Stuart v Rabobank Australia Ltd
[2021] FCA 1388
•11 November 2021
FEDERAL COURT OF AUSTRALIA
Stuart v Rabobank Australia Ltd [2021] FCA 1388
File number: NSD 471 of 2019 Judgment of: HALLEY J Date of judgment: 11 November 2021 Catchwords: BANKING AND FINANCIAL INSTITUTIONS – misleading or deceptive conduct – financial products – loan facility – allegations that respondent misled applicants by making representations as to loan facility – whether representations were made – whether representations were false or misleading – whether representations contravened s 12DA of the Australian Securities and Investments Commission Act2001 (Cth) (ASIC Act) – whether representations were fraudulent – tort of deceit – whether provision of finance unconscionable – whether conduct contravened ss 12CB and 12CC of the ASIC Act – whether respondent’s conduct at mediation unconscionable – cross-claim by respondent for outstanding indebtedness
DAMAGES – ss 12GF and 12GM of the ASIC Act – tort of deceit – causation – identification of counterfactual – whether applicants’ loss was result of respondent’s conduct – whether respondents have suffered loss or damage by reason of applicants’ default
LIMITATION OF ACTIONS – ss 12GF and 12GM of the ASIC Act – applicants time barred – s 38 of Limitation of Actions Act 1974 (Qld) – whether applicants discovered the alleged fraud prior to the end of the limitation period – applicants time barred
CONSUMER LAW – whether respondent contravened s 76 in sch 1 to the National Consumer Credit Protection Act 2009 (Cth) (National Credit Code) – whether loan advanced by respondent was “carried over instrument” – whether loan facility was a credit contract – whether loan was for personal, domestic or household purposes – whether deed of forbearance was a credit contract – application made to issue notice pursuant to s 78B of the Judiciary Act 1903 (Cth) (78B notice) due to alleged conflicting interpretations of the National Credit Code – application to issue 78B notice dismissed
EVIDENCE – proposed tender of expert reports – s 79(1) of the Evidence Act 1995 (Cth) (Evidence Act) – whether expert witnesses had requisite specialised knowledge – whether opinions of expert witnesses based wholly or substantially on that knowledge – reports inadmissible – alleged delay by respondent to comply with discovery obligations – respondent’s delay in producing documents did not justify drawing of any adverse inferences – application to adduce tendency evidence – s 97 of the Evidence Act – whether reasonable notice provided – whether proposed evidence has significant probative value – application dismissed – admissibility of hardship evidence – efficient conduct of hearing
PRACTICE AND PROCEDURE – application to set aside deed of forbearance – whether equity will intervene to prevent unconscientious reliance on deed of forbearance
CONTRACTS – whether binding contract entered into regarding carbon farming project – whether any loss or damage flowed from alleged breach of contract
Legislation: Constitution s 51
Australian Securities and Investments Commission Act 2001 (Cth) ss 12CB, 12CC, 12DA, 12GF, 12GM
Competition and Consumer Act 2010 (Cth) s 87
Competition and Consumer Act 2010 (Cth) sch 2, The Australian Consumer Law s 238
Corporations Act 2001 (Cth) s 912A
Evidence Act 1995 (Cth) ss 55, 76, 79, 97
Federal Court of Australia Act 1976 (Cth) s 37AF
Judiciary Act 1903 (Cth) s 78B
National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 (Cth) s 4, sch 1 s 3
National Consumer Credit Protection Act 2009 (Cth) sch 1, National Credit Code s 76
National Consumer Credit Protection Act 2009 (Cth) ss 128, 130
Trade Practices Act 1974 (Cth) ss 52, 87
Corporations Regulations 2001 (Cth) reg 7.6.02
Consumer Credit (Queensland) Act 1994 (Qld) app, Consumer Credit Code ss 6, 11
Credit (Commonwealth Powers) Act2010 (Qld) ss 4, 11
Fair Trading Act 1989 (Qld) s 38
Limitations of Actions Act 1974 (Qld) ss 10, 38
Chancery Amendment Act 1858 (UK) s 2
Cases cited: Aravena v R (2015) 91 NSWLR 258; [2015] NSWCCA 288
Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd (2021) 388 ALR 577; [2021] FCAFC 40
Australian Securities and Investments Commission v Australia and New Zealand Banking Group Limited [2018] FCA 155
Australian Securities and Investments Commission v Citrofresh International Ltd (2007) 164 FCR 333; [2007] FCA 1873
Australian Securities and Investments Commission v Dover Financial Advisers Pty Ltd (2019) 140 ACSR 561; [2019] FCA 1932
Australian Securities and Investments CommissionvKobelt (2019) 267 CLR 1; [2019] HCA 18
Australian Securities and Investments Commission v Narain (2008) 169 FCR 211; [2008] FCAFC 120
Australian Securities and Investments CommissionvNational ExchangePty Ltd (2005) 148 FCR 132; [2005] FCAFC 226
Australian Securities and Investments Commission v The Cash Store Pty Ltd (in liquidation) (No 2) [2015] FCA 93
Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) (2018) 266 FCR 147; [2018] FCA 751
Banditt v The Queen (2005) 224 CLR 262; [2005] HCA 80
Bradford Third Equitable Benefit Building Society v Borders [1941] 2 All ER 205
Canavan v Wright [1957] NZLR 790
Commonwealth Bank of Australia v Quade (1991) 178 CLR 134; [1991] HCA 61
Connor v Blacktown District Hospital [1971] 1 NSWLR 713
Dasreef Pty Limited v Hawchar (2011) 243 CLR 588; [2011] HCA 21
Derry v Peek (1889) 14 App Cas 337; [1886-90] All ER Rep 1
Domain Names Australia Pty Ltd v .au Domain Administration Ltd (2004) 139 FCR 215; [2004] FCAFC 247
Dorfler v Australia and New Zealand Banking Group Limited (1991) 103 ALR 699; [1991] FCA 545
Doyle v Olby (Ironmongers) Ltd [1969] 2 QB 158; [1969] 2 All ER 119
Eckford v Six Mile Creek Pty Ltd (No 2) [2019] FCA 1307
Edgington v Fitzmaurice (1885) 29 Ch D 459; [1881-5] All ER Rep 856
Fuge v Commonwealth Bank of Australia [2019] FCA 1621
Gooley v NSW Rural Assistance Authority [2020] NSWCA 156
Gould v Vaggelas (1985) 157 CLR 215; [1985] HCA 75
Grant v John Grant & Sons Proprietary Limited (1954) 91 CLR 112; [1954] HCA 23
Haynes v St George Banka Division of Westpac Banking Corporation; Haynes v Westpac Banking Corporation [2018] SASCFC 51
Honeysett v The Queen (2014) 253 CLR 122; [2014] HCA 29
Hornal v Neuberger Products Ltd [1957] 1 QB 247; [1956] 3 All ER 970
Hughes v The Queen (2017) 263 CLR 338; [2017] HCA 20
IMM v The Queen (2016) 257 CLR 300; [2016] HCA 14
Jones v Dumbrell [1981] VR 199
Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8
Jonsson v Arkway Pty Ltd (2003) 58 NSWLR 451; [2003] NSWSC 815
Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd [1988] FCA 88
Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11
Lewis v Australian Capital Territory (2020) 381 ALR 375; [2020] HCA 26
Magill v Magill (2006) 226 CLR 551; [2006] HCA 51
Make It Mine Finance Pty Ltd, in the matter of Make It Mine Finance Pty Ltd (No 2) [2015] FCA 1255
Mayne Nickless Ltd v Multigroup Distribution Services Pty Ltd (2001) 114 FCR 108; [2001] FCA 1620
Mullet v Mason (1866) LR 1 CP 559
Nicholls v Taylor [1939] VLR 119
Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199; [2015] FCAFC 50
Pasley v Freeman (1789) 100 ER 450; [1775-1802] All ER Rep 31
Pertzel v Qld Paulownia Forests Ltd [2008] 2 Qd R 526; [2008] QCA 287
Phelan v Melbourne Health [2019] VSCA 205
R v Chatimba (No 1) [2021] NSWSC 204
R v Gordon (No 4) [2016] NSWSC 312
R v Sharpe (No 5) [2021] NSWSC 52
R v Wilson (No 3) [2017] NSWSC 1680
Re Culleton (2017) 340 ALR 550; [2017] HCA 3
Redgrave v Hurd (1881) 20 Ch D 1; [1881-5] All ER Rep 77
Reeves (a pseudonym) v R (2013) 41 VR 275; [2013] VSCA 311
Reilly v Australia and New Zealand Banking Group Limited (No 2) [2020] FCA 1502
RH v R (2014) 241 A Crim R 1; [2014] NSWCCA 71
Sarina v Fairfax Media Publications Pty Ltd (2018) 365 ALR 15; [2018] FCAFC 190
Sent v Jet Corporation of Australia Proprietary Limited (1986) 160 CLR 540; [1986] HCA 35
Smith v Chadwick (1884) 9 App Cas 187; [1881-5] All ER Rep 242
Stanley v Service to Youth Council Incorporated (No 2) (2014) 317 ALR 141; [2014] FCA 644
Stuart v Rabobank Australia Limited [2018] FCA 30
Stuart v Rabobank Australia Ltd [2018] FCA 1304
Stuart v Rabobank Australia Ltd [2019] FCA 343
TB v R [2019] NSWCCA 224
Toteff v Antonas (1952) 87 CLR 647; [1952] HCA 16
Wardley Australia Limited v The State of Western Australia (1992) 175 CLR 514; [1992] HCA 55
Webb v GetSwift Limited (No 5) [2019] FCA 1533
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 844 Date of last submissions: 12 June 2021 (Applicants / Cross-Respondents)
4 June 2021 (Respondent / Cross-Claimant)Date of hearing: 6-28 and 30 April 2021 Counsel for the Applicants / Cross-Respondents: Mr PE King with Ms EJ Rusiti Solicitor for the Applicants / Cross-Respondents: Nexus Lawyers (24 March 2020 onwards)
Spencer & Co Legal (26 March 2019 – 23 March 2020)Counsel for the Respondent / Cross-Claimant: Mr P Braham SC with Mr S Gray Solicitor for the Respondent / Cross-Claimant: Gadens Lawyers ORDERS
NSD 471 of 2019 BETWEEN: MARK LINDSAY STUART
First Applicant
CATHERINE ENID STUART
Second Applicant
AND: RABOBANK AUSTRALIA LTD
Respondent
AND BETWEEN: RABOBANK AUSTRALIA LTD
Cross-Claimant
AND: MARK LINDSAY STUART
First Cross-Respondent
CATHERINE ENID STUART
Second Cross-Respondent
ORDER MADE BY:
HALLEY J
DATE OF ORDER:
11 NOVEMBER 2021
THE COURT ORDERS THAT:
1.The amended originating application dated 22 April 2021 be dismissed.
2.The cross-claimant be awarded damages for breach of contract in the sum of $2,972,705.42 together with interest from and including 1 April 2021.
