for possession made by him was founded on an admission of personal indebtedness and of default under the mortgage. There were admissions arising from conduct of the defendants following receipt of notices served in 1991. There have been open offers to settle the proceedings. The assertion that the first account was a company account was not made in those proceedings until after the second of the two summary judgment applications.

25   The plaintiff also contends that the defendant is estopped from asserting that the first account is a company account. The estoppel is said to arise from the judgment of Master Greenwood delivered in July 1996. Competing submissions were made on this argument. There may well be considerable force in the plaintiff’s contention. However, for present purposes, it is unnecessary to pursue this matter.

26   I am satisfied that, both accounts were at all times personal accounts. Even if a different view had been taken on these matters, once the company had been deregistered changed contractual relationships would have come into being with the continuing conduct of both accounts. There was a change in the contractual relationship when the amalgamation of the accounts took place. The changed contractual relationships had to be between the plaintiff and the defendants.

27   The plaintiff is entitled to judgment against both defendants. The balance of the Cross-claim is dismissed. The defendants are to pay the costs of the proceedings and of the Cross-claim. The exhibits may be returned.
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Last Modified: 10/12/1999