3.Subject to any consent position with respect to the payment of the costs of the proceeding including the cross-claim:
(a)the applicants file and serve written submissions on costs limited to three pages and any supporting evidence by 4.30 pm on Thursday, 18 November 2021;
(b)the respondent file and serve written submissions on costs in response limited to three pages and any supporting evidence by 4.30 pm on Thursday, 25 November 2021;
(c)the applicants file and serve any written submissions in reply on costs limited to two pages and any supporting evidence by 4.30 pm on Thursday, 2 December 2021;
(d)written submissions must be easily legible using a font size of at least 12 points and one and a half line spacing throughout, including in any footnotes and annexures; and
(e)the issue of costs be determined on the papers unless either party seeks an oral hearing.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
NSD 471 of 2019 BETWEEN: MARK LINDSAY STUART
First Applicant
CATHERINE ENID STUART
Second Applicant
AND: RABOBANK AUSTRALIA LTD
Respondent
AND BETWEEN: RABOBANK AUSTRALIA LTD
Cross-Claimant
AND: MARK LINDSAY STUART
First Cross-Respondent
CATHERINE ENID STUART
Second Cross-Respondent
ORDER MADE BY:
HALLEY J
DATE OF ORDER:
11 NOVEMBER 2021
THE COURT ORDERS THAT:
1.[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
2.[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
(a)[REDACTED]
(b)[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
(i)[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
(ii)[REDACTED]
(iii)[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
(iv)[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
(v)[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
(vi)[REDACTED]
(vii)[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
(viii)[REDACTED]
(ix)[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
(x)[REDACTED]
(xi)[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
(xii)[REDACTED] [REDACTED]
(xiii)[REDACTED]
(xiv)[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
(xv)[REDACTED] [REDACTED]
(xvi)[REDACTED]
(xvii)[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
(xviii)[REDACTED] [REDACTED]
(xix)[REDACTED]
(xx)[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
(xxi)[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
(xxii)[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
(xxiii)[REDACTED]
(c)[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
(i)[REDACTED] [REDACTED] [REDACTED]
(d)[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
(i)[REDACTED] [REDACTED] [REDACTED]
(ii)[REDACTED] [REDACTED] [REDACTED]
(iii)[REDACTED] [REDACTED] [REDACTED]
(iv)[REDACTED] [REDACTED]
(v)[REDACTED] [REDACTED]
(vi)[REDACTED] [REDACTED]
(vii)[REDACTED]
(e)[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
(f)[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
(g)[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
(h)[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
(i)[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
3.[REDACTED] [REDACTED] [REDACTED]
(a)[REDACTED]
(b)[REDACTED] [REDACTED]
(c)[REDACTED] [REDACTED] [REDACTED]
(d)[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
THE COURT NOTES THAT:
4.[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Table of Contents
A. INTRODUCTION
[1]
B. PRINCIPAL CONCLUSIONS
[18]
C. DRAMATIS PERSONAE AND LAY WITNESSES
[19]
The Applicants
[19]
The Respondent
[25]
Mr Ellem and other Rabobank personnel
[26]
Mr Couper
[32]
Ms Bowden
[36]
Mr Nevison
[39]
Applicants’ lay witnesses
[41]
Ms Hawking
[41]
Ms Bodkin (née Christmas)
[43]
Mr McCallum
[45]
Mr Cowley
[46]
Ms Beardsley (née Bonnett)
[47]
Mr Wass
[50]
Mr and Mrs Brauer
[52]
D. WITNESSES AND CREDIT ISSUES
[54]
Mrs Stuart
[54]
Mr Stuart
[66]
Other lay witnesses of the Stuarts
[72]
Mr Ellem
[73]
Mr Couper
[88]
Mr Brady
[90]
The expert reports of Mr White and Mr Green
[93]
E. EVIDENTIARY ISSUES
[112]
Admissibility of McGovern and Keogh reports
[113]
Dr McGovern’s reports
[119]
Mr Keogh’s report
[135]
Admissibility of hardship evidence
[146]
Weight to be given to testimonial evidence
[153]
Jones v Dunkel inferences
[158]
Application to adduce tendency evidence
[166]
Sequence of events
[169]
Consideration
[180]
Section 97(1)(a) – “reasonable notice”
[183]
Section 97(1)(b) – “significant probative value”
[188]
Disposition
[221]
F. FACTUAL BACKGROUND
[224]
The Stuarts’ prior property dealings
[225]
Initial entry into a Rural Term Loan
[226]
November 2004 Letter of Offer - Wallal
[227]
December 2004 Letter of Offer - Tullochard
[234]
Conversion of Rural Term Loan to an All in One Facility in February 2005
[247]
July 2005 Letter of Offer
[249]
Sale of Kurrajong in October 2005
[258]
June 2006 Letter of Offer
[260]
Purchase of Evergreen and sale of Tullochard in July 2006
[263]
December 2006 loan limit increase
[264]
Decision to sell Evergreen in mid-2007
[266]
December 2007 loan limit increase
[271]
Proposed property acquisitions in late 2007 and early 2008
[274]
The Stuarts’ offers on Mt Morris
[277]
February 2008 Evergreen auction
[283]
April 2008 Letter of Offer
[287]
Purchase of Mt Morris
[293]
Vendor finance option for sale of Evergreen
[302]
Progression of the application for finance in early May 2008
[308]
Negotiations for purchase of Mt Morris are stalled
[313]
Negotiations for purchase of Mt Morris resume
[323]
Contracts are exchanged for purchase of Mt Morris
[324]
27 May 2008 valuations by Mr Ellem
[327]
28 May 2008 internal Rabobank Dalby emails
[337]
May 2008 Loan Application
[339]
May 2008 Credit Submission
[341]
June 2008 Letter of Offer
[349]
Loan documents alleged to be signed by the Stuarts in mid-May 2008
[355]
Consumer Credit Code declaration
[369]
Completion of purchase of Mt Morris on 30 June 2008
[371]
Advertising Evergreen for sale in July 2008
[372]
October 2008 QRAA application
[375]
March 2009 instructions to agents to sell Evergreen
[380]
March 2009 Letter of Offer
[381]
Burberrys’ offer to purchase Evergreen
[386]
3 September 2009 valuation of Evergreen
[408]
October 2009 Letter of Offer
[412]
Sale of Lot 14 of Evergreen in January 2010
[417]
June 2010 Letter of Offer
[422]
November 2010 credit submission
[426]
31 December 2010 interest payment
[431]
2 March 2011 letter to Rabobank
[435]
3 May 2011 valuation of Mt Morris
[448]
Lease of Lots 3 and 7 of Evergreen
[450]
3 February 2012 farm debt mediation notice
[453]
Sale of Lots 3 and 7 of Evergreen
[454]
9 August 2012 Mediation
[457]
Deed of Forbearance
[459]
10 April 2013 Rabobank offer to the Stuarts
[475]
Sale of Mt Morris
[480]
2015 Proceedings
[485]
Statement of indebtedness
[493]
G. ASIC ACT SECTION 12DA – MISLEADING AND DECEPTIVE CONDUCT
[494]
Relevant statutory provisions
[494]
Relevant principles
[495]
H. FRAUD AND DECEIT CLAIMS
[500]
Relevant principles
[500]
I. 15 YEAR REPRESENTATION
[508]
Was it conveyed?
[508]
Was it made in trade or commerce?
[514]
Was it misleading or deceptive?
[515]
Was it knowingly false or made recklessly?
[516]
Was it relied upon?
[517]
Did the Stuarts suffer any loss or damage by reason of their reliance?
[518]
J. REPAYMENT REPRESENTATION
[519]
Was it conveyed?
[519]
Was it made in trade or commerce?
[533]
Was it misleading and deceptive?
[534]
Was it knowingly false or made recklessly?
[535]
Was it relied upon?
[536]
Did the Stuarts suffer any loss or damage by reason of their reliance on it?
[537]
K. SUITABLE FINANCE REPRESENTATION
[538]
Was it conveyed?
[538]
Was it made in trade or commerce?
[549]
Was it misleading and deceptive?
[551]
Was it knowingly false or made recklessly?
[577]
Was it relied upon?
[584]
Did the Stuarts suffer any loss or damage by reason of their reliance on it?
[589]
L. ASIC ACT SECTION 12CB – UNCONSCIONABLE CONDUCT
[590]
Relevant statutory principles
[590]
Relevant principles
[592]
Was Rabobank’s conduct unconscionable?
[598]
Bredhauer unconscionability claims
[600]
Inequality of bargaining power
[614]
Not reasonably necessary for legitimate protection
[615]
Use of unfair tactics
[616]
Failure to comply with lending and credit policies
[617]
Refusal to negotiate permanent repayment provision
[625]
Taking advantage of disadvantageous circumstances
[626]
Unilateral right to vary or terminate the Facility
[627]
Failure to act in good faith
[628]
M. DAMAGES
[629]
Relevant statutory provisions and principles
[631]
Section 12GF of the ASIC Act
[631]
Section 12GM of the ASIC Act
[634]
Damages for action in deceit
[640]
Causation
[644]
Stuarts’ Particulars of Loss and Damage
[656]
The White loss report
[662]
Oral evidence of Mr White
[674]
N. LIMITATION ISSUES
[684]
Reliance on s 12GM of the ASIC Act
[685]
Fraud and deceit claims
[691]
Postponement in cases of fraud
[694]
Postponement in cases of fraudulent concealment
[712]
Section 12GF of the ASIC Act
[719]
O. DEED OF FORBEARANCE
[722]
P. CARBON FARMING CLAIM
[752]
Was a binding contract or arrangement entered into?
[753]
Was there any breach?
[763]
Causation
[766]
Quantum
[768]
Q. NATIONAL CREDIT CODE CLAIM
[769]
Does it apply?
[769]
Were the changes to the Facility unjust?
[791]
Should the Court reopen the credit contract?
[805]
Section 78B application
[806]
R. COMPLIANCE WITH DISCOVERY OBLIGATIONS
[816]
Delay case
[816]
S. AMENDED STATEMENT OF CROSS-CLAIM
[826]
Facility breach cross-claim
[828]
Contractual indemnity cross-claim
[834]
Misleading or deceptive conduct cross-claim
[837]
Consideration
[840]
T. DISPOSITION
[843]
REASONS FOR JUDGMENT
HALLEY J:
A. INTRODUCTION
By late 2007, after a series of successful rural property acquisitions and realisations, the applicants Mark and Catherine “Cate” Stuart (the Stuarts) by late 2007 found themselves in a position where they could no longer meet their financial commitments on their current rural property without continued extensions to their facility limit of the financing provided to them by the respondent, Rabobank Australia Ltd (Rabobank).
The Stuarts were confident that they could address this predicament by increasing the limit of their facility to enable them to purchase an alternative property pending the sale of their existing property. Unfortunately, the combined effect of the severe drought and the global financial crisis frustrated their efforts to sell their existing property. The Stuarts were not able to continue to meet interest payments on their facility with Rabobank and they defaulted.
Ultimately, both properties were sold for prices well beneath their expectations, receivers were appointed, and the Stuarts have been left with virtually nothing and a substantial debt outstanding to Rabobank.
In this proceeding the Stuarts seek declarations of contravention, damages, compensation and various orders relieving them from liability and setting aside facilities and mortgages against Rabobank.
In an attempt to address the difficult financial position they faced, in late 2007 the Stuarts embarked on a course of action to sell Evergreen, a cattle property they owned near Talwood in Queensland, and purchase a new cattle property. The farming operation conducted by the Stuarts on Evergreen had not been profitable and in around April 2008, the Stuarts agreed with Rabobank to sell Evergreen and use the proceeds of the sale to substantially reduce their existing facility with the bank with a view to them acquiring a different cattle property.
In May 2008, prior to the entry into any contract for the sale of Evergreen, the Stuarts entered into a contract for the purchase of Mt Morris, a cattle property near Charleville in Queensland.
On 11 June 2008, the Stuarts accepted a letter of offer from Rabobank dated 3 June 2008 (June 2008 Letter of Offer), pursuant to which Rabobank agreed to extend the limit of the Stuarts’ existing facility with the bank (Facility) from $1.12 million to $3.48 million to fund the purchase of Mt Morris. A term of the extension of the limit of the Facility (Facility Limit) was that the proceeds of the proposed sale of Evergreen had to be used to reduce the indebtedness of the Stuarts to Rabobank under the Facility from $3.48 million to $250,000 by 31 March 2009.
The Stuarts were not able to sell Evergreen by 31 March 2009.
Notwithstanding the requirement to reduce the outstanding balance of the Facility to $250,000 by 31 March 2009, Rabobank maintained the Facility Limit at $3.48 million until December 2009.
In December 2009, Rabobank increased the Facility Limit to $3.6 million, but then reduced it to $2.7 million in January 2010 following the receipt of $900,000 from the sale of part of Evergreen. In June 2010, Rabobank increased the Facility Limit to $2.75 million, then subsequently reduced it to $950,000 in December 2010 and ultimately reduced it to nil in May 2012.
The Facility was in default from December 2010 by reason of the Stuarts’ failure to meet an interest payment under the Facility.
On 9 August 2012 the parties attended a mediation (Mediation), following which they entered into a deed described as a Deed of Forbearance and Acknowledgement (Deed of Forbearance). It included a clause purporting to contain a release by the Stuarts of all claims that they might have against Rabobank with respect to, inter alia, the June 2008 Letter of Offer. The deed provided for the Stuarts to complete the marketing campaign for the sale of Mt Morris by 30 November 2012. In the event Mt Morris was not sold by this date, the Deed of Forbearance required the Stuarts to agree an acceptable amount with Rabobank in full and final satisfaction of the debt owed by them to the bank on or before 31 March 2013 while also continuing their efforts to sell Mt Morris. Neither of these two provisions was satisfied.
On 10 April 2013, Rabobank agreed to accept the sum of $1.5 million in full and final satisfaction of the debt owed by the Stuarts, if payment was made by 31 May 2013. The date for payment was subsequently extended to 30 August 2013. No payment was ever made by the Stuarts and, on 9 September 2013, Rabobank declared an end to its moratorium on enforcement action under the Deed of Forbearance.
On 7 November 2013, receivers were appointed to Mt Morris by Rabobank (Receivers). On 10 October 2014, the Receivers took possession of Mt Morris and it was sold at auction. The sale was completed in June 2015.
As at 31 March 2021, the outstanding balance under the Facility was $2,972,705.42 (including interest up to 31 March 2021).
Briefly stated, the Stuarts seek to advance the following claims against Rabobank:
(a)15 Year Representation: The Stuarts contend that Rabobank falsely represented that the increase in the Facility to fund the purchase of Mt Morris was made on an interest only basis until the expiry of the Facility on 30 July 2019 and that representation was thereby misleading or deceptive or likely to mislead or deceive in contravention of s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). It is further alleged that the 15 Year Representation was made by Rabobank knowing it to be false or was made recklessly as to its falsity;
(b)Repayment Representation: The Stuarts contend that Rabobank falsely represented that the requirement in the Facility to repay $3.23 million on or before 31 March 2009 was a typographical error and that the representation was thereby misleading or deceptive or likely to mislead or deceive in contravention of s 12DA of the ASIC Act. It is further alleged that the Repayment Representation was made by Rabobank knowing it to be false or was made recklessly as to its falsity;
(c)Suitable Finance Representation: The Stuarts contend that Rabobank falsely represented that the finance to be supplied by Rabobank pursuant to the June 2008 Letter of Offer was suitable finance, serviceable by the Stuarts, “right” for the farming operations of the Stuarts and that Rabobank’s All in One finance product was designed for primary producers like the Stuarts. It is alleged that the Suitable Finance Representation was thereby misleading or deceptive or likely to mislead or deceive in contravention of s 12DA of the ASIC Act. It is further alleged that Rabobank made the representation knowing it to be false or was reckless as to its falsity;
(d)Unconscionable Provision of Finance: The Stuarts contend that Rabobank engaged in unconscionable conduct by providing finance to the Stuarts pursuant to the June 2008 Letter of Offer in breach of its lending, credit and valuation policies and that the finance was unsuitable for the Stuarts, unserviceable by them, financially imprudent, comprised asset lending and was not fit for purpose and that Rabobank took advantage of the Stuarts’ inferior bargaining position in contravention of s 12CB(1)(a) of the ASIC Act;
(e)Carbon Farming claim: The Stuarts contend that Rabobank breached a binding contract or arrangement reached between them in relation to a proposed carbon farming initiative on Mt Morris by failing to sign an “Eligible Interest Holder Consent” form required by the Clean Energy Regulator and failing to fund the costs of the verification process required by the Clean Energy Regulator for the proposed initiative;
(f)National Credit Code claim: The Stuarts contend that the Facility should be reopened as an unjust credit transaction pursuant to s 76 of the National Credit Code contained in sch 1 to the National Consumer Credit Protection Act 2009 (Cth) (National Credit Code), by reason of the variation to the Facility pursuant to the terms of the June 2008 Letter of Offer, inter alia, on the basis that:
(i)the permanent repayment provision of $3.23 million by 31 March 2009 comprised a form of financial misconduct;
(ii)there was a relative inequality of bargaining power;
(iii)Rabobank engaged in unfair tactics;
(iv)the provisions in the Facility, as varied in June 2008 and thereafter, were not reasonably necessary for the legitimate protection of Rabobank’s interests; and
(v)Rabobank failed to comply with the Australian Bankers’ Association Code of Banking Practice (Code of Banking Practice) by undertaking enforcement action rather than working with the Stuarts to resolve their financial difficulties;
(g)Deed of Forbearance claim: The Stuarts contend that the Deed of Forbearance: does not bar or release any claims made by them; is invalid and unenforceable as a result of Rabobank’s alleged financial misconduct; was rendered void by Rabobank making unauthorised alterations; was not entered into pursuant to an authorised dispute resolution scheme; and was an unjust transaction within the meaning of s 76 of the National Credit Code;
(h)Serious Consideration Representation: The Stuarts contend that Rabobank, by its servants or agents Richard Witherow, Greg Brady and/or Lee Nevison, falsely represented that it intended to give serious consideration to an offer received from the Stuarts immediately prior to the Mediation on 9 August 2012 to refinance the Stuarts’ indebtedness to the bank and that the representation was thereby misleading or deceptive or likely to mislead or deceive in contravention of s 12DA of the ASIC Act;
(i)Unconscionable Mediation Conduct: The Stuarts contend that Rabobank, by its servants or agents Mr Witherow, Mr Brady and/or Mr Nevison, engaged in unconscionable conduct at the Mediation on 9 August 2012 and thereafter, inter alia, by placing undue pressure and/or duress upon the Stuarts to sign the Deed of Forbearance in contravention of s 12CB(1)(a) of the ASIC Act; and
(j)Fraud and Fraudulent Concealment: The Stuarts allege that Rabobank is precluded from relying on the limitation periods advanced by Rabobank in its defence on the grounds that the Stuarts’ claims are based in fraud or deceit or otherwise because each is a cause of action that has been fraudulently concealed, in that each wrongful act was not reasonably discoverable and fully appreciated by the Stuarts prior to June 2018.
Briefly stated, Rabobank advances the following claims in its amended statement of cross-claim:
(a)Breach of the Facility: Rabobank contends that the Stuarts are in default under the Facility and that although it has served a valid demand for payment of all amounts outstanding (together with accrued interest), the Stuarts have failed to pay the amounts demanded and Rabobank has thereby suffered loss and damage;
(b)Contractual Indemnity: Rabobank contends that, independently of the Breach of the Facility claim, the Stuarts are obliged to indemnify Rabobank pursuant to the indemnity contained in the standard terms to the Facility. This includes indemnity against any losses that Rabobank has suffered as a result of the Stuarts’ defaults, Rabobank’s costs of exercising its rights pursuant to those defaults and any losses that Rabobank may suffer as a result of the Stuarts bringing this proceeding; and
(c)Misleading or Deceptive Conduct: Rabobank contends that the Stuarts made misleading or deceptive representations to it in relation to loan applications they made in May 2008 and May 2010, six Rabobank letters of offer between June 2008 and June 2010 and the mortgage that the Stuarts provided to Rabobank over Mt Morris in June 2008, and thereby engaged in misleading or deceptive conduct in contravention of s 12DA of the ASIC Act.
B. PRINCIPAL CONCLUSIONS
For the reasons set out below, my principal conclusions in relation to the claims advanced by the Stuarts against Rabobank are as follows:
(a)Rabobank did not make the alleged 15 Year Representation;
(b)Rabobank did not make the alleged Repayment Representation;
(c)Rabobank did not make the Suitable Finance Representation;
(d)I accept, however, that Rabobank made a representation as to the suitability of the finance offered to the Stuarts pursuant to the June 2008 Letter of Offer, but this did not extend to any representation as to the ability of the Stuarts to service their ongoing commitments under the Facility and the representation made was otherwise not misleading or deceptive or false;
(e)Rabobank did not engage in unconscionable conduct by providing finance to the Stuarts pursuant to the June 2008 Letter of Offer;
(f)Rabobank did not enter into any binding contract or arrangement with the Stuarts with respect to any carbon farming initiative proposed for Mt Morris;
(g)the National Credit Code has no application to the variation to the Facility effected by the Stuarts’ acceptance of the June 2008 Letter of Offer;
(h)the Deed of Forbearance was not a credit contract for the purposes of the National Credit Code;
(i)in any event, all of the claims advanced by the Stuarts with respect to the variations to the Facility between June 2008 and May 2010, the Carbon Farming claim and the Mediation (other than the Unconscionable Mediation Conduct claim) were released pursuant to the terms of the Deed of Forbearance;
(j)Rabobank did not engage in the conduct the subject of the Unconscionable Mediation Conduct claim;
(k)in any event, the claims advanced by the Stuarts with respect to the variations to the Facility between June 2008 and May 2010 are time barred;
(l)Rabobank did not act fraudulently or deceitfully, nor did its conduct give rise to any fraudulent concealment;
(m)the Stuarts are in default of their contractual obligations pursuant to the Facility, as varied on and from June 2008; and
(n)Rabobank has suffered loss and damage by reason of the Stuarts’ default.
C. DRAMATIS PERSONAE AND LAY WITNESSES
The Applicants
Mrs Stuart was born on a family farm in Eugowra in the Central West region of New South Wales. She married Mr Stuart in 1985 and they had four children. The Stuarts worked on several farms before acquiring a succession of their own rural properties in New South Wales and Queensland, culminating in the purchase of Mt Morris in 2008.
Mr Stuart has extensive experience in outback farming operations. In the period between 1990 and 1998 he undertook rural property development work for a company in southern New South Wales, including cropping and pastures, irrigation and tree clearing.
Mr and Mrs Stuart took on distinct roles and responsibilities in their rural property acquisition partnership. Mr Stuart concentrated on what he describes as the “groundwork” and Mrs Stuart attended to most of the “secretarial work and finances”. This is established by the contemporaneous documents and the oral evidence each of the Stuarts gave in the course of the hearing.
On 5 August 2004, the Stuarts refinanced their existing loan facilities with Elders Limited (Elders) and became Rabobank clients. The Stuarts obtained a $400,000 loan facility with Rabobank that was secured by a registered mortgage over Kurrajong, a cattle property in central Queensland that was owned by the Stuarts, and an associated water licence.
Mr and Mrs Stuart both describe their current occupations as displaced graziers. Mr Stuart is currently working as a fly-in fly-out miner in Queensland to support his family following the sales of Evergreen and Mt Morris.
It was readily apparent from the oral evidence of Mr and Mrs Stuart that they both hold Rabobank responsible for their current parlous financial position.
The Respondent
Rabobank is a foreign-owned public unlisted company. It was incorporated in 2000 as the Primary Industry Bank of Australia Ltd and changed its name to Rabobank Australia Limited in 2003. The company specialises in the provision of corporate financial services to the Australian and New Zealand food and agribusiness industries. Rabobank is part of the international Rabobank Group, which markets itself as “the world’s leading specialist in food and agribusiness banking”.
Mr Ellem and other Rabobank personnel
Christopher Ellem is currently employed as a machinery operator in rural Queensland. He was previously employed by Rabobank.
Mr Ellem commenced employment with Rabobank as a rural manager in 2002. He was based at the Dalby branch of Rabobank in central Queensland. He was the Stuarts’ relationship manager from when they first became customers of Rabobank in 2004, until he was promoted to the role of senior rural manager and moved to the Bundaberg branch of Rabobank in 2011.
Michael Webber was the Rabobank Dalby branch manager during the time that the Stuarts were clients of the bank. Mr Webber was Mr Ellem’s immediate manager and authorised all credit submissions put forward by Mr Ellem in his role as a “C Signatory”.
Greg Brady was another senior rural manager employed by Rabobank at the Dalby branch. Mr Brady started as a finance officer in August 2008, was promoted to rural manager in September 2009 and then senior rural manager in April 2013, a role that he performed until his death on 6 March 2021.
Mr Brady took over the portfolio of clients previously managed by Mr Ellem in approximately July 2011. This portfolio included the Stuarts. Mr Brady considered himself to be the Stuarts’ relationship manager from this time until his last dealing with them, when the Receivers were appointed to Mt Morris in 2013.
Richard Witherow, Peter Varnay and Bob Ole all worked within the central Special Asset Management department of Rabobank, which provided support to clients in financial distress.
Mr Couper
Scott Couper is a solicitor in Queensland. He has practised in commercial litigation in Australia and the United Kingdom for more than 27 years and has been a partner of Gadens Lawyers in Brisbane for at least 12 years.
Mr Couper has provided legal advice to Rabobank in relation to its dealings with the Stuarts since 2012. This included preparation for and attendance at the Mediation on behalf of Rabobank.
Mr Couper continued to represent Rabobank in the years following the Mediation, including in relation to settlement negotiations, demands for the payment of the debt owed by the Stuarts, the appointment of the Receivers to Mt Morris, settlement refinancing negotiations and the ultimate sale of Mt Morris by the Receivers in June 2015.
Mr Couper represented Rabobank in these proceedings, as well as in similar proceedings filed by the Stuarts in the Federal Court of Australia in 2015 (2015 Proceedings).
Ms Bowden
Angelea Bowden is a rural financial counsellor based in Charleville in Queensland. She is currently employed by Rural Solutions Queensland Inc, a not-for-profit organisation operating in regional Queensland. Rural Solutions Queensland Inc coordinates and manages the Rural Financial Counselling Service (Southern Queensland) (Rural Financial Counselling Service). It is a service that is funded by the Australian Federal Government. It provides free support to farmers, fishers and small rural businesses experiencing financial difficulties.
In her role as a rural financial counsellor, Ms Bowden regularly assists farmers with the review and preparation of financial contracts and loan applications. She also facilitates meetings with lenders and financial institutions.
Ms Bowden provided rural financial counselling to the Stuarts between 2010 and 2014. This included assisting the Stuarts with applications to Centrelink for financial hardship payments, representing the Stuarts at the Mediation and assisting the Stuarts to find emergency housing after Mt Morris was repossessed in 2014.
Mr Nevison
Lee Nevison is a nationally accredited mediator and member of the Queensland Bar Association Alternative Dispute Resolution Committee.
Mr Nevison acted as the independent mediator at the Mediation.
Applicants’ lay witnesses
Ms Hawking
Kerry Hawking is the Stuarts’ accountant. She works at Dawson & Partners, a rural accounting firm based in Cootamundra in southern New South Wales.
Ms Hawking has known the Stuarts for more than 25 years. She met Mr Stuart in the early 1990s when he was working on rural properties and she commenced acting as the Stuarts’ accountant when they began to purchase their own farming properties. She continues to act as their accountant to this day.
Ms Bodkin (née Christmas)
Prue Bodkin has ten years’ experience in the real estate sector. She was employed in various roles in Sydney in New South Wales between 2001 and 2005. In 2005, she relocated to Southern Queensland. She worked as a real estate salesperson at the St George offices of Leonard & Co Raine & Horne and GDL Real Estate between 2005 and 2010.
Ms Bodkin was involved in the Stuarts’ sale of Tullochard (a rural property at Mitchell in Queensland) in 2006 and their attempts to sell Evergreen in 2009 and 2010.
Mr McCallum
Andrew McCallum is a real estate agent based in Dalby in southern Queensland. He also worked for GDL Real Estate and was involved in the sales marketing campaigns for Mt Morris and portions of Evergreen in or about 2010.
Mr Cowley
Michael Cowley is a solicitor in Queensland. He is currently a director of Fox and Thomas, a law firm based in Goondiwindi in the Darling Downs region of Queensland. Mr Cowley provided legal conveyancing services to the Stuarts in relation to their purchase of Mt Morris in 2008.
Ms Beardsley (née Bonnett)
Ruth Beardsley is an investor and the sole director of Mintaka Investments Pty Ltd. She has been retired since 2001 and currently lives in Brisbane in Queensland.
Ms Beardsley has known the Stuarts since in or about 2009 when she met with Mrs Stuart to discuss the impact of carbon pricing on the farming industry in Australia. She visited the Stuarts at Mt Morris a number of times and provided them with accommodation in Brisbane during the Mediation.
On the morning of the Mediation, Ms Beardsley offered the Stuarts a negotiated equity share in her company’s unencumbered real property with an approximate market value of $1.3 million in exchange for a share in Mt Morris.
Mr Wass
Robert Wass is a multi-generational farmer who lives at Warren in the Orana region of New South Wales. He has been involved in his family’s wool and crop production agricultural business since 1975 and is currently the chairman of that business.
Mr Wass began corresponding with Mrs Stuart via an online agricultural forum when the Stuarts were living at Evergreen. Mr Wass began speaking with both Mr and Mrs Stuart somewhat regularly via telephone about their common experiences as primary producers with young families. The Stuarts visited Mr Wass and his wife at their property at Warren in 2008.
Mr and Mrs Brauer
Adrian and Wendy Brauer are farmers. They operate a cattle property near Theodore in central Queensland. The Brauers were clients of the Rabobank Dalby branch from 2005 to 2016. They suffered financial hardship in or about 2013.
Mrs Brauer gave evidence at the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Financial Services Royal Commission) in Brisbane on 27 June 2018. Mrs Brauer outlined her family’s experiences with Rabobank and the resulting financial and personal impact on their lives. The Stuarts travelled to Brisbane to attend the Financial Services Royal Commission public hearings and claim that they personally identified with the evidence and experiences described by Mrs Brauer.
D. WITNESSES AND CREDIT ISSUES
Mrs Stuart
Mrs Stuart gave extensive oral evidence in support of her case. A large amount of contemporaneous documentation authored by Mrs Stuart was also tendered as evidence in this proceeding.
At all relevant times Mrs Stuart maintained what she described as an options book in which, inter alia, she sought to analyse the financial implications of various proposed property purchases that the Stuarts were contemplating in the period leading up to the acquisition of Mt Morris.
While both Mr and Mrs Stuart had many oral conversations with their accountants, solicitors and Rabobank, all written communications were exclusively conducted by Mrs Stuart. These written communications were primarily in the form of emails.
Mrs Stuart’s options book, contemporaneous emails and oral evidence demonstrated a relatively sophisticated appreciation of both legal and financial matters.
Her credit was challenged by senior counsel for Rabobank, Mr Braham SC who appeared with Mr Gray for the respondent.
Understandably, given she considers that Rabobank financially ruined her family, Mrs Stuart found giving evidence challenging at times. Her examination in chief had to be suspended at one point when she almost collapsed in the witness box and required treatment in hospital.
Unfortunately, at times her evidence in cross-examination became somewhat petulant, argumentative and rehearsed, as evident from the following exchange with senior counsel for Rabobank:
Mr BRAHAM SC: I’m exploring the recollection that you proffered up a little while ago where you say – you said you remember discussing it with Mr Ellem?---Yes, because it was a little bit of a surprise, but I accepted it - - -
All right?--- - - - afterwards.
All right. But when you say afterwards, you mean – you’re not talking about years and years afterwards, you’re talking about in the weeks afterwards?---After signing it.
After signing it?---Like a week or two week or three weeks later, whatever.
All right. And on that occasion you discussed with Mr Ellem the obligation to make the permanent repayment?---I just said it was stupid, but yes.
All right. Well, by this stage it was the fourth letter of offer you had signed from the bank, wasn’t it, that had an obligation for permanent repayment in it?---The fourth – yes, the fourth one it says, “surprise, defer, roll it over, stick with you, you’ll be right, all in one, suitable product, 15 years.” Yep, that’s the one.
All right. But at very least, you were getting used, weren’t you, to seeing that term or a term like it in the letters of offer that the bank provided you for the purposes for your credit arrangements?---Actually, no, I didn’t get used to it. Each time it was a bit of a shock because I thought once-off was simply once-off and it didn’t keep reoccurring.
All right. But by April 2008, you had had – you had seen and identified four of these one-off, permanent repayments, hadn’t you?---You’re telling me.
And I’m asking you to agree; do you agree?---If it was four, it was four.
A further example of her apparent advocacy, rather than genuine recollection, was her oral evidence in chief concerning the purpose of the finance to be provided pursuant to the June 2008 Letter of Offer. Mrs Stuart was taken by her counsel, Mr King, who appeared with Ms Rusiti for the applicants, to an internal Rabobank document that recorded the relevant subject for consideration to be “[i]ncrease to facility of $2,360,000 for the purpose of purchasing additional property”. It is difficult to see how this was not an accurate statement of the purpose of the proposed variation to the Facility, namely, to enable the Stuarts to purchase Mt Morris pending the sale of Evergreen.
Mrs Stuart, however, gave the following evidence in chief in an apparent attempt to characterise the provision of credit in a manner that would attract the operation of the National Credit Code, notwithstanding that the Stuarts intended to operate a working cattle grazing operation on Mt Morris and did not propose to live there until after the sale of Evergreen:
MR KING: Would you have a look, please, at page – I think it’s 955 in the Court Book. See, that’s an internal bank work request number 78643 which has dates apparently commencing on Wednesday, 28 May 2008; do you see that?---I do.
And when did you first see that document?---Through discovery from the bank.
Thank you. Do you see in the top under ‘Summary’ in the fifth line it refers to an apparent purpose for the Mt Morris advance; do you see that?---I do.
Increase to facility?---I do.
Is that an accurate record of the purpose of the finance which you informed Mr Ellem?---No.
And how would you describe – sorry, withdraw that. To the best of your recollection, what did you say to him was that purpose?---Well, there are a number of things that come to mind here. And that is, firstly, when we began before - - -
MR BRAHAM SC: I object.
MR KING: Yes, just - - -
HIS HONOUR: Mrs Stuart, try to concentrate a little more sharply on Mr King’s question.
MR KING: Sorry, Mrs Stuart, that’s probably my error. In – you mentioned you – I mentioned three conversations which I took you through yesterday. Was – in any one of those conversations in particular, do you recall discussing the issue that I’ve just raised with you?---Yes, I do.
And do you know which – whether it was one or all three conversations?---All three.
And just doing the best you can, can you recall what it is you said about what the purpose of the Mt Morris finance was for you and - - -?---It was personal. It was our home. I’m a generational grazier.
And did you – what were the words you actually used, to the best of your recollection?---That it was an investment in my family.
Again, notwithstanding the extent to which the advance funding to enable the purchase of Mt Morris pending the sale of Evergreen could reasonably be characterised as “bridging finance”, her counsel elicited this evidence from Mrs Stuart:
MR KING: Thank you. All right. Now, would you – did – the bank, in its defence, has pleaded that this was bridging finance. Did you ever have that perception?---Never. Poppycock.
Did Mr Ellem ever mention bridging finance to you?---Never.
Did Mr Webber, his manager at Dalby, ever mention that to you?---Never.
Considerable caution therefore needs to be exercised in accepting Mrs Stuart’s evidence, except to the extent that it is supported by contemporaneous documents or is objectively plausible. Her recollections were advanced in a litigious context, many years after conversations and events occurred.
The inherent difficulties in accepting such evidence were exacerbated in this case by reason of the number of dealings that the Stuarts have had with Mr Ellem involving the provision of finance pursuant to variations to the Facility, and the previous close and friendly relationship that the Stuarts had with Mr Ellem.
Mr Stuart
Mr Stuart found it difficult in the course of his cross-examination to focus on the questions he was asked to address. He was inclined to be argumentative and some of his evidence was at times implausible, offensive and evasive. He came across in his oral evidence as less financially and legally sophisticated than Mrs Stuart. He took every opportunity to attack Mr Ellem’s credit and advance implausible evidence that he might have thought supported his case.
In the course of his supplementary oral evidence in chief, after his cross-examination had commenced, Mr Stuart gave the following evidence with respect to his signature on a letter of offer from Rabobank dated 1 June 2010 regarding a variation to the Facility (June 2010 Letter of Offer):
MR KING: Would you then go across, please, to page 1995?---Yes.
And you see there that there’s a reference in – sorry, your Honour. If you go across, please, to – just looking at page 1995. It’s not clear, but is that your – initial at the bottom of the page, or not?---Yes, it does look like it.
And then, the following page?---No. I never – just do an M and an S.
Just go across to page 1999. Is that your signature there?---No.
HIS HONOUR: Wait, when you say 1999, are you talking about the signature next to Mark Lindsay Stuart or are you talking about the initials of signatories at the foot of the page?
MR KING: Yes. I do apologise, your Honour. Just looking at the middle of the page, not the bottom of the page?---Yes. No.
HIS HONOUR: So you’re saying that’s not your signature?---I never use my middle initial, ever.
MR KING: Well – well .....
HIS HONOUR: Well, this evidence should have been led in chief, Mr King. If it’s seriously suggested that this is a document that does not bear Mr Stuart’s signatures, why wasn’t this evidence led in chief?
MR KING: Yes, your Honour, I’m - - -
HIS HONOUR: Or is this the first time you’ve heard that?
MR KING: I acknowledge this is the first time I’ve heard that, your Honour. It wasn’t the purpose of me leading this evidence; the purpose of me leading this evidence, I’m about to address, and that’s this: Mr Stuart, you see there, at page 1995 - - -?---Yes.
- - - the reference to “working capital”, under Loan Purpose – beside Loan Purpose?---Yes.
To what did you understand that was a reference?---It was not working capital. That was an interest repayment.
You mean, by that, a provision for an interest repayment?---Yes, that was money to pay interest.
All right. Now, I just want to ask you this question, please: if you had known at that time that the bank was proceeding in relation to the provision of its finance on the basis of the material in the credit submission to which I have referred – page 1972 and 1973 – would you have signed that letter of variation?---No. Definitely not.
That’s the only evidence, your Honour.
The “letter of variation”, being the June 2010 Letter of Offer, gave the Stuarts a further six months to make a $1.8 million permanent principal reduction and advanced them a further $50,000 in working capital to make an interest payment. The implausibility of Mr Stuart’s evidence that he would not have signed the document was the subject of the following exchange in cross-examination:
MR BRAHAM SC: You were asked by your counsel what you would have done, in 2010, if you had known the matters to which he drew your attention, and you said you would not have signed the credit submission. Now, is that truthful evidence?
HIS HONOUR: I think the letter of offer.
MR BRAHAM SC: The letter of offer. Is that truthful?---Yes.
Well, what would you have done instead?---I would have made the bank come back with more realistic bloody terms, wouldn’t I?
What, particularly, in the terms, in 2010, would you have wanted changed?---Ellem has lied to me.
No - - -?---I’ve - - -
- - - no?--- - - - stated it.
No, Mr Stuart, that question is not another opportunity - - -?---Right-o.
- - - for you to say something about Mr Ellem. Now, what different terms would you have required from the bank in 2010?---I would have insisted that nine months, which he lied to me about, was taken out.
Well, it was already 12 months down the track and you were – I’m sorry, it was already two years down the track and you were being given more time to repay. What different terms would you have wanted, Mr Stuart?---More terms, for the bank to steal more assets? Is that what you’re saying? Might take all my equity, which you did.
You answered a question from Mr King, a minute ago, on your oath. He said, “if you had known various matters were in the credit submission, would you have signed the letter of offer at that time”; and you said, no, you wouldn’t have?---No, and Chris Ellem, I would have made sure he was sitting in front of me.
Isn’t this the case, Mr Stuart: you’re willing to agree to any proposition Mr King puts to you, without thinking about it, without any regard to whether it’s the truth or a lie, and that’s what happened in that last piece of evidence, isn’t it?---No.
You didn’t know what you were agreeing to, when you agreed to that proposition for Mr King, didn’t you. You had no idea what you were agreeing to, did you; isn’t that right?---No. You’re wrong.
And you agreed to it because Mr King put it to you even though it made no sense to you at all - - -?---You’re wrong.
- - - isn’t that right?---You’re wrong.
And that’s the way you’ve conducted your evidence in chief, isn’t it? Agreeing to things Mr King has put to you - - -?---No.
- - - even if you don’t understand them.
MR KING: I object.
THE WITNESS: You’re wrong. I’m here because the bank stole my assets.
MR BRAHAM SC: And you’re going to say that over and over again, Mr Stuart, no doubt?---You repeat yourself, too, pretty well, sir.
HIS HONOUR: We might break then. Could we adjourn for – please adjourn the Court.
The extent to which Mr Stuart found it difficult to give his evidence objectively was also demonstrated in the course of an unsuccessful attempt by counsel for the Stuarts to challenge the credit of Mr Couper, the solicitor acting for Rabobank and a witness in the proceedings.
Counsel for the Stuarts, presumably as a result of a communication with Mr Stuart, made the following serious challenge to the credit of Mr Couper in the course of his cross-examination:
MR KING: Do you recall that yesterday, when his Honour released Mr Ellem from giving his evidence, that his Honour made plain that Mr Ellem wasn’t to speak further about his evidence to anybody?---Yes.
Did you do so?---Did I speak to Mr Ellem about his evidence?
Yes?---Certainly not.
Didn’t you follow Mr Ellem into the corridor and down the corridor to the lift?---Yes, I did.
And didn’t you say to him with respect to an aspect of his evidence, “You’ve got to,” and then you were interrupted by Mr Mark Stuart, who said, “You’re not supposed to be speaking to the witness, and you gulped, and the conversation ceased?---No, that did not happen.
In the course of re-examination, senior counsel for Rabobank elicited this evidence from Mr Couper:
MR BRAHAM SC: So, Mr Couper, what happened outside the courtroom yesterday afternoon, after Mr Ellem had completed his evidence and you spoke to him?---I followed him down the corridor. I wanted to make sure that he was okay to get a cab to get out to the airport, and he asked me what he would do about his witness expenses, and I said he should write to me about that. When that conversation finished, I turned around to walk back to the courtroom. Mark Stuart was on my left, and as I walked past him, he started walking with me and he said, “what are you doing, you little prick? You’re just a grub”.
And was there any other words exchanged between you and Mr Ellem or you and Mr Stuart in that period?---No.
Other lay witnesses of the Stuarts
The Stuarts called Ms Bowden, Mr McCallum, Mr Wass, Ms Bodkin, Mr Cowley, Ms Beardsley and Ms Hawking as lay witnesses. I found them to be candid and credible witnesses and have no reason to doubt the veracity of their evidence.
Mr Ellem
It was clear from Mr Ellem’s oral evidence that he only had a very limited recollection of his dealings with the Stuarts. Much of his evidence, as perhaps could be expected given the effluxion of time and the number of dealings he had with the Stuarts, was in substance evidence of his usual practice, particularly when it came to alleged conversations that he had had with the Stuarts. The weight to be given to evidence of a usual practice, and the question of whether that evidence is to be preferred, depends upon the specific nature and quality of the evidence that is given in a particular case: see Phelan v Melbourne Health [2019] VSCA 205 at [84] and the cases cited at [80]-[83] (Tate AP, Kaye JA and Zammit AJA).
Mr Ellem’s credit was forcefully challenged by counsel for the Stuarts, who submitted that his evidence should not be accepted on any issue unless it was corroborated by both independent documentary evidence and independent evidence of any alleged practice or system of Rabobank. If evidence was not supported in this manner, it was submitted that it should be treated as speculation and mere hope or reconstruction, referring to Connor v Blacktown District Hospital [1971] 1 NSWLR 713 (Connor v Blacktown) at 721 (Asprey JA with whom Mason JA agreed); R v Gordon (No 4) [2016] NSWSC 312 (Gordon) at [14]-[15] and [20] (Campbell J). There is no reference, however, in Connor v Blacktown or Gordon to any requirement of independent corroboration or treating uncorroborated evidence of usual practice as only speculation, mere hope or reconstruction.
Asprey JA explained in Connor vBlacktown at 721, quoting from McCormick, CT, Handbook on the Law of Evidence (West Publishing Company, 1954) at 341-2, that evidence of an act that is habitually done by a person under like circumstances will be received as evidence that it was done by the person on a particular occasion, subject to the Court having a discretion to exclude the evidence if it was not sufficiently regular and uniform or the circumstances were not sufficiently similar to outweigh the danger, if any, of prejudice or confusion.
In Gordon, Campbell J stated at [15], that evidence of a practice lays a foundation for an inference that the practice was followed on a particular day and that is the proper basis for its admissibility. However, evidence to the effect that a person believed they did something on a particular day because that was their usual practice would not be admissible, as it would be a conclusionary statement, rather than evidence of what they saw, heard or otherwise perceived: Gordon at [17].
In any event, to my observation, Mr Ellem was seeking at all times to be listening carefully to the questions he was asked and genuinely attempting to answer them by reference to his recollection, rather than engaging in any process of reconstruction, speculation or mere hope. He is no longer employed by Rabobank and on his own evidence left the bank in strained circumstances. He certainly did not appear to have any incentive to embellish his evidence to suit Rabobank’s position. When faced with inconsistencies or potential inconsistencies between those paragraphs of his outline that were admitted into evidence and his oral evidence, he somewhat candidly admitted that he was unable to explain the inconsistencies. He did not attempt to defend his position by engaging in any form of rationalisation or seek to diminish the significance of any concession that the cross-examiner may have believed he had obtained. His evidence on some matters was more emphatic, particularly with respect to the less plausible aspects of the cases sought to be advanced by the Stuarts, such as the typographical error in the Repayment Representation and the 15 Year Representation alleged to have been made by him to the Stuarts.
Much of the attack on the credit of Mr Ellem was directed at his evidence that he visited Mt Morris in 2008 prior to the issue of the June 2008 Letter of Offer. In his written outline that was admitted into evidence Mr Ellem stated at [62]:
I refer to a Property Inspection/Valuation Report on “Mt Morris” by a Mr Swalling dated 5 June 2007. Mr Swalling was Branch Manager in Longreach and later was in credit in the Brisbane office of the Bank. My recollection is that Mr Swalling prepared the valuation from information that I provided to him. I relied on this valuation as well as my own checks. This document is in the Court Book, pages 525 and 526.
Mr Ellem, however, gave the following evidence in cross-examination:
MR KING: Could you have a look, please, at – so let me ask you this. When do you say, if at all, you visited the farm Mt Morris? When was – do you say you visited?---Yes.
When was the first time?---Prior to submitting to credit for the loan application.
Just prior to it, in May 2008?---I think so.
Well, would you have a look, please, at page 525 of the Court Book – in Volume 1, your Honour. Is that document familiar to you?---It looks like a property inspection report prepared by Craig Swalling.
Yes.
…
Yes, was Mr Swalling in credit in Brisbane at that time?---I don’t think so.
So did you have any involvement in the preparation of this report?---No.
If you have a look at paragraph 62 of your statement, according to your statement, you said that Mr Swalling prepared the valuation from information you provided to him?---Okay.
Which is right: the evidence you’ve just given in the box or what you’ve said in your statement?---My memory may be incorrect.
Can you please assist the court by telling us which is correct?---I don’t know.
It can perhaps readily be accepted that it was most unlikely that Mr Ellem had provided any material to Mr Swalling with respect to the Property Inspection/Valuation Reports of Mt Morris that were generated from his 5 June 2007 inspection and valuation. Much of the apparent force in the challenge to Mr Ellem’s credit on the issue of an inspection of Mt Morris prior to the June 2008 Letter of Offer is diminished when one has regard to a subsequent Property Inspection/Valuation Report for Mt Morris that was run on 14 September 2011 and records an inspection date by Mr Ellem of 1 May 2008 (2011 Ellem Mt Morris Valuation). The criticisms made of this report by counsel for the Stuarts on the basis that it records Mr and Mrs Stuart as the registered proprietors prior to their acquisition of Mt Morris and a valuation of $1.8 million for Mt Morris, rather than the $2.2 million used in the credit submission in May 2008, are misconceived. The copy of the 2011 Ellem Mt Morris Valuation in evidence was printed on 14 September 2011 at the time of the preparation of the credit submission by Mr Brady, which recommended that the account strategy for the Stuarts include a sale of Mt Morris. By this time the Stuarts had been the registered proprietors for more than three years and both the credit submission and the version of the 2011 Ellem Mt Morris Valuation printed on 14 September 2011 expressly refer to an external valuation of Mt Morris provided by Herron Todd White in May 2011. The compelling inference is that the 2011 Ellem Mt Morris Valuation had been updated to reflect events since the stipulated inspection date of 1 May 2008.
Further evidence that Mr Ellem inspected Mt Morris prior to the June 2008 Letter of Offer is provided in the handwritten notes of Mrs Stuart that were tendered from her options book. Her notes on 10 April 2008 recorded:
10th HAPPY TO LOOK AT IT AT 2.2
RANG Keith – checked above details asked
about $ pr hd & terms of (RATE) 1,500 hd adjustedInspection on 18th with Chris
NEED to check equipement (didn’t before)
A list of equipement & house/quarters [illegible]
Need to check feed/fences after flood.In context, I am satisfied that “Keith” is a reference to Keith Richardson, Kevin Bredhauer’s selling agent, “Chris” is a reference to Mr Ellem and “Inspection on 18th with Chris” is a reference to a proposed inspection of Mt Morris by the Stuarts with Mr Ellem on 18 April 2008. Mr Bredhauer and his then wife Sharon Bredhauer were the registered proprietors of Mt Morris at the time. The Bredhauers were also customers of Rabobank.
Ultimately, equally misconceived was the challenge to Mr Ellem’s credit directed at the circumstances surrounding the signing of the loan application in relation to the June 2008 Letter of Offer. Counsel for the Stuarts submitted in their closing written submissions that Mr Ellem’s evidence that he arranged for the loan application to be signed on the date that it bears, namely 28 May 2008, was false and hence “his strenuous assertions that he did not have the loan application form with him, or if he did the Stuarts did not sign it in mid-May at his farm visit … should be rejected”.
The principal focus of the attack on Mr Ellem’s credit in this respect was his denial that the Stuarts signed the loan application in “mid-May” 2008, namely at a time prior to their entry into the contract for the purchase of Mt Morris.
Counsel for the Stuarts submitted in their closing written submissions that:
One explanation is that, as the Stuarts have maintained throughout their oral testimony, that prior to signing the contract for sale, he came to the farm with bank documents and that they signed the loan applications in blank which he took away [Ex R 9]. It follows his evidence at Tr 876/14 to the Court was false. The letter of 3 June 2008 also makes his evidence on this topic false, but for a different reason. [MFI – 47] does not have an original fully completed loan application in it, which would be expected if the returned envelope from the Stuarts contained the completed loan application form.
However, Rabobank’s letter to the Stuarts of 3 June 2008, as explained below, demonstrates that contrary to its usual procedures Rabobank did not have a signed loan application form prior to the issue of the June 2008 Letter of Offer. Hence it was not possible for the Stuarts to have signed the loan application either in mid-May 2008 or on 28 May 2008.
In the circumstances, I am not prepared to accede to the submission by counsel for the Stuarts that I only accept the evidence of Mr Ellem to the extent that it satisfies the two stipulated conditions identified above.
Mr Couper
Mr Couper gave evidence of his involvement in Rabobank’s legal dealings with the Stuarts, primarily in relation to the Mediation.
I found Mr Couper to be a candid and credible witness and have no reason to doubt the veracity of his evidence.
Mr Brady
Mr Brady died on 6 March 2021. Prior to his death on 25 November 2019, Mr Brady provided an outline of evidence in relation to these proceedings to Craig Melrose, a solicitor at Gadens in Brisbane.
On 16 September 2020, Mr Brady confirmed via email to Mr Melrose that he had reviewed the Stuarts’ outlines of evidence in reply. Mr Brady advised that his outline of evidence dated 25 November 2019 represented the evidence he intended to give in these proceedings and he did not wish to provide any further outline of evidence in response to the Stuarts’ outlines of evidence in reply.
The authenticity of Mr Brady’s outline of evidence was established by Mr Melrose in an affidavit. I have no reason to doubt the veracity or credibility of Mr Brady’s evidence.
The expert reports of Mr White and Mr Green
The Stuarts relied on an expert report prepared by Stuart White dated 25 October 2020.
Mr White currently operates a business advisory firm specialising in business planning, financial management and financial modelling for business projections. He has previously been an auditor and chartered accountant at KPMG, CEO of Macquarie Premium Funding and executive chairman of a financial technology start-up enterprise. At the commencement of his report, Mr White notes: “Whilst I have not had direct experience with Rural Lending per se, I consider my qualifications and experience relevant to these circumstances …”
Mr White was asked to address the following questions in his report (I note that there was no question numbered one):
2. In assessing the Stuarts’ credit application in May 2008 to vary the All in One account with RBL [Rabobank] in respect of the purchase of Mt Morris and in offering them finance on or prior to 2 June 2008 in your view did RBL breach its own guidelines and/or did it other act imprudently? [All In One Facility – Variation]
3. Whether in your view the All in One account as amended in June 2008 for the purpose of the purchase of Mt Morris by the Stuarts was suitable finance for the Stuarts? [All In One Facility – Suitability]
4. Whether in your view the All in One account as amended in June 2008 for the purpose of the purchase of Mt Morris by the Stuarts remained after its amendment a 15-year Interest Only facility? [All In One Facility – 15 Year Interest Only]
5. What in your view was the loss of the Stuarts having regards to the particulars of loss claimed:
a) On the assumption that the Stuarts did not proceed with the purchase of Mt Morris;
b) On the assumption that the Stuarts did go ahead with Mt Morris? [Loss Estimates]
Rabobank retained Geoff Green to prepare a report in response to the report prepared by Mr White in respect of Questions 2 to 4. Mr Green was not asked to address Question 5 dealing with loss estimates.
Mr Green is a chartered accountant. At the time of writing his report dated 5 February 2021, he had 12 years’ credit and risk experience at the National Australia Bank (NAB) and two and a half years’ experience with the Australia and New Zealand Banking Group (ANZ). His experience at NAB included a role as an Agribusiness Leader in the Strategic Business Services division of the bank, which manages problem loans. Mr Green has also directly managed several Queensland cattle farming and other agribusiness enterprises.
Mr White and Mr Green conferred with each other prior to the commencement of the hearing and produced a joint report dated 31 March 2021.
In their joint report, Mr White and Mr Green agreed that:
(a)Kurrajong, Tullochard, Evergreen and Mt Morris were all cattle farming properties;
(b)the approval of the credit submission for the Mt Morris advance in May 2008 was prompt;
(c)the Facility remained an interest only facility after the Mt Morris advance;
(d)the credit assessment documents of Rabobank included the formal credit submission, the work flow request and other information that the credit team already had access to (eg through the CMS or CRE system), or may have requested the originating team to provide (eg client financial statements); and
(e)the Stuarts’ historical business model of buying and selling properties was relevant to the assessment of their capacity to comply with the condition to sell Evergreen by 31 March 2009.
There were five principal areas of disagreement between Mr White and Mr Green.
First, while both experts agreed that the Facility remained an interest only facility after the advance to permit the Stuarts to purchase Mt Morris, they disagreed as to whether the periodic reviews had any effect on the term of the Facility. Mr White was of the view that the reviews permitted the term of the Facility to be shortened at Rabobank’s sole discretion, while Mr Green considered that the review provisions were standard provisions that did not falsify the proposition that, from its inception, the Facility was a 15 year interest only facility. Ultimately, I consider that this is largely a matter for me to determine, but as I explain later in these reasons, Mr Green’s evidence was of assistance in determining this issue.
Second, the experts disagreed as to whether Rabobank breached its own guidelines in the assessment and approval of the Mt Morris advance. Mr White found that various specified policies were mandatory, while Mr Green found that they were not mandatory and that some of the policies specifically permitted non-compliance. I did not derive any real assistance from either expert on this issue. The experts sought to construe the language of the Rabobank policies in seeking to characterise whether the policies were mandatory or discretionary. I do not consider that this is an appropriate matter for expert evidence. Moreover, for reasons developed below, whether policies were mandatory or discretionary and whether, in any event, Rabobank complied with those policies does not answer the question of whether Rabobank acted unconscionably.
Third, Mr White and Mr Green disagreed as to whether Rabobank acted imprudently in the assessment and approval of the May 2008 Credit Submission (see [341] below) for the increase to the Facility Limit to facilitate the purchase by the Stuarts of Mt Morris. Mr White contended that Rabobank acted imprudently, citing deficiencies in the serviceability assessment that “resulted in this risk of default being materially mis-judged”. These deficiencies included breaches of Rabobank’s policies, a lack of consideration of actual events that did not reflect assumptions, a lack of consideration of the net decline in the Stuarts’ equity, insufficient cash flow from Mt Morris to cover drawings and information deficiencies. Mr White concluded that the credit assessment deficiencies, taken collectively, were material enough to have resulted in a different credit outcome. On the contrary, Mr Green did not believe that Rabobank acted imprudently, stating that any deficiencies in the credit submission would not have led to a different outcome. Overall, Mr Green characterised the Mt Morris advance as “a simple transaction that was clearly to the benefit of the Stuarts”.
I did not find this conflicting evidence of much assistance. It was largely directed at measuring the materiality of the alleged deficiencies by speculating on whether or not Rabobank would have declined to approve the May 2008 Credit Submission had the deficiencies not occurred. This is inherently a counterfactual question that could only be answered by drawing inferences from a large quantity of conflicting evidence from which an informed but ultimately impressionistic view is required. Ultimately, it is again a matter for the Court to determine, not an expert issue.
Perhaps this is most clearly demonstrated in the approach taken to the valuations of Evergreen and Mt Morris in the May 2008 Credit Submission. Formal valuations were not obtained by Rabobank of these properties, but the objective evidence taken as a whole (in particular, the evidence of Ms Bodkin given in cross-examination that was not considered by the experts) suggests that the values attributed to those properties in the May 2008 Credit Submission and the likely timeframe for selling Evergreen would generally have been consistent with values and estimated timeframes that would have been provided if formal valuations had been obtained.
Fourth, the experts disagreed as to whether or not the Mt Morris advance was suitable finance. Mr White concluded that it was not while Mr Green found that it was. Mr White gave three reasons as to why it was not suitable finance:
(1)it was reasonably foreseeable that the Stuarts would be unable to comply with the terms and conditions of the Facility because the net proceeds from the sale of Evergreen were unlikely to equate to $3.23 million;
(2)it was reasonably foreseeable that the Facility would not meet the objectives of the Stuarts due to insufficient projected cash flow from Mt Morris; and
(3)the acquisition of Mt Morris elevated the risks of the Stuarts’ financial situation.
Both experts acknowledged that each had used a different definition of “suitable”: Mr White used the definition given in the National Credit Code while Mr Green used the definition of “suitable” in the ordinary sense of the word.
Again, these are inherently factual issues for the Court to determine having regard to all the evidence, rather than expert issues. Further, their resolution is not assisted by experts using definitions derived from a specific statutory context or by resorting to notions of the “ordinary sense” of a word.
Fifth, in regard to whether Rabobank understood that the Stuarts’ primary business was cattle farming in the assessment and approval of Mt Morris, Mr White was of the opinion that it did and that Rabobank’s categorisation of the Stuarts’ enterprise as cattle farming was demonstrated in the credit assessment documents. However, Mr Green found that there was nothing to suggest that the Stuarts were operating their properties to maximise income from cattle production itself; rather, the success of the Stuarts as cattle farmers was also as a consequence of their improvement of properties. Again, I did not find this evidence to be of any real probative value. The issue was of only tangential relevance and any necessary characterisation would ultimately be a matter of fact to be determined by the Court, not experts expressing opinions by reference to limited assumptions.
Both experts were cross-examined at some length following a concurrent evidence session. Senior counsel for Rabobank sought to discredit the evidence of Mr White, noting, among other matters, that Mr White had never worked in a bank and that he did not have experience in the sort of lending that was the subject of these proceedings. Given Mr White’s relative lack of such experience compared with Mr Green, I would have generally preferred the evidence of Mr Green but given my views on the relevance of their expert evidence this was of little significance for the determination of the issues in this proceeding.
The reasoning of the Full Court of the Supreme Court of South Australia in Haynes v St George Banka Division of Westpac Banking Corporation; Haynes v Westpac Banking Corporation [2018] SASCFC 51 (Haynes) provides further support for the proposition that the provision of funds to purchase a farming operation is for a “business purpose”. In that case the relevant credit supplied was for the purchase of a property on which there were two residential buildings and a flower farm. The Full Court of the Supreme Court of South Australia agreed with the finding of the trial judge that the credit supplied was predominately supplied for business purposes: see Haynes at [60]-[65] (Kourakis CJ, with whom Blue and Doyle JJ agreed).
In Haynes, Kourakis CJ placed particular reliance on the fact that the borrower had claimed as an interest expense in his personal tax return for the 2009/2010 financial year the entirety of the interest payable on the loan to acquire the property. This was done on the basis that he had rented the property to a company that had registered the business name “Flower Folly” and that company had claimed as an expense rent payable to the borrower of $21,000: Haynes at [61]. Kourakis CJ also relied on the business or investment purposes declaration provided by the borrower, even though it was ineffective by reason of s 11(2) of the Uniform Consumer Credit Code (since replaced by the NCCP Act and National Credit Code), the historical use of the property for substantial flower production and the decision to delay settlement to enable the borrower to inspect the spring stocks of flowers: Haynes at [62]-[63].
Kourakis CJ also noted that the trial judge had taken into account that the borrower had “intended to, and did in fact, move his residence” to the property, but at the same time the borrower had “proposed to rely on the income from flower production to support him after his retirement, or at least semi-retirement, from real estate agency and development work”: Haynes at [64].
Fourth, the Stuarts’ reliance on Jonsson v Arkway Pty Ltd (2003) 58 NSWLR 451; [2003] NSWSC 815 (Jonsson) to suggest that the funds advanced pursuant to the June 2008 Letter of Offer were for personal purposes is misplaced. Even if it is accepted for present purposes that “personal, domestic or household purposes” is not a compendious expression subject to the sui generis principle of statutory construction and that “personal” can be construed broadly, it cannot be construed independently of the other provisions in the Queensland Credit Code that draw sharp distinctions between “business and investment purposes” and “personal, domestic or household purposes”. In Jonsson the relevant benefit found to be conferred on a person for personal purposes was the provision of funds to enable her parents to purchase a home. That benefit is clearly distinguishable from the provision of funds for the purchase of a property to operate a cattle grazing business. As Shaw J observed at [32]:
The Code should not, in my opinion, be interpreted so that it excludes non-business and non-investment borrowing to purchase a home and hold it on trust for one’s purposes. The position may be different if the trust had a business or investment objective, as distinct from the provision of a benefit for a close family member.
For the reasons outlined above, I find that the June 2008 Letter of Offer was not a credit contract for the purposes of the Queensland Credit Code and was therefore not a carried over instrument for the purposes of the application of the National Credit Code. Accordingly, the pleaded unjust credit contract allegations cannot succeed.
Were the changes to the Facility unjust?
If, contrary to the conclusion that I have reached above, the National Credit Code does apply, it is necessary to determine whether the June 2008 Letter of Offer was an unjust credit transaction within the meaning of s 76 of the National Credit Code.
Section 76 of the National Credit Code relevantly provides:
76 Court may reopen unjust transactions
Power to reopen unjust transactions
(1) The court may, if satisfied on the application of a debtor, mortgagor or guarantor that, in the circumstances relating to the relevant credit contract, mortgage or guarantee at the time it was entered into or changed (whether or not by agreement), the contract, mortgage or guarantee or change was unjust, reopen the transaction that gave rise to the contract, mortgage or guarantee or change.
Matters to be considered by court
(2) In determining whether a term of a particular credit contract, mortgage or guarantee is unjust in the circumstances relating to it at the time it was entered into or changed, the court is to have regard to the public interest and to all the circumstances of the case and may have regard to the following:
(a) the consequences of compliance, or noncompliance, with all or any of the provisions of the contract, mortgage or guarantee;
(b) the relative bargaining power of the parties;
(c) whether or not, at the time the contract, mortgage or guarantee was entered into or changed, its provisions were the subject of negotiation;
(d) whether or not it was reasonably practicable for the applicant to negotiate for the alteration of, or to reject, any of the provisions of the contract, mortgage or guarantee or the change;
(e) whether or not any of the provisions of the contract, mortgage or guarantee impose conditions that are unreasonably difficult to comply with, or not reasonably necessary for the protection of the legitimate interests of a party to the contract, mortgage or guarantee;
(f) whether or not the debtor, mortgagor or guarantor, or a person who represented the debtor, mortgagor or guarantor, was reasonably able to protect the interests of the debtor, mortgagor or guarantor because of his or her age or physical or mental condition;
(g) the form of the contract, mortgage or guarantee and the intelligibility of the language in which it is expressed;
(h) whether or not, and if so when, independent legal or other expert advice was obtained by the debtor, mortgagor or guarantor;
(i) the extent to which the provisions of the contract, mortgage or guarantee or change and their legal and practical effect were accurately explained to the debtor, mortgagor or guarantor and whether or not the debtor, mortgagor or guarantor understood those provisions and their effect;
(j) whether the credit provider or any other person exerted or used unfair pressure, undue influence or unfair tactics on the debtor, mortgagor or guarantor and, if so, the nature and extent of that unfair pressure, undue influence or unfair tactics;
(k) whether the credit provider took measures to ensure that the debtor, mortgagor or guarantor understood the nature and implications of the transaction and, if so, the adequacy of those measures;
(l) whether at the time the contract, mortgage or guarantee was entered into or changed, the credit provider knew, or could have ascertained by reasonable inquiry at the time, that the debtor could not pay in accordance with its terms or not without substantial hardship;
(m) whether the terms of the transaction or the conduct of the credit provider is justified in the light of the risks undertaken by the credit provider;
(n) for a mortgage—any relevant purported provision of the mortgage that is void under section 50;
(o) the terms of other comparable transactions involving other credit providers and, if the injustice is alleged to result from excessive interest charges, the annual percentage rate or rates payable in comparable cases;
(p)any other relevant factor.
…
The Stuarts advanced the following contentions in support of their allegation that the June 2008 Letter of Offer was an unjust credit transaction within the meaning of s 76 of the National Credit Code.
First, the Stuarts contend that the permanent repayment obligation in the June 2008 Letter of Offer had the result that the Facility became, in effect and operation, asset lending, as the permanent repayment obligation could only be satisfied from the sale of assets. Both the Stuarts and Rabobank, however, proceeded at all times on the basis that the permanent repayment obligation was to be paid from the proceeds of the sale of Evergreen. The allegation that the bridging finance characterisation constituted a form of financial misconduct comprising asset lending against repayment out of equity is misconceived. It ignores the very basis on which the finance was provided, namely a short term extension to an existing facility to fund the acquisition of a new property pending the sale of an existing property.
Second, the Stuarts contend that there was a relative inequality of bargaining power between the Stuarts, as commercially unsophisticated outback Queensland farmers, and Rabobank, as a multinational financial institution. Rabobank accepts that there was an inequality of bargaining power, but submits that it was ameliorated by reason of the Stuarts’ relative experience and sophistication and their access to independent legal and financial advice. On balance, I accept that the inequality of bargaining power was of limited significance, given the Stuarts’ prior experience and success in purchasing and selling rural properties and entering into financial facilities with initially Elders and subsequently Rabobank on very similar terms and their appreciation, at least by Mrs Stuart, at the time of the risks involved in the proposed purchase of Mt Morris prior to selling Evergreen as reflected in her entries in her options book and email communications.
Third, the Stuarts contend that the nine month permanent repayment term inserted in the June 2008 Letter of Offer was unilaterally imposed over the objections of the Stuarts and was not the subject of any negotiation. If, when and the extent to which the Stuarts may have objected to the inclusion of the permanent repayment term is the subject of contested evidence. What is clear is that the parties were proceeding on the basis that Evergreen was to be sold and the proceeds of the sale would be used to reduce the amount outstanding on the Facility. Given the Stuarts’ previous experience and the contemporaneous expectations of rural property real estate agents, a period of nine months was not an unrealistic period of time in which to expect a sale of Evergreen.
It is also important to bear in mind that the contract to purchase Mt Morris included a subject to suitable finance clause and the Stuarts had engaged a solicitor to act on their behalf with respect to the purchase of Mt Morris. If the nine month permanent repayment obligation was not acceptable, the Stuarts were free not to accept the June 2008 Letter of Offer and not to proceed with the purchase of Mt Morris, if they so desired.
Further, as I have found, the Stuarts concerns about the nine month repayment obligation were raised with Mr Ellem prior to their acceptance of the June 2008 Letter of Offer. Mr Ellem addressed those concerns by expressing confidence that if the Stuarts needed more time, Rabobank would look favourably on any request for an extension.
In the circumstances, the allegation that the permanent repayment term was unilaterally imposed or not the subject of any negotiation cannot be accepted.
Fourth, the Stuarts contend that the permanent repayment term was not reasonably necessary for the legitimate protection of Rabobank’s interests in that it comprised a form of asset lending requiring repayment out of the sale of assets. For the reasons advanced above, this again misconceives the nature of the transaction and the contention cannot succeed.
Fifth, the Stuarts contend that they were relatively unsophisticated with respect to understanding “contract terms and legal requirements in respect thereto” and did not have the benefit of legal or financial advice in relation to the June 2008 Letter of Offer and later alleged variations to their Facility. While the Stuarts may not have sought specific legal or financial advice with respect to their acceptance of the June 2008 Letter of Offer, at all relevant times the Stuarts had solicitors acting for them on the purchase of Mt Morris, retained accountants for the purpose of preparing detailed financial statements and had engaged experienced rural property real estate agents to act on their behalf with respect to the proposed sale of Evergreen. The Stuarts certainly had the ability to obtain legal or financial advice if they had thought it necessary or desirable.
Further, Mrs Stuart demonstrated in both her oral evidence and contemporaneous documentation a relative sophistication in understanding the structure and risks inherent in the finance offered pursuant to the June 2008 Letter of Offer and previous letters of offer from Rabobank. In any event, the terms of the letters of offer were clearly and succinctly expressed and neither Mr Stuart nor Mrs Stuart had any apparent difficulty in understanding the important terms of the June 2008 Letter of Offer, as evidenced by their contemporaneous concerns expressed to Mr Ellem about the permanent repayment obligation, as noted at [798] above.
In addition, the Stuarts advance contentions that are directed at the conduct of Rabobank after the drawdown of funds pursuant to the June 2008 Letter of Offer, to the effect that Rabobank:
(a)charged interest inconsistently with the terms of the June 2008 Letter of Offer;
(b)engaged in conduct that was not reasonably necessary to protect its legitimate interests, such as refusing to permit the Stuarts to sell Evergreen in 2009 pursuant to the Burberrys’ offer;
(c)engaged in unfair tactics by refusing to honour earlier representations that they would advance funds to enable the Stuarts to restock Mt Morris after the end of the agistment period and refusing to support an application in 2011 by the Stuarts to the QRAA;
(d)failed to comply with the Code of Banking Practice by undertaking enforcement action rather than working with the Stuarts to resolve their financial difficulties;
(e)failed to comply with the now superseded voluntary industry code of practice known as the Queensland Farm Finance Strategy in the course of taking enforcement action; and
(f)failed to inform the Stuarts that the Facility had been referred to the Special Asset Management department of Rabobank for “exit of the finance from the Bank and closure of the Facility prior to its expiry on 30 July 2019”.
Given that each of these contentions is directed at conduct after the June 2008 Letter of Offer was entered into, none can be relevant to whether it was an unjust credit transaction at the time that it was entered into. Further, I am not satisfied that the necessary underlying facts to support each of these contentions have been established on the evidence before me.
Should the Court reopen the credit contract?
By reason of my findings outlined above, in any event, the Court should not reopen the credit contract pursuant to s 76 of the National Credit Code.
Section 78B application
On the last day of the hearing, at the conclusion of his oral reply, counsel for the Stuarts submitted that it would be appropriate to issue a notice pursuant to s 78B of the Judiciary Act 1903 (Cth) (Judiciary Act) on the basis of conflicting interpretations of the application of the National Credit Code (s 78B Notice).
Section 78B of the Judiciary Act relevantly provides:
78B Notice to Attorneys‑General
(1)Where a cause pending in a federal court including the High Court or in a court of a State or Territory involves a matter arising under the Constitution or involving its interpretation, it is the duty of the court not to proceed in the cause unless and until the court is satisfied that notice of the cause, specifying the nature of the matter has been given to the Attorneys‑General of the Commonwealth and of the States, and a reasonable time has elapsed since the giving of the notice for consideration by the Attorneys‑General, of the question of intervention in the proceedings or removal of the cause to the High Court.
(2)For the purposes of subsection (1), a court in which a cause referred to in that subsection is pending:
(a) may adjourn the proceedings in the cause for such time as it thinks necessary and may make such order as to costs in relation to such an adjournment as it thinks fit;
(b) may direct a party to give notice in accordance with that subsection; and
(c) may continue to hear evidence and argument concerning matters severable from any matter arising under the Constitution or involving its interpretation.
...
(5) Nothing in subsection (1) prevents a court from proceeding without delay to hear and determine proceedings, so far as they relate to the grant of urgent relief of an interlocutory nature, where the court thinks it necessary in the interests of justice to do so.
The conflicting interpretations of the National Credit Code were alleged to arise under or involve the interpretation of the Constitution because the National Credit Code is a law that has been adopted by the state of Queensland in the place of the Queensland Credit Code. Section 51(xxxvii) of the Constitution provides:
51 Legislative powers of the Parliament
The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to:
…
(xxxvii) matters referred to the Parliament of the Commonwealth by the Parliament or Parliaments of any State or States, but so that the law shall extend only to States by whose Parliaments the matter is referred, or which afterwards adopt the law;
Pursuant to s 4(1) of the Credit (Commonwealth Powers) Act2010 (Qld) (CCPA), the state of Queensland adopted the NCCP Act and the NCCP Transitional Act within the meaning of s 51(xxxvii) of the Constitution. Pursuant to s 11 of the CCPA, the Queensland Credit Code and related legislation was repealed with effect from 1 July 2010.
Counsel for the Stuarts contended that as a result of the repeal of the Queensland Credit Code, the transitional provisions preserving the operation of parts of the Queensland Credit Code could have no relevant operation. He contended that this led to the result that the National Credit Code had been adopted in Queensland without the transitional provisions and the Queensland Credit Code would apply retrospectively to all credit contracts entered into prior to the adoption by Queensland of the National Credit Code.
He submitted that this contention had given rise to a legal point involving interpretation of both the Constitution and the National Credit Code.
I did not accept that submission. Making reference to a state law adopting a law of the Commonwealth and pointing to a provision in the Constitution that provides for the Queensland Parliament to pass legislation referring powers to the Commonwealth Parliament is not sufficient to give rise to a constitutional issue or a matter involving the interpretation of the Constitution. It is simply, as senior counsel for Rabobank submitted, a matter of interpretation of the relevant statutes. It is not controversial that s 51(xxxvii) of the Constitution permits states to refer matters to the Parliament of the Commonwealth.
As Gageler J stated in Re Culleton (2017) 340 ALR 550; [2017] HCA 3 at [29], the constitutional issue must be “real and substantial” to give rise to the obligation under s 78B of the Judiciary Act:
Section 78B of the Judiciary Act does not, in my opinion, prevent me from dismissing so much of the summons as seeks to give effect to Senator Culleton’s attempt to raise the constitutional objection to jurisdiction. French J made the point in Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd that s 78B “does not impose on the Court a duty not to proceed pending the issue of a notice no matter how trivial, unarguable or concluded the constitutional point may be”. To give rise to the obligation not to proceed without notice a cause pending in court must truly “involve” a matter arising under the Constitution or involving its interpretation. As Toohey J stated in Re Finlayson; Ex parte Finlayson, in a passage quoted with approval by Gummow, Hayne and Callinan JJ in Glennan v Commissioner of Taxation, “[I]n terms of s 78B, a cause does not ‘involve’ a matter arising under the Constitution or involving its interpretation merely because someone asserts that it does”. In short, the constitutional point must be real and substantial.
I was not satisfied that counsel for the Stuarts had raised a matter that could arguably be characterised as a “real or substantial” issue arising under the Constitution or involving its interpretation. The issue for determination, as outlined above, is a matter requiring the interpretation of the respective credit legislation and the relevant transitional provisions, irrespective of which parliament may have enacted the legislation.
I therefore declined to issue the s 78B Notice.
R. COMPLIANCE WITH DISCOVERY OBLIGATIONS
Delay case
In their closing written submissions, the Stuarts make reference to a delay case alleged against Rabobank:
[T]he Respondent has at every step not merely not complied with orders of the Court but has knowingly not cooperated with the Applicants and the Court in disclosing to the Applicants its documents related to its alleged financial misconduct supporting an inference that the Applicants’ delay case should be accepted on its face …
The Stuarts allege that Rabobank failed, on four occasions, to comply with orders for standard discovery that resulted in the need for orders to be made for non-standard discovery on the 14th day of the hearing.
Specifically, the Stuarts allege that Rabobank took a “mushroom” approach to the production of its records, by putting forward Mr Ellem as a witness who “cannot recall anything of any significance but instead [gave] equivocal and evasive evidence” and providing “as few documents as it can get away with” and further “adducing no evidence as to its practices and procedures although having available witnesses able to give such evidence”. The Stuarts describe the conduct of Rabobank in producing documents as doing so “in a desultory recalcitrant fashion, as if extracting teeth, but calculated to undermine the court’s due process”. Counsel for the Stuarts alleged that Rabobank has, by reason of this alleged conduct, impliedly admitted financial misconduct which it has sought to conceal.
Counsel for the Stuarts made reference to Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 (Kuhl) and Commonwealth Bank of Australia v Quade (1991) 178 CLR 134; [1991] HCA 61 (Quade).
Kuhl was a workplace negligence case in which the trial judge was not satisfied by the workman’s evidence where, for whatever reason, the workman was “reluctant to say precisely what happened”. The trial judge concluded that it was not possible to identify either a breach of any relevant duty of care or the precise cause of the injury: see Kuhl at [66]. A majority of the High Court of Australia found that it was not open to the trial judge to incorporate into his reasons for judgment a finding that the workman had suppressed evidence without giving him the opportunity to address with that criticism: Kuhl at [67] (Heydon, Crennan and Bell JJ).
Counsel for the Stuarts submitted that the circumstances surrounding the orders for discovery amounted to an implied admission by Rabobank or circumstantial evidence that permitted an adverse inference to be drawn against Rabobank, consistent with the comments of the majority in Kuhl at [64] concerning the rule in Jones v Dunkel:
Depending on the circumstances, when a party lies, or destroys or conceals evidence, or attempts to destroy or conceal evidence, or suborns witnesses, or calls testimony known to be false, or fails to comply with court orders for the production of evidence (like subpoenas or orders to answer interrogatories), or misleads persons in authority about who the party is, or flees, the conduct can be variously described as an implied admission or circumstantial evidence permitting an adverse inference.
The Stuarts submit that Rabobank’s implied admission is that the “[a]pplicants’ whole case has merit which the Respondent is not prepared to formally admit in its Defence” and that Rabobank “accepts it has still not complied with its discovery obligation”.
Quade involved a failure by the successful party, the Commonwealth Bank, to give discovery of relevant documents until after judgment was delivered. In their written submissions, the Stuarts seek to rely on the following passage of Quade at 142 (emphasis added by counsel for the Stuarts):
In so far as the demands of justice in the individual case are concerned, it would cast upon the innocent party an unfairly onerous burden of demonstrating to virtual certainty what would have happened in the hypothetical situation which would have existed but for the other party’s misconduct. In so far as the public interest in the administration of justice generally is concerned, it would be likely to ensure to the successful party the spoils of his own default and thereby encourage, rather than to penalize, failure to comply with pre-trial orders and procedural requirements.
In deciding whether to order a new trial, the High Court of Australia in Quade unanimously concluded at 142-3:
It is neither practicable nor desirable to seek to enunciate a general rule which can be mechanically applied by an appellate court to determine whether a new trial should be ordered in a case where misconduct on the part of the successful party has had the result that relevant evidence in his possession has remained undisclosed until after the verdict. The most that can be said is that the answer to that question in such a case must depend on the appellate court’s assessment of what will best serve the interests of justice, “either particularly in relation to the parties or generally in relation to the administration of justice”. In determining whether the matter should be tried afresh, it will be necessary for the appellate court to take account of a variety of possibly competing factors, including, in addition to general considerations relating to the administration of justice, the degree of culpability of the successful party, any lack of diligence on the part of the unsuccessful party and the extent of any likelihood that the result would have been different if the order had been complied with and the non-disclosed material had been made available. While it is not necessary that the appellate court be persuaded in such a case that it is “almost certain” or “reasonably clear” that an opposite result would have been produced, the question whether the verdict should be set aside will almost inevitably be answered in the negative if it does not appear that there is at least a real possibility that that would have been so.
It is difficult to see how this case is relevant to this proceeding. Rabobank produced the documents during the hearing. I am not persuaded that Rabobank’s delay in producing any documents justifies the drawing of any adverse inferences against Rabobank.
S. AMENDED STATEMENT OF CROSS-CLAIM
Rabobank filed a statement of cross-claim against the Stuarts on 23 August 2019 for breach of the terms of the Facility relating to their failure to repay the outstanding debt and their failure to provide a contractual indemnity. The statement of cross-claim was amended on 28 April 2020 to include a claim for misleading or deceptive conduct against the Stuarts.
The Stuarts rely on the matters alleged in the 2FASOC in answer to the whole of Rabobank’s statement of cross-claim.
Facility breach cross-claim
On 30 June 2010, Rabobank advanced $2,740,498.63 to the Stuarts under the Facility. Pursuant to the June 2010 Letter of Offer, the Stuarts were required to make a permanent repayment of $1.8 million in reduction of the Facility limit by 31 December 2010. The Stuarts failed to make this permanent repayment and have also failed to meet their half-yearly interest repayment obligations since December 2010. Rabobank claims these are events of default under the Facility.
On 9 September 2013, Rabobank made a demand for the Stuarts to pay the amount outstanding under the Facility, together with all accrued interest and fees and all other amounts owing, by 18 September 2013. The Stuarts did not pay the amount demanded by this date, or at all. Accordingly, Rabobank claims the Stuarts are in breach of the Facility, causing the bank to suffer loss and damage.
Rabobank issued the Revised Statement of Indebtedness to the Stuarts on 27 April 2021, which identified the debt owed as at 31 March 2021 as $2,972,705.42, including interest up to that date. The Revised Statement of Indebtedness confirms interest will continue to accrue until the debt is paid. By accepting the terms of the Facility, the Stuarts agreed that such a statement is sufficient to prove the amount they owe to Rabobank, unless they are able to prove the Revised Statement of Indebtedness is incorrect.
The terms of the Facility require statements of indebtedness to be signed by a Rabobank employee whose title includes the word “manager”. On 27 April 2021, senior counsel for Rabobank tendered a statement signed by Stephen Musso, the Head of Financial Restructuring at Rabobank. The next day, senior counsel tendered the Revised Statement of Indebtedness signed by Rabobank Senior Manager Bob Ole. The statements are largely identical in that they specify the amount owed, albeit the Revised Statement of Indebtedness includes further details about the terms of the Facility relevant to statements of indebtedness.
Counsel for the Stuarts initially objected to the tender of the Revised Statement of Indebtedness on three grounds. First, that Rabobank’s case was closed. Second, the Revised Statement of Indebtedness merely purported to be signed by Mr Ole without evidence of that fact. And third, the tender of the Revised Statement of Indebtedness was proposed without explanation. Senior counsel for Rabobank explained that the Revised Statement of Indebtedness was tendered because of the formal requirement in the terms of the Facility that the statement be signed by a bank officer with the title “manager”. I admitted into evidence the Revised Statement of Indebtedness signed by Mr Ole in substitution for the previous statement signed by Mr Musso. Rabobank had not formally closed its case so as to warrant the need for an application for leave to reopen and, in any event, senior counsel for Rabobank had expressly reserved his position in relation to the tender of any further material. I also invited counsel for the Stuarts to make further submissions regarding the validity of the Revised Statement of Indebtedness prior to admitting it into evidence. No further submissions were made.
The Stuarts contend that by reason of the various causes of action they allege, the variation of the Facility in June 2008 and all subsequent variations were void and of no effect. Accordingly, the variations to the Facility pursuant to the June 2010 Letter of Offer were also alleged to be void and of no effect and thus it was submitted that the Stuarts did not breach any obligations to Rabobank by failing to repay the outstanding amount. The Stuarts also relied on the National Credit Code claim to set aside the Facility as an unjust credit contract.
Contractual indemnity cross-claim
Further and in the alternative, Rabobank claims that by accepting the standard terms of the Facility, the Stuarts agreed to indemnify Rabobank against all actions, claims, demands, losses, damages, liabilities, costs, charges or expenses of any nature (including legal costs on an indemnity basis) arising from the occurrence of any events of default. This includes Rabobank’s costs in exercising its rights pursuant to those defaults and any losses that Rabobank may suffer as a result of the Stuarts bringing this proceeding.
Rabobank claims that the Stuarts are obliged to indemnify Rabobank against any losses suffered as the result of these proceedings, including legal costs on a full indemnity basis. By refusing to provide such an indemnity, Rabobank claims a separate and independent breach of the terms of the Facility by the Stuarts.
The Stuarts again rely on their various pleaded causes of action in this regard and contend that the terms of the Facility relating to the contractual indemnity cross-claim should be set aside or declared void ab initio.
Misleading or deceptive conduct cross-claim
Rabobank also claims that the Stuarts made a number of misleading or deceptive representations in relation to all of the letters of offer issued by the bank, the 2008 and 2010 loan applications and the mortgage over Mt Morris in June 2008. These allegedly misleading or deceptive representations reflect the Stuarts’ pleaded causes of action and can be summarised as follows:
(a)all information provided by the Stuarts was true and correct;
(b)credit was to be applied predominately or wholly for business purposes;
(c)the Stuarts agreed to the terms of the Initial Facility and the Facility, including Rabobank’s discretions pursuant to the terms of those agreements; and
(d)the Stuarts were not entering into the contract in reliance on any terms that were not expressly included in their written agreements with Rabobank.
Rabobank essentially contends that if any of the representations pleaded by the Stuarts were upheld, the Stuarts themselves had engaged in misleading or deceptive conduct by accepting the agreements with Rabobank. This is pleaded alternatively and concurrently as a breach of s 52 of the TPA, s 38 of the Fair Trading Act 1989 (Qld) and/or s 12DA of the ASIC Act.
The Stuarts deny the misleading or deceptive conduct cross-claim and rely on their various fraud and/or deceit representation claims in defence. In particular, the Stuarts allege that Rabobank knew the May 2010 Credit Submission was based on erroneous information when it was approved. The Stuarts claim that, unbeknownst to them, Mr Ellem relied upon livestock numbers, sale projections and cattle agistment details that he knew to be false when he prepared the May 2010 Credit Submission.
Consideration
As none of the Stuarts’ pleaded causes of action were established, the Facility breach cross-claim must succeed. By letter dated 9 September 2013, Rabobank, by its solicitors, advised the Stuarts’ solicitors that the failure to sell Mt Morris, the failure to agree an amount in full and final satisfaction of the outstanding indebtedness of the Stuarts to Rabobank and REFL and otherwise the failure of the Stuarts to repay all their outstanding indebtedness each amounted to failures to perform obligations under the Deed of Forbearance. The letter included a formal declaration that the moratorium on enforcement had ended because Rabobank and REFL relied on these failures as constituting Termination Events pursuant to clause 5.1.2 of the Deed.
I find no issues with the validity of the Revised Statement of Indebtedness signed by Mr Ole and I accept that it is correct.
The other elements of the cross-claim were largely responsive to the claims advanced by the Stuarts and were not developed during the hearing or in the written submissions of either the Stuarts or Rabobank. In the circumstances, it is unnecessary for me to determine the contractual indemnity or the misleading or deceptive conduct cross-claims.
T. DISPOSITION
The Stuarts have been wholly unsuccessful and Rabobank has succeeded on its cross-claim. Orders will be made dismissing the originating application and giving judgment for Rabobank on its cross-claim.
Ordinarily costs would simply follow the event and Rabobank would be entitled to its costs of and incidental to the hearing. I note, however, that counsel for the Stuarts has foreshadowed that they intend to make an application for indemnity costs in respect of the further discovery of documents by Rabobank in the course of the hearing. It is desirable that all costs issues be dealt with at the same time. I will therefore make directions that the parties exchange and file submissions of no more than three pages as to what costs orders should be made and I propose to determine the issue of costs on the papers, subject to any contention by either party to the contrary.
I certify that the preceding eight hundred and forty-four (844) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Halley. Associate:
Dated: 11 November 2021
3
8
